Thomas Su Diary - 6 Apr 2009

moneycat

It seems more positive news are coming once again, with Wall Street leading the gains - and today RBA may make an announcement of a further interest rate cut amidst continuing recession - but we do see some positive news coming out, especially from US and China.

Looking at the Australian market, we continue our search for good value stocks that can come out from the recession - this time, we turn our attention to some of the construction companies - in particular, we have been looking the companies that are not solely focused on the residential projects.

On the list - this includes Leighton Holdings, United Group, Lend Lease and also Adelaide Brighton.

Leighton Holdings was hit particularly hard last 12 months - because of the problems in Middle East and also falling construction activities. Middle East remains as a promising market - with oil price now recovering strongly, their wealth may come back again, and the delayed constructions may start once again. Back in the early 2000, Multiplex and Leighton Holdings were the biggest Australian icones in the Middle East, Multiplex is now part of the Canadian Brookfield Multiplex Group, therefore not listed on ASX anymore. Leighton still has many projects in the Middle East as well as Asia, and once economy starts to recover or once the governments starts to announce new infrastructure projects as part of stimulus package - they should benefit from them.



United Group has been one of the market darlings for a long term - they have quite a diversified business portfolio - in the past, their railway infrastructure services has been performing well due to the mining boon which has driven the demand for rail cars by the larger miners. In addition, their competitor, Downer EDI had a lot of problems in supplying and maintaining various railway networks, which had lost contracts to United Group. Like other companies, UGL was also hit by the downturn in the economy and delcine in infrastructure projects. Their share price has been performing relatively well, it was quite steady, it is also expanding rapidly into the facilities and property management divisions.

The problem faced by many companies in the infrastructure construction companies is the credit crunch, as most of the large infrastructure projects are debt funded, including properties. However, with the interest rate now at historical low point and with the lenders start to lend once again, maybe the construction cycle will commence from second half of this year.

Source: http://moneycat.com.au/