Why Shares In Costain Group PLC Tumbled

Costain Group plc (LON:COST) plummets over 18%.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares in international engineering and construction group Costain Group (LSE: COST) took a beating in early trade this morning, plunging more than 18% following the news that it proposes to raise around £75m, of which £25m is to be gained via a firm placing, while the remaining £50.1m is set to be raised through a placing and open offer.

So what: The open offer consists of just under 33.4 million new ordinary shares at 225p each, which — in much the same way we saw Barclays shares tumble after announcing its rights issue last year — has caused the share price to fall from yesterday’s close of 319.5p.

Management have stated that they expect the fundraising to “enable Costain to take greater advantage of the opportunities in its chosen markets and thereby accelerate the Group’s medium and long-term growth prospects”, in other words allowing the company to bid for a greater number of large-scale projects, among other advantages.

So what: Costain also revealed its final results for the year ended 31 December 2013 this morning, with highlights including a 12% increase in underlying operating profit to £27.4m, while it also increased its order book by 25% (to £3bn). Elsewhere, management also lifted the dividend by 7% to 11.5p, putting Costain on a yield of 3.4% to match the average of the FTSE 100.

costainAll of which will leave investors asking questions — do the strong results combined with the decline in share price mean that Costain is a falling knife waiting to be caught? Or does the performance of its shares over the last 12 months put you off? Well, it’s up to you whether today’s news combined is enough to make the company a buy.

 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Sam does not own shares in Costain Group.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »