This a small thread, largely me thinking out aloud as I look over the portfolio searching for downgrade risk.

You can do a lot worse than old Downer, given current valuations. Decent yield…


, with the balance sheet in good nick, running at around 1.5x ND/EBITDA.


Cashflows are quite okay since divesting all the capex-heavy divisions (mining, for example).

Obvious problems are weather and whatever lingering COVID effects there may be on absenteeism. You can see the very sizeable COVID-related drop in earnings from 2020 on.

Using 2019 as the baseline to extrapolate “normalised earnings” from seems reasonable, which is pretty much what it looks like consensus (street expectations) have done.

At the least, that latter effect of COVID should be fading, given case rates, and border reopening should be helping with accessing labour, leading to margin improvement (right person, right place, right job type stuff).

Over the long run, there are oodles of work to be done through DOW’s power division, which should have loads of electrification work to grind through over the coming decades.

Mostly, it’s the stuff described below—reliable, long-dated contracts with cost escalation baked by solid relationships over many years. You might need to expand the image to read the text.

Given downgrades (today) like BBN, in which they cite margin falls due to cost pressures/inflation, it’s a handy offset.

Now the whole point of the thread is me thinking out loud while looking at the portfolio in terms of who is cum downgrade risk, given that I think there will be a lot of disappointment over AGM season.

A case of “who’s next?”

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