Analysis of Mota-Engil

Company: Mota-Engil (only in Portuguese, Quarter & Annual summaries can be found in English)

ISIN PTMEN0AE0005 | WKN 896770 

Business: A Portuguese construction company. They have three divisions: Engineering and Construction (railway, ports, dams, bridges, roads), Environment & Services (wast treatment) and finally Transport Concessions (management of railways and highways). 

Active: Europe, Africa and South America

P/E: 9.4

The P/E of Mota-Engil is great with 9.4 and the P/B is also excellent with 0.8 which gives us a very clear buy from Graham. The earnings to sales I find to be low with only 2% and also the ROE is not that great with 8.8%. The book to debt ratio is low also for construction industry with 0.2.
in the last five years they have had an excellent yearly revenue growth of 3.4% which then gives us a motivated P/E of 12 to 15 which means that Mota-Engil is today undervalued by the market.
They pay a very nice dividend in the size of 5.2% which correspond to almost 50% of their earnings and this I also find to be ok. As a foreign investor one have to pay 35% taxes in Portugal on dividends.

Conclusion: Graham says yes to Mota-Engil and I also find it to be highly interesting. Their activity in Africa and South America will hopefully become more and more profitable in the future. The P/E and P/B is excellent and the dividend is great with the biggest issue being the low ROE.

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