The sudden and immediate resignation of Cardno Limited's (ASX: CDD) chief executive rattled investors and sent its share price plunging to a six-year low this afternoon.
But blood in the water could tempt an opportunistic predator to take a bite as the embattled engineering sector struggles to find favour with investors.
The engineering contractor said Michael Renshaw will step down from the top job immediately and current chief financial officer Graham Yerbury will act as chief executive until a permanent replacement is found.
Battle-wary shareholders have seen the value of Cardno fall by over 50% in the past year as management disappointed with a weak full year result in August last year and a profit warning three months later for its first half of 2014-15 results.
There's still little joy in seeing Renshaw leave as the abruptness of any departure of a senior executive is usually a red flag for investors to sell first and ask questions later. Renshaw has only spent 10 months in the top job.
While there may be a silver lining in all this there's no overlooking the pain of today's 15.5% crash in the share price to $2.90.
The company expects to achieve a net profit of $27 million to $31 million for the six months to end December 2014, compared with the $39.1 million adjusted net profit it posted for the previous corresponding period .
Assuming the same run rate in the current half, the stock looks cheap as it will be on a forecast price/earnings (P/E) multiple of 7.8 times and a potential yield of around 9% if Cardno sticks to its payout ratio of around 70%.
What makes Cardno stand out more than its peers is its well diversified business – not that this has helped the company much thus far. Not only does it operate across industries like mining, energy and infrastructure; it also has businesses in several other countries like the United States, Europe and Africa.
Cardno should technically be a big beneficiary of the falling Australian dollar as around half of its revenue is made in US dollars.
One has to wonder if the lack of a chief executive would make the $487 million market cap company anymore of a takeover target. This lack of leadership was probably one factor that enticed Programmed Maintenance Services Limited (ASX:PRG) to make an unsolicited bid for Skilled Group Ltd. (ASX:SKE) just after Christmas.
Skilled's incoming chief executive Angus McKay was not supposed to take up his role until January 20. The bid has prompted McKay to start his job earlier on January 5.
