In what's been a tumultuous year for Transfield Services Limited (ASX: TSE), the company recently announced the signing of a five-year $88 million integrated facilities management and property services contract with the University of Newcastle, delivering on its strategy to enter new growth markets.
The scope of work with the University of Newcastle will initially focus on providing integrated facilities management and property services across its metropolitan and regional campuses in New South Wales and will commence in July 2015.
Transfield Services' Managing Director and CEO, Graeme Hunt, said: "The tertiary education sector, along with the defence, social and property sectors, represent exciting growth markets for Transfield Services. The engagement with the University of Newcastle supports Transfield Services' successful expansion into the tertiary education sector with a key customer."
"We appreciate the importance of a quality education delivered in quality facilities and we look forward to supporting both students and staff at the University of Newcastle," added Graeme Hunt.
Transfield Services continues to forecast fiscal 2015 earnings before interest, tax, depreciation and amortisation, or EBITDA, at between $260 and $280 million, a 20% to 29% increase on the prior year, after achieving underlying EBITDA of $217 million in fiscal 2014. Despite subdued domestic economic conditions.
Transfield board under pressure
It doesn't seem that long ago that Spanish infrastructure group Ferrovial offered an indicative bid of $1.95 for Transfield's shares when they were trading at just $1.33. Ferrovial later raised its bid to $2. Transfield's board rejected both offers. Transfield's share price currently hovers around $1.40.
Chief executive, Graeme Hunt, said at the time, "Our board was very clear, and our major shareholders had the view that what they were offering was insufficient."
The next 18 months will be challenging for the company with delays and deferments for mining, energy and infrastructure projects slowing growth.
Valuation
TSE is currently priced at $1.41, which is in the bottom third of its 52-week range. Its price has grown by nearly 9.3% in the past 12 months, compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which has risen just 2.5%. Its P/E is just over 11. For me, the share price is undervalued but even if Transfield's full-year announcement is positive I think its future growth will be slow.
