who knows where its heading ..... not citi !!, page-4

the knives are out for LEI


King of the stock jocks

LEIGHTON'S Wal King must rate as one of the best stock spruikers in the game because the extraordinary 19.3 per cent rise cannot be justified on any known metric.

We know the share register is fundamentally unstable, with 54 per cent owner Hochtieff reporting losses and seemingly kept afloat by its stake in Leighton.

With so much stock tied up in one volatile hand, Leighton is an easy stock to move, and being valued at $10.9 billion, it tends to drag other developers with it.

Long term, the stock trades at a 2 per cent price/earnings multiple discount to the market. Now it is trading at 16.4 times 2011 year earnings, based on Goldman Sachs's forecast of $2.15 a share, it is trading at a 45 per cent premium to the market -- which is trading at 11.5 times.

King is one of many cheerleaders for the Australian economy right now, joining RBA boss Glenn Stevens, Woolies chief Michael Luscombe and others.

Leighton was arguably oversold when it fell to $16.15 a share back in January, and it is over-bought now, but when you have momentum the market is hard to stop.

King has the lion's share of the big-project market in Australia, as illustrated by the fact that every time there is a big government job up for grabs -- like last month's Victoria desalination plant -- the choice is between Leighton and a Leighton division and the winner is Wal King.

He confided yesterday that while happy to continue to do business with McMahon Holdings, he wasn't planning to renew the standstill agreement on his 19 per cent stake in the company. That left the market talking about which of the three options he would take: buy, sell or hold.

As Leighton's Dubai losses showed, the company is not infallible, but the market has it priced for perfection.

It is backed by an investment theme that says forget about 2010. This is a dream for any company boss, because it is an invitation to pile all the bad news into this year and really take off in the 2011 financial year.

As a developer, King is also benefiting from the fact the big projects are still going ahead. In all, a perfect mix for a market in the right mood.