Downer EDI will divest its Western Australian open cut mining business, Mining West, to MACA ((MLD)) for $205m, which includes a sale price of $175m and $30m in working capital. The sale price is in line with UBS’s expectations.
UBS notes the divestment of Mining West follows other divestments including the sale of a 70% stake in Spotless Laundries, Downer Blasting Services, Snowden Consulting and RTL Mining.
The broker views Downer EDI as a restructuring story expected to position the company to deliver enhanced cash flows of more than $350m. The restructure will enable the company to focus on its core urban services infrastructure businesses, adds the broker.
The broker retains a Buy rating with a target of $6.30.
Sector: Commercial & Professional Services.
Target price is $6.30.Current Price is $5.37. Difference: $0.93 – (brackets indicate current price is over target). If DOW meets the UBS target it will return approximately 15% (excluding dividends, fees and charges – negative figures indicate an expected loss).
