In today’s daily we have covered stock research on Worley Parsons (BUY).











 
The S&P 500 was down by 6.07points or 0.30%on Wednesday to 2045.73 points.   U.S. stocks fell from record levels as Federal Reserve minutes showed some members said the central bank should remain attentive to the possibility prices in the U.S. economy aren’t rising fast enough. The greenback rose to a seven-year high against the yen as the latest Fed minutes affirmed that the US is moving toward higher interest rates while Japan pursues further economic stimulus

Royal Mail was the biggest faller in London after posting a drop in earnings as its parcels division faces fierce competition from US online giant Amazon, which is doing its own deliveries. Royal Mail fell 8.4 per cent to 430 pence “after it warned that growth in parcels would slow thanks to Amazon and its competitive delivery network”. The Fed also maintained a pledge to keep rates low for a “considerable time.”



Royal Mail Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by30.9points or0.57% on Wednesday and closed at 5368.8 points. Commonwealth Bank of Australia lost 0.5 per cent to $80.54, while ­Westpac edged up 0.1 per cent to $32.79. Australia and New Zealand Banking Group fell 0.2 per cent to $31.77, and National Australia Bank dropped 0.7 per cent to $32.13. Woolworths fell for the eighth session in a row, down 2.2 per cent to $32.26. Building materials supplier James Hardie added 4.3 per cent to $12.52 as it showed a stronger than forecast 66 per cent jump in interim net ­operating profit.
Virgin Australiafell 1.3 per cent to 39.5¢ as the airline said it will strengthen ties with Singapore ­Airlines frequent flyer program. IPH Ltd, the holding company for patent attorneys Spruson & Ferguson defied the market gloom, jumping 47.6 per cent on its ASX debut to $3.10. Resources giant BHP Billiton lost 1.5 per cent to $32.67, while Rio Tinto shed 2.5 per cent to $57.98. Fortescue Metals dropped 7.7 per cent to $2.74. The Australian dollar is trading at US86.43¢ at 6.19am AEDT, compared with Wednesday’s local close of US86.85¢.  Iron ore fell for a fifth day, approaching $US70 a dry ton in a retreat to the lowest level in more than five years.
 

James Hardie Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Worley Parsons Limited (BUY)

WorleyParsons (WOR) which delivers projects, provides expertise in engineering, procurement and construction, and offers a wide range of consulting and advisory services, is again fallen in our radar.



Five Year Performance at a Glance (Source – Company Reports)

The recent award of an engineering, procurement, construction and installation (EPCI) contract for ConocoPhillips’ capacity increase project on the Ekofisk Complex in the Norwegian part of the North Sea is provided as an update by the Company. The Contract value is estimated to be 167 million AUD. The project is planned to be executed from WOR’s Stavanger facilities in Norway.


Expectations in FY15 (Source – Company Reports)

In fact, WOR has also provided a snapshot of the strategic segmentation with regards to global hydrocarbons subsectors for FY15 forecast.


Global Hydrocarbons Subsectors FY15 Forecast (Source – Company Reports)

For the Hydrocarbons sector, the aggregated revenue of $5,372 million and EBIT of $627 million, lower than the previous corresponding period was reported for FY14. The overall Hydrocarbons EBIT margin declined by 0.2%. For Minerals, Metals & Chemicals sector, aggregated revenue of $1,066 million and EBIT of $131 million, lower than the previous corresponding period was reported. The EBIT margin declined by 0.7%. For the Infrastructure sector, aggregated revenue of $926 million and EBIT of $64 million, lower than the previous corresponding period was reported. EBIT margins declined by 3.4%.

However, the reorganization into three business lines – Services, Major Projects and Improve would enable WOR to reduce overhead costs and would enable it to deliver greater customer satisfaction. Under the development group, two businesses are currently being supported - Advisian and Digital Enterprise.

Under the hydrocarbons sector, Australian LNG is moving into operational and maintenance support phase. Even, North American LNG is now focusing on Canada’s West coast.


The UCOG Value Chain (Source – Company Reports)

WOR’s mining and mine development leverage the Company’s mining expertise and capability at a global level.



Mining & Mine Development (Source – Company Reports)

The Company witnessed sustained global growth for Fertilizers segment. The intention is to grow position in Potash, Phosphates and nitrates. The Company is also putting efforts to steer productivity improvement in Bauxite & Alumina segment. Further, under the chemicals growth, differentiated offering is leveraging China capability. The Company is more or less focusing on US, Middle East and Asia.

Under the Infrastructure sector, customers are shifting to private funding in the developed world and governments are investing and owning in the developing world. Customer base under this sector includes Hydrocarbons customers (Pipelines, LNG and liquids terminals and unconventionals); Minerals & Metals customers (Brownfields optimization); and All Customers.


Facility Concept Projects (Source – Company Reports)
 
WOR is executing global projects in multiple locations. Primarily, there are 16+ major projects contracts contributing to ~12% FY2014 aggregated revenue.


Major Projects Highlights (Source – Company Reports)

The Company has also identified major project opportunities for award in FY15 for ~$1B revenue. Major upstream developments entail works at onshore Alaska & Western Canada LNG, offshore East Africa, deep water, and arctic. Geographic expansion works include efforts in Mexico and East Africa. For instance, 174 discovered fields in Arctic and 83% of discovered resources are Russian.

As per WOR’s global major projects outlook, FY2015 margin improvement focuses on creation of major projects business line, further developing the global delivery centers, and training and consistent application of best practices. Awards in FY2015 are expected to ramp up.


FY14% Services Revenue by Region (Source – Company Reports)

In Europe Middle East North Africa, growth opportunities entail Middle East hydrocarbons, Saudi Arabia power market, Port expansions in the Middle East and Middle East chemicals, with challenges in Offshore Norway and Russia. In Sub-Saharan Africa, growth opportunities entail East Africa hydrocarbons and Global underground mining, while challenged markets include Nigeria, RSA public infrastructure, Minerals and metals, and Angola. In Latin America, growth opportunities include Mexico (hydrocarbons), Ecuador, and Brazil hydrocarbons while challenged markets include minerals and metals, and Brazil. In North America, UCOG, Gas processing and distribution including LNG, Chemicals and Refinery Revamps, Growth into Latin America proffer growth opportunities while challenged markets entail minerals and metals, Fossil power and Oil Sands. In Australia Pacific Asia China, growth opportunities include Chemicals, Brownfield services for new assets particularly Australian LNG facilities, UCOG, and Government infrastructure, while challenged markets entail minerals and metals.

For INTECSEA, the growth opportunities entail Offshore Full Field Development (concept selection), Mexico – Gulf of Mexico with IOCs and Pemex, East Africa offshore Mozambique, Brazil, India – Deepwater off the east coast, and Deepwater brownfield particularly in the GoM.

Contrado JV with MWH and MTG acquisition appear to enable WOR to better participate in US UCOG in view of the enhanced water and hydrocarbons expertise provided by these entities. Australia - New Zealand markets are also becoming stable after some windy years. The Company further reports that Advisian will be a material contributor in next 3-5 years by virtue of organic growth and acquisitions.

In view of the above, we put a BUY recommendation for this stock at the current price of $12.15.

 
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