New Value Analysis of Carillion Plc 2017 (LSE:CLLN)

Published by Studio 61 Wealth Management at 28th May 2017

New Value Analysis of Carillion Plc (LSE:CLLN)

A new value analysis of Carillion Plc (LSE:CLLN), a company listed on the London Stock exchange, has been added to our research pages here. Carillion Plc is an international integrated support services business. CLLN employs around 48,500 people and operates in the UK, Canada and Middle East. CLLN provides construction and buildings management services with annual revenues of more than £5bn.

Why would a value investor consider an investment in Carillion Plc?

The price of the Carillion Plc common stock has declined from roughly 375p in February 2014 to just above 200p now. The share price has nearly halved in that time. During that time the earnings per share are actually up slightly. Carillion looks like one of those value cases where the market has overreacted to decline in earnings between 2012 and 2013. It brings to mind Warren Buffett’s reference to Mr Market in his 1987 letter to shareholders, which can be found here.

Go to the section on “Marketable Securities” to see what I mean.

Apart from the decline in earnings CLLN has some debt, but close analysis of the financial structure of the company shows that the debt is well structured to protect owners of the common stock. In particular there is an element of the debt that is a convertible bond that converts to common stock at 378.56p in 2019. The conversion price is way above the current share price, which provides some protection to owners of the common stock at the current price. The debt will be removed from the balance sheet in 2019 without drawing on the cash assets of the company.

The current yield makes CLLN look particularly attractive for income investors and the dividend also looks sustainable as it is covered 1.9 times by underlying earnings.

To find out if a value investor should consider an investment in Carillion Plc common stock click here to download the new analysis.

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