Gamble of the week a property contractor for the brave – MoneyWeek

ThisiswhereUKcontractor,GallifordTry,comesin。

Thecompanyshousingarmspecialisesinconstructingsocialandresidentialproperties。

Indeed,GallifordTryhasamassedaland-bankof9,600plots(worthabout£490m),whichitplanstodevelopoverthenextfewyears。

However,thejewelinthefirmscrownisitscivilengineeringdivision,Morrisonconstruction–thenumber-oneplayerinwaterinfrastructure。

Gambleoftheweek:GallifordTry(LSE:GFRD)

Atthelastcount,Morrisonhadachunky£1。

75bnorderbook,providingcoverfor91%ofitstargetedrevenuesfortheyearendingJune2011(55%for2012)。

Thesectorsplitforthebacklogis41%regulated(ie,water),49%publicand10%private。

Furthermore,thisunithaswonseveralprestigiousnewcontractsoverthepastthreemonths,includingworkwithinthewater,education,healthcare,andhotelindustries。

Financially,thegroupisinfinefettletoo。

Netfundsof£76。

5m(excludinga£17mpensiondeficit),areequivalentto92ppershare。

HousebrokerKBCPeelHuntisanticipating2010salesandunderlyingEBITDAof£1。

2bnand£34。

3mrespectively–afterstrippingoutthedistortingeffectofthecashpile,whichputsthestockonamiserlyenterprisevaluetoEBITDAmultipleoflessthansix。

Thatsfartoocheapforasuchahigh-qualityasset,payinga3。

5%dividendyieldandwithnettangibleassets(NTA)worth368ppershare。

Sowhatshouldyouwatchoutfor?

Oneofthebiggestworriesisthepropertysectortakinganotherlurchsouth。

Thatwouldhurtprofits。

However,withthesharestradingata20%discounttoNTA,theresplentyofslackbuiltintotheprice。

Thefirmisalsoexposedtotheusualrisksassociatedwithmanaginglong-termcontractsandcopingwiththegovernmentsausteritymeasures。

Inshort,Gallifordisacheapinflationaryhedgeforthemoreadventurousinvestor。

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