Shaft Sinkers has finally pulled the plug on a £94m contract in Russia after progress in "difficult underground conditions" proved too slow for client EuroChem. That's left the company with a slug of costs to recoup and a hole in its order book. But tendering activity is at record levels, suggesting there's plenty of new work to be won, while the shares are very lowly rated and sport a large yield.
Indeed, two contracts are already in the bag: £48m of work with Impala Platinum and £11m of new business on the Afplats' Leeuwkop project. And although the current order book looks thin at £207m, Shaft Sinkers has more than £1bn of outstanding tenders or price submissions on 10 projects, a number of which it is "well-placed" to win. South Africa is core to the business - Lonmin’s Saffy and Hossy shafts and AngloGold Ashanti’s Moab shaft generated plenty of revenue last year - yet winning higher margin contracts in the former Soviet states and India is crucial if Shaft is to achieve the double-digit return on capital employed (currently 8.2 per cent) that it has targeted within three years.
On an underlying basis, EPS of 23.4p was 15 per cent ahead of Westhouse Securities' estimate. For 2012, the brokerage is pencilling in EPS of 15p and notes that the company is valued on only two times cash profits.
SHAFT SINKERS (SHFT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 80.5p | MARKET VALUE: | £ 38.2m | |
| TOUCH: | 79-82p | 12-MONTH HIGH: | 192p | LOW: 37.5p |
| DIVIDEND YIELD: | 8.9% | PE RATIO: | 4 | |
| NET ASSET VALUE | 101p | NET CASH: | £6.1m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 148 | 12.5 | 23.6 | nil |
| 2010 | 183 | 16.7 | 29.8 | nil |
| 2011 | 227 | 13.5 | 18.3 | 7.2 |
| % change | +24 | -19 | -39 | - |
Ex-div: 02 May Payment: 12 Jun | ||||
