RE: Bargain buying opportunity9 Jun 2020 00:31
Exert from motley fool.
I believe the best place for you to look at is the governmental funding of public projects. This sector remains a growth industry during a recession with the intent to stimulate the economy.
For example, the company that sources its revenue from government contracting could help reduce its dependency on the private sector. Therefore, I think risk to market exposure could be minimised, and the stock may be a lot more resilient.
Kier is contracted to build the HS2 high-speed rail enterprise, bringing in £250m of revenue per annum over the next six years.
Despite its past struggles, I think Kier seems to be turning itself around. The market wants to see that expenses, as well as debt, are under control. In my opinion, Kier is making all the right sounds with its improved balance sheet.
The introduction of its cost-cutting programme is expected to reduce inefficient costs of up to £65 million. Meanwhile, the company’s underlying pre-tax margin grew from 1.5% to 1.7%, at the end of this year.
I think the announcement of work across an 80km section of the new high-speed rail link could present long-term benefits for Kier.
Just over 65% of Kier’s construction work is sourced through long-term frameworks. I think this is a clear indicator of the company’s success.
In my opinion, the near-certain generation of cash sourced from public construction projects could improve the earnings outlook for Kier in a time where private construction starts to dry up, holding Kier is investing in a long-term view. Buying now could reap rewards.
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