DOW - Downer EDI

[Trav.]

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.

 

[Miner]

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

 

[Trav.]

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

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.

 

[Miner]

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.

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Weekly - DOW looking good in 2019 until Wind Farm Update

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

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

 

[rnr]

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.

 

[So_Cynical]

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.
~

 

[greggles]

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]

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.

 

[sptrawler]

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.

 

[galumay]

Does anyone sense a possible buying opportunity?

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

 

[MovingAverage]

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.

 

[So_Cynical]

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.

 

[Smurf1976]

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]

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?

 

[Johny5]

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.

 

[sptrawler]

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

 

[MovingAverage]

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

 

[Smurf1976]

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]

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

 

[Miner]

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 .