Tuesday saw engineering company WOR endure its worst session in 3-years after its largest shareholder, Dubai-based infrastructure group Sidara, sold a 19% stake at $14.35; it was encouraging to see the stock close over 5% above the placement price. We believe seeing its long-time agitator largely removed from its share register will come as a relief to WOR’s board, which can now focus on what it believes is best for the company – remember Sidara’s (DAR Group) bid for WOR in 2016 before creeping up the register over the ensuing years, a move which Worley’s Board unanimously opposed. Dar subsequently withdrew its FIRB application to acquire more WOR shares, and it has clearly now (mostly) left the building.
- We believe Sidara’s sell-down will ultimately be a marginal net positive for WOR and nothing to worry about from an investment standpoint.
WOR delivered a solid result in February. Its aggregated revenue for the 1H was $5.61bn, up 7.8% on the year and around 3% ahead of consensus. This produced an underlying net profit after tax (NPAT) of $188m, ahead of expectations for ~$ $178 m. At MM, we were very encouraged by the improvement in margins, as the proportion of work linked to decarbonisation continues to grow. We believe the New Energy opportunities are stronger than the market appreciates, leaving the stock undervalued at around $15, although it may take some time for the market to be convinced of this view. We are optimistic about its ability to grow market share in sustainability projects, which will ultimately boost earnings and margins. Hence, we like WOR’s future and believe this current dip in share price is presenting an excellent entry opportunity for investors.
- We believe WOR is an excellent quasi-play on the ESG revolution without taking on the risk of, say, volatile lithium prices.
- We are considering increasing our WOR position closer to $14.50, or 4% lower – MM is long WOR in our Active Growth Portfolio.
MM is long and bullish toward WOR
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