Sunday, June 27, 2010

Questor share tips: Ignore traders short-termism and buy Amec

By Garry White, Questor Editor Published: 7:01AM GMT 05 March 2010




QUESTOR: AMEC is wash out with money and still display expansion

Questor says BUY

The one word that spooked the markets in the proclamation was that "the trade sourroundings will sojourn challenging". This caused the shares to tumble about 8pc at the open yesterday as the marketplace took the perspective that the association was articulate down this years prospects.

However, it can frequency be a warn that markets are severe and there was essentially most to be certain about the statement. The association has an sequence book of �3.2bn and it expects this to go on to grow. With revenues station at �2.53bn in 2009, this represents about fifteen months of work.

The association additionally pronounced that it approaching this sequence tube to go on to urge as the year progressed, so Amec contingency be well down the line in discussions for new contracts. However, these new orders are not approaching to strike the tip line in 2010, with the benefits seen from 2011 onwards. This is approaching to be the source of the beating and stirred the share cost fall.

The association did contend that it had seen signs of a pick-up in the marketplace in the initial quarter. Significantly, Amec reliable that it still approaching to strike the domain aim subsequent year. The organisation is targeting an gain prior to interest, taxation and amortisation (EBITDA) domain of 8.5pc subsequent year. In 2009, the organisation managed to enlarge this domain magnitude by an considerable 110 basement points to 8.2pc. It has additionally set a aim of some-more than doubling gain per share to at slightest 100p by 2015.

In the 12-month duration to Dec 31, pre-tax enlarge came in at �203m compared with �306m in the prior year. The sum division for the year was 17.7p, a 15pc year-on-year increase. The last remuneration of 11.6p will be done in May and the shares go ex-dividend for this remuneration on May 19. The shares are agreeable 2.5pc.

When Questor spoke to Ian McHoul, Amecs arch monetary officer, yesterday, he was bullish on long-term prospects for the group. He remarkable that there was lots of wake up in the zone in that the organisation operates, with the event to get in on a series of oil projects at the early scrutiny stages something that could lead to poignant long-term projects for those where successful discoveries were made.

The organisation had a net money on all sides of �743m at the finish of the year. This has led to a little analysts observant that the change piece is emasculate and under-leveraged. Mr McHoul pronounced that the companys main plan for the money was to have vital acquisitions at the right price, but he would cruise returning it to shareholders around an earnings-enhancing buy-back in twelve months should no befitting purchases benefaction themselves.

He believes that the expectations opening in between the cost at that commercial operation owners are rebuilt to sell and the cost at that intensity acquriers are rebuilt to buy is closing, so an enlarge in M&A wake up opposite the marketplace is likely.

The shares are trade on a Dec 2010 gain mixed of 14.4 times, descending to 12.5 in 2011. However, if the money is nude out from the valuation, the organisation is trade on an ex-cash mixed of about eleven times, that looks cheap.

Questor believes that the long-term commercial operation box for Amec is total and yesterdays falls have presented a shopping opportunity. The shares were initial endorsed at 531p on Jan 8 last year and the shares are up 44pc compared with a marketplace up 23pc. Buy.


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