FGE - Forge Group: mining services/construction

[thereslifeafter87]

It has been a while since I've introduced a stock to sharetrader, but here is one that I very much like the look of.

FGE listed recently as the result of a demerger.

It is into construction and engineering services for the resource
industry, as well as civil works/infrastructure.

It is priced similarly to PDO (another cheap mining construction stock), but has the advantage of a track record of profitability and management that has proved that it can integrate acquisitions with the recent Cimeco acquisition.

It has a strong balance sheet with little debt so plenty of scope for EPS accretive acquisitions. The company has announced they are in due diligence on at least one opportunity.

Management is forecasting strong growth in profitability.

Profit this year was impacted by demerger costs and restructuring costs, and is set for a big turnaround next year which should see the stock looking very cheap.

Cashflow was strong and was used to pay down debt and pay dividends.

Market cap = $45mill
Historic P/E (normalised) = 12
Forward P/E (est): 7-9

The company has recently announced $35 million of new contract wins that should see its revenue lift to $100mill plus, with a correpsonding increase in earnings. Any eps accretive acquisition that is announced will see further value added for shareholders, and the company is well capitalised to pounce on any opportunities.

The stock jumped from 75 to 90 yesterday on the new contracts announcement, but has settled back into the low 80s.

Your thoughts are appreciated.

[macduffy]

I had a look at their recent annual report and was impressed by its clean, lean look! No glossy photos for this co, in fact its hard to get much idea of what sort of a year it had. I know its a recent demerger situation so the reported eps of 1.5c doesn't mean much, nor the historical P/E of around 50 ( before "Normalisation").
The web site wasn't very informative either, but then there hasn't been much to report so far, apart from the $35m contract won in Ghana.
Looks to be conservatively financed and comes from a solid history apparently, but I w ould need a lot more info before I could invest with confidence.

[thereslifeafter87]

Historical non-normalised PE is 16. Where do you get 50 from?

[macduffy]

I was working off EPS 1.5c, SP 83c.
Could have made a mistake - would not be my first - I bought Reid Murray in the 1960's !

[thereslifeafter87]

They have used a low number of shares in the EPS calc due to it being calculated on a weighted average with a lower number of shares outstanding before the demerger.

Historic NPAT is $2.67m. Market cap is $45m.

[macduffy]

They have used a low number of shares in the EPS calc due to it being calculated on a weighted average with a lower number of shares outstanding before the demerger.

Historic NPAT is $2.67m. Market cap is $45m.

?? Wouldn't a lower number of shares result in an inflated Earnings per share number?

Looking to the future, what do we know about their ability to operate profitably in West Africa? The $35m contract is a big chunk of their work.

[thereslifeafter87]

The EPS is listed in dollars on the annual report - not cents. so $1.50 not 1.5 cents.

[thereslifeafter87]

http://www.asx.com.au/asxpdf/20071029/pdf/315fpq2tg5325g.pdf

Forge group announces $18m of contract wins in its commercial building division.

[thereslifeafter87]

This stock has crept up over the last few weeks from around 80 cents to 101 cents.

I hope some sharetraders jumped on board at the lower levels.

However, despite its rise, this stock is still on a forward PE of less than 10x, not counting any earnings accretive acquisitions that it may make. If you take a look at the balance sheet, there is plenty of scope acquisitions to be made.

[thereslifeafter87]

Great announcements out today from FGE.

First, they have announced a new acquisition which will double their annualised revenue, and second, they have given guidance of $12.5m NPAT for calendar year 08.

There is still significant scope for this company's forward PE to increase to become in line with industry norms.

[mamos]

Bought a few of these on Thursday. Wasnt expecting the acquisition but the earnings upgrade was hinted by the company in previous announcements.

[tommy]

Well done TLA87 for picking this one up on the cheap in October!

Must admit to buying into FGE along with SXE lately since the acquisition announcement last month, which I believe is an excellent undervalued stock with good potential and strong balance sheet IMHO.

As my 2008 stock competition entries reflect (FGE, SXE, ZGL), I expect mining enginnering companies to do well in 2008 as any weakening in commodities prices will make mining companies "dig more volumes" to compensate for the fall in price. If commodities boom continues, what da heck who cares, mining engineering companies will continue to laugh anyway :-)

Win-win situation, if you know what I mean!

So FGE is another low risk high return play, although whether or not the "gap" will be filled or not is anyone's guess:

http://asx.netquote.com.au/charts.asp?code=fge&x=25&y=11

[Summary]
Forge Group Limited is an Australia-based company engaged in the construction industry. aiConstruction Limited is the parent entity. aiConstruction Limited is the result of the merger of the businesses of Webb Construction Pty Ltd, Quality Piping and TVT Engineers Pty Ltd while Cimeco Pty Ltd. (Cimeco) acquired the business of the south west construction company Devaugh Pty Ltd. The merged businesses of aiConstruction Limited and Cimeco provides multi-disciplinary project management and construction services, specializing in tank construction, structural mechanical and piping installation, fabrication, civil contracting and commercial building construction. On September 5, 2006, the Company acquired the entire share capital of Cimeco Pty Ltd.

Company website:
http://www.forgegroup.com.au

http://www.thewest.com.au/default.aspx?MenuID=159&ContentID=49037

Forge forges ahead with aquisition
30th November 2007, 15:00 WST

Shares in Forge Group Ltd rose 31 per cent on the Australian Securities Exchange today following the acquisition of Nedlands-based Abesque Engineering and Construction in a cash and scrip deal that could be worth over $26 million.

Forge will acquire Abesque for $10 million and the issue of 14 million shares, with up to 3 million more shares to be issued should Abesque record an EBIT of over $6 million in the current financial year.

In an announcement to the Securities Exchange, Forge said the company would be an immediate fit with its major subsidiary Cimeco, itself formed from the merger of Bunbury construction firm Devaugh and the construction assets of Perth’s aiLimited.

Abesque currently provides engineering services to Portman Iron Ore’s Koolyanobbing plant upgrade and Jabiru Metals’ Jaguar Base Metals project.

Company managing director Greg McRostie will also join the board of Forge under the deal.

Forge shares closed at $1.40 today, up from the previous day’s closing of $1.07.

[Huang Chung]

Tommy, '87.....

One of my two holdings (PDZ) has commissioner Abesque Engineering to design their new processing plant.

There is a bit of info on Abesque in PDZ's BFS announcement from October, for which I've added a link.

http://stocknessmonster.com/news-item?S=PDZ&E=ASX&N=378731

[wns]

Up 11% from $1.35 to $1.50 today on no news (at time of writing), and lowest priced seller at present is $1.80.

Good day for FGE holders when the rest of the market is a sea of red.

[tommy]

FGE was the only green stock in my holdings list! Can someone dump this stock so I can pick up more please? Anyway, acquisition of Abesque Engineering & Construction Ltd via the acquisition of Alanthus Nominees Pty Ltd has been approved today, yay.

[soulman]

Just imagine that. I pick FGE in the comp but was waiting for the share placement price before I get in. Tempted at $1.28 and also see a lot of buyers. Now, it's ahead. The best stock performer in the last month or two.

I thought the placement might be in the low $1 to $1.10. Still don't know yet?

[tommy]

Hi all,

Does anyone know when FGE half year results are due to be announced?

ANG announced pretty good results recently so I am hoding FGE would perform well too, being in da same sector...

Since the gap closed, support seems to have been found at around $1.10, which seems damn cheap.

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Arfg&draw.x=54&draw.y=17

Am I the only one looking forward to forge ahead with this unloved stock?

[Footsie]

HI tommy

I think they are around the 26th... but not 100% sure.

Under the radar this stock with no insto holdings.

This stock has a lot of potential and is very cheap at this price.

[tommy]

Thanx footsie,

Stock price has been falling on low volumes, so I am quite eager to pick up more. hopefully below a dollar...hehehe

[macduffy]

I've been watching FGE on and off since last year when thereslifeafter 87 made a good call on it at 90c.
Didn't buy any but I agree now that it looks the goods. May be tempted at these levels.

SP has been down, along with all other companies involved with mining services/construction - NOD, BKN,SWK,RCR etc.

Would be interested in 87's thoughts.

:)

[soulman]

Still no announcement on the capital raising. Not buying until they have announce the price.

Still, the market these days command higher returns because cash rate is at 7% and maybe 7.5% by June this year.

Looks good value at anything less than $1.

[tommy]

Still no announcement on the capital raising. Not buying until they have announce the price.

Still, the market these days command higher returns because cash rate is at 7% and maybe 7.5% by June this year.

Looks good value at anything less than $1.

What capital raising announcement? When did they say they were gonna raise capital?

[soulman]

Sorry Tommy. Missed the 1st Feb announcement. Action 4 said a capital raising of no less than $7 mil was a pre-requirement to the acquisition. That was scrap probably because their adviser notice a cap raising in this environment would require subs discount. Instead NAB comes to the rescue.

No sure about this Abesque. I live in Perth but have not research enough on FGE.

Just want to know about their dividend policy before making an investment. Their result should be out soon.

[thereslifeafter87]

If I had more cash I would be buying these guys. Looking extremely cheap, with a solid forward order book. I am also still medium term bullish on the resource sector, so IMO these guys will continue to do well for a while yet.

[tommy]

Contract announcement. WTF happened to half year results?

Award of Contract – Hillgrove Copper

The company’s wholly owned subsidiary Abesque Engineering & Construction Ltd (AEC) has been awarded the Project Definition Stage (“PDS”) for the Kanmantoo Copper Project for Hillgrove Copper Pty Ltd. The agreement between the parties is for the performance of the PDS works which are precedent to the Process Plant Design and Construction Contract (“the Contract”). Whilst no obligations arise on either party under this agreement including an agreement to enter into “the Contract”, it is the intention of both parties to enter into such a contract at the completion of the PDS.

Hillgrove’s Kanmantoo project is located 60km from Adelaide within the Kanmantoo Trough and Gawler Craton and is recognised among Australia’s most prospective regions for copper and gold.

With first production planned by mid – 2009, Kanmantoo will be a 2Mta operation producing 17,000 tonne of copper and 8,000oz of gold per annum.

The award of this contract stage is particularly pleasing given the potential scale and exposure that such an important project may bring to the company so soon after the acquisition of Abesque.

Hillgrove Resources (ASX: HGO) is an Australian resources company listed on the Australian Stock Exchange focused on developing its South Australian base and precious metals projects.

[Footsie]

yeah.... oh well they have a few days to go....to report
i'm looking for big things from FGE

i'd like to know the $ value of that contract too.

[tommy]

FGE up 6% today, chart seems to show indications of downward trend reversal despite low volumes. (that said, don't trust the charts in this market 100% because everything goes down the toilet when DOW sneezes!)

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Afge&draw.x=0&draw.y=0

Is it finally da time to FORGE ahead? SWK posted healthy increase (as did ADY), so engineering companies are obviously doing well this year. Fingers crossed for FGE too, but man, how long do we have to wait until the half year results?

Still holding Footsie and TLA87?

[Footsie]

im in for the ride tommy

FGE is set to breakout iMHO

[thereslifeafter87]

FGE is a large percentage of my portfolio along with ZGL in a similar sector.

I also have a smaller holding in ANG.

These three stocks are part of a group of maybe 5 companies (on my watchlist of 40 or so) in the resource services sector that are in positive territory over the last six months or so.

In my opinion, they will continue to outperform. ANG and ZGL have both released strong results, and I am sure FGE will follow suit.

[skeet]

Up almost 7% today, up 24c this week since monday. Odds on to bet its january highs within a couple weeks.

[Footsie]

Welcome skeet

yup result must be tomorrow - so let hope its a good one!

[Footsie]

Quite a complicated letter to decipher.

However, NPBT is $5.30m (before options) vs the $4.5m quoted in November.

So still on track to post $12m NPBT for the full year.

[tommy]

Yo Footsie,

NPAT increased 140%!
Operating cash flow increased massively from $4,966,085 to $7,841,965!
Has almost 6 million in the bank!

Great results!!!

[thereslifeafter87]

For some reason the market doesn't like it.

Might have to do with commentary around the need for prudent capital management due to funding the acquisition with debt. Looks like that cash will be used to fund activities.

[tommy]

WTF... FGE -13%... stop loss triggered and got booted out... totally shocked :-(

[soulman]

Sorry Tommy. Missed the 1st Feb announcement. Action 4 said a capital raising of no less than $7 mil was a pre-requirement to the acquisition. That was scrap probably because their adviser notice a cap raising in this environment would require subs discount. Instead NAB comes to the rescue.

No sure about this Abesque. I live in Perth but have not research enough on FGE.

Just want to know about their dividend policy before making an investment. Their result should be out soon.

Results was complicated as you pointed out Footsie.

Dividend was nil and no policy was outlined on future dividends. No sure about this. I'll wait and see.

[thereslifeafter87]

They won't pay a dividend as they need the cash for growth.

[Footsie]

bit of an overreaction.... they actually beat forecasts

and are well on track for full yr numbers... plus that recent contract win

I think if they'd done a proper half yr "marketing" presentation like most firms it would have been better than a letter.

In summary I dont get this market!!! It's driving me nuts... im starting to lose some faith in my ability to pick stocks
I cant get anything right lately

[soulman]

Just have another read, the last paragraph was the worry. Working capital requirement. FGE might have to raise capital after all if their banker NAB decided that credit risk are too much. Banks must be vigilant with their lending policies now since the corporate collapsed of Australian companies.

Also Footsie, since 28th of June 2007 to now, FGE is probably one of the best performers in the Australian sharemarket so seeds investors would be happy with their performance, nearly doubling their money in 8 months.

FGE is a new entity that only listed for 8 months so the SP has leaped ahead of itself. They don't have any proven history and management credibility, along with Abesque. Forecast might be a bit too stretched if things don't work out.

I will stay out for now as any future capital raising would likely come at a discount.

[Footsie]

Compare FGE to BYL another small WA construction coy

FGE. BYL
m/cap 60m 130m
EPS 1st hlf 6.93c 2.68c
Price 1.08 1.18
FGE - no insto ownership yet - under the radar.
BYL - widely held.

Speaks for itself.

[soulman]

Hi Footsie,

I have a different perspective to that.

BYL have contracts with blue chips client while FGE (still early stage in life as a public coy) have contracts mostly in Africa and whatever the Abesque business brings.

Blue chips client are likely to pay their bills and are highly cash-up compared to minnowed clients (AED as an example).

BYL announce a 2 cents dividends and forecast 4.25 cents for the year. FGE did not announce a dividend and did not say anything about their dividend policy = uncertainty in that field.

Currently, I'll rather buy BYL than FGE.

[Footsie]

and obviously the market agrees with you....

FGE's lack of disclosure and bad PR doenst help

[skeet]

Down 12% already today...

[thereslifeafter87]

Hi Footsie,

I have a different perspective to that.

BYL have contracts with blue chips client while FGE (still early stage in life as a public coy) have contracts mostly in Africa and whatever the Abesque business brings.

Blue chips client are likely to pay their bills and are highly cash-up compared to minnowed clients (AED as an example).

BYL announce a 2 cents dividends and forecast 4.25 cents for the year. FGE did not announce a dividend and did not say anything about their dividend policy = uncertainty in that field.

Currently, I'll rather buy BYL than FGE.

FGE has only the one contract in Africa, and it is pre-paid for the work it performs there.

[Footsie]

Well it is cheap.

[mark100]

I actually thought the result was ok. As at 31 Dec they had net cash of $3.6m although they would have paid out $10m since balance date for the acquisition. Still, thats hardly a high debt load relative to earnings.

FGE is probably suffering a bit compared to BYL as BYL was floated through a broker and therefore has some after-market support. Also the lack of dividend doesn't help but if they make the forecast profit and cash flow remains solid I don't mind.

[The Big Ease]

i found this stock doing a "value" based search on etrade and sure enough the folk at sharetrader are all over it!

anyone care to predict where the price is trending and some potential milestones to look out for? thanks in advance.

[macduffy]

SP still losing steam. I've got it on my watchlist but won't be buying unless/until there's signs of an uptrend.

:cool:

[Footsie]

macduffy has the tide turned for FGE?

confirmed EPS guidance and announced two new contracts....
Looks good

[macduffy]

It certainly looks promising. Maybe the tide has started to turn.
I've been loading up on junior oilers lately so would need to sell something to accommodate FGE.
Another tough decision!

;)

[thereslifeafter87]

Earnings guidance released today.

A mixed result - earnings will either be slightly above or 15% or so below guidance, on revenues $20m less than guidance.

What is good to see is that FGE's margins are stronger than guidance - a great result considering the cost pressures experienced by constructors like RCR.

PE is now somewhere between 5 and 6, depending on the tax rate on its Ghanaian earnings.

[Footsie]

TLA87 are you still holding....

I'm still there...well under water

I think the margin improvement is very good - as that is where the other construction companies have failed.

the drop in revenue is no issue to me as that's just a contract timing delay.

What i cant understand is why is there a 2m variance is earnings projection despite the fact that year end accounts have now been done.
odd

anyway, they were up yesterday so the market was obviously comfortable with it.

I will continue to hold.

[thereslifeafter87]

I think it's around timing of the completion of a contract.

I'm still holding, now underwater and well off the highs :-(

If they continue to increase earnings we should see some price appreciation, but right now the market is saying "so what" to it achieving its forecasts and looking forward to the next few results and how sustainable earnings are.

[COLIN]

Some recent comments under "Austin Engineering (ANG)" for anyone interested.

[Footsie]

I sold this near the bottom

idiot.

[Sauce]

Ok ok,
Surely time to res-erect this thread. Especially after further earnings upgrades today!

Thought I would re-post this here from ANG thread to keep on topic

FGE. Forge Group. Same sector. Incredible fundamentals. Double digit margins, increasing year on year. High ROE, very little debt. Supurb track record of revenue and earnings growth.

The best part - they have recently announced a forecast of 100% + increase in earnings for interim result due this month and a record forward order book north of $250-300m revenue which will put them in good stead to have another record half.

They are working on some big big projects - their competitive advantage seems to be this "one stop shop" service where they project manage, engineer and build and things for the mining industry.

Current PE around 9 and forward PE (assuming second half is say, as good as the first half. The first half is practically assured and in the bag with their recent announcement) of like 5 or 6 max.

Margins in the region of 12% - clearly have good cost control and they seem to operate with comparatively low overheads.

It looks very cheap for a well managed and fast growing engineering company. I would say this company is likely to well outperform ANG in the short term as the market wakes up and realises its too cheap on current earnings guidance.

Im not yet convinced its a better company than ANG - but if the last few years and recent announcements are concerned it could well have the potential to be the next Worley Parsons if it keep growing at the same pace it has been. However in my opinion ANG is almost a sure bet to double its revenues in the next 2-3 years - whereas FGE is definitely more of a wild card, but potential to do even better than that.

My suggestion: Read all the annual reports since they listed, and all the announcements and presentations for the last 12 months. You will be suitably impressed.

I hold and I am still accumulating FGE.

Cheers

[Sauce]

FGE

Further earnings upgrade today - forecast NPAT up 184% on previous corresponding period. 21% increase on Nov forecast.

Also note the upbeat comments about forward orders.

If your not on, get on. My recent large top up at $1.90 was a bit of a fluke - got to love it. Tomorrow will be interesting.

Cheers
Sauce

[drillfix]

FGE

Tomorrow will be interesting.
Cheers
Sauce

Whats your target on this stock sauce, do you have one?

[Sauce]

Whats your target on this stock sauce, do you have one?

Short term: I think a current PE of about 10 would be consistent with its peers - its trading on about that on historical numbers. However, clearly with current earnings guidance the forward PE is rediculously low. Who knows how the market will perceive the value but even $3.50 would be very conservative if they can keep this up.

Long term: With their track record and their confidence - check the chart, and earnings for last ten years, of WOR and see what it did. Sure that's as optimistic as it gets but who knows...... Even the directors probably don't know and as laypeople we are so far behind the 8 ball its not funny. But the stats, figures and commentary point to good things to come - I won't be selling my shares at $3.50 without very good reason that's for sure.
Cheers
Sauce

[Sauce]

P.S. I think this is one of those rare instances where we can literally see a re-rating happen in slow motion with every ounce of opportunity in front of us. The information is there, the company is screaming at everyone to wake up.

Take notice.

And we are not talking speculative "wont be long now, has to happen, its in the ground, so undervalued" we are talking cash money. Proven positive cashflows streaming into the coffers and increasing by 100's of percent each year. There's a big difference!

[COLIN]

FGE

Further earnings upgrade today - forecast NPAT up 184% on previous corresponding period. 21% increase on Nov forecast.

Also note the upbeat comments about forward orders.

If your not on, get on. My recent large top up at $1.90 was a bit of a fluke - got to love it. Tomorrow will be interesting.

Cheers
Sauce

Sold some underperformers this afternoon and, just as I had tossed up between adding to my ANG or to my FGE, deciding on FGE, lo and behold their profit upgrade hit the screens. I immediately hit the "Buy" button, at slightly above the then price of 213, but by the time the order had been processed the price got away on me and I had to chase it all the way up to 228, which did annoy me. It closed at 235 but I hate depriving myself of gains, needlessly, through poor timing! A hotter button would be wonderful.

I agree with you, Sauce, that there should be a lot of mileage left in this little baby, yet. Their story is a good one.

[drworm]

Well done Sauce and Colin. I added some more to my holdings yesterday also (~$3.31)

This is a pretty good bet. 21% upgrade onto of their 135% guidance is absolutely huge.

Plus, they might be hinting at something in their initial guidance (figures below in terms of contract value):
Top 5 projects for 1st Half FY10: $10m, $20m, $11m, $10m, $10m
Top 4 projects for 2nd Half FY10: $40m, $35m, $15m, $22m

Colin, I think you definitely made the right choice with adding to FGE. Although I am a fan of the ANG business, after doing some profit calcs with stock dilution I think they'll be hard pressed to post any EPS growth for the next two years. The high AUD will not help also.

[Corporate]

I've had a quick look at FGE. Looks very solid. I like the high margin, low debt and continued growth in NPAT.

Today might be a good day to pick up some cheaply...dow down 200+ points.

[Sauce]

Well done Sauce and Colin. I added some more to my holdings yesterday also (~$3.31)

This is a pretty good bet. 21% upgrade onto of their 135% guidance is absolutely huge.

Plus, they might be hinting at something in their initial guidance (figures below in terms of contract value):
Top 5 projects for 1st Half FY10: $10m, $20m, $11m, $10m, $10m
Top 4 projects for 2nd Half FY10: $40m, $35m, $15m, $22m

Colin, I think you definitely made the right choice with adding to FGE. Although I am a fan of the ANG business, after doing some profit calcs with stock dilution I think they'll be hard pressed to post any EPS growth for the next two years. The high AUD will not help also.

Hi drworm

Clearly FGE is better value on a dollar for dollar basis with more short term upside.

But I would love for you to post your numbers on ANG. 2 years without EPS growth is a monster call considering the expansion they are currently undertaking. Sure their upcoming interim results will be fairly flat taking dilution into consideration - which the market already knows - but the company clearly believes it will achieve growth in the second half.

Beyond FY10 You would have to disagree with the companies own commentary on the South American potential and the likelyhood of success of their expansion into JEC and re-introduction of Westech (we all know how well Westech introduction went in Aus) plus impact of new production facilities they are building this year, brazil etc.

Don't forget this company grew EPS +27% during 08/09 when most of the engineers had a shocker of a year and have said many times that forward orders are picking up.

I would say even the directors couldn't come close to accurately predicting their EPS even for second half let alone two years out of course but they have announced forward orders improving significantly since the lows of the GFC.

Woops now Ive moved the FGE discussion to the FGE thread and here I am raving on about ANG. heh. Anyway I would love to hear your thoughts and analysis and see your numbers on ANG earnings Drworm.

Cheers
Sauce

[Corporate]

Sauce I'd be really interested in the other stocks you invest in or have on your watchlist?

I am really liking the look of FGE. And I am re-considering why I'm looking at shares like NGE, CUE and VPE when for similar market cap you can buy FGE.

[Sauce]

Sauce I'd be really interested in the other stocks you invest in or have on your watchlist?

I am really liking the look of FGE. And I am re-considering why I'm looking at shares like NGE, CUE and VPE when for similar market cap you can buy FGE.

High corporate thanks for your interest.

I wouldn't personally own those companies. Because of lessons learned the hard way I only like businesses with runs on the board and clear growth path.

For something totally different:

I like RYM on the NZX - Ryman Healthcare - They build and operate Retirement Villages in NZ. It must be the most boring stock compared to all the specs, miners etc and consequently never discussed anywhere online, but it will continue to provide 10-15% annualized returns for the foreseeable future with almost utmost certainty. its not exactly undervalued but who cares, 10 -15% compounding is enough to make you very wealthy over a lifetime. No excitement or magic though.

Disc. Own.

have you read The Intelligent Investor by Benjamin Graham Corporate? It was someone on this forum who suggested it to me and I must have read it four times now - its very relevant reading in the current economic climate.

[Corporate]

High corporate thanks for your interest.

I wouldn't personally own those companies. Because of lessons learned the hard way I only like businesses with runs on the board and clear growth path.

For something totally different:

I like RYM on the NZX - Ryman Healthcare - They build and operate Retirement Villages in NZ. It must be the most boring stock compared to all the specs, miners etc and consequently never discussed anywhere online, but it will continue to provide 10-15% annualized returns for the foreseeable future with almost utmost certainty. its not exactly undervalued but who cares, 10 -15% compounding is enough to make you very wealthy over a lifetime. No excitement or magic though.

Disc. Own.

have you read The Intelligent Investor by Benjamin Graham Corporate? It was someone on this forum who suggested it to me and I must have read it four times now - its very relevant reading in the current economic climate.

Hi Sauce.. yes I have the Intel Investor on my self I just haven't had a chance to read it yet. It's on the list :-)

Why do you like RYM so much? Seems that they aren't that profitable. Stripping out fair value movements on investment properties they only made circa $8m from operations in the last half.

Interested to hear your thoughts?

Cheers
C

[Corporate]

Another thing to like about FGE is the registry. The top 20 own 56% (as at August last year).

[Corporate]

hey guys, does anyone know why FGE's tax expense is so low?

I see that in note 4 of the annual report there is $4.2m of exempt income (permanent difference). Anyone know what the story is with this?

[COLIN]

I am really liking the look of FGE. And I am re-considering why I'm looking at shares like NGE, CUE and VPE when for similar market cap you can buy FGE.

Corporate: If its any comfort, your thinking is the same as mine. I got rid of my CUE and VPE exposure some time ago, and have no regrets. And energy stocks, in general, aren't exactly the most promising of areas to be dabbling in, in the current climate.

And Sauce: For the record, I also hold RYM (NZX) as a core stock.

[Corporate]

Bugger - trading halt - relating to significant corporate activity. I was going to buy some FGE early this week!

[COLIN]

Bugger - trading halt - relating to significant corporate activity. I was going to buy some FGE early this week!

But is it positive or negative? If they are trying to gobble up something that may be considered a bit too ambitious for their size/resources, for instance, the market might react badly? Just thinking aloud.

[Sauce]

But is it positive or negative? If they are trying to gobble up something that may be considered a bit too ambitious for their size/resources, for instance, the market might react badly? Just thinking aloud.

Almost certainly anouncement of JV

Cheers
Sauce

[Sauce]

“Nevertheless, as a result of the scale of opportunities being
presented ……. the Company is actively seeking a larger
international or national partner to assist with this expected
growth”

[soulman]

The word 'concerning' instead of 'regarding' a corporate transaction. See how a word can set fires.

Both words have similar meaning but 'regarding' is more soothing.

[Corporate]

guys if you not in this share take a serious look. forward PE of 7, Growth stock, no debt, lots of cash, and full year guidance of $28-30m. I think they will beat it.

not much time now but will post over the weekend.

I'm in at 2.70 which was yesterdays high.

[drillfix]

guys if you not in this share take a serious look. forward PE of 7, Growth stock, no debt, lots of cash, and full year guidance of $28-30m. I think they will beat it.

not much time now but will post over the weekend.

I'm in at 2.70 which was yesterdays high.


Well corp, looks like your into a good position there. A choice to take a 10c profit or let it run hey :P

[Corporate]

Well corp, looks like your into a good position there. A choice to take a 10c profit or let it run hey :P

Yeah it did cross my mind. I'm only up $750 at the moment so I don't like to cut it short to early.

[drillfix]

Yeah it did cross my mind. I'm only up $750 at the moment so I don't like to cut it short to early.


Hahaaha, Love it corp. Only up $750 for the day on a trade, sheebers times are getting tough there hey :)

Well, good on ya there all the same corp, to which ever profit you choose. Key point is that its nice to be in such a position, but it may also help to check out the indicators to see what strength or weakness lay a head potentially (as you probably know though).

[Corporate]

Hahaaha, Love it corp. Only up $750 for the day on a trade, sheebers times are getting tough there hey :)

Well, good on ya there all the same corp, to which ever profit you choose. Key point is that its nice to be in such a position, but it may also help to check out the indicators to see what strength or weakness lay a head potentially (as you probably know though).

Ah ha, I'm in for the big money drill. Up again today :-)

[Corporate]

Look at the depth. This goes to $2.90 tomorrow if the dow behaves and $3+ in the near future.

[Corporate]

Alright,

Fully diluted FGE is sitting on a forward PE of 8.

No debt

Lots of cash in the bank

Fully loaded order book

History of smashing half year and fully year guidance

great margins

JV with Clough

Recent project wins

Moving into providing more services to the Oil and Gas, and booming LNG industry

Conservative PE of 12 puts FGE at $4.42 per share.

Don't wait until the market picks up on this story. At $2.93 this is low risk compared to some of the resource/oilers out there.

[Footsie]

how can one buy a stock when one saw it at 25c and ignored it.............

[Sauce]

how can one buy a stock when one saw it at 25c and ignored it.............

Didn't you sell out at the bottom Footsie? I remember reading you post that somewhere and thinking then that you should buy back in regardless - and that was when the price was about a third of what it is now.

The company was telling the market in big BOLD letters, practically screaming, that they were undervalued.

I know its easier said than done, but all the best business people and investors I have met so far, make very disspassionate and rational decisions.

Still trading at a reasonable price. The huge margin of safety has become a much smaller one but still value there... IMO.

Clough got a very good deal. Lets hope they ad the value they are promising.

Cheers and good luck

Sauce

[h2so4]

how can one buy a stock when one saw it at 25c and ignored it.............

Feeling good about it might be a start.

Hey Sauce you checked out RCR lately?

[Sauce]

Hey Sauce you checked out RCR lately?

Hi h2so4

The rise in the share price doesn't change the way I think about the company. There are "comparatively" better businesses within the sector in my opinion. But my view doesn't preclude RCR's share price from going up. If anything the rise in the share price just makes it more unattractive compared to the better choices.

It's not that I think RCR will tank! Quite the opposite. It's just that, dollar for dollar, there is considerably more long term "value" in buying the best, most efficient businesses possible. RCR doesn't fit that bill when compared to the likes of ANG - in my opinion.

Cheers

Sauce

[Sauce]

Although I am now way behind in my shootout with SKOL ;)

[COLIN]

Sauce: As I am on the other side of the globe at the moment I feel quite a bit out of touch with the market. Wondering how you assess the terms of the JV with Clough? Getting their placement at 190 and then offering 210 for 50% of the rest, doesn't sound appealing to me, given where the FGE sp is at the moment!! How do you intend to vote? Would appreciate your wise counsel.
Cheers,
COLIN


Didn't you sell out at the bottom Footsie? I remember reading you post that somewhere and thinking then that you should buy back in regardless - and that was when the price was about a third of what it is now.

The company was telling the market in big BOLD letters, practically screaming, that they were undervalued.

I know its easier said than done, but all the best business people and investors I have met so far, make very disspassionate and rational decisions.

Still trading at a reasonable price. The huge margin of safety has become a much smaller one but still value there... IMO.

Clough got a very good deal. Lets hope they ad the value they are promising.

Cheers and good luck

Sauce

[Corporate]

Well even though I still beleive FGE is cheap, I have sold out. Reason being, I'm leaving on friday for a big holiday and would like some more spending money. Plus having no internet access while I'm away makes me a bit nervious especially while the CLO deal is still a little uncertain.

I'll be back.

[Sauce]

Sauce: As I am on the other side of the globe at the moment I feel quite a bit out of touch with the market. Wondering how you assess the terms of the JV with Clough? Getting their placement at 190 and then offering 210 for 50% of the rest, doesn't sound appealing to me, given where the FGE sp is at the moment!! How do you intend to vote? Would appreciate your wise counsel.
Cheers,
COLIN

My view is fairly limited and it's a complex deal that only experienced investment bankers can probably fully understand. However I did spend some time trying to work it out as best I could and their letter of explanation was helpful.

My laymens assessment:

Qualitatively: How much value will the strategic alliance add going forward? As laypeople the answer to this is completely intangible. It's really a leap of faith - the management have a vision and to feel this is a good deal is really about having faith in that vision and the managements understanding of their business. However great sector, great track record, management have delivered so far...

Quantitatively: there seems no doubt that the placement at $1.90 is a very good deal for CLO - which, in my opinion, destroys some immediate value to current shareholders. However, while the mechanics of the deal seem like a terrible deal on the surface, I believe it's not as bad as it looks and has largely been engineered to obtain the desired outcome within the takeover rules.

Here are my thoughts on this that I posted on HC in response to everyone berating the company for the $2.10 offer. (Bear in mind I am not an expert, just happen to have the companies act in hard copy):

- under the takeover rules, a partial takeover MUST be extended to ALL shareholders and MUST be for MORE than 50% of shares, and across all classes of share. Which, if successful, means the offeror takes effective control of the company.

I highly doubt the offer for 50% of our shares at $2.10 was ever designed to be attractive. They DONT want us to take it up. FGE management have been prudent - they want to ensure Clough won't end up steering the ship.

The intended result is Clough holding a tad over 31% - achieved through the placement as well as the 'offer' - the 31% is guaranteed because they already have the major shareholders and directors shares locked in.

But the 'potential' range is 31% - 56% as is necessary under the takeover rules. And neither FGE or Clough expect or intend for more than 31% holding to be achieved.

The deal has been engineered so that their regulatory requirements are met, small shareholders have the chance to participate in the same deal offered to the large shareholders. The price can be considered to be "at arms length" based on the shareprice preceeding the offer, but small shareholders won't accept.

This is possibly why the profit anouncements coincided with the offer - to ensure that the share price (and perception of value) would move away from the offer price and ensure people would be unlikely to accept.

Unless I am missing something, I think as FGE shareholders we should appreciate this deal for what it is, and not spit tax at the company for structuring things in a way that provides the management with certainty of tenure at the helm.

I hope these thoughts are helpful Colin. I am happy to hold a fair few for the long term to see what happens. I think the deal seems like a bargain for CLO, but if management extract the value they are touting then it will be a good deal for everyone. The company has excellent margins, track record, good sector etc. What can you do but wait and see what happens from here?

Cheers

Sauce

[Sauce]

One other thought:

The real achievement was getting the major shareholders to agree to sell down their 50% at that price. I haven't researched who these people are, however one assumes they will be highly sophisticated and experienced investors.

While no guarentee its probably a good sign that, along with the directors, they are supporting the deal.

[Sauce]

Colin

If it isn't obvious from my post - I will be voting in favour of the placement and declining the offer for half my shares at a third of their current price. :)

With directors and major shareholders holding 40% of the vote, they don't have many to convince, I think the placement will succeed and the final tally with be CLO holding 31% at close of the offer.

Cheers
Sauce

[Sauce]

This will be interesting.


NOTICE OF COMPETING PROPOSAL
Forge wishes to advise that it has received a confidential and non-binding competing proposal from a third party in relation to a change in control transaction for Forge.
The Forge Board has determined that the competing proposal can reasonably be considered to become a Superior Proposal and that it must enter into discussions and negotiations with the counterparty to the competing proposal in relation to the competing proposal to comply with the fiduciary and statutory duties of the members of the Forge Board.

[COLIN]

This will be interesting.


NOTICE OF COMPETING PROPOSAL
Forge wishes to advise that it has received a confidential and non-binding competing proposal from a third party in relation to a change in control transaction for Forge.
The Forge Board has determined that the competing proposal can reasonably be considered to become a Superior Proposal and that it must enter into discussions and negotiations with the counterparty to the competing proposal in relation to the competing proposal to comply with the fiduciary and statutory duties of the members of the Forge Board.

Interesting, indeed. The plot thickens! And thanks, Sauce, for your views on the implications of the Clough development - let's see whether they are now prepared to outbid the Competing Proposal.

Regards,
COLIN.

[Huang Chung]

Great going with FGE guys. Was wondering your views on Monadelphous (MND) who operate in the same kind of space. Massive ROE, which interests me.

[Sauce]

Great going with FGE guys. Was wondering your views on Monadelphous (MND) who operate in the same kind of space. Massive ROE, which interests me.

Hi HC

I think MND is a stellar business. Incredible track record, ok margins & cost control, huge ROE/ROC and debt only 10% of total capital. They also have a good reputation of very conservative forecasts - under promising and then over delivering - This personally gives me a lot of confidence in the management.

The only thing I would say is that its probably fairly close to its intrinsic value at current levels. FGE was a huge value play but its a tiny company and I suspect it carries more operational risk than MND.

Unfortunately the massive discount for MND is behind us now. Still, that worn out old saying applies here: better to buy a great business at a fair price than a fair business at a great price. I would buy MND tomorrow over say, RCR.

If you look 10 years out, the future is quite clear for MND and my opinion is that anyone holding for that time will do very well indeed.

Cheers

Sauce

Disc. None held

[h2so4]

I thought FGE was a cracking good buy today. Traded MAK and HUN for nice profits today.

[Sauce]

Yeap, I loaded up too. shy of the lows, unfortunately I was out when it really tanked.

[Corporate]

Yeah I'm looking at FGE very closely. Originally purchased at $2.70 and sold at $3.00.

Does anyone know what the total number of shares on issue is now? I get 78m off directbroking.co.nz - but does this include the recent issue to clough?

[drworm]

Yeah I'm looking at FGE very closely. Originally purchased at $2.70 and sold at $3.00.

Does anyone know what the total number of shares on issue is now? I get 78m off directbroking.co.nz - but does this include the recent issue to clough?
Numbers since the 15% placement

* Shares Raised: 10,257,262
* Total Shares After Placement: 78,689,014
* Off-market Options: 7,480,000
* Full Diluted Total Shares + Options: 86,169,014 (FY10 EPS 32.49 - 34.82 cents/share)
* Weighted as of June 30 2010: 78,476,068 (FY10 EPS 35.68 - 38.23 cents/share)

[COLIN]

If you want to read a success story, just have a look at today's results announcement. Profit up 89%, no debt, 2011 order book equates to the whole of 2010 revenue. And to top it all off, share price has increased by almost 500% over the year, making them one of the very best performers on the ASX. Congratulations to all those who purchased near the bottom. I didn't join until last November, having had it brought to my attention by Sauce - to whom I am eternally grateful.
And market seems to be happy with the result, which seems to have exceeded expectations. I am sure there are further good things to happen, with the Clough involvement.

[Sauce]

If you want to read a success story, just have a look at today's results announcement. Profit up 89%, no debt, 2011 order book equates to the whole of 2010 revenue. And to top it all off, share price has increased by almost 500% over the year, making them one of the very best performers on the ASX. Congratulations to all those who purchased near the bottom. I didn't join until last November, having had it brought to my attention by Sauce - to whom I am eternally grateful.
And market seems to be happy with the result, which seems to have exceeded expectations. I am sure there are further good things to happen, with the Clough involvement.

Hi Colin
FGE is still very undervalued. Plenty of upside from here.
Cheers
Sauce

[h2so4]

Getting closer to value.

Cashed out today.

[Corporate]

Getting closer to value.

Cashed out today.

Good move...did you consider ploughing those funds into VMG? half the PE

[Sauce]

For any followers of FGE who haven't jumped ship yet,
Management appear to be well on track to meet their goal of 500m revenue by 2013. Latest update confirms they are maintaining their stupendous return on capital of about 40%. At the current rate of growth this companies intrinsic value could be twice what it is now in as little as two to three years.

There is still a small discount inherent in the current shareprice.

Things look very very good indeed for Forge Group and shareholders.

With regards,

Sauce

[COLIN]

Also worth reading related comments on ANG thread.

[drillfix]

Hi Colin, Sauce,

The chart for this stock is fantastic.

Good stuff there~!

[COLIN]

This share just never ceases to amaze - now up 2,600% over the last two years - no, that is not a misprint. The rise has been steady and consistent. And the P/E is still relatively modest. It is now one of my larger, long-term holdings. And again I must express my gratitude to Sauce for first introducing me. (Sauce, I still hold ANG and class it as a "good" share, but it doesn't hold a candle to FGE. ANG "only" up 300% over the same time period!).

And all this while the rest of the world has been wrestling with Credit Crunches, GFC's, Great Recessions, PIGS, Double Dips, V's v. W's, Old Uncle Tom Cobleigh and all.

[Sauce]

This share just never ceases to amaze - now up 2,600% over the last two years - no, that is not a misprint. The rise has been steady and consistent. And the P/E is still relatively modest. It is now one of my larger, long-term holdings. And again I must express my gratitude to Sauce for first introducing me. (Sauce, I still hold ANG and class it as a "good" share, but it doesn't hold a candle to FGE. ANG "only" up 300% over the same time period!).

And all this while the rest of the world has been wrestling with Credit Crunches, GFC's, Great Recessions, PIGS, Double Dips, V's v. W's, Old Uncle Tom Cobleigh and all.

Hi Colin

Sorry for delay in response Colin, I just got back from somewhere in the Indian Ocean :)

If FGE deliver on their target revenue goals (they have consistently outperformed them historically) there should be considerable upside to come from FGE.

The big caveat here is that they must maintain their margins. From what I think I am learning, one of the big issues with constructors appears to be the execution risk. With fixed price contracts and a focus on larger projects, I think shareholders might carry more risk than they think.

ANG on the other hand has (in my opinion) much more identifiable competitive advantages and a proven replica-table business model which means they can compound returns in a very systematic fashion, with much more certainty.

All that being said, ANG is trading at levels that appear approximately full value as of now and at its highs $4.90ish I feel would be slightly overvalued. Of course it's prospects are so rosy, and returns on incremental capital so high, that it won't be long before its value well surpasses that, so holding on is still the right move.

FGE on the other hand still trades at a price that looks reasonable, and even cheap, provided the company delivers on its revenue goals, while maintaining margins, over the next few years.

FGE has indeed well outperformed ANG in the short term and I suspect it may well continue to do so. But I am happy with my current portfolio weighting in favour of ANG simply because I think its a safer bet in the long run.

Of course I hold both and will continue to do so until their prospects change materially.

Good to hear from you Colin, I hope you had a relaxing break and good time with family and friends over the holiday season.

With regards,

Sauce

[Huang Chung]

Sauce, I was noticing that ANG has come off a bit, and was thinking about getting back on board.

Still sitting on the fence though, as the Qld floods might cause a bit of a downgrade in their half yearly. A poor half, or a profit warning might allow a cheaper entry. What do you think.

(PS...I realise ANG is getting more and more geographically diversified, but the Qld coalfields must still be a material part of their business)

[Sauce]

Hi HC

I will reply in ANG thread to keep on topic!

Cheers

Sauce

[drworm]

Anyone still holding onto their Forge holdings?

I'm interested in hearing from others about the management transition announcements coming out. No doubt they're moving from a board full of executive directors to one with more non-executive directors, which is not a particularly strange thing for a company that has just entered the ASX300.

But something about the whole thing doesn't quite feel right to me. Judging from the wording on the announcements this month, it appears that Clough it having a major say in calling the shots. The founding directors have also been given put options by Clough with a strike price of $5.60 which is at quite a discount to the current stock price. Why would anyone come up with this sort of agreement unless there's some downward risk to the stock price?

All seems a bit weird to me and brings back memories of the weak $2.10 partial takeover offer between Clough and Forge that got pushed through.

[mamos]

I think there will be a more formal JV announced soon perhaps a merger also.


Anyone still holding onto their Forge holdings?

I'm interested in hearing from others about the management transition announcements coming out. No doubt they're moving from a board full of executive directors to one with more non-executive directors, which is not a particularly strange thing for a company that has just entered the ASX300.

But something about the whole thing doesn't quite feel right to me. Judging from the wording on the announcements this month, it appears that Clough it having a major say in calling the shots. The founding directors have also been given put options by Clough with a strike price of $5.60 which is at quite a discount to the current stock price. Why would anyone come up with this sort of agreement unless there's some downward risk to the stock price?

All seems a bit weird to me and brings back memories of the weak $2.10 partial takeover offer between Clough and Forge that got pushed through.

[Sauce]

Anyone still holding onto their Forge holdings?

I'm interested in hearing from others about the management transition announcements coming out. No doubt they're moving from a board full of executive directors to one with more non-executive directors, which is not a particularly strange thing for a company that has just entered the ASX300.

All seems a bit weird to me and brings back memories of the weak $2.10 partial takeover offer between Clough and Forge that got pushed through.

Clough got a bargain at the expense of shareholders which was obvious even at the time.

I am still holding but I feel the business is carrying a lot more risk than people realise. I may look to exit Forge soon. There are also some opportunities in the nano & micro caps that look like much better value.

I feel that this "transitional" period and the focus on larger projects in new areas ads a lot of uncertainty compared ot where they were a year ago. Also they have to find something to do with all that cash, and who knows how good they will be at adding value through acquisition. The Clough deal showed poor capital allocation skills in my opinion.

Of course if it all pans out Forge could even represent reasonable value right and FGE might end up the size of Monadelphous one day. But a bit too much uncertainty exists in my opinion. How can you really know whats going on behind the boardroom walls?.

Good to hear from you DrWorm I hope all is well!

Cheers

Sauce

[drworm]

Thanks for your thoughts mamos and Sauce.

I too have an inkling that a merger may be on the way. Given that Clough have proved themselves much better negotiators than Forge, I'm not sure if we'll ever realise the full potential of FGE.

Agree Sauce regarding the risks. I don't think anyone is willing to bet that they maintain their outstanding ROE in the face of increasing project sizes and complexities. Although the share price is still reasonable for a company with a good growth profile and with a sizable battle chest in the bank.

Must admit that I reduced some of my holdings last week. These recent developments have made me a little uneasy about the rest of my holdings. Ultimately I believe the company deserves a price of around $7.50. Not sure if "corporate activities" will come and ruin the party.

[Sauce]

Agree Sauce regarding the risks. I don't think anyone is willing to bet that they maintain their outstanding ROE in the face of increasing project sizes and complexities. Although the share price is still reasonable for a company with a good growth profile and with a sizable battle chest in the bank.

Must admit that I reduced some of my holdings last week. These recent developments have made me a little uneasy about the rest of my holdings. Ultimately I believe the company deserves a price of around $7.50. Not sure if "corporate activities" will come and ruin the party.

Hi Drworm

Your thoughts and actions are almost identical to mine Drworm. Except I haven't offloaded any yet. I think upwards of $7 is fair estimate of value also. For this reason I will probably wait until the after the full year result. Odds very much in favour of an excellent second half. If share price gets into the $7's before then I will almost certainly reduce my holding.

Sitting on 3.5 bags in 12 months, so I won't be too dissapointed if I miss out on further gains :)

Regards,

Sauce

[mamos]

Initiated coverage today by Citi with a hold. $6.90.

Comments:


Going forward, we expect that as Forge’s business model continues to mature, it will
likely win bigger, longer duration contracts which will drive significant revenue growth.
We forecast FGE to deliver revenue growth of 29% CAGR over the coming 3 years
on the back of its move from tendering and winning small/mid–tier sized contracts
(<A$50m) to starting to be successful in securing larger sized contracts (>A$100m).
This step change should drive significant earnings growth for Forge. As mentioned
earlier, Forge has published public targets of $500m of revenue for FY13.


We expect however that there will need to be a trade-off for Forge’s revenue step
up, and that is why we expect margins to come back from their current lofty levels.
With Forge's move toward tendering materially larger projects, it will move away
from lump-sum contracting towards more cost-plus type contracts. With this move
comes significantly less risk and therefore margins will fall. Overall we believe EPS
will continue to grow given the projected revenue growth, however margins will
begin to move to be more in line with industry standards for contractors operating in
the >$100m contract market (EBITDA margins of around 10%).
Another factor that is expected to weigh on margins is overheads. Historically Forge
has maintained very low overheads as the business grew rapidly. However Forge is
now at the point that it needs to invest in people, IT platforms and systems,
additional office space etc.

[Sauce]

Hi Mamos

Thanks for this, info appreciated as usual. Citi thoughts are good ones IMO. Risk to margins significant. And execution risk. Leightons...

Regards,

Sauce



Initiated coverage today by Citi with a hold. $6.90.

Comments:


Going forward, we expect that as Forge’s business model continues to mature, it will
likely win bigger, longer duration contracts which will drive significant revenue growth.
We forecast FGE to deliver revenue growth of 29% CAGR over the coming 3 years
on the back of its move from tendering and winning small/mid–tier sized contracts
(<A$50m) to starting to be successful in securing larger sized contracts (>A$100m).
This step change should drive significant earnings growth for Forge. As mentioned
earlier, Forge has published public targets of $500m of revenue for FY13.


We expect however that there will need to be a trade-off for Forge’s revenue step
up, and that is why we expect margins to come back from their current lofty levels.
With Forge's move toward tendering materially larger projects, it will move away
from lump-sum contracting towards more cost-plus type contracts. With this move
comes significantly less risk and therefore margins will fall. Overall we believe EPS
will continue to grow given the projected revenue growth, however margins will
begin to move to be more in line with industry standards for contractors operating in
the >$100m contract market (EBITDA margins of around 10%).
Another factor that is expected to weigh on margins is overheads. Historically Forge
has maintained very low overheads as the business grew rapidly. However Forge is
now at the point that it needs to invest in people, IT platforms and systems,
additional office space etc.

[Sauce]

Some more noise from the media. Consume at your own risk.

Growth to squeeze margins

Staff reporter, 21 April 2011 (http://www.highgrade.net/issue/2011-04-21)

TAKE a look at the handsome profit margins of companies like ASX-listed Forge Group. They could soon be things of the past, according to the analyst team at Citi.
While the investment bank has $A555 million-market-cap Forge forging ahead, as it were, on the earnings front in the years ahead as resource-sector work continues to pile up for it and other engineering construction contractors, it would be on far more substantial revenue streams.
“As Forge moves up into the market for larger ticket contracts, the level of competition and the sophistication of its competitors are both expected to increase,” Citi said in a research note initiating coverage of Forge.
“This will be one of the key drivers of the margin compression we expect to see Forge face in the coming few years.”
Citi said the “smallest” of Forge’s rivals as it moved to win more contracts worth greater than $A100 million was Monadelphous, which generated 3.5-times the annual revenue Forge did, with the likes of Thiess, United and John Holland bigger again. While the size of the market “pie” was set to get materially larger over the next decade and Forge would win its fair share of it, this would unfortunately mean the company had to sacrifice margin.
“Perhaps the biggest competition that Forge faces is not in winning work but rather in attracting and keeping staff,” Citi said.
“Whilst the macro environment is incredibly supportive for Forge – and most contractors – the micro environment is less supportive, particularly the scarcity of skilled labour in Australia at present.
“The competitive threat for labour is not a major issue from a cost point of view as most labour cost inflation is contractually passed directly through to the client, however, the competitive threat is really being able to maintain a workforce that is sufficient to physically complete the work on hand and to win new work.
“This threat is by no means isolated to Forge, it is an industry wide problem that will need some sort of regulatory response to solve.”
Citi said Forge had grown from being a contractor generating annual sales of $A75 million three years ago to a forecast $330 million in FY11. So far the company hadn’t lost material money on a contract, but with the business growing so rapidly there was increasing risk of such an event particularly if existing management systems did not keep up.
“Management themselves identified this risk and this is why Clough was offered an equity position and board seat,” Citi said.
“Time will tell if this risk has been alleviated.”
Meanwhile, Perth-based financial group Argonaut Securities also noted some changes at Forge even while “from an announcement perspective it has been all quiet on Forge’s front”.
“The company is, for example, evolving its board to include a managing director with a skill set commensurate with an engineering and construction company that is entering a new significant growth phase, while the current MD moves to the position of executive chairman,” Argonaut observed.
Its take on earnings growth was slightly more upbeat.
“In uncertain market conditions, such as that experienced in recent weeks, it is generally recommended that investors in the resource services space concentrate on companies with improving earnings generation, strong balance sheets, quality management, and exposure to Western Australia’s Pilbara and North West Shelf, and Queensland’s coal and LNG industries.
“Whilst a newer organisation, Forge meets these criteria,” it said.
“It has a good track record for delivery and managing its rapid growth.”

[COLIN]

Sauce: Looks like the concerns to which you drew our attention have shaken out some holders, including myself - I sold off half my holding last week, for 636. Its been a wonderful performer for me, and one of my largest holdings, but one can't expect the golden weather to continue for ever.

Thanks, again, for drawing it to our attention.

[Sauce]

Hi COlin,

Thanks very much Colin. I think its easy to tip a share that looks good but ultimately you researched it and had the gumption to act on your conviction!

Nice trade there. You did very well. I think the valuation was pretty full in mid 6's, and as you say, the future is a bit murkier - always pays to be conscious of high returns tending to "revert the mean". To be frank, the resources industry is starting to smell very frothy to me. The last time I felt this way about a market, it ran hard for another two more years and then blew up completely.

On the macro side it seems there are two camps; The commodity bulls (more generally) and the china bears (more specifically).

I notice that mining services is now picked by most analysts as the hot sector. That in itself is probably a very good reason to be wary.

Most value investors accept a tendency to getting in a bit early and getting out a bit early as well. I'd rather that than lose money. And for that reason I think your decision to offload now is the correct one Colin. From a handicapping (odds) perspective...

We better find another undervalued gem like FGE and ZGL for your newly released equity Colin! :)

With many regards,

Sauce

[mamos]

Update guidance: The Board wishes to advise that the Company forecasts net profit before tax for the half year ending 30th June 2011 to be in the range of $25m - $27m. This is below 1H which was ~30m NPBT.

[mamos]

May be sign of lower margins for contractors. There is plenty of work out there however some of it is being bid a competitive rates / unsustainable rates.

[drworm]

May be sign of lower margins for contractors. There is plenty of work out there however some of it is being bid a competitive rates / unsustainable rates.

I think Sauce has mentioned previously, and I agree - FGE's margains/ROE is quite high. As they do bigger projects, it's bound to come down a little towards the industry average. I think we're just seeing this starting to happen.

I'm all out today at $6.35 average.

[mamos]

I wasnt sure why this went up after its 2H guidance, however now FGE getting smashed everyday while small-caps index is higher. We may see FGE back in the 4's on a down-day in the market.

[soulman]

I think Sauce has mentioned previously, and I agree - FGE's margains/ROE is quite high. As they do bigger projects, it's bound to come down a little towards the industry average. I think we're just seeing this starting to happen.

I'm all out today at $6.35 average.

Well done drworm. It seems the announcement (seems illegal to me) misled many traders. It should state a profit downgrade from their half yearly forecast instead of stating a 26 percent YOY rise. Misleading.

Not a holder.

[drworm]

My ears pricked up on this one just this morning.

FY11 results came in last week and it's business as usual. Growing well, cash building up, strong order book ($355m after the last couple of contracts), JV with Clough started up with first contact win, Africa strategy sounds promising though have risks attached. Reasonably priced at around 11 trailing P/E.

There's a bit of margin compression (employee salaries appears to be a large factor) starting to creep in. And with no outlook statement, there's a bit of uncertainty.

What is interesting though is the Forge/Clough 50/50 JV has been awarded an Early Contractor Involvement (ECI) contact for a bit of work with Hancock Prospecting’s Roy Hill Iron Ore Project. Looks like they're doing a Bankable Feasibility Study (BFS), scoping out the work, schedule and price. Clough was kind enough to through some information up on this in its slide pack this morning and stated that it could lead to $500m+ worth of work.

Anyone have any thoughts on this? $250m+ contact would be a huge boon and is over 50% of the company's annual revenue. And with Hancock involving FGE/CLO at this stage I'm guessing the contract win for the scope of work would be of a high possibility?

[Sauce]

Hi Dr Worm
My only thoughts are:
another very strong result from FGE. Agree with all your comments.
The contract is not in the bag until its in the bag.
Its good to see that the relationship with Clough might see them through to the larger contracts they were looking for.
Regards,
Sauce

[drworm]

Thanks for your thoughts as always Sauce.

A big contract such as the Hancock one should set them up for growth over the next couple of years.

[drworm]

Half yearly came out and the earnings were flat - $21.2m (25.4 cps). A bit of continued margin compression too. But the growth story is probably not over for this one and the next few halves will be of great interest. Because:

1. This company knows how to win and deliver projects. The order book via existing divisions has doubled since this time last year and now sits at around $600m. No doubt this will start flowing into revenue and profits pretty soon. Even at a reduced margin, this is will be significant.

2. Their acquisition, CTEC, looks the goods. Fully funded by cash reserves. Adds around $15-20m EBITDA/annum and another $600m to the order book. Kicker is this company subcontracts out alot of its work. A large proportion of this is going to flow onto FGE subsidiaries as internal revenue - probably around the $100m/year mark. I did a few calcs, and the full impact of CTEC could be around NPAT +$19m/annum.

All up, I can see 70-80% earnings growth flowing in quite easily over the next couple of years. Not bad for a company trading at around P/E 12, $500m market cap, minimal debt, $80m+ cash in the bank.

I got back in a few months ago averaging $5.25. Also hold ANG and STS in the mining services type sector.

[Sauce]

PE 7.8
EV/EBIT about 4
ROE 35%
ROIC much higher approx 80%+ once you remove massive cash pile in the bank earning nothing

The herd thinks the work is going to dry up.

I own a few.

Cheers

Sauce

[mamos]

Hi Sauce

FGE was one of my favourites.
New management team need to put some runs on the board.
I find it more difficult to analyse now than it used to as it has become a much more complicated business post JV's and CTEC acquisition to get a feel for true maintainble earnings.
Massive cash pile but also massive payables.
At least they are leveraged to the bigger players now which are more likely to expand production than the smaller players.
The question is what multiple do you put on a 5 year earnings stream. EPC/EPCM is not recurring work so hard to forecast beyond 5 years.


PE 7.8
EV/EBIT about 4
ROE 35%
ROIC much higher approx 80%+ once you remove massive cash pile in the bank earning nothing

The herd thinks the work is going to dry up.

I own a few.

Cheers

Sauce

[Sauce]

Hi Mamos

I agree with your comments entirely. Very good post. The reality is its not a business an outsider (and possibly even insiders) can get a clear windscreen to see out of.

And as a contractor there will be no mercy if there is a hard landing in the mining sector.

I crystalised a 3 bag gain on FGE but I kept a few and I still like to follow it. Will be interesting to see how it plays out.

Cheers

Sauce

P.s. looking forward to Austin's 4D next week.

[h2so4]

PE 7.8
EV/EBIT about 4
ROE 35%
ROIC much higher approx 80%+ once you remove massive cash pile in the bank earning nothing

The herd thinks the work is going to dry up.

I own a few.

Cheers

Sauce

RBA says boom will continue. Extraordinary result. At $5 probably still worth a tickle.

[h2so4]

RBA says boom will continue. Extraordinary result. At $5 probably still worth a tickle.

Crikey now $3.80. Down down and away. I thought $5 was cheap and that was just 2 weeks ago.

[Sauce]

From memory analyst consensus (for what that is worth - i.e. nothing) was 72cps.

Announcement of 90 - 100m pre tax should be about 73 - 82cps

Looks like an earnings upgrade to me (for what thats also worth - i.e. not much)

PE for current year of 4.7 - 5.4 ???

$330m market cap, $138m cash on the balance sheet should baloon much higher, earning $90-$100m pre tax this year, ROE of 41pc ???

... what will management do with all that cash?

hmmm..

Armegeddon for contractors... or not?

but.... only 31pc order book exposure to Iron Ore. Over half the order book is not even related to the mining industry.

The words 'not alot has got to go right from here' come to mind.

Regards,

Sauce

[Corporate]

Looks like a buy to me...just can't work out what I'm missing!

[Sauce]

Hi Corporate

Being a contractor there is plenty of risk. There is no earnings visibility out past 2014. Things could get more competitive for Forge and margins could get compressed. But I feel the price reflects a much worse scenario than what will play out, as they have been dragged down by profit downgrades from less diverse contractors, so I feel the risk vs reward ratio is in favour of buyers at the current price. It's not a high-conviction play for me; just a small weighting.

Regards,

Sauce

[soulman]

Looks like a buy to me...just can't work out what I'm missing!

I bought yesterday and sold today. Watching them closely for buyers/sellers demand. I see more value in MND.

Just combing through their Annual Report last night. Intangibles asset gone up $33 mil, payables outweigh receivables by $70 mil. Borrowings has doubled albeit from a small base.

They still have a net cash position though, I think.

As Sauce pointed out, definitely outlook for the next few years will be key.

[soulman]

I bought yesterday and sold today. Watching them closely for buyers/sellers demand. I see more value in MND.

Just combing through their Annual Report last night. Intangibles asset gone up $33 mil, payables outweigh receivables by $70 mil. Borrowings has doubled albeit from a small base.

They still have a net cash position though, I think.

As Sauce pointed out, definitely outlook for the next few years will be key.

Looks like the market likes company with good future outlook. Hence, I can see FGE and MND continues to rally, along with other industrial stocks with good outlook such as BRG. The outlook is for 12 months only though.

FGE has a very nice rally the last few session.

[soulman]

Nothing good can come out from this long suspension re: contracts.

Not a holder. Quite a smashing from other mining services contractors the last few weeks. ASL and today WOR.

[soulman]

The Board is of the view that it will be unable to meaningfully update the market further until it is able to successfully complete these arrangements, therefore Forge presently expects to stay in suspension pending an announcement regarding the finalisation of the proposed financing and its revised FY14 earnings guidance, which it currently anticipates making in the week beginning Monday, 25 November 2013.

Still waiting. This could be a disaster for shareholders.

[Joshuatree]

Def will be a disaster unfort and will drag the whole M/S down in sentiment in another keelhauling. Estimates down below a $1.50 cap raise. How's it going Sauce? Hope ang rides thru ok and i know its just a blinkin time to you:)

[Joshuatree]

DRopped as low as 27c:scared: currently 73c ; fortune favors the brave.

[Joshuatree]

Thats re 84% drop in S/P. Hope no share traders have been caught in here.

[Snow Leopard]

Saw the Forge shares plummet 90% headline on Business Spectator.
It is fascinating / frightening.
You buy another company and then it nearly brings you down.

I must go and find what they said when they announced they were buying CTEC, bet it was all wonderful then.

Makes you remember the risks involved with investing. [Scurries off to check on all his investments]

Best Wishes
Paper Tiger

[born2invest]

Saw the Forge shares plummet 90% headline on Business Spectator.
It is fascinating / frightening.


Wow!

This is amazing to see in progress.

I looked into Forge Group two years ago for a potential investment, but decided I just couldn't understand their company well enough or their future revenue/profit.

[FarmerGeorge]

Wow!

This is amazing to see in progress.

I looked into Forge Group two years ago for a potential investment, but decided I just couldn't understand their company well enough or their future revenue/profit.

Wow is right. <holds up finger and thumb almost touching> I came THIS close to buying into FGE earlier in the year. Chose to lose money on TTE instead...

[born2invest]

Wow is right. <holds up finger and thumb almost touching> I came THIS close to buying into FGE earlier in the year. Chose to lose money on TTE instead...

The question is now though...

Is 60 million a good price to pay for something that has 900 million potential revenue next year with 45-50 million EBITDA?

Not too much debt (although deal with ANZ will increase this), another 900 million-1 billion in contracts due the year after?

Even if it only makes 10-15 million net profit, that is a P/E of 4-6

Not for me as I don't understand the nature of the industry but something to ponder.

[Corporate]

What a rollercoaster. I saw the announcement 11pm UK time and then couldn't believe my eyes when when the price opened in the the low 30's. Way over done.

By the time I bought it was 34.5c, but within seconds it touched 28c before thankfully marching higher!

[blackcap]

What a rollercoaster. I saw the announcement 11pm UK time and then couldn't believe my eyes when when the price opened in the the low 30's. Way over done.

By the time I bought it was 34.5c, but within seconds it touched 28c before thankfully marching higher!

Well done. Fortune favours the brave. I was thinking of buying some CFD's on this late afternoon at 72 but then bailed. Really that would have been gambling. Missed it on the open, stocks and events like this seem to get overdone initially. If its margin calls hitting margin calls hitting stops hitting stops I do not know but Australian stocks seem to get hammered hard on bad news (and vice versa too off course), but often it is overdone initially anyway.
But as a dear friend once said "picking bottoms is dirty business" so I try and stay away from it.

[Corporate]

Well done. Fortune favours the brave. I was thinking of buying some CFD's on this late afternoon at 72 but then bailed. Really that would have been gambling. Missed it on the open, stocks and events like this seem to get overdone initially. If its margin calls hitting margin calls hitting stops hitting stops I do not know but Australian stocks seem to get hammered hard on bad news (and vice versa too off course), but often it is overdone initially anyway.
But as a dear friend once said "picking bottoms is dirty business" so I try and stay away from it.

I usually avoid this type of situation as well! However, at a market cap of <$30m it was a no-brainer.

[tosspot]

ofcourse the trend changes as soon as I buy in, got in at 78c then it dropped and never returned up. tonight UK time should be very interesting.

[soulman]

What a rollercoaster. I saw the announcement 11pm UK time and then couldn't believe my eyes when when the price opened in the the low 30's. Way over done.

By the time I bought it was 34.5c, but within seconds it touched 28c before thankfully marching higher!

Nice one Corp. Didn't know you got a gamble in you.

[Snow Leopard]

Close at $0.89 up $0.18 (25%) today.

Corporate has done very well.

and I am 'quite pleased' with my $0.52 purchase of the 16th.

Best Wishes
Paper Tiger

[Snow Leopard]

Close at $0.89 up $0.18 (25%) today.

Corporate has done very well.

and I am 'quite pleased' with my $0.52 purchase of the 16th.

Best Wishes
Paper Tiger

From $1.09 to $1.96 today and currently $1.53-ish.

This is getting a little silly.

Best Wishes
Paper Tiger

[winner69]

Business Spectator says this .....corporate activity?


http://www.businessspectator.com.au/article/2013/12/30/resources-and-energy/forging-more-roy-hill-fortune

Forging more than a Roy Hill fortune?
Stephen Bartholomeusz25 min ago
IndustriesResources and Energy

About a month ago Forge Group shares suffered an extraordinary implosion after the engineering group had a near-death experience. This morning its shares spiked nearly 66 per cent in volatile trading on heavy turnover, suggesting either the worst is behind it or there’s something more strategic occurring.

There is an obvious explanation for why the shares leaped 67 cents to $1.69 in this morning’s trading before falling back to about $1.42 at lunchtime.

Before the start of trade Forge announced it had received a formal notification from Samsung C&T to proceed with phase three works for the $1.5 billion engineering, procurement and construction contract for the processing facility at Gina Rinehart’s Roy Hill iron ore project in the Pilbara.

Forge’s share of the contract, which it has joint ventured with Spain’s Duro Felguera, is about $830 million and its chief executive, David Simpson, said the go-ahead would underpin the group’s order book for the rest of this financial year and into 2015. He said it was encouraging to note that the Roy Hill project was progressing to schedule.

Over the past week or so the $10 billion Roy Hill project has secured debt funding approaching $3.5 billion from South Korean and US trade finance agencies.

In some respects the market’s reaction to the Roy Hill announcement isn’t unexpected, given that an announcement of a mere $40 million asset management contract two weeks ago caused an equally sharp spike in its share price, albeit from markedly lower levels.

Since that earlier pick-up, however, Forge’s price has risen as much as 168 per cent, suggesting there might be something other than a reaction to some good news occurring.

Towards the end of last week there were some suggestions in the market that Forge could become a takeover target.

The Australian Securities Exchange last week queried the group about a surge in its share price but Forge said it knew of no reason for the rise, other than the asset management contract it won earlier in the month.

About 17 per cent of Forge’s shares were traded this morning, reflecting either a massive change of institutional opinion in relation to the group, or something more strategic.

About a month ago Forge Group lost 84 per cent of its value when it came out of a three-week trading halt and disclosed a $127 million profit writedown associated with loss on two power station projects in Western Australia and Queensland. Forge had picked up those contracts with its 2012 acquisition of the privately owned engineering services company, CTEC.

Not only did Forge announced the writedown but it said it faced a $45 million net cash outlay to complete the projects at a point where it had only $44 million of net cash – creating a “challenging” liquidity position as early as this month.

Had it not been for the support of ANZ Bank the former sharemarket darling would have been in a desperate position.

ANZ agreed to waive a number of covenants, expanded Forge’s working capital facility and deferred quarterly principal repayments on an existing facility. In return Forge agreed to issue warrants equivalent to about 13 per cent of its capital base (if the warrants were exercised) at one cent apiece.

ANZ Bank’s support indicated that it, at least, believed Forge’s problems were confined to the two power station projects, which Forge has quarantined from the rest of its business. The market activity over the past few days of trading would tend to vindicate the ANZ decision, as well as pointing to a potentially tidy little profit on the warrants.

Given that Forge’s market capitalisation had collapsed from nearly $600 million earlier this year to less than $60 million, if the issues confronting the company were only those two troubled contracts then the market’s reaction to them could be regarded as a massive over-reaction.

Considering the volume of Forge shares traded over the past few days, it should become clearer before too long whether the massive rebound in the group’s share price reflects a reappraisal of its prospects, or something – from Forge’s point of view – more sinister and opportunistic.

[winner69]

From $1.09 to $1.96 today and currently $1.53-ish.

This is getting a little silly.

Best Wishes
Paper Tiger

Well done PT .....56 to 196 in a few days is fantastic stuff ....millionaire stuff

[Snow Leopard]

I have sold down all but 10,000 shares, which I will keep so that I keep my eye on this particular ball, and also booked a nice little profit of about 150% on the rest.

I am very surprised by the good returns achieved in a little less than three weeks.
Sometimes you win big but often you don't win at all, but overall it seems to be a strategy worth following when the opportunities arise.

Best Wishes
Paper Tiger.

[percy]

Paper Tiger.
Fantastic.
Well done.!

[Corporate]

Welldone PT

[Snow Leopard]

Second halt "pending a material announcement on the financial position".

I would assume given the first TH & announcement that this is another negative, but we will see.

Best Wishes
Paper Tiger

[Snow Leopard]

Dont you think it was suspicious that Blackrock took a SSH position in Dec then quickly bailed on it a few days ago?

Could be all sorts of reasons.

Perhaps they thought it suspicious that I sold most of my recently acquired holding? :D

Apparently on Thursday the price was dropping rapidly and then turned round went up and then Friday we get a trading halt. So did the market get wind of something?

We just wait and see.

Best Wishes
Paper Tiger

[gv1]

Something to ponder....from the Australain
THE roller-coaster ride that is Forge Group looks set to take another significant twist, the company's latest trading halt sparking speculation of more bad news and a potential equity raising. The Perth-based mining contractor entered the halt early yesterday, issuing only a brief statement to explain the move.
"Forge Group is seeking the trading halt pending an announcement providing a material update on the financial position of Forge Group and its subsidiaries," the company said.
The language in the statement triggered talk that further operational problems could have surfaced at the company, after problems with two power station contracts triggered a spectacular share price meltdown in November.
Shares in Forge plummeted from $4.18 to as low as 28.5c in a single day after it revealed it would need to spend $45 million more than first thought to complete the Diamantina and West Angelas power stations in Queensland and Western Australia respectively.
Those issues took Forge to the brink of collapse, before ANZ Banking Group agreed to extend its existing facilities rather than push the group into administration.
The company also seriously considered an equity raising at that time, but baulked at the significant dilution that would result from such a move.
Sources told The Weekend Australian there were ongoing concerns that further problems could still emerge from the Diamantina and West Angelas projects, with the original cost blowout figure only an estimate.
The company's less advanced power station contracts are also seen as a possible source of bad news, given that they were signed up under the same management team that conceived the troubled Diamantina and West Angelas contracts.
"Either it will be bad news or they will get an equity injection away, I would have thought," said one analyst who did not want to be named.
"They obviously mulled around an equity raising not too long ago, but couldn't get it away. Now that the price has settled down they might look at it again."
Forge shares had begun to recover in the wake of the November carnage, rallying to as high as $1.965 a share late last month as it confirmed it had secured other contracts, including work at Gina Rinehart's Roy Hill iron ore project.
Forge last traded at $1.25 a share on Thursday.
At that price, any equity raising would be priced well above the levels of late November and cause far less dilution of existing holders.
A recovery appeared to be gathering momentum recently, with the world's biggest asset manager, BlackRock, emerging as a significant shareholder on January 3.
However, BlackRock's position was short-lived, as the group dropped back below the 5 per cent ownership threshold just three days later.
A number of investment banks have been swirling around Forge in recent months, proposing both equity raisings and potential asset sales that would provide more strength to the company's balance sheet.Goldman Sachs looked at handling an equity raising for the group in November but is understood to no longer be involved.
At least one European contracting group is believed to have been sniffing around Forge, eyeing both its assets and a possible position in the company.
KordaMentha has previously been reported as being brought in by ANZ as adviser.
The November issues came at the end of a protracted 24-day trading halt.
Sources said Forge was unlikely to win any such leeway from the ASX for an extended halt this time around.
Forge traded as high as $6.98 a share last March, with the company previously considered one of the contracting sector's better performers because of its diversification into power stations.

[winner69]

PT what has transpired since makes your trade one of the most inspired ever

[Snow Leopard]

So another trading halt and there was one whilst I was wandering around!

So that make three this year since the original.

Not for the faint hearted this one, if it ever gets to trade again I might drop the rest.

Best Wishes
Paper Tiger

[mark100]

I don't think it will ever trade again. Equity value is zero in my view

[noodles]

But while its the first to go, it won't be the last. Fair few other mining services companies in the same boat. I imagine their bankers are getting pretty nervous about now.
Thanks KW. Did you have any candidates in mind?

[baller18]

scary...... totally frightening, how the SP can rise so fast and then plummet even faster....

[Corporate]

Wow scary waking up to this! I feel sorry for holders.

[steve fleming]

In relation to FGE, the ironic thing was, it was actually the attempt to diversify AWAY from mining services (i.e. into power station construction) that got FGE into trouble.

This was confirmed by the receivers this morning : "The appointment of Administrators and Receivers follows the company reporting significant costover-runs and profit downgrades in power construction contracts."

As i understand, the mining services side was doing fine, until all the negative publicity of late last year.