Drivers to support momentum: WorleyParsons Ltd (ASX: WOR), announced the award of a service contract by Trans Mountain Pipeline L.P in Canada, under which WOR will provide skilled resources as an extension to the Trans Mountain Expansion Project (TMEP) for the management team for construction and monitoring, and for inspection on the TMEP. This pipeline will carry oil from Alberta, through the Rocky Mountains to the British Columbia coasts for the export to the international locations. This is the second contract which was awarded in relation to TEMP. WOR also announced the engineering, procurement and construction contract which was awarded to WorleyParsonsCord. This service contract will allow WOR to continue to support for bringing Canadian energy resources to the world. The group was also awarded PMC services contract by Reliance Industries late last year.
It is also considering the impact of the US Tax Cut reform and the Jobs Act. There is expected to be a one-time charge of the income tax expense at 31 December 2017 to the group which will be between AUD45m and AUD60m. This charge relates to a reduction in the Group’s US deferred tax assets partly owing to the decrease in the US corporate tax rate from 35% to 21%. The charge is said to be excluded from the underlying earnings of the group.
On the other hand, WOR completed the acquisition of AFW UK Oil & Gas Limited (AFW UK) for an enterprise value of A$303 million. For this, the company has successfully raised $322 million through the entitlement offer. The Acquisition and the Entitlement Offer is expected to be EPS accretive in the first year of ownership and reduces the net debt / EBITDA from 2.4x to 2.2x. Moreover, the acquisition sets a robust entry for WOR into the UK North Sea market as a profitable market leader and is an acceleration of WOR strategy to build a global MMO (Maintenance, Modifications & Operations) business.
In order to improve its service delivery, specific offerings were developed to provide a further value to WorleyParsons customers and it launched the Advisian business line which integrated the Breakthrough Project Delivery Model into the Project Management Consulting (PMC), accelerating the work process transfers to the Global Delivery Centres (GDC). As far as the stock prices are concerned, WOR has moved up by 25.9% in the past six months (as at January 17, 2018), and the current scenario is expected to proffer a steady performance. We give a “Hold” recommendation at the current market price of $14.17
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Positive MMO Market Scenario (Source Company Reports)
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