Worley Parsons (WOR) Results Preview

Submitted by Jim Thesiger on 9 May, 2008 - 12:56

Worley Parsons (WOR) has been highly successful in recent years by investment its expertise as a service provider and is substantially placed from Australian stockmarket analyst Macquarie Research Equities.

Worley Parsons (WOR): Worley Passin' with Flying Colours

Worley Parsons (WOR) has been highly successful in recent years by leveraging its expertise as a service provider to the booming energy, infrastructure and resource industries. WOR offers a wide range of services to these industries from project design and upgrades to feasibility studies and daily services. One driver of WOR’s future success will be its ability to remain a provider of choice for many of the large resource and energy companies. In this respect we believe WOR is well placed.

Worley Parsons (WOR) Fundamental Analysis

Macquarie Research Equities (MRE) Fundamental View:

1. WOR has keenly chased accretive acquisitions in recent years completing 4 in FY06, 5 in FY07 and 5 so far in FY08. The key for WOR in the current acquisition cycle is to fill geographic and skills gaps in its business.
2. The macro environment remains very supportive for WOR to make further acquisitions. Current credit conditions are supportive of further acquisitions with acquisition targets unable to rely on private equity and equity markets. WOR’s lazy balance sheet with 29.9% net debt to equity and FY08 EBIT cover >17x is extremely well placed to fund accretive acquisitions.
3. The recent INTEC acquisition added significant front end capacity. Front end capacity requirements have proven to be a key indicator of future work.
4. High oil and mineral prices don’t look like leaving us any time soon, resulting in an investment boom benefiting WOR’s oil, minerals and metals businesses.
5. Increasing complexity in reaching hydrocarbons has increased opportunities for WOR
6. Environmental engineering could prove a big new growth area as companies look to modify facilities to reduce emissions or energy consumption. WOR has the skills to provide most sustainable and emissions-related technologies.
7. Should Australia change policy, WOR also has a large nuclear power skill base.

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