Tuesday, February 13, 2007

United Group results look satisfactory

Engineering firm, United Group Limited (ASX:UGL), has performed satisfactory in the first half of 2006-07. It posted a net profit of $35.3 million, which was actually slightly lower than the same period from the previous year due to an $18.1 million write-down. But fortunately EBIT improved 23% to $62.3 million and revenue increased 18% to $1.3 billion.

United Group predicts growth to be strong in the second-half of 2006-07.

United Group is sitting on a price earnings (PE) ratio of 19 and a dividend yield of 3.3%. This is fairly standard in the market and unless they can find more growth in the second half of the year I don't see any value in the company. The $18.1 million write off hurt the result significantly but it does show the underlying fundamentals of the company are sound. My only concern with the company fundamentals is the 50% debt to equity. This is fairly high and a downturn in the industry will be a major issue for the company.

At this point of time I say wait for a better price.

Good Luck Investing.

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