TRANSFIELD SERVICES LIMITED (TSE)



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General Information
Company Name: Transfield Services Limited
Stock Code: TSE
Website: www.transfieldservices.com
GICS Sub-Industry: Diversified Commercial & Professional Services
Market Cap ($M): 430
Equiv. Shares (M): 512

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
$ 0.840 $ 0.840 $ 0.845 $ 0.825 $ 0.840 1,400,132 0%

Current Broker Consensus Recommendation more
Recommendation: Sell
Recommendation Date: 13th Mar 2014
12 Month Target Price (average): $0.852
Brokers Surveyed: 5

Company Overview

Business Description:
Transfield Services Limited (TSE) is a provider of operations, maintenance, asset management and project management services. TSE operates in Australia, New Zealand, the United States, the United Arab Emirates, Qatar, South East Asia, India and Canada across industries, including mining and process, hydrocarbons, roads, rail and public transport, water, power, telecommunications, facilities management and defence. TSE provides services through its subsidiaries including APP, Broadspectrum, Easternwell, Hofincons, and ICD.

Strategy Analysis:
TSE holds strong market share in Australia and NZ in outsourced asset maintenance. Contracts are usually of medium to long term duration across numerous industries such as power, rail, road, oil and gas, minerals, oil refineries, petrochemicals, water utilities and telecommunications. The willingness to establish alliance-style contracts allows the company to extend its skills to new areas. Solid cash flows and balance sheet support a strategy of growth via acquisition. Most customers are blue-chip and there are solid growth prospects. Transfield Services reported a net loss of $246.91m for the half-year ended 31 December 2012. Revenues from ordinary activities were $1.75bn, up 15% from the same period last year. Basic and Diluted EPS was (48.0) cents compared to 6.0 cents last year. Net operating cash flow was $30.65m compared to $25.64m last year. The interim dividend declared was 3.0 cents compared with 5.0 cents last year. A return to earnings growth for the group is expected in FY14, driven by: further overhead reduction flowing from the flatter ANZ organisation structure and integration of Easternwell in the ANZ Resources & Energy business; a program to identify and streamline contract overheads; a detailed operating model review to increase productivity and service level effectiveness; and optimisation of procurement and purchasing repetitive processes through automation or outsourcing.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2015  F 55.9 10.9 -2.4 7.7 2.0 2.4 50.0
2014  F 57.3 11.2 -7.0 7.5 0.0 0.0 0.0
2013  A 61.7 12.0 -15.8 13.8 3.0 1.8 0.0
Source: Morningstar analyst estimates.

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F
Brambles (BXB) $14,691 M 0.1359 -0.2224 0.1674 20.1630 25.9310 22.2117 0.0287 0.0264 0.0279
Downer EDI (DOW) $2,207 M 0.1056 0.0388 0.0188 11.1135 10.6985 10.5012 0.0414 0.0469 0.0513
Mineral Resources (MIN) $2,220 M 0.0160 0.3011 -0.3379 12.2214 9.3930 14.1869 0.0403 0.0521 0.0407
SAI Global (SAI) $911 M 0.0053 -0.0461 0.2629 19.1405 20.0650 15.8882 0.0347 0.0350 0.0395
Transfield Services (TSE) $430 M -0.0293 -0.2579 0.0466 6.0519 8.1553 7.7922 0.0357 0.0000 0.0421

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth P/S Ratio
TSE 0.90 7.66 0.58 10.00 0.13
Market 1.07 16.0 1.27 1.98 1.72
Sector 0.90 12.7 1.27 2.62 0.71

Directors
Name Position Start Date
Mr Dean Anthony Pritchard -- 28 October 2013
Ms Kathy Hirschfeld -- 28 October 2013
Mr Graeme Hunt Chief Executive Officer,Managing Director 07 May 2012
Mr Steven Crane Non-Executive Director 12 February 2008
Mr Douglas Norman Snedden Non-Executive Director 21 December 2009
Mr Roy McKelvie Non-Executive Director 31 August 2012
Ms Diane Lee Smith-Gander Non-Executive Director,Non-Executive Chairman 22 October 2010

Management
Name Position
Ian Maxted Chief Development Officer
Larry Ames Chief Executive - Americas
Elizabeth Hunter Chief Executive - Human Resources
Nicholas Yates Chief Executive - Infrastructure ANZ
Steve MacDonald Chief Executive - Marketing & Investments, Project Director - Portfolio Review
Gareth Mann Chief Executive - Resources & Energy ANZ
Joe Sofra Chief Executive - Resources & Energy ANZ
Tiernan O'Rourke Chief Financial Officer, and Chief Executive - Middle East & Asia
Stephen Phillips Chief Information Officer
Kate Munnings Chief Risk and Legal Officer,Company Secretary
Angelique Nesbitt Joint Company Secretary
Philip Wratt President Americas & Middle East and Asia President Americas

Substantial Shareholders
Holding Name
40,092,997 (7.29%) Mondrian Investment Partners Limited
42,752,735 (8.26%) JCP Investment Partners Ltd
77,343,060 (15.09%) Allan Gray Australia Pty Ltd
57,849,887 (11.19%) Transfield (TCL) Pty Ltd

Calendar of Events
Date Event
26 February 2015 Report (Interim)
22 September 2014 Report (Annual)
27 August 2014 Report (Prelim)
© 2011 Morningstar, Inc. All rights reserved. The data and content contained herein are not guaranteed to be accurate, complete or timely. Neither Morningstar, nor its affiliates nor their content providers will have any liability for use or distribution of any of this information. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Some material is copyright and published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). DISCLOSURE: Employees may have an interest in the securities discussed in this report. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.

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