The Motley Fool

Why the CIMIC share price is down 19% today

The CIMIC Group Ltd (ASX: CIM) share price has been hammered in early trade and is down 19.87% at the time of writing.

This comes after the group’s shares climbed 2% higher following a contract update to the ASX yesterday.

So, what’s dragged the CIMIC share price down to its current $29.03 per share level?

Why the CIMIC share price has been smashed

CIMIC provided an update on its strategic review of BIC Contracting (BICC). BICC is a company operating in the Middle East in which CIMIC holds a 45% non-controlling interest.

As part of the review, CIMIC initiated a confidential M&A process in respect of its financial investment in BICC. Discussions are ongoing with potential buyers for all or part of BICC.

The CIMIC share price has plummeted as investors try to revalue the stock in light of the news.

CIMIC said it has decided to exit the region and focus its resources on its major markets. These include Australia, New Zealand and Asia Pacific, where the group sees more growth opportunities.

One of the big impacts of a sale will be on the group’s financials. CIMIC will recognise a one-off, post-tax impact of around $1.8 billion in FY19. This represents all of CIMIC’s exposure in relation to BICC.

For context, CIMIC reported a half-year net profit after tax of $367 million in July 2019. This is a big hit to the group’s financials which is why the CIMIC share price has been hammered in early trade today.

Excluding the BICC impact, CIMIC expects to report NPAT of around $800 million. The group’s financial results are expected on 4 February 2019.

The group will also not declare a final dividend for 2019 as it keeps its cash for a potential $700 million outlay in 2020.

Foolish takeaway

The CIMIC share price has been hammered more than 19% today following the news.

However, it is still not the worst performing ASX 200 stock. That goes to Downer EDI (ASX: DOW), which is down more than 20% today.

Downer downgraded its FY20 profit guidance following underperformance in its engineering, construction and maintenance business this morning.

If you're after some stable dividend shares for 2020, check out these 3 high-yield stocks for the right price today!

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 126%) and Collins Food (up 79%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!