Peel Hunt today reaffirms its buy investment rating on Kier Group PLC (LON:KIE) and set its price target at 1600p .
I missed this amongst the doom and gloom on here, that is some re rating and not the first broker to opine positively of late , given the company track record and recent reports, it is no surprise . Those top ups at sub 945p , looking like a massive missed opportunity for the retired bricklayers.
That report is truly appalling even by today's low standards.
The industry has been awash with cowboys for many years. Apprenticeships and training are dirty words in the building/construction industry. Everybody uses sub contractors, who employ smaller firms, who may sub the work out further, or employ the first guy who says he can lay bricks, fit doors etc. Accountability and control are lost.
Of course if the Councils own Building Inspectors were doing their job properly many of these faults would have been noticed. Unfortunately, if my experience on house extensions is anything to go by, they are hardly ever there, rarely pay surprise visits, don't check the work against the plans, and are often hoodwinked.
Perhaps, it's just as well I sold up a few days back.
Report slams Kier over defect-riddled leisure centre
Extract from article below
"A leisure centre designed and built by Kier contained so many defects that questions must be asked of the construction industrys professionalism and competence, according to a report commissioned by the client"
I would extend this discussion to the price paid for other acquisitions in relation to returns on investment.
Not sure the markets really concern themselves with the fundamentals unless the proverbial hits the fan, so hopefully the share price will continue to rise to target levels and those smart enough to have bought in recently can make a bit of dosh before getting the hell out until the next buy in opportunity.
There was a time when Neil Woodford investing in a company was seen as a very encouraging sign. Unfortunately his performance in the last couple of years has been anything but stellar. Hopefully he has at least got this stock pick right.
Benarfa, Having looked into this and accepting that in reality dividends are not covered by earnings (funded through reserves or debt) it occurs to me that barring, disposals, asset reduction or a rights issue it's going to take a long long time for the benefits (if any) of the acquisitions to work through. Obviously the dividends are welcome but unfortunately have been more than offset by the reduction in the share price. I note your comment regarding net debt reduction. Disposing of the low margin contracting division as mentioned on here before might be sensible.
Thanks anyway, I'll do some research of my own on the adjustments, must be some detail somewhere. I'll bet that drop in the Dow today won't have done any good for the pension liabilities of these firms.
The HL figures in my previous post here been lifted directly from Kiers published and audited financial statements. To state the obvious you either believe what they say or you dont. Pay your money and take your chance - or just keep it in your pocket.
That is a fair point. In recent years, due to the amount of business restructuring by Kier, the financial reporting can only be deciphered by detailed analysis. By "business restructuring" I mean acquisitions, sales of business divisions and closures. The results you have posted are not reflective of the ongoing business, which is why the company prepares an adjusted earnings per share figure based purely on that ongoing business. And that figure has risen steadily to over £1 in 2017, of which about 65p is paid in dividends.
So assuming you are prepared to believe the figures presented there is a fairly profitable underlying business here. I am an accountant so am fully aware of the tricks that can be used in such presentations! The true test will come when the provisions for closures etc have wound out and the truth of the business is starkly revealed.
In the mean time the net debt figure over the last 4 years has reduced from £200 million to £146 million as at 30th June 2017. For true comparison I am talking about year end figures and not interim as the company has said the net debt stated in the December 2017 accounts will reduce by 30 June 2018.
Please understand that, by no means, am I suggesting that your point is invalid - far from it. We will only know for sure what this business looks like when the fog related by the restructuring program has been lifted - if it ever does!
It is, to some extent, the Carillion factor. There is fear of this particular sector in the market at present.
The Kier net debt is only £239 million (and is expected to reduce substantially by year end). In addition the pension deficit is negligible. The size of these two values were significant markers in Carillions profile. However check out Kiers accounts and you will see that they are working on tight margins. And on high value contracts you do not much to go wrong in order to turn potential profit into loss. Also the balance sheet has a large amount of goodwill on it due to several acquisitions in recent years. Deduct the goodwill and there isnt any meat on the bone left in the net asset value.
Despite anything said above, I do I think these boys know what they are doing. That is just an opinion of course. They continue to churn out profits (and pay dividends) so I will hold my shares for the time being.
Thanks for the compliment re my trading skills Prezza, however, I am no guru.
You said it yourself "Kier is ideal for trading, sp moves in good set ranges and low spreads."
I have just bought back in at 996p, but may hold for the dividend this time.
By all means keep your main holding, but what have you got to lose by buying a few at these low prices, and selling on any rises?
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