Theiss, the wholly owned subsidiary of engineering contractor Leighton Holdings (ASX: LEI), has announced that it has been awarded a four-year contract worth $570 million by Wesfarmers (ASX: WES).
The contract is an extension in the scope of work Theiss currently undertakes within its existing 10-year contract at the Wesfarmers owned Curragh North coal mine in Queensland for the removal of overburden and coal mining activities.
This latest contract win comes after a number of other recent wins by the Leighton group. In the last month alone, the group has secured a $550 million contract for the expansion of Lake Vermont, has been chosen as the preferred builder with its joint venture partner Mirvac (ASX: MGR) for the $5.2 billion Perth City Link project, been awarded (via its part owned Habtoor Leighton Group) a contract to construct the Residential Towers project in Dubai valued at $1.45 billion and selected as part of a partnership to deliver the NZ$1 billion Transmission Gully motorway among other contract wins.
Foolish takeaway
Leighton's share price took a dive in early October when a number of accusations were raised against the company which led to the stock dropping from around $19.60 to $16.80. The stock price has continued to trend down since then, with the share price recently at $15.50.
Based on consensus earnings (according to Morningstar) the stock is now trading on a forecast price-to-earnings ratio for the financial year ending December 2013 of 9.7. While this may be low when compared to the valuations many mining service contractors have traded on over the past few years, given the inherent difficulties and low profit margins, a multiple of around 10 is not unreasonable. The impressive growth in Leighton's order book over the last month however, could make Leighton a stock well worth investors putting on their watch lists.
