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Non-Tech : The SHAW Group -- Ignore unavailable to you. Want to Upgrade?

To: Scott D. who wrote (185)	11/17/1997 9:30:00 AM
From: Greg h2o	Respond to of 291

they have a conference call this morning at 10:00 am (est). I would imagine you'll see estimate hikes after the call, so if you're planning on buying, I'd seriously consider doing it before the call is over. regards, greg

To: Scott D. who wrote (185)	11/17/1997 10:34:00 AM
From: Greg h2o	Respond to of 291

Conference call notes: It certainly was nice to NOT hear a Smith Barney analyst on the call! Some points from the call -$88 mil backlog being acquired from Prospect of which they are renegotiating some of the contracts. -This gives SGR major exposure in Europe with the inclusions of Prospect, which is a 100 year old company. -Prospect is currently running at 60% capacity and it is expected that SGR will be able to pick up some of that capacity to make it more profitable. Further, they stated they hope to have Prostpect running at the same profit margin as SGR's other facilities during fiscal '99, although they said it's yet to be seen. -The other liabilities mentioned in the press release were merely a pension (which is overfunded) and employee contracts, which I would imagine will be renegotiated at some point. It didn't sound as though there were any other financial considerations beyond the cash paid for Prospect. -On another topic, it was stated that all contracts within Asian countries have been either by LOC or paid before shipping so there has been no affect by the weakening currencies. Further, they say because of the great demand in this region, they have seen no slowdown in new contracts, although they expect there could be one... but, only 12% of the current power bidding activity is in that region. Hope it's all clear as mud for you... Actually, it appears as though they basically "stole" the assets of Prospect, while leaving the banks holding the liabilities. They were the only ones in a position to bid for the assets because they had actually looked at acquiring the company 9 months ago but felt the asking price was too high. Because it was basically a fire-sale of assets, SGR made out like bandits. regards, greg

To: Scott D. who wrote (185)	11/17/1997 4:07:00 PM
From: Greg h2o	Read Replies (1) \| Respond to of 291

To All: Analyst Upgrade--great review These comments are for information purposes only. Under no circumstances should it be used or considered as an offer to sell or a solicitation of an offer to buy the securities mentioned in it. The information contained herein has been obtained or derived from sources believed by us to be reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. During the past three years, Hoak breedlove wesneski & co. has served as a co-manager of a public securities offering for the shaw group inc. Hoak Breedlove Wesneski & Co., its affiliates and/or their officers and employees may from time to time acquire, hold or sell a position in the securities mentioned herein or related futures or options. Hoak Breedlove Wesneski & Co. may also perform or seek to perform investment banking for entities referred to herein. Copyright 1997 Hoak Breedlove Wesneski & Co. A MEMBER OF NASD AND SIPC. 13355 NOEL ROAD SUITE 1650 DALLAS, TEXAS 75240 TEL 972.960.4867 FAX 972.960.4821 The Shaw Group Inc. (SGR - $20 7/8) November 17, 1997 Rating: Strong Buy Analyst: (972) 960-4867 EPS: 1996 A: 1997 A: 1998 E: Industry: Industrial Trading: (800) 893-5759 1Q: $0.11 $0.31 $0.35 FY End: Aug. Exchange: NYSE 2Q: $0.20 $0.31 $0.43 Market Cap. (mil) $259 Shares Out: 12.40 3Q: $0.19 $0.29 $0.50 Book Value / Share: $10.70 Debt to Capital: 27% 4Q: $0.19 $0.30 $0.60 Institutional Ownership: 37.2% Year End: $0.69 $1.21 $1.88 P/E 30.3 17.3 11.1 RATING RAISED TO STRONG BUY -- $15.8 MILLION ACQUISITION On November 14, 1997, The Shaw Group completed the purchase of the principal operating assets of Prospect Industries (PPI-LSE) of Derby, United Kingdom for $15.8 million in cash. The purchase will be financed through SGR's revolving line of credit. The transaction has already been cleared with the Department of Justice. Important assets acquired in the transaction include Connex Pipe Systems, a piping systems fabricator located in Troutville, Virginia, CBP Engineering Corporation, an abrasion and corrosion resistant pipe systems operation, Aiton Australia, a piping systems and project management company located in Sydney and selected assets of Prospect Engineering Limited (PEL), a turnkey piping system operation located in Derby, United Kingdom. Connex Pipe Systems was an important competitor of Shaw Group's power segment. Because of Prospect's weak financial condition, we are assuming that SGR's profit margins in the power segment were being restrained by Connex's aggressive bidding for projects. The acquisition of PEL gives SGR an important presence on the European continent where it now can qualify for European-financed projects in the power generation and process markets. While the combined sales of Prospect were $151 million for the year ended September 30, 1996, we are assuming total sales to be moderately less than that level at the time of SGR's acquisition. We view the Prospect purchase as very bullish for SGR shareholders. First, the acquisition makes The Shaw Group the dominant piping systems fabricator worldwide, possessing the industry's best technology. Remember that SGR recently acquired the assets of Cojafex, the manufacturer of SGR's technologically superior pipe bending machinery. Second, it increases SGR's potential for power and processing fabrication in the European market where it subcontracted out much of its business to a U.K. fabricator. Third, it broadens SGR's vertical integration in the pipe fabrication and construction markets. Boiler refurbishment and boiler steam leak detection represent new products and services for SGR. Fourth, the acquisition will serve to reinforce SGR's alliance agreements with many of the engineering and construction companies it does business with as the "preferred provider" of piping systems solutions. While we do not have any details as yet of the transaction, we would not expect Prospect to be accretive to SGR in fiscal 1998. Given its weak operating results, we assume that Prospect may have significant low margin business that needs to be worked through its operation. As a result, we are not adjusting our $1.88 forecast for fiscal 1998. Second, given SGR's attention to strengthening its balance sheet, we would anticipate SGR's management to take an aggressive approach to asset management. However, given the low price paid for Prospect's assets, we would not be surprised if The Shaw Group H B W generates negative goodwill from the assets purchased. Although we do not have an estimate for fiscal 1999, Prospect's assets are likely to be accretive. Based upon an assumption that Prospect generates $140 million in revenue and operates at a margin of 6.5%, below Shaw's level of the past two years, the acquisition of Prospect could add between $0.25-$0.40 per share to SGR's 1999 income statement. INVESTMENT RECOMMENDATION At the end of August we raised our target price to $32.00 from $22.00 based upon a strong conclusion to SGR's fiscal year and a buildup of the company's backlog throughout fiscal 1998. Year-end backlog levels combined with the company's recent power project announcement indicates the backlog continues to grow across its product segments. The purchase of Prospect Industries' principal operating assets serves as reinforcement of our price target. This purchase at a "value" price of $15.8 million is consistent with SGR's strategy of buying distressed properties and within a short period of time significantly improving those acquired operating results. SGR's purchase ten years ago of B.F. Shaw, a boarded up fabrication facility started the value acquisition, the 1994 purchase of Word, a money losing pipe fabricator at the time of purchase, which has contributed to SGR's results in a rather short period of time are examples of SGR's successful acquisition program. NAPtech, acquired as a money losing operation, is now contributing to SGR's bottom line. More than a year ago The Shaw Group's common stock sold at an all time high in the mid-30's based upon investor projections of strong infrastructure spending internationally, particularly from the power segment. Since that time, the company has changed significantly for the better. It has broadened its products and services. As a result, the company today is in a much stronger position to deliver on the expectations investors had for The Shaw Group Inc. a year ago. As a result, we are raising our investment rating to STRONG BUY with a conservative price target of $32.