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More wins with good clients
https://www.constructionenquirer.com/2022/08/10/kier-pulls-off-contracts-league-double-in-july/
And we're only halfway through the week. More contract wins to come?
wtfau2, that was the big contract announcement today. £400m is a major project. Kier is close to finishing another prison (Five Wells for £253m) and last week Kier was awarded the Glasgow prison build too. Last week saw a load of contract wins and this week has seen a load more including these below. The firm is on a roll. Order book was already up by over 25% on last yr by the end of June but now it must be much bigger. Share price hasn't even moved. Annual report numbers are out in mid-September. Very, very undervalued imo. For once I agree with the brokers on this one, a triple-bagger short term, and maybe five times by late 2023. Here's some of the news this week in addition to the huge prison contract mentioned earlier:
Kier awarded £36M Liverpool school building contract
https://www.constructionenquirer.com/2022/08/03/kier-signs-off-36m-liverpool-school-job/
Kier will build North Lanarkshire’s Bargeddie community hub, which includes the new St Kevin’s Primary School and a community facility
https://scottishbusinessnews.net/hub-south-west-scotland-appoints-kier-construction-to-deliver-st-kevins-community-hub/
Kier awarded £25m Walsall hospital scheme
https://www.theconstructionindex.co.uk/news/view/kier-and-archus-in-for-25m-walsall-hospital-scheme
YORbuild has selected Kier and other firms for its £600m minor works framework:
https://www.constructionenquirer.com/2022/08/01/yorbuild-selects-firms-for-600m-minor-works-deal/
I just read that Kier is to build the new £400m Yorkshire prison....
This is yet another major Government award showing that Kier is vital to the regeneration of the UK via the huge planned infrastructure spend. Now it is a solid, properly run business again (and whatever colour the Government might change to) Kier is perfectly poised to be the beneficiary.
Massively undervalued given its order book, its customer base and its outlook. I'm in.
Btw, @trade67, thanks for all of the updates. That list of contract wins is very impressive, coming as it does after of the major wins mentioned in the trading update. Looks like that 26% increase in orders might keep going up.
Second table on this page (link below) shows the contract totals won for the rolling 12 months prior. These are actual project contracts, not frameworks. Kier is in the top spot, beating sector peer Morgan Sindall by almost half a billion pounds. An outstanding performance imv.
https://www.constructionenquirer.com/contract-leagues/
Kier has paid off all of its covid loans and closed out its KEPS scheme which was seen as some as pushing debt off the balance sheet. Closing KEPS will have meant finding about £50m I think, so the fact that the end of year net debt is also eliminated (the firm has net cash now) suggests that Kier managed to generate a large amount of cash from its profits. It's looking like the September full report will show some very healthy numbers for turnover, profit margin and cash generation. Just seven weeks to go. From memory, I think Kier might even issue the full numbers before the annual report (due on 15th September) so we might get the chance to assess Kier's success much earlier. Either way, the current sp of 75p and market cap of £340m looks way, way too low. Probably a 2023 price/earnings of about 2. I think I said this earlier, but I would expect Kier's p/e to be nearer 10, which is between 3 and 5 times the current share price. Dividend is being rumoured by Peel Hunt (if I read them right) for reinstatement around 2024. Every way I look at this, it looks like a very rare bargain.
Kier has the size and financial strength to flourish in this climate. Many others are struggling:
More than 350 construction firms have defaulted on their COVID loans at least once. Around 2.5 per cent of all the construction firms who claimed COVID loans have defaulted on repayments, which could foreshadow a wave of administrations.
https://www.constructionnews.co.uk/supply-chain/hundreds-of-construction-companies-default-on-covid-loans-15-06-2022/
In these uncertain times, there will be a flight to quality. That's at least partly behind Kier's recent blockbuster contract wins, including many in London imo. Kier is known as a regional construction firm, working across the UK, but the number of London projects which has won recently suggest to me that it is now sweeping all before it in virtually every market.
Been catching up on the news over the last week; hence the updates below. Looking extremely good for Kier in the short / medium / long term.
https://www.constructionnews.co.uk/buildings/kier-chosen-for-69m-london-project-18-07-2022/
https://www.constructionnews.co.uk/civils/kier-bam-jv-lands-navy-dockyard-revamp-19-07-2022/
https://www.constructionnews.co.uk/contractors/kier/kier-order-book-jumps-by-a-quarter-19-07-2022/
https://www.constructionnews.co.uk/contractors/kier/kier-lands-salisbury-flood-defence-22-07-2022/
Now I don’t ever invest in this sector but are the clouds finally going to lift for kier and see some good price movement.They just seem really good value only time will tell so started off with £1000 starter position good luck all.
All of us who have kept the faith are now able to finally feel we are invested in a slick and profitable company with excellent prospects, dividends, and security of investment within a relatively safe haven sector.
It's looking like turnover and profit will be revised upwards. At 26% more orders, even in this inflationary year, the business turnover will be £5bn plus. Kier is saying 3.5% profit. That's £175m. Dividends can't be far away now. 2023 p/e is just 2 and the firm has NET CASH at year end. Did you ever hear of such a thing? Peel Hunt's analyst is right. Re-rating is needed now. I think this will be £3 in 12 months, assuming the war in Ukraine doesn't escalate.
TRADING
The Group's full year results are anticipated to be in-line with the Board's expectations. This reflects a strong operational performance despite inflationary pressure which the company remains confident it can continue to mitigate going forward.
These results also reflect the cost savings realised in responding to the anticipated reduced volumes in the Construction division during the financial year.
ORDER BOOK
Despite political and economic uncertainties, core markets remain favourable. The year-end order book is expected to be in excess of GBP9.7bn, a significant increase of c.26% against the prior year (FY21: GBP7.7bn) reflecting a significant number of contract wins across all divisions.
Long term framework positions, as well as the pipeline and fees from the Property Development division, are excluded from the order book and represent an additional opportunity.
Solid and steady. Happy to have added recently too.
yuri you've missed the point. Kier has just been through three years of cost-cutting, redundancies, rights issue funding and sell-offs of assets. The shareprice values the company at barely the value of the cash injection that went in a year ago (£330m). But Kier has a £4bn turnover and is one of the largest UK construction firms and now has very low net debt - possibly even cash positive. Like you, the market only sees the recent history, not the future profitability even though profit margin has been going up over the last year or two. It's a high-profile business even though it currently languishes outside the FTSE250. If Peel Hunt is right (and I think they are) the update tomorrow will show that the business has fully recovered from its brush with disaster and is worth a great deal more than a market cap of £330m. If half-year profit comes in at £50m (ie a full year 2023 circa £100m) then a market cap of £1bn would give a price/earnings value of just 10. That is still very low and a shareprice of about £2.15, THREE TIMES THE CURRENT SHARE PRICE. So it all depends on what gets reported tomorrow on whether it's a big day, but the potential is clearly there.
It's not like KIE was having profits high enough to justify valuation/m-cap.
I can only see loses so far, even for pre-covid year.
So even with as you say "inflation not having dramatic impact" - there's no reason for a big day, rather just regular update.
Should be a big day for the Kier shareprice tomorrow. Most of the construction firm reports that I'm seeing are showing that inflation has not had a dramatic impact on profits. If Kier is making a profit and continuing to reduce average debt (which is not large now) the market should re-rate the shareprice. As Peel Hunt points out, 2023 p/e of 3.7 is incredibly low. Their analyst is targeting £2 and I reckon that is about right for now. If the Ukrainians continue to hold their own and inflation begins to subside, I see every chance that the shareprice will treble over the next few months. GLA and DYOR.
RedbullRJ; I liked this description of Kier Group. I reckon Peel Hunt's analyst is exactly right. Kier's shareprice has fallen on worries about inflation and the Ukraine/Russian war but now that the latter seems to be heading towards a level of stasis, probably with a frontline which will shift back and forth for a few months before the Russians attempt to settle on taking what they've managed to grab so far, I think we will see some of those worries begin to subside. It's no longer looking like a potential global conflict.
Peel Hunt says that Kier is an “incredible buying opportunity” at 71p. It notes the FTSE All-Share company has de-rated by 45% in the last year to 3.7 times 2023 earnings, despite unchanged estimates.
For me, those are the standout numbers and the right conclusion. Kier is an incredible bargain right now. It was only a few years ago that this firm was paying out £50m a year in dividends. I reckon the rest (below) is spot on too.
Analyst Andrew Nussey believes the improving quality of earnings and free cash flow remain materially undervalued, leading to a 200p target price. He added “Management is delivering, and we believe just continuing to meet expectations should drive a rerating.
“However, we see potential upside risk to 2024 estimates through organic outperformance, as well as from modest bolt-ons. The likely return to the dividend list 2024 is notable, but the strength of the free cash flow could unlock other accretive actions.”
https://www.ii.co.uk/analysis-commentary/are-these-six-fallen-mid-caps-now-good-value-ii524630
When Peel Hunt says 'accretive actions' I reckon several things are possible, like the sale of the old Kier HQ which is a huge estate, capable of being a housing development and probably has price tag of somewhere around £50m by now. Also there was a story doing the rounds recently about Kier buying Tilbury Douglas, the rebranded Interserve construction business, for not much money. Kier's had a chequered history with aquisitions but a low cost merger with Tilbury D might be a good idea if the management teams can incorporate it easily into the Kier universe and reduce back-office costs.
A review of heavily-sold mid-caps has named Future FUTR1.78%, Kier Group KIE 1.69% and Rank Group (The) RNK 1.39% among stocks where 2022’s slide in market valuations appears to have gone too far.
Peel Hunt also includes Grafton Group Shs GFTU 0.90%, Impax Asset Management Group IPX0.53% and Kenmare resources KMR 0.90% after the broker’s analysts picked “six of the best” from this year’s stock market sell-off.
It believes the risks implied by the market on the six firms look excessive on a two-year view.
On Kier, the City firm regards the infrastructure services and construction business is an “incredible buying opportunity” at 71p. It notes the FTSE All-Share company has de-rated by 45% in the last year to 3.7 times 2023 earnings, despite unchanged estimates.
Analyst Andrew Nussey believes the improving quality of earnings and free cash flow remain materially undervalued, leading to a 200p target price. He added “Management is delivering, and we believe just continuing to meet expectations should drive a rerating.
“However, we see potential upside risk to 2024 estimates through organic outperformance, as well as from modest bolt-ons. The likely return to the dividend list 2024 is notable, but the strength of the free cash flow could unlock other accretive actions.”
https://www.ii.co.uk/analysis-commentary/are-these-six-fallen-mid-caps-now-good-value-ii524630