Icarus Signal New Entries: WorleyParsons And NRW Holdings

This story features FLEETWOOD LIMITED, and other companies. For more info SHARE ANALYSIS: FWD

Update on share prices and consensus price targets.

By Rudi Filapek-Vandyck

WorleyParsons ((WOR)) has landed on Icarus' radar with the share price finding the going tougher this week. To followers of FNArena's Icarus Signal this hardly comes as a surprise as most stockbrokers with a positive bias towards the stock have set a price target around current level. Those with a less buoyant outlook have targets at lower levels.

It is easy to forget that, amidst all the market noise around, but WorleyParsons is a member of the pick and shovel services providers in the Australian share market; engineers and contractors servicing tomorrow's output in iron ore, coal and base metals and, in WorleyParsons' case, emerging supply in oil and gas. Observe the share price is actually HIGHER than it was back in January and about 10% off the mini-Bubble peak reached in March this year (when literally everyone and his dog wanted a piece of this sector).

Are there any conclusions to draw from the WorleyParsons experience?

I think so. One is not all services providers are the same. WorleyParsons does not have that same (extreme) leverage built-in as, for example, Emeco ((EHL)) and Boart Longyear ((BLY)). Secondly, investors do manage to distinguish the higher quality names from the weaker colleagues in this as in other sectors of the share market. History suggests, and recent price action confirms, WorleyParsons is among the higher quality names. As is Monadelphous ((MND)).

Observe that Monadelphous' share price is unchanged (on a net basis) since the start of 2012, so WorleyParsons has outperformed. One quick look at Stock Analysis (see elders on this website) immediately reveals why: better growth prospects. If current market consensus turns out correct, WorleyParsons should continue churning out financial performance updates showing double digit profit growth. Expectations have risen in the weeks past, for Monadelphous market expectations have dimmed slightly. Monadelphous is much more exposed to iron ore and coal.

Conclusion number three: Mr Market is not so negative about those contractors that will be servicing the ballooning LNG industry in Australia. Apart from WorleyParsons, see, for example, the share price of Mermaid Marine ((MRM)).

Meanwhile, it cannot be left unmentioned that some stocks in this sector are still seeing investors leaving in droves. Observe, for example, how the share price of Fleetwood ((FWD)) is falling off a cliff these past few weeks. The other obvious example is NRW Holdings ((NWH)); quality company with quality management servicing quality customers. Right now, however, investors prefer to be safe rather than sorry. Can anyone imagine the shares trading as high as $4.40 earlier this year? Well, they're below $2.20 now and that is no less than 62% below consensus target.

The result is stocks such as Fleetwood and NRW Holdings seem to be offering ridiculous dividend yields (9-10%) and ever so lower multiples. Bargains for the brave? Mr Market, volatile as ever, doesn't always get it right but sometimes these excessive sell-offs do precede another bad news cockroach creeping from under the refrigerator. So treat with the appropriate risk assessment.

There are now 38 stocks trading in the vicinity of their target and this list, unsurprisingly, contains many solid dividend payer, including Sydney Airport ((SYD)), Transurban ((TCL)) and National Australia Bank ((NAB)).

No less than 78 stocks are trading above target, and this group includes the likes of Woolworths ((WOW)), Thorn Group ((TGA)), Spark Infrastructure ((SKI)), Tatts ((TTS)) and Westpac ((WBC)). Newcomers are CSL ((CSL)), Domino's Pizza ((DMP)), DUET Group ((DUE)) and Navitas ((NVT)).

There is the odd miner or exploration company in both groups, but most are still to be found in the Bottom 50 where stocks including Buru Energy ((BRU)), Resource Generation ((RES)) and Panoramic Resources ((PAN)) are waiting for the right sparkle to fly higher. Better be careful, though, as these apparant bargains deserve to be treated with the right risk assessment too.

Investors should consider the information and data are provided for research purposes only.

Stocks <3% Below Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 WOR $ 27.75 $ 27.83 0.29% 2 HIL $ 1.15 $ 1.155 0.43% 3 CSR $ 1.58 $ 1.589 0.57% 4 WHG $ 0.95 $ 0.957 0.74% 5 CPA $ 1.04 $ 1.056 1.54% 6 CMW $ 0.77 $ 0.783 1.69% 7 IGR $ 0.56 $ 0.57 1.79% 8 MTS $ 3.65 $ 3.725 2.05% 9 RKN $ 2.28 $ 2.335 2.41% 10 CTD $ 2.72 $ 2.79 2.57% 11 GWA $ 1.82 $ 1.868 2.64% 12 AUB $ 7.93 $ 8.143 2.69% 13 MGR $ 1.41 $ 1.449 2.77% 14 RDF $ 2.04 $ 2.10 2.94%

Stocks Above Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 DMP $ 10.26 $ 10.24 – 0.19% 2 CSL $ 45.18 $ 44.43 – 1.66% 3 DUE $ 2.08 $ 2.045 – 1.68% 4 NVT $ 4.20 $ 4.12 – 1.90%

Top 50 Stocks Furthest from Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 PPX $ 0.06 $ 0.107 75.41% 2 NFE $ 0.80 $ 1.30 62.50%

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