Engineering and construction company RCR Tomlinson Limited (ASX: RCR) has seen its order book or work rise to $1.03 billion, after the contractor acquired the Engineering and Construction Services (ECS) business from the Water Corporation of Western Australia.
The acquisition, for $10.4 million, comes with a guaranteed work commitment of at least $130 million over three years. Combined with RCR's existing $881 million order book, the company now has more than $1 billion of work on its books.
That's more than 31% higher than the previous financial year (FY2014) and 45% higher than the first half of this year and represents almost 2 years of revenues.
RCR Managing Director Paul Dalgleish was upbeat about the acquisition as it gives the company access to the water sector. It also diversifies revenues into infrastructure and RCR can use the ECS's intellectual property and expertise to leverage into projects for other water authorities in Australia and offshore.
70% of the company's revenue and earnings currently comes from infrastructure and energy sectors, with remainder from resources.
At the current price of $1.65, RCR appears cheap, trading on a trailing P/E ratio of 5.4x and paying a fully franked dividend yield of 6.4% but Foolish investors might want to wait for the company's next financial results, before diving in.
As we've mentioned before, contracts don't mean much if they aren't profitable. RCR seems to be heading in the right direction, and this latest acquisition appears to be a good move.
