By Jenny Ruth
Friday 27th May 2011
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Opus International Consultants is well positioned to benefit from the rebuilding of Christchurch but the share price has rallied too hard on this fact, says Andrew Harvey-Green at Forsyth Barr.
"Whilst there is little doubt that OIC's range of engineering services fits perfectly with the type of services required during the rebuild, how much it will benefit is extremely uncertain," Harvey-Green says.
"We estimate that OIC revenue could be boosted $60 million to $250 million spread over a three to four year period. This flows through to an after-tax benefit of $4 million to $28 million or two cents per share to 16 cents per share."
His base view is the work will be worth between five and ten cents per share.
"In addition to the direct work OIC is likely to win, there are also likely to be indirect effects. In particular, the Christchurch work is likely to boost margins throughout the country, although that may be tempered by increases in staff costs," Harvey-Green says.
He values OIC shares at $2.21 and says that includes about 26 cents of cash. "Typically the market does not pay fully for cash," he says.
"Furthermore, we do not consider our valuation to be bearish. Our long-run EBIT (earnings before interest and tax) margin of 8.7% is close to OIC's best ever result."
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