# DOW - Downer EDI



## GreatPig (9 August 2006)

One way to correct back to the longer-term trend  

Fortunately I don't hold.

Cheers,
GP


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## Sean K (9 August 2006)

I hold quite a few, but fortunately bought at an average $3.80ish.

Took a bold punt this afternoon and bought another chunk at $5.14 expecting a bounce. I might have well gone down to Crown, but hey, you only live once.   

My theory is that a 30% drop is a knee jerk reaction and companies making good profits ($138m less abnormals), come back.


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## michael_selway (9 August 2006)

kennas said:
			
		

> I hold quite a few, but fortunately bought at an average $3.80ish.
> 
> Took a bold punt this afternoon and bought another chunk at $5.14 expecting a bounce. I might have well gone down to Crown, but hey, you only live once.
> 
> My theory is that a 30% drop is a knee jerk reaction and companies making good profits ($138m less abnormals), come back.




Do u think Future NPAT forecasts wil be affected?

Earnings and Dividends Forecast (cents per share) 
2005 2006 2007 2008 
EPS 32.8 48.3 55.9 61.4 
DPS 18.0 25.0 28.0 31.0 



> Date: 9/8/2006
> Author: James Hall
> Source: The Australian Financial Review --- Page: 49
> 
> Rather than delivering an expected net profit of over $A140m, Downer EDI has announced an enormous write-down. On 8 August 2006 the Australian engineering contractor said it had written $A199m off its books, including $A163m for a delayed mineral sands project. Downer's 2005-06 underlying profit came in at $A138m, up by 32.7%, but write-downs took its final result to a $A25m net loss. The results are unaudited and Downer is still battling with Iluka Resources over who should be liable for extra costs at the Douglas project. CEO Stephen Gillies said conservative accounting of the disputed contract had been used, as required by Australia's new accounting standards




thx

MS


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## Sean K (10 August 2006)

The current sp gives it a forecst p/e of about 10.3. (from fat profits) 

With the other engineering/contractor firms in high teens and 20s, that's pretty low! 

Lonsec are rating it a hold while Aegis is reviewing it's recommendation to sell.


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## Sean K (10 August 2006)

Trying to find a positive spin here: 

Director Stephen Gillies buying $1.8m of shares yesterday at $5.17 is a good sign to me. 

Not a lot of good news in the papers this morning.


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## Sean K (11 August 2006)

Well, I took a gamble of such and bought a few more expecting a bounce after the market overreacted on Wednesday. Perhaps lucky get a 6% rise in past 2 days.

Aegis have raised their recommendation from Hold to Buy based on the price movement which places DOW on a prospective pe of around 10.

"We reiterate our view on DOW's 8 August shock announcement. The provisioning was a surprise, but sometimes contracts turn "rogue". The real concern is that the company moved to hose down the market's medium term earnings projections with a below consensus $155M NPAT guidance for FY07. It will take some time for sceptical investors to forgive and forget. *For those bargain hunters with a "buy and hold" ethos now is an opportunity*. Next stop, the company's full FY06 results on 22 August."


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## Sean K (14 August 2006)

Up 8% from fall.

6 directors bought shares in past 3 days. 

Aegis/HSBC now have it at buy with 12 mth target $6.65.


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## michael_selway (14 August 2006)

kennas said:
			
		

> Up 8% from fall.
> 
> 6 directors bought shares in past 3 days.
> 
> Aegis/HSBC now have it at buy with 12 mth target $6.65.




its recovering well it appears since first day

thx

MS


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## Sean K (14 August 2006)

I'm not convinced the cat is alive though Michael. Will be under pressure when they announce final results on 28 Aug (I think)


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## Julia (14 August 2006)

kennas said:
			
		

> I'm not convinced the cat is alive though Michael. Will be under pressure when they announce final results on 28 Aug (I think)



Kennas
I don't hold this stock but noticed the large drop (who wouldn't?)
I'm interested to know why after such a large write down you bought more before any reversal or uptrend began?  Do you have such great confidence in the company, was it gut feeling, or some other technical consideration that is eluding me?

I'm not at all being critical but am really interested to know why you did this.
You are "not convinced the cat is alive".  Did you consider waiting until said cat started twitching its tail before buying more?

Julia


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## Freeballinginawetsuit (16 August 2006)

I bought these also at $ 5.18. Only because I thought the reaction was overdone. Downer has decent fundamentals and their SP going down was only because of their stuff up on the ILU quote and subsequent proffit loss.Downer are a solid company and why wouldn't you buy in on a one of SP drop?.


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## Sean K (17 August 2006)

Julia, I've noticed that in the past that after a 'good' company produces a negative result in a jittery market, they get smashed and it it generally oversold. This represents a short term buying opportunity imo, but it is of course risky (Isn't it all).

I have held this company for 3 years and have had a fantastic return and have been very impressed with management. Up to now. So, I calculated it was worth the risk at the time.

I have now sold my entire holdings and made about 10% on the shares I bought when it bombed. 

I've sold out pending stabilisation of the sp, their final result, and the NSW rail car contract they are competing with UGL over. If UGL get it, then I think DOW will find it hard to keep support. On the other hand if they get it, then they will probably recover nicely. 

Interesting that brokers are going one way and the other. Aegis/HSBC/Lonsec say hold, Fat Profits say sell.........Both can't be right. And they're the 'experts'!!

I'm back on the side for the moment.


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## Freeballinginawetsuit (13 September 2006)

Dow performed well today on good volume.


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## dutchie (15 September 2006)

DOW performing well again today up 30c (5.2%) on average volume.

Somebody knows something.

Cheers

Dutchie


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## Halba (15 September 2006)

bidders are looming the rumour is everywhere now

selling at a p/e of 10. easy prey for a cashed up predator, when peers are selling for double the valuation


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## Freeballinginawetsuit (15 September 2006)

DOW is starting to build some momentum, glad I took the punt with this one last month.
Positive momentum on a bad market day, a good sign.


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## Sean K (17 September 2006)

Halba said:
			
		

> bidders are looming the rumour is everywhere now
> 
> selling at a p/e of 10. easy prey for a cashed up predator, when peers are selling for double the valuation




I ended up selling all at $5.60. Now thinking to get back in again.

Got a reference for the rumours Halba? Looks and sounds like it could be in play. 

Oh, an hi everyone. Back from playing war in the desert. How I love hot water flowing out of the shower head!


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## Realist (21 September 2006)

Freeballinginawetsuit said:
			
		

> I bought these also at $ 5.18. Only because I thought the reaction was overdone. Downer has decent fundamentals and their SP going down was only because of their stuff up on the ILU quote and subsequent proffit loss.Downer are a solid company and why wouldn't you buy in on a one of SP drop?.





Amazing that in the past 12 months DOW hit $5.18 ONCE for about 2 minutes and you managed to buy it then, you managed to buy DOW at the all time 12 month low, and you tell us about it a week later when DOW had rocketed up to $5.70.

Amazing.

How did you manage to pick that 2 minute period in the past 12 months.


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## michael_selway (21 September 2006)

Realist said:
			
		

> Amazing that in the past 12 months DOW hit $5.18 ONCE for about 2 minutes and you managed to buy it then, you managed to buy DOW at the all time 12 month low, and you tell us about it a week later when DOW had rocketed up to $5.70.
> 
> Amazing.
> 
> How did you manage to pick that 2 minute period in the past 12 months.




yeah not bad Freeballinginawetsuit

Earnings and Dividends Forecast (cents per share) 
2006 2007 2008 2009 
EPS 46.4 49.2 53.1 54.2 
DPS 20.0 25.0 26.2 27.0 

Well Fwd Terminal PE = $5.40, anything under is cheapish, but are there risks (upside & downside)?

thx

MS


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## Sean K (27 September 2006)

Looks to have recovered very nicely, good support around $5.50 in the end and pushing through $6.00.

I sold at $5.60 and and now taking another look as the bad news has pretty well washed away. 

Upside potential in the coming days with the NSW rail contract to be awarded. UGL are expected to get it and I think this is already factored into the prices. If DOW win it would be worth quite a bit to their sp.....


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## bowser (27 September 2006)

MACD looks promising Kennas. 

Wouldnt be surprised if previous resistance become support (around $6), and then see DOW try to reach $6.80+.

One to watch over the next week.


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## Sean K (30 October 2006)

Time to go long DOW.

1104 [Dow Jones] Downer (DOW.AU) up 2.9% at A$6.80, hits A$6.82, up nearly 8% in 2 days on "Friday's talk was of a Leighton (LEI.AU) bid," says senior institutional trader. Another dealer says there's talk of an A$8.50 takeover bid. Follows Oct. 19 revelation from DOW that LEI bought small shareholding in early Sept. LEI and WorelyParsons (WOR.AU) have been rumored as potential acquirers of DOW. Recent confirmation of support from former resistance near A$6.25 leaves pressure on major resistance at A$7.00. Break targets A$7.60-A$7.75 area. (DWR)


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## Sean K (2 November 2006)

DOW now rumoured to be taking some UK services company....

Still other rumours flying about that DOW will be the target.......

I sold out at $5.60 after what I thought could have been the dead cat bounce after the disasterous right in August on the Iluka deal. Seems that was a bit premature. Stock has recovered very nicely and trending back up.

Circle indicates last takeover spec on DOW.


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## matti_pacman (25 November 2006)

It has recently won the NSW rail contract and is consolidation around the $7 region... Good time to get back in? Stock looks bullish to me... 

But i guess the lack of transparency in management and potential for other contracts fallout is scaring me abit.


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## Sean K (26 November 2006)

matti_pacman said:
			
		

> It has recently won the NSW rail contract and is consolidation around the $7 region... Good time to get back in? Stock looks bullish to me...
> 
> But i guess the lack of transparency in management and potential for other contracts fallout is scaring me abit.



Matti, I don't think they can afford to get it wrong again. They sacked all the peoiple responsible for the lack of info flow on the contract problems. This was a great buy a month or so ago. Takeover tumours have given it drive and the rail deal was a coup. I am a big supporter of this company and waiting for a decent pullback to get back in.


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## Sean K (4 December 2006)

Looks to have consolidated nicely the past week or so and might be a buying opportunity. Looks like good support about $6.90. Will be looking to buy in on a break through $7.10 possibly. Had a great run since the sp implosion mid year.


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## maverick11 (6 December 2006)

i wouldn't kennas mate.  More losses expected jan sometime...


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## Sean K (6 December 2006)

maverick11 said:
			
		

> i wouldn't kennas mate.  More losses expected jan sometime...



Really. Do you work there? I'll save my money then, cheers.


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## Sean K (21 February 2007)

maverick11 said:
			
		

> i wouldn't kennas mate.  More losses expected jan sometime...



 Perhaps in Feb, then?? Maybe March?

Half yearly results due 23 Feb, so maybe then?


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## Sean K (21 February 2007)

On the chart has found resistance as expected around $7.50 ish after the break through $7.10. $7.00 ish should now be support and a break through $7.50 would be very bullish IMO, probably sending it to next resistance at $8.30 ish.

As long as the downgrade/loss doesn't eventuate....


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## Halba (21 February 2007)

looks like the recovery stock of 2007 huh


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## Sean K (21 February 2007)

Halba said:
			
		

> looks like the recovery stock of 2007 huh



Maybe. I'm a bit bearish overall right now. 

Waiting for a correction....that's not coming   

On the chart, note the MACD rising and just about to break signal line. VG.

However, if DOW do ann further losses due to cockups, they'll be severely punished, perhaps even worse than Aug 06. Not comfortable getting back into this until they confirm they're back on track.


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## Halba (21 February 2007)

Hi kennas

My opinion is this. Correction won't happen to every single stock right in the end of reporting season. 1/2 of the companies that beat expectations will gradually increase, and the ones that don't will be the ones to correct.

The good co's will not correct IMHO as they are beating expectations.


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## Sean K (23 February 2007)

Ann out. I'm hopeless at reading these things. Need to be able to compare to last years and guidance throughout. Can't see any additional write downs or losses.....Will be interesting to see how the market takes it.


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## sammy_k2000 (10 July 2007)

So a skilled labour company that is currently looking cheap and possibly about to post a nice profit.  Should be a good month for holders and if not with GUD in play I can only imagine that it won't be long till Downer is in play with its price so low.


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## maverick11 (11 July 2007)

I’m very bearish towards DOW.  As a company on a whole, they may be doing ok(ish) but one major portion of their business is doing poorly & they are also undergoing a lengthy legal dispute with a major client for their approx $100M loss.


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## sammy_k2000 (11 July 2007)

Mav which part of their business is doing poorly?  Most of their mining arm are in partnerships with the companies running them in which they share part of the profits and I can only see this been a benefit to the company.  As for the legal dispute this has already been heavily factored into the share price as it was that loss that caused the massive loss in share price in the first place.

Cheers


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## sammy_k2000 (1 August 2007)

Uh oh any ideas on the trading halt today?  I can only hope that this might be some better news.  Its make or break time for this company.


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## Sean K (3 November 2007)

This company needs to be taken over and shown how to do it. 

Problem after problem after problem. 



> *Downer's flat earnings spark share price slide*
> November 3, 2007
> 
> DOWNER EDI's share price fell more than 12 per cent after it warned that earnings were likely to be flat because of softness in its mining division caused by lost contracts, wet weather and port congestion.
> ...


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## SevenFX (3 November 2007)

kennas said:


> This company needs to be taken over and shown how to do it.
> 
> Problem after problem after problem.




Couldn't Agree More.

July 28th 2006 Gap Down 30.5%
August 2nd 2007 Gap Down 16.5%
November 2nd 2007 Gap Down 12.8%

Contracting Gap Down are Good Aren't They...??? 

SevenFX


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## vishalt (4 November 2007)

hahahahaha at this stock, so many gap downs its amazing

I think the hint that its a bad stock was in the name ... DOWN(er) EDI


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## Sean K (14 November 2007)

This is getting worse and worse at a time when it's divisions should be pumping!

Sum of parts must be looking tasty to LEI or WOR, or anyone with spare change...


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## maverick11 (14 November 2007)

One of downers divisions is dragging it down.  I hear rumours of a possible leightons takeover in the near future.  Although, Im wondering if competition laws could come into effect?


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## Sean K (7 November 2008)

I wonder if DOW will do it's usual thing after a massive sell off.

Although, this self off is market related I suppose and not through a company **** up. 

Still if it follows the trend, there's a potential move from $5 back to $6.50-$7 ish if it follows the previous trends. 

Obviously past performance is no guarantee of nada, but interesting nonetheless.


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## skc (1 June 2010)

What a Downer! Problems at Reliance rail was well flagged so surprised to see such savage reaction today. Stock down 23% and below $5. They were $9.5 not that long ago.

The punters might be fearful that a cap raising is on the cards - which usually happens a month after a company denies that they need to raise capital. Today's announcement left the door ajar for some cap raising imo.

Still... most likely overdone in the short term so probably a bounce tomorrow if the overall market isn't too crazy.


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## kingkev (27 January 2011)

Down down depper and down

Taken a hammering today

How much lower can it go before a takeover looms


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## skc (27 January 2011)

kingkev said:


> Down down depper and down
> 
> Taken a hammering today
> 
> How much lower can it go before a takeover looms




Thankfully the rest of the businesses are going OK which propped the share price fall today. HY EBIT of ~$132m means FY NPAT ~$200m (assuming they don't pay any tax this year), or ~58cps. At $3.60, PE is 6.2...compare that to LEI which trades at ~15.

However I think the situation is a bit politically sensitive for a takeover to be launched right now. No one would like to be the guy looking after this rotten project under the scrutiny of various political parties and risk heaps of reputational damage. May be when things are back on track mid-late 2012 (with delivery schedule being met) and the share price is still depressed...

Something I couldn't understand about the $250m provision, which included a positive impact of $92m from the delay. Here's the description... it just seems like a very large number out of no where...



> Manufacture Delay Income
> Under the prime contract between Downer and Reliance Rail, milestone payments are paid to Downer by Reliance Rail in accordance with the actual delivery schedule achieved. To the extent that these monies are not paid to Downer (and indeed Hitachi) due to late delivery and missed performance milestones, the monies are held by Reliance Rail in a ‘Manufacturing Delay Account’ (MDA), with the monies invested to earn interest income.
> The RSM contract provides that monies held in the MDA are to be paid to Downer upon achievement of contracted milestones, and that interest that accrues on the MDA is to be paid over when train set 78 is delivered to Reliance Rail.
> Total interest of $94 million is projected to accrue against the MDA for the benefit of Downer, which will be payable to Downer in October 2014 based on the projected delivery of train set 78.


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## kingkev (21 February 2011)

It appears that the share price has taken a hammering and many see this as a bit of over-reaction.  It is still in a depressed state however pundits are putting this stock on buy recommendations because of the overreaction and the fact that other parts of their operations are still very  good  Might be a good time to get in.


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## zzaaxxss3401 (21 February 2011)

I bought in at $3.66 when they dropped and sold out recently nearer to $4.00. I'm watching, but was worried they were going to enter into a trading halt prior to announcing a capital raising.


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## kingkev (21 February 2011)

I am also one that cannot understand how you can actually make money by delaying the whole project.  The issue here will probably be the delivery of train set 78 being on time.  If the delay cannot deliver on time there wil be no positive impact but if it is only a hiccup and they can still deliver the final goods on time...how do they still make $9m?

The mind boggles


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## prawn_86 (13 August 2012)

Up a lot this morning on the back of them actually hitting their profit guidance. They pretty much miss it every reporting season so actually hitting it has forced a repricing


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## Knobby22 (9 April 2013)

I've been in due to technical reasons since Christmas and the company is one of my better performers. They have been drifting back but a sharp jump again today. Dividends have returned and PE looks to be about 9 for the year. Infrastructure boom expected after the election?


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## skc (9 April 2013)

Knobby22 said:


> I've been in due to technical reasons since Christmas and the company is one of my better performers. They have been drifting back but a sharp jump again today. Dividends have returned and PE looks to be about 9 for the year. Infrastructure boom expected after the election?




The jump is not sector-wide.

JPM (or was that UBS) has a write up on them this morning.

I had a long from yesterday but managed to sell this morning at $4.85... speaking of leaving plenty on the table!


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## Knobby22 (9 April 2013)

Bad luck. Thanks for the information.


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## systematic (1 December 2015)

This one must currently be on the radar of serious income/dividend investors?


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## So_Cynical (22 March 2016)

systematic said:


> This one must currently be on the radar of serious income/dividend investors?




Belated thanks for bringing DOW to my attention, i bought a thousand shares on the 10th Dec 2015 @ $3.35 as im slowly switching to dividends.

It dipped a little over the NY but doing ok now, a little all boats rising when the tide comes in i suppose, i needed a solid dividend stock as retirement approaches, at the time i was hoping the $3.30 bottom line would hold..anyway, all good, dividend held.
~


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## systematic (23 March 2016)

So_Cynical said:


> Belated thanks for bringing DOW to my attention, i bought a thousand shares on the 10th Dec 2015 @ $3.35 as im slowly switching to dividends.




I hope it works out to be a wonderful trade.

I'd like to hear a little more about why you're focusing on dividends for income - if you're happy to share any thoughts.  I haven't thought a great deal about it (retirement income) as yet.


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## So_Cynical (5 August 2016)

systematic said:


> I hope it works out to be a wonderful trade.
> 
> I'd like to hear a little more about why you're focusing on dividends for income - if you're happy to share any thoughts.  I haven't thought a great deal about it (retirement income) as yet.




Dividend still holding and uptrend in place, good news flow and $4.75 close...wonderful trade indeed.



systematic said:


> I'd like to hear a little more about why you're focusing on dividends for income - if you're happy to share any thoughts.  I haven't thought a great deal about it (retirement income) as yet.




Focusing on Dividends because my super wont be tax free for another 7 years so plan on leaving that alone, thinking that the dividends are fairly regular spread across the 30 stocks i hold when looked at as a whole, so regular dependable income from dividend (mostly tax paid), trading profits as a bonus.


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## systematic (6 August 2016)

So_Cynical said:


> Dividend still holding and uptrend in place, good news flow and $4.75 close...wonderful trade indeed.




...I'm so pleased.  I did wonder the other day whether you were still in.  I looked again at some dividend stuff the other day (which obviously I don't normally do) and DOW still shows up in the top group on that and other measures.  




So_Cynical said:


> Focusing on Dividends because my super wont be tax free for another 7 years so plan on leaving that alone, thinking that the dividends are fairly regular spread across the 30 stocks i hold when looked at as a whole, so regular dependable income from dividend (mostly tax paid), trading profits as a bonus.




...Cool, thank you.  Dividends are certainly an important part of a longer-term trader's profits.  Just look at the results on the magic formula thread.  Dividends don't even feature in the selection process, but made up something like a third of the returns!

Will you be concentrating on dividend stocks in retirement, do you think?  Or just buying as you currently do and dividends are the byproduct of a longer-term approach etc?


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## So_Cynical (6 August 2016)

systematic said:


> Cool, thank you.  Dividends are certainly an important part of a longer-term trader's profits.  Just look at the results on the magic formula thread.  Dividends don't even feature in the selection process, but made up something like a third of the returns!
> 
> Will you be concentrating on dividend stocks in retirement, do you think?  Or just buying as you currently do and dividends are the byproduct of a longer-term approach etc?




Over the last 6 years dividends have consistently made up about a third of my return, average total return of around 13 - 15% PA with dividends being about 3.5 to 4.5% of that...dividends are important.

When its time to add a new stock dividends play a big part in my selection process, my annual dividend growth is lagging my portfolio growth and has been for the last 3 years, actively addressing that now...i have enough non dividend stocks.

Two edged sword as often its the non dividend stocks that move, a balanced portfolio needs both but should be slanted to dividends, in my main portfolio i have 35 stocks at the moment (max will be 40) with 12 current non dividend payers though im confident that 3 or 4 of those will begin paying over the next 12 months or so.


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## peter2 (26 September 2016)

This chart is looking much more healthier than it has in the past. Looks like mgt has turned the ship around. It was heading for the rocks. I've only traded this stock once as was bitten by a downgrade. They're were many more downgrades that followed over the years.


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## So_Cynical (26 September 2016)

peter2 said:


> This chart is looking much more healthier than it has in the past. Looks like mgt has turned the ship around. It was heading for the rocks. I've only traded this stock once as was bitten by a downgrade. They're were many more downgrades that followed over the years.




6 years of ranging, hardly a disaster heading for the rocks at any point, buy weakness sell strength keep a few each time and make a motza...many brokers still have DOW as a sell.


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## skc (21 March 2017)

Downer today announced a bid for SPO at a hefty premium of $1.15 per share, follow overnight raid which netted it 15% of the target. DOW will also be raising capital @ $5.95 on a 2-for-5 renounceable rights issue. 

Any thoughts on this deal? It's quite a big transaction for DOW... it'd add 1/3 to it's market cap.

SPO has been a basket case not long after its IPO and has seen its financials deteriorate markedly from the dressed-up under PE ownership. The deal doesn't even require due diligence - so how would DOW know about the state of SPO's assets, details of their major contracts etc?

The deal is also all cash - with DOW shares at multi-year highs (and running +100% in the last 12 months), I am surprised that they didn't use some / lots of script... may be 1 DOW for every 10 SPO shares plus 20c cash would have done the trick. This would only require ~100m new DOW shares + $200m cash, and probably won't need a capital raising at a heavy discount.

The capital raising price of $5.95 is at a substantial discount to DOW's recent share price. Perhaps a large discount is needed because it is quite a big bite. It would be interesting ot see how DOW performs upon trading resumption. My guess is the market won't like it. TERP is $7 for the record.


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## Wyatt (21 March 2017)

Yes that will probably put a nasty bend in the end of a really nice chart over the last 12+ months. Hopefully it is only a 6% haircut. That gap up on 16/3 with volume is of interest, maybe the story got mixed up.


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## skyQuake (21 March 2017)

Being a cash offer makes it more compelling in a hostile bid.
Also a share raid is a lot easier when offering cash!

In the ends its easier to get existing holders to stump up cash than sweet talking management/obstinate funds into taking your dirty dirty script


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## skc (21 March 2017)

skyQuake said:


> Being a cash offer makes it more compelling in a hostile bid.
> Also a share raid is a lot easier when offering cash!
> 
> In the ends its easier to get existing holders to stump up cash than sweet talking management/obstinate funds into taking your dirty dirty script




Yeah of course... 

I just can't help but think that DOW has gone in a bit gun-ho?! Were they bidding against anyone else? A 59% premium is hefty to say the least. I don't see why they can't take their time and engage the target. The SPO management probably would welcome a script based bail out.

Coppo said it well in his report 


> Spotless used its response this morning to urge shareholders to stand pat as it assesses the “highly conditional” proposal. Is he serious … take the money and just run… This is the greatest get out of jail card for shareholders they have ever seen – don’t throw this one away.




On FY17 forecast earnings,  DOW's at $175m and SPO at $85m. So combined earnings with say plus $20m synergies pre-tax you get ~$275m NPAT, over the expanded shares on issue of 595m shares. The calculated EPS is ~46.2cps, which is 15.5% higher than the last reported number of 40cps, in line with DOW's presentation.

So what multiple should/would the market apply to this earning? DOW currently trades at PE~17.5x while SPO at ~14x (at $1.15 bid price).... will DOW enjoy a PE arbitrage freekick? SPO isn't a private business and the market priced it's earnings at 9x yesterday for a reason. The weighed PE (pre-takeover premium) is ~14.5-15x, which is a share price of $6.7-$6.9 (a tad under the TERP). Although I thought DOW share price was looking quite rich as it is... so a downside toward $6 over time isn't out of the question imo.


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## skc (23 March 2017)

This is not looking good...

http://www.afr.com/street-talk/down...ils-to-fly-red-friday-pending-20170323-gv4p4m



> As Street Talk first reported on Wednesday, UBS was in the market seeking to sell 45 million Downer shares at or above $5.95 a share. The shares were left over from the institutional portion of its entitlement offer, and were believed to represent about 35 per cent of stock available to fund managers under the raising.
> 
> It is understood the auction failed to climb above the $5.95 floor price, which means renouncing shareholders will not be compensated for those rights.




First the insto offer takeup rate was only 65%, then a poor auction on the remainder means the rights are worth nothing. Chances are UBS might be left holding some underwritten shares, and they will almost certainly be left with a bag of shares from the retail offer shortfall as well.

Given the TERP of $7, if DOW opens tomorrow at the cap raising price of $5.95, it would represent a drop of ~$600m in market cap. Coincidentally that's about the premium DOW decided to throw at SPO shareholders.


----------



## icemanmelb (24 March 2017)

I feel sorry for the retailers if the instos manage to push the price past $5.95.

Ice



skc said:


> This is not looking good...
> http://www.afr.com/street-talk/down...ils-to-fly-red-friday-pending-20170323-gv4p4m
> First the insto offer takeup rate was only 65%, then a poor auction on the remainder means the rights are worth nothing. Chances are UBS might be left holding some underwritten shares, and they will almost certainly be left with a bag of shares from the retail offer shortfall as well.
> Given the TERP of $7, if DOW opens tomorrow at the cap raising price of $5.95, it would represent a drop of ~$600m in market cap. Coincidentally that's about the premium DOW decided to throw at SPO shareholders.


----------



## skyQuake (24 March 2017)

icemanmelb said:


> I feel sorry for the retailers if the instos manage to push the price past $5.95.
> 
> Ice



Heard that UBS managed to get some unlucky funds to sub-underwrite most of it. Doubt retail will take up their rights, which means another big pile of shares coming on late april

Wonder if this is a Slater-esque moment for management!


----------



## helpme (24 March 2017)

I just suffered a very painful loss in DOW shares this morning. Truly very painful. From good gain to loss after a good night's sleep. The rights issues DOWR are pretty worthless now. It is a joke to me. I cannot even cover the brokerage fee if I sell the rights issues. I am not familiar with rights issues. If I simply leave the rights issues alone until they expire, are there any liabilities? Will I be forced to exercise the rights?



skc said:


> This is not looking good...
> 
> http://www.afr.com/street-talk/down...ils-to-fly-red-friday-pending-20170323-gv4p4m
> 
> ...


----------



## skc (24 March 2017)

helpme said:


> I just suffered a very painful loss in DOW shares this morning. Truly very painful. From good gain to loss after a good night's sleep. The rights issues DOWR are pretty worthless now. It is a joke to me. I cannot even cover the brokerage fee if I sell the rights issues. I am not familiar with rights issues. If I simply leave the rights issues alone until they expire, are there any liabilities? Will I be forced to exercise the rights?




There are no liabilities attached to the rights. It's a right, not an obligation. If you simply do nothing, the raising broker (UBS in this case) will run a bookbuild of the retail shortfall, and you will still get the benefit of any proceed if the shortfall shares are sold above the issue price of $5.95. 



skyQuake said:


> Heard that UBS managed to get some unlucky funds to sub-underwrite most of it. Doubt retail will take up their rights, which means another big pile of shares coming on late april
> 
> Wonder if this is a Slater-esque moment for management!




Can they still pull out of the bid? Or it's legally impossible? What would happen to the retail rights issue (and the proceeds raised) if the bid doesn't go ahead? They can choose not to waive the 90% condition and not answer the phone calls from the last 10% of holder who want to accept?! Or could they not accept their own 20% holding citing clerical error? Lol... that would be fking hilarious.

I don't think this is quite Slater-buying-Quindell bad. SPO, whilst a dog's breakfast, is not a fraud - It's a legitimate business that's been around for some time. The free cash flow is poor so it will be a drag on DOW's ROI/ROC for some time... until DOW writes down the acquisition in 12 months time. But DOW is financially strong enough so it won't be fatal... unless of course it runs into trouble on it's other businesses at the same time.

In 5 years time , look up a business school text book on "management hubris" and you will find SGH and DOW appearing as case studies.


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## Trendnomics (24 March 2017)

helpme said:


> I just suffered a very painful loss in DOW shares this morning. Truly very painful. From good gain to loss after a good night's sleep. The rights issues DOWR are pretty worthless now. It is a joke to me. I cannot even cover the brokerage fee if I sell the rights issues. I am not familiar with rights issues. If I simply leave the rights issues alone until they expire, are there any liabilities? Will I be forced to exercise the rights?




In the same boat here. Rights might be worth more by next week Friday (Allotment Date + Normal Settlement) - most retail traders (including me) don't currently have their rights and trading is currently on a deferred settlement basis.


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## Wyatt (24 March 2017)

A very calm and reasoned response Trendnomics, another person could express great annoyance by such wealth destruction witnessed today. What would that number be? somewhere close to $1Bn? Clearly all but the board are wrong, who advised them? Someone must be p!ssing themselves laughing and why was the bid so high? SPO must have been on everyone's radar. 
Having done a bit of backtesting in similar situations, often a better price can be had after the panic passes, hopefully this is one of those occasions. We will see. The SPO price is 9% shy of the bid price, holders must still think it too good to be true


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## FuturePlay (12 August 2017)

Hi all,

as a Downer shareholder I have finally come to a place where I do not want Downer to enter in to a contract to build and operate Adani's coal mine in Queensland's Galilee Basin. As such, I have registered to be one of the 100 shareholders required to put up a Resolution - for the contract not to be entered - at their AGM to be voted upon.

If you also feel strongly about this relationship not going ahead then please consider being part of the 100 members too. You can register your interest here

*If you want to understand more then read on.....*

I am fully on-board Downer making sound business decisions and exercising their right to operate a lawful business, but I don't think this is a sound business decision nor a sound decision in respect to its social and environmental impact.

I have been closely following the anti-Adani campaign now since the beginning of the year and in particular a campaign that has been targeting Downer directly (which in itself is concerning). I'm on their newsletter list and so have discovered that this campaign is proposing to put a Resolution up at Downer's AGM - that Downer not go in to a binding contract to build Adani's mine. This needs 100 shareholders to achieve, so please register if you agree this resolution must be put forward to a vote.

*Why I think it is a bad idea*
I am concerned with Downer's business relationship with Adani for a number of reasons (also see the bottom of this post for a summary I found online - you can be the judge on whether you think it's based on fact of fiction):
- the bad history Adani has in respect to its contractors
- the risk of stranded assets (Adani has been rejected by 14 financial institutions; the future of coal is being contested even by those on the 'right' of politics)
- the contribution that this mine - the largest in the Southern Hemisphere - will have to global warming. The international community - including world leaders and financial institutions - recognises that there must not be any new coal mines.

*Summary Sheet*
Dear potential supplier to Adani,
Our aim is to provide additional information to you, to enable you to make an informed decision regarding the risk associated in such a business relationship.
Our research considers the economic, social and environmental risks to your business. For all substantiating references, please refer to: https://envirojustice.org.au/adani-brief-documents

*Economically*, how secure would you feel about being involved with a foreign-based company that:
• Has been rejected for a loan by 14 national and international banks and finance companies
• Has a record of reneging on payments to contractors
• Asks you to invest in technology that is seen by economists, mining companies and financiers as belonging to the last century, and is fast being made obsolete around the globe
• Relies on a complex business structure with bases in the Cayman Islands to conceal money flows and minimise taxation
• Needs a $1billion dollar loan from Australian taxpayers to build their railway
• By nature of you having a business relationship with them, will make you a target of ongoing disruptive action, backed by the broad Australian community?

*Socially*, how would your reputation be affected if you were associated with a project that:
• Is not supported by most Australians and is internationally condemned
• Has been ‘sold’ on lies to our government and the people
• Overrides the land rights of Australian Native Title holders
• Threatens the Great Barrier Reef and hence the 70,000 jobs associated with the tourism this national treasure generates

*Environmentally*, do you want to do business with a company that:
• Is facing huge fines for environmental damage in Australia and around the world
• Has the capacity to damage the Great Artesian Basin
• Will increase the risks to our struggling Great Barrier Reef
• Will contribute to accelerating global impacts from climate change, affecting the lives and lifestyles of generations to come
We trust this information provides a more rounded view of a company that promises much, but has a history of delivering little.
Sincerely, for a better world.


----------



## So_Cynical (12 August 2017)

FuturePlay said:


> Hi all,
> 
> as a Downer shareholder




How long have you been a shareholder?


----------



## Miner (20 March 2018)

So_Cynical said:


> How long have you been a shareholder?



Hello Future Play
Out of interest and learning Downer lost the court case today in the High Court, I visited DOW thread today.
Noticed So Cynical asked a question to Future back in August 2017 and never received a response.
I have no conflict of interest but as a member of ASF since 2007, would like to know from members who want to raise voice using this forum also have a duty to respond to Member's query.
Future play (please do not mind) if you have posted a lengthy appeal then please do not feel shy to respond of an one liner . This will also demonstrate genuineness and that some one is not using proxy against Adani. I have nothing against or for Adani or Downer but want to see this forum is clean. I am not batting for SC either even if I have a lot of respect on him and his unbiased postings.
Cheers


----------



## greggles (17 August 2018)

Downer EDI at 8 year highs this morning following yesterday's release of its FY18 financial results and Annual Report.

While annual net profit dropped 61% to $71.4 million from $181.5 million in the previous corresponding period, total revenue for the Group increased by $4.8 billion to $12.6 billion, up 61.5%. 

DOW declared a 50% franked final dividend of 14c per share.

It is currently trading at $7.835, up 4.33% from yesterday's close.


----------



## Trav. (28 December 2018)

I like the look of the Downer chart and BO possibility in the new year @ $6.70.  i know that they are won several contracts recently with BHP and looking at their announcements they have also won a $420M Parramatta Light Rail Contract


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## Trav. (24 February 2019)

Well good to see Downer doing well. Lucky I didn't buy as then they would have been in trouble. 

6 Feb = closed @ $7.56 and just gone ex Div on the 20 Feb now @ $7.21.

Can it break the $8 mark this year ? Last time was 2009


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## Smurf1976 (6 March 2019)

Trav. said:


> Can it break the $8 mark this year ? Last time was 2009



I note two previous tops at $8.61 (2006) and $8.60 (early 2010) so around there might be a possible target it it can get past the 2018 high of $7.98.


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## Trav. (6 March 2019)

Smurf1976 said:


> I note two previous tops at $8.61 (2006) and $8.60 (early 2010) so around there might be a possible target it it can get past the 2018 high of $7.98.



Correct you are mate, not sure how I stuffed that up.


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## Miner (17 June 2019)

Anyone here? 
Kalkin (one of the rogue financial agencies) recommended Downer as a buy.
Often they say buy before the share prices drop. Only once they were right - KDR.
DNH Downer but watching.
Downer EDI Limited (ASX: DOW) happens to be a leading provider of the integrated services in Australia and New Zealand. As on June 17, 2019, the market capitalisation of Downer stood at ~$4.16 billion. The company reported its results for the half-year ended December 2018 in which it witnessed increases in the total revenue, earnings before interest, tax and amortisation of acquired intangibles assets (or EBITA) and NPAT.
BTW has anyone noticed the massive performance rights of more than 30000o shares  https://www.asx.com.au/asxpdf/20190603/pdf/445kxx758tpd6z.pdf
What was delivered to earn this


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## Trav. (18 June 2019)

Not sure about BUY but maybe WATCH. 

DOW were having a good year then their partner on the Murra Warra WInd Farm entered self administration causing the SP to gap down. Maybe a bit more pain is in sight once the dust settles. I would wait for the project to get get completed or another announcement clarifying impact to Downer.












Weekly - DOW looking good in 2019 until Wind Farm Update








Miner said:


> BTW has anyone noticed the massive performance rights of more than 30000o shares  https://www.asx.com.au/asxpdf/20190603/pdf/445kxx758tpd6z.pdf
> What was delivered to earn this




I believe that these shares are not for the directors but employees used to encourage retention.


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## Miner (18 June 2019)

Trav. said:


> Not sure about BUY but maybe WATCH.
> 
> DOW were having a good year then their partner on the Murra Warra WInd Farm entered self administration causing the SP to gap down. Maybe a bit more pain is in sight once the dust settles. I would wait for the project to get get completed or another announcement clarifying impact to Downer.
> 
> ...



Thanks @trav
If not a coincidence, on 28th May itself after the announcement DOW dived south


----------



## rnr (15 September 2019)

Downer appears to be setting up to take out the May high of $8.17 which represents a strong recovery from the gap down in late May! The ATH is around the $8.61 mark.


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## So_Cynical (10 January 2020)

Touched 8.70 today, a 10 year high, been a great 4 and a half years for Downer, the charts really good, all boats rising and all that. total shares on issue up about 20% over the last 5 years perhaps mostly due to the spotless T/O.
~


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## greggles (23 January 2020)

So_Cynical said:


> Touched 8.70 today, a 10 year high, been a great 4 and a half years for Downer, the charts really good, all boats rising and all that.




Until today.

DOW has been smashed today after announcing that its NPATA guidance for the 2020 financial year has been revised down to $300 million, an 18 per cent downgrade on an earlier forecast of $365 million.

The main reason given for the downgrade is a blow out in costs of $43 million to complete a number of construction projects currently in progress.

The announcement has spooked the market big time and the DOW share price was punished today, hitting a low of $6.45 but currently trading at $7.10, down 18.9%.

Seems like today's share price pummeling might be an overreaction. Does anyone sense a possible buying opportunity?


----------



## peter2 (23 January 2020)

I've lost count of the number of times that DOW has disappointed their shareholders. There's a lot of huge gap downs on the daily chart since 2006 when they had troubles with the NSW train contracts. DOW has been on my never to be traded list since then and I've not been disappointed with that decision. 

However I do understand how a very contrarian trader (buying after any of these poor news announcements) could have traded DOW with much more success than a break-out trader.


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## sptrawler (23 January 2020)

peter2 said:


> I've lost count of the number of times that DOW has disappointed their shareholders. There's a lot of huge gap downs on the daily chart since 2006 when they had troubles with the NSW train contracts. DOW has been on my never to be traded list since then and I've not been disappointed with that decision.
> 
> However I do understand how a very contrarian trader (buying after any of these poor news announcements) could have traded DOW with much more success than a break-out trader.



Engineering services companies are always a minefield IMO, they always appear to be one bad quote away from oblivion, United Construction comes to mind from recent history.
As for never to be traded again, STO is on my never to touch again list.
We all have companies that have a special place in our inner psyche.


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## galumay (23 January 2020)

greggles said:


> Does anyone sense a possible buying opportunity?




I think there are better businesses in the sector. Wouldn't be on my list!


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## MovingAverage (23 January 2020)

Am holding DOW...today hurt 

But can't help thinking it was an overreaction so could be a buying opportunity for some--but not me.


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## So_Cynical (24 January 2020)

sptrawler said:


> Engineering services companies are always a minefield IMO, they always appear to be one bad quote away from oblivion.




The nature of the game - with big contracting you win some and you lose some.


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## Smurf1976 (24 January 2020)

So_Cynical said:


> The nature of the game - with big contracting you win some and you lose some.



Where the danger arises is if the company takes on projects which are large relative to the size of the company.

Do that and the risk becomes existential.


----------



## MovingAverage (24 January 2020)

So_Cynical said:


> The nature of the game - with big contracting you win some and you lose some.



 while I somewhat agree with you surely these companies have enough experience with major projects to know that they can be high risk with real prospects for project blowouts. Can’t they put in place risk management strategies to deal with these scenarios and mitigate the downside?


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## Johny5 (24 January 2020)

MovingAverage said:


> while I somewhat agree with you surely these companies have enough experience with major projects to know that they can be high risk with real prospects for project blowouts. Can’t they put in place risk management strategies to deal with these scenarios and mitigate the downside?



A friend worked as an accountant for Downer's  (I better be careful here) they found it extremely stressful dealing with the various reporting discrepancies coming back from site managers, the figures were often rubbery, incomplete and often missing vital pieces of information. So it made forecasting and budgeting difficult and often inaccurate, the old rubbish in rubbish out phenomenon.


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## sptrawler (24 January 2020)

Cost blowout due to site issues can be enormous. Covering poor planning and logistics, with overnight transport companies bringing materials to site, can cost amazing sums of money.lol


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## MovingAverage (24 January 2020)

Johny5 said:


> A friend worked as an accountant for Downer's  (I better be careful here) they found it extremely stressful dealing with the various reporting discrepancies coming back from site managers, the figures were often rubbery, incomplete and often missing vital pieces of information. So it made forecasting and budgeting difficult and often inaccurate, the old rubbish in rubbish out phenomenon.




couldn’t agree with you more, some companies are much better than others at forecasting and provisioning for risk


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## Smurf1976 (24 January 2020)

sptrawler said:


> Cost blowout due to site issues can be enormous. Covering poor planning and logistics, with overnight transport companies bringing materials to site, can cost amazing sums of money.lol



The individuals involved can be a crucial factor too in this business.

Civil contractors can be an outright magnet for “bull at a gate” types. They seem to do well, they push productivity up and get jobs done on time and on budget, but tend to be embedding huge risks in doing so.

Sooner or later one of those risks blows up.

That comment’s a generic one about these sorts of companies not specifically Downer but I’ve seen first hand more than one such contracting company obviously doing that sort of thing whilst working for the client.


----------



## MovingAverage (24 January 2020)

up 6% today...seems like some folks spotted a good buying opportunity


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## Miner (25 January 2020)

I have been keeping eye on Downer since it was just above $4. But only entered after it fell down.
If it stays well then in two days price going up from $6.90 to $7.6 is not bad. I chose not to react immediately when it came down to $6.46 , without watching for a while. Would not mind to re-enter again if reaches lower value again. Downer has technical strength and a loyal workforce. Not every construction company has the same strength.
What I liked that market did not see the report on their order book. It is massively better. Company already taken action to restructure meaning high performers will stay.  I heard that from December itself company has been warning people and apparently EPCM has never been a strongest unit for Downer.
Same goes with CIM - I missed to enter.
In short, I think market has over reacted and unless mining and construction industry does very bad, Downer IMO, will only go north.
I was proven wrong many times so this could be no different .


----------



## Dona Ferentes (13 February 2020)

Downer Group will stop bidding for construction work in many of its traditional markets, with chief executive Grant Fenn declaring on Wednesday “we’re out” of solar, iron ore and coal projects. Downer delivered a delivered a 35.7 per cent fall in after-tax profits for the first half of the financial year. Mr Fenn admitted the result was “disappointing”, and pointed to the risks in the company’s fixed-price bids on major projects.


> "Despite Downer’s service businesses performing well, construction losses have driven a disappointing result for the group in the first half of the financial year,” he told analysts on an earnings call on Wednesday. “Our engineering and construction business will no longer tender for hard dollar construction contracts in the solar, coal, iron ore and industrial sectors."




Mr Fenn said Downer’s decision to pull out of solar construction projects was “disappointing but inevitable” given the dearth of new investment in the sector over the last year.


> “Developers, contractors and bankers have all struggled to come to terms with the risk of large power loss factors, grid stability problems, connection problems, and equipment performance issues,” he said “These problems will no doubt be sorted out in time, but right now we don’t see a construction market in the short to medium term that will accept our terms and risk position on these matters. *So we’re out.*”




Mr Fenn said Downer intended to continue “strictly limiting” the risk it took on in its construction division, which had driven down the number of contracts it will bid on. Construction work is now worth only $5.7bn of the $47.4bn worth of work in hand at Downer, and the bulk of that is smaller, low risk contracts.


> “To accelerate our shift to less volatile service markets we have decided to focus our major construction efforts on areas where we have competitive differentiation,” he said. “That’s in transport, including road rail and systems, high voltage transmission and substations, telecommunications, water and aspects of wind farms."



- _and maybe a more rational market for others_


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## So_Cynical (22 July 2020)

Equity raising - Entitlement offer, 1 for every 5.58 to raise 400M at $3.75 per share.

A bit of a discount but not crazy cheap, money to be used to complete the spotless buyout.


----------



## Miner (22 July 2020)

So_Cynical said:


> Equity raising - Entitlement offer, 1 for every 5.58 to raise 400M at $3.75 per share.
> 
> A bit of a discount but not crazy cheap, money to be used to complete the spotless buyout.



I have been tracking Downer but could not time the right issue. Good time as they are going through significant changes.


----------



## peter2 (7 October 2020)

Good ol' DOW. This one's been on my "never to be traded" list forever. During the days when they were making the train carriages for NSW they reported poor news almost every quarter/half. The price would always tank and I vowed to never trade it. 

Have mgt got it right yet? Is mgt the same? Probably not, I would hope.

Another bullish price break-out but not for me. I'm posting it for discussion only. 
Is DOW going to benefit from the Gov't incentives for manufacturers?


----------



## galumay (7 October 2020)

Word in my sector is that the NBN contract they won for some of the network work for NBN in NT, WA & SA will be a disaster for them. They massively under tendered SSM who knew exactly how much margin was in the work as they had been doing it for quite a few years. Contractors refusing to onboard with them because their rates are so much lower.  I dont imagine its a big part of their overall revenue, but it looks like further evidence of management not executing very well.


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## debtfree (14 June 2021)

Certainly heading in the right direction chart wise but I do hear what all of you are saying.


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## divs4ever (10 June 2022)

DOWNER AWARDED ELECTRICAL FIELD SERVICES CONTRACT WITH POWERCO
Downer EDI Limited (Downer) today announced it had been awarded an Electrical Field Services Agreement
with Powerco worth approximately $360 million over a maximum term of five years.
Commencing in July 2022, the contract is for an initial three-year term, with two one-year extension options.
The contract replaces Downer’s current Electrical Field Services Agreement, which ends in June, and will
see Downer provide construction, maintenance and fault repair services to Powerco’s electricity distribution
network on New Zealand’s North Island.
The Chief Executive Officer of Downer, Grant Fenn, said the contract reflected Downer’s strong performance
for Powerco over the past eight years.
“This contract strengthens our position as market leader in New Zealand’s Utilities sector,” Mr Fenn said.
“It is a strong endorsement of Downer’s capability and underlines the strength of our ongoing, long-term
relationships with our customers.”
The Chief Executive Officer of Downer New Zealand, Steve Killeen, said he was pleased to be continuing
Downer’s relationship with Powerco.
“This extension demonstrates our ability to bring world-leading insights and solutions that deliver costeffectiveness, safety, and reliability for our customers,” Mr Killeen said.
Authorised for release by Downer’s Chief Executive Officer, Grant Fenn.

i hold DOW ( bought March 2020 @ $3.63 )


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## divs4ever (22 June 2022)

DOWNER AWARDED $800 MILLION IN ROAD MAINTENANCE CONTRACTS

Downer EDI Limited (Downer) today announced it had been awarded two road maintenance contracts by
Auckland Transport, valued at approximately $800 million over a maximum term of 10 years.
The contracts commence on 1 July 2022, with initial five-year terms plus five-year extension options.
Downer will act as stewards of Auckland Transport’s Central network and North Rural network, delivering
maintenance and renewal activities and emergency repairs.
The contracts expand Downer’s strong working relationship with Auckland Transport, which includes the
delivery of the award-winning Downtown Program.
The Chief Executive Officer of Downer, Grant Fenn, said Downer is the leader in road maintenance services
in Australia and New Zealand.
“Downer maintains 28,000 kilometres of roads across Australia and 25,000 kilometres across New Zealand,”
Mr Fenn said.
“Downer has been maintaining roads in Auckland for more than 30 years, and we look forward to continue
working closely with Auckland Transport to deliver reliable road networks to ensure efficient and safe
journeys.”
The Chief Executive Officer of Downer New Zealand, Steve Killeen, said the contracts were an opportunity to
deliver positive social and sustainable outcomes for Downer’s customers and communities.
“Our collaborative relationship with Auckland Transport has given Downer the opportunity to continually
improve and develop our services. We’re committed to making a positive impact on the communities we
serve by delivering high-performing, sustainable and reliable solutions,” Mr Killeen said.
Authorised for release by Downer’s Chief Executive Officer, Grant Fenn.


=======================================================================

DYOR

i hold DOW i bought in March 2020  ( @ $3.64 )


----------



## JohnDe (8 December 2022)

Down $1.025 (21.35%)

Added this to my alert list several months ago, at a very low price but what I thought was fair. today it crashed to that price.

What's happened?

*Accounting irregularities in Downer’s Australian Utilities business *​Downer has identified certain accounting irregularities in its Australian Utilities business involving historical misreporting of revenue and work in progress in one of Downer’s maintenance contracts.​


----------



## finicky (8 December 2022)

Seems to be cheap. After this ajustment they are still guiding to fy23 NPATA $210m - 230m, athough this is highly qualified new guidance.  But assuming I am comparing like with like, NPAT FY22 was $152m?
Yet today trading 45c below book value for an ok if not exciting ROE.
They have endured widespead setbacks recently, citing weather and roads, manpower shortage and supply chain disruption. They say these are dissipating but not in time for fy23 results.

Not Held
Not Buying


----------



## peter2 (8 December 2022)

Whenever I see "accounting irregularities" it's a sell. They're like cockroaches, there's never just one of them.


----------



## The Triangle (8 December 2022)

finicky said:


> Seems to be cheap. After this ajustment they are still guiding to fy23 NPATA $210m - 230m, athough this is highly qualified new guidance.  But assuming I am comparing like with like, NPAT FY22 was $152m?
> Yet today trading 45c below book value for an ok if not exciting ROE.
> They have endured widespead setbacks recently, citing weather and roads, manpower shortage and supply chain disruption. They say these are dissipating but not in time for fy23 results.
> 
> ...



When you take out intangibles from Downers balance sheet they have only $100 million in net assets...  I mentioned on either the PRN or MAH thread last week that those companies traded at around 115% and 60% of net assets minus intangibles, well DOW is 2500%...😬

I never pay much attention to reported profits as it's an easy number to manipulate - but cashflow is very hard to manipulate and their cash generation is still ok. Although some large engineering/contracting firms have a tendency to frontload revenue in a contract to make the numbers look better, so even then you really have to look at 3-4 years of reports to work out what's really happening.  Personally, I can't fathom how Downer trades this high even after today's smashing.   

Will there be fines/class actions now?



peter2 said:


> Whenever I see "accounting irregularities" it's a sell. They're like cockroaches, there's never just one of them.



I agree with that, and whenever I see 'share buy backs' as well I usually see it as a sell signal.   It's financial engineering and rarely a good idea - especially when a company has a very high debt level and relies on contracts which will always have big working capital swings. Maybe at a public level it will be swept up as being a problem in "XYZ Division", but I think whatever has gone on with accounting irregularities is probably not a one-off rogue department but a diseased culture from the top down.


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## Miner (10 December 2022)

peter2 said:


> Whenever I see "accounting irregularities" it's a sell. They're like cockroaches, there's never just one of them.



Well said @peter2
Fat prophets already declared Sell too


----------



## divs4ever (10 December 2022)

Miner said:


> Well said @peter2
> Fat prophets already declared Sell too



am looking for sub $3 to add more 

aren't mainly big engineering companies left in Australia  

 am thinking there will be a discrete lifeline if needed 

 but more pain to come first


----------



## Miner (13 December 2022)

divs4ever said:


> am looking for sub $3 to add more
> 
> aren't mainly big engineering companies left in Australia
> 
> ...



Looks like sub 3 not coming in near future unless more financial irregularities are exposed.
I was also hoping to get $3 but no luck. DNH


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## divs4ever (13 December 2022)

as someone else commented recently , 'financial irregularities   are like cockroaches ' 

 it would be interesting to see more details  on these irregularities  , for example did they acquire such problems ( say with the Spotless acquisition ) or were they home-grown  ( say a gambling addict in the accounts section ) , or maybe it is just different accounting systems across the different  company divisions 

 for example over the decades i have observed ( or participated in ) several methods of 'stock-takes ' ( some are absolutely hilarious in the retelling )


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