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Willbros Group Inc. Message Board

  • spanspur spanspur Mar 8, 2013 1:32 PM Flag

    The Macro View: WG The Value Proposition/Takeover Target

    Those that have seen the white paper understand what is ongoing and what will be happening in North America during the next decade or two. Energy will be one of the levers, just like in the 1970's, that the government will be using to bring America back to financial prospersity. Inflation will come into play, but not until 2015. American companies are accelerating their projects, just like the mult-nationals, because of the low cost money which continue for another 12 to 18 months. This bodes extremely well for the energy sector companies.

    The other lever that the government will pull will be a dramatically higher stock market. Spanspur sees 20% to 24% overall gains in 2013. And an additional 12% to 26% gains through 2014/15. Why? Unlike 1976, the downturn has already been worked through, money and the cost of capital is at all time lows, the contraction from the downturn in military spending will be eased by growth in the energy sector, and the wealth from historic gains in the capital markets will provide economic velocity from consumers, while also driving dramatic revenues to the U.S. Treasury from cap gain taxes.

    WG is undervalued imo. There are 50 million shares outstanding. Let's use $8.50 per share as our starting point. WG's market capitalization is $425 million, and with $300 million in debt (I believe 40% of the debt is due the Nigerians and is not accruing interest), therefore today, WG would have a naked enterprise value of approximately $725 million. At this weeks presentation the CFO commented that the company would paydown debt by $50 to $100 million in 2013. With each $100 million in paydown WG achieves about $.20 per share in bottomline performance (I believe this was the situation a year ago, do your own math). There are plenty of assets to sell, management is focused on safety and performance, and with the ongoing activity of the engineering segment of the business things are indeed optimistic.

    Sentiment: Buy

2.95-0.06(-1.99%)Jun 24 4:02 PMEDT