Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

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Event-Driven

Our advice remains for <a href="https://www.smartkarma.com/entities/12754" target="_blank" data-smartkarma-citation="entities:12754:1">UGL Ltd (UGL AU)</a> shareholders to accept CIMIC’s AUD 3.15 per share bid in the absence of a higher offer. This includes the option of selling on-market if the sale price covers the brokerage, or if certainty of sale is the imperative. CIMIC’s bid is pitched at a 40% premium to our AUD 2.25 per share fair value estimate, and is final. Our AUD 22.00 fair value estimate for CIMIC is unchanged given the relatively small AUD 525 million market capitalisation of UGL, and the fact that AUD 9 billion market-capped CIMIC is paying a full price.Why then would CIMIC bid for UGL? Because the opportunity has presented itself, UGL’s workin-hand is attractive, diversification appeals, and because purchase multiples add-up, as we discuss in greater detail below. For UGL we maintain our no-moat and very high uncertainty ratings, as it operates in a highly fragmented and cyclical market where barriers to entry are limited. CIMIC also has no moat with excess returns until 2014 largely a function of the China-driven commodities boom. The lumpiness of large scale projects and exposure to cyclical mining end-markets feed into our high fair value uncertainty for CIMIC.Analyst: Mark Taylor

Our advice remains for UGL Ltd (UGL AU) shareholders to accept CIMIC’s AUD 3.15 per share bid in the absence of a higher offer. This includes the option of selling on-market if the sale price covers the brokerage, or if certainty of sale is the imperative. CIMIC’s bid is pitched at a 40% premium to our AUD 2.25 per share fair value estimate, and is final. Our AUD 22.00 fair value estimate for CIMIC is unchanged given the relatively small AUD 525 million market capitalisation of UGL, and the fact that AUD 9 billion market-capped CIMIC is paying a full price.Why then would CIMIC bid for UGL? Because the opportunity has presented itself, UGL’s workin-hand is attractive, diversification appeals, and because purchase multiples add-up, as we discuss in greater detail below. For UGL we maintain our no-moat and very high uncertainty ratings, as it operates in a highly fragmented and cyclical market where barriers to entry are limited. CIMIC also has no moat with excess returns until 2014 largely a function of the China-driven commodities boom. The lumpiness of large scale projects and exposure to cyclical mining end-markets feed into our high fair value uncertainty for CIMIC.Analyst: Mark Taylor

Why Is No-Moat UGL Limited a Takeover Target for CIMIC?

CIMIC Group Ltd

Why Is No-Moat UGL Limited a Takeover Target for CIMIC?