Two stocks that dipped - Link Administration Holdings Ltd and WorleyParsons Limited

Link Administration Holdings Ltd

LNK Details
· ACCC raises concerns on the group’s pillar acquisition: Link Administration Holdings Ltd (ASX: LNK) stock fell over 7.2% on October 13, 2016 due to the Australian Competition and Consumer Commission’s (ACCC) concern over the proposed acquisition of the Superannuation Administration Corporation (trading as Pillar) by the group. ACCC pointed that the acquisition could potentially lead to a decrease in competition in the supply of superannuation administration services by establishing Link’s dominant position, leading to a lower service levels or rise in prices, which would in turn be passed on to fund members. Moreover, ACCC believes that the competition to the group would decrease post the merger as no alternative superannuation administration services provider has such capacity which could offer administration services to larger funds in competition with Link. On the other hand, LNK is reviewing the issues and is preparing to address the same. LNK stock is, however, trading at unreasonable valuations with a very high P/E and a low dividend yield.

· Recommendation:We give an “Expensive” recommendation on the stock at the current price of – $ 7.59

WorleyParsons Limited

WOR Details
· Ongoing cost control with a strong contract base: WorleyParsons Limited (ASX: WOR) stock fell over 2.76% on October 13, 2016 due to slight correction in the commodity prices. The group’s cost control focus decreased their overheads by $170 million in fiscal year of 2016 as compared to the same period of last year. By the end of June 2016, the group delivered an annualized cost reduction of $200 million, exceeding their target of $120 million. These savings offset the group’s underlying EBIT margins to a certain extent. WOR even launched the Advisian business line, an integrated the Breakthrough Project Delivery model into the Project Management Consulting (PMC) which could lead to a better work process transfer to the Global Delivery Centers (GDC). On the other side, the oil prices could see a recovery once the details of Russia and Saudi Arabia’s plans of cutting oil production come out in the next month. Despite this, WOR has built a solid contract base while the stock generated an outstanding return of over 89.5% during this year to date (as of October 12, 2016).

· Recommendation:We give a “Buy” recommendation on WOR at the current price of - $ 9.19

Global operations and major contract wins (Source: Company Reports)

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