By Jason Fittler
Watpac is a listed construction company and property developer in Queensland.
The company operates across the country, with offices in Brisbane, Townsville, Perth, Adelaide, Sydney, and Melbourne, and an international office in Vietnam.
It consists of the following divisions, Construction, Civil Infrastructure, Mining, Property, and Specialty Services. Watpac spans construction across all of QLD, with an operational base in Townsville. The portfolio includes well-known landmarks such as Suncorp Stadium, Brisbane Cricket Ground and Seaworld Nara Resort.
WTP's interim result gave no cause for concern, with FY10 guidance provided with the result pointing to strong growth.
We currently forecast FY10 profit of $26.8m and assume no profits from property sales.
The company remains well positioned given its strong balance sheet ($71m in surplus cash), property pipeline (book value $381m) and growing workbook (approx. $1bn with new project wins likely to be announced in the short-term - management indicated at the result there are around $350m in potential near term project wins).
We expect acquisitions will focus on civil businesses with a NSW focus.
In our view, the key swing factors relate to construction margins and timing on property sales. The stock is trading on attractive fundamentals including a PE of 8 times and a 7% fully franked dividend yield. As at 31 December NTA stood at $1.46. We expect little value is being attributed to the group's property book.
For more information on Watpac (WTP) please call us on 07 4771 4577.