Hi EKS,
I try to avoid using goodwill/ intangibles at all in my GN calculation. IMO serial acquirers are one of those instances where the GN gets really dangerous. On the one hand you have book inflated with goodwill and FMV since the acquirer purposely overpays. On the other hand you have earnings inflated by write down of the tangible assets. To apply GN as I do, you get DNE because tbook is negative.
Of course if CBI stops acquiring and starts improving operating performance for its existing projects, that FMV may have value. I just don't feel it makes sense to assume these projects are okey-dokey when calculating a margin of safety.
Wrt backlog, the most worrisome thing to me on the Q1 call was how unconcerned Asherman was about the potential for fallout from the energy downturn. Even if their backlog has as little exposure to their former best IOC customers as is claimed, at very least the reduction in state tax revenue from the energy sector could spell trouble for their gov't contracts, for example.
Anyway, what scares me the most is their D/E which could theoretically have any value. Hopefully they muzzle their acquisitive spirit and divest, divest, delever, delever.
Thanks for the idea on JEC, I'll take a look. Someday, when I grow up, I want to invest in something other than cyclicals :)
Graham |
