TEESSIDE SCAFFOLDER
Well-known member
Questor share tip: Cape slump looks overdone
Services group Cape had been one of Questor's best-performing tips – until last week. The shares plunged by a third on Wednesday after the group's latest trading update. However, Questor regards the falls as overdone.
By Garry White
7:00AM GMT 13 Nov 2011
Comment
Cape
347.9p
Questor says BUY
The company supplies and manages industrial scaffolding and insulation, and undertakes industrial cleaning and painting. Most of its services are essential maintenance work and its business is heavily weighted to the offshore and onshore oil and gas industries.
The market was concerned by a number of issues. There is margin pressure in the Middle East, which could crimp earnings, and there was a surprise one-off charge for a contract in the North Sea. Three contracts were also subject to delays in the projects.
Of course, none of this is good news. However, the magnitude of the share price fall appears to be discounting a significant slowdown in its business.
This is unlikely given the world's structural need for energy, and the amount of investment that is going into the mining industry over the next few years is going to be massive. The company is also active in liquefied natural gas, which offers good growth opportunities.
Services group Cape had been one of Questor's best-performing tips – until last week. The shares plunged by a third on Wednesday after the group's latest trading update. However, Questor regards the falls as overdone.
By Garry White
7:00AM GMT 13 Nov 2011
Comment
Cape
347.9p
Questor says BUY
The company supplies and manages industrial scaffolding and insulation, and undertakes industrial cleaning and painting. Most of its services are essential maintenance work and its business is heavily weighted to the offshore and onshore oil and gas industries.
The market was concerned by a number of issues. There is margin pressure in the Middle East, which could crimp earnings, and there was a surprise one-off charge for a contract in the North Sea. Three contracts were also subject to delays in the projects.
Of course, none of this is good news. However, the magnitude of the share price fall appears to be discounting a significant slowdown in its business.
This is unlikely given the world's structural need for energy, and the amount of investment that is going into the mining industry over the next few years is going to be massive. The company is also active in liquefied natural gas, which offers good growth opportunities.