Leighton Holdings is Australia’s largest project development contractor, with operations in Australia, New Zealand, Asia, and the Indian subcontinent. As well as contract mining services, Leighton Holdings holds a growing backlist of construction projects in the infrastructure, telecommunications, and real estate sectors, including the expansion for Melbourne Airport and a recently announced 27-floor tower in Brisbane.

During their most recent conference call, Leighton Holdings representatives announced a major expansion for the company and guided results significantly higher over the next five years. In fiscal year 2009–2010, revenue was forecast to be $19 billion, growing to $29 billion within the projected time frame, while net profits were guided at $600 million growing to $900 million. In the conference call, Leighton Holdings’ CEO noted that the largest obstacle to the company’s growth at this time was not problems in Dubai but a shortage of construction workers, as projects such as the Gorgon natural gas development have made trained manpower a scarce commodity.

Note that for the first half of 2009, profits at Leighton Holdings fell by 60% due to writedowns on the value of listed investments. Also note that roughly 7.5% of the company’s work has been in Dubai, where Leighton Holdings owns a 45% stake in Al Habtoor Engineering, accounting for $495 million of their revenue earned during the first half of fiscal year 2009.

The stock LEI has a P/E ratio of 24.29 and EPS of 1.48.

In 2007 LEI soared as high as 65.62. However, in May of that year LEI began falling, finally bottoming out 23 January 2009 at 16.15. At that point it initiated an uptrend that remains in effect, as shown on the chart, below:

The stock reached a medium-term reaction high 11 May at 26.55, but then entered a consolidation triangle that held through mid-July. When the price action broke from the triangle, it was with a bullish surge that rose almost vertically off the long-term trendline, leaving two gaps in its wake, one between 24.10 and 24.54, the other between 31.72 and 32.62. These two gaps remain to be filled, implying a retraction toward the trendline for LEI’s price action.

In the shorter term, LEI set another reaction high 20 October at 38.99. The picture forming seems to be a head and shoulders reversal pattern, which also implies a retraction back to the trendline. If fulfilled, that pattern would account for at least the higher of the two gaps, although the lower would require a fall beneath the long-term trendline.

technical analysis by Craig Liles

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