What Happened to the UGL Share Price?
Shares in utility service provider UGL Ltd [ASX:UGL] got dumped today, with the stock closing down more than 6%. The last four months have been a rollercoaster for UGL…the stock has defied the traditionally stable utilities sector to trade in a price range of nearly 30% from peak to trough.
Why Did This Happen to the UGL Share Price?
UGL’s share price has rallied over the past few weeks as it has bedded down the sale of DTZ, its property services arm. Last financial year, DTZ contributed the majority of UGL’s $36.5 million profit.
Yesterday, UGL entered into a binding agreement for the sale of DTZ to a private equity consortium for $1.215 billion.
Today, UGL’s newly-appointed CEO Ross Taylor warned that the bad news across the contracting and engineering sector is not over. Taylor signalled a cautious approach to acquisitions when he takes the helm of the group later this year.
With good news in the rear view mirror and relatively bad news just unveiled, investors are taking this as a cue to lock in the profits made in the past few weeks…hence today’s share price drop.
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What Now For UGL Ltd?
Don’t panic if you own the shares. UGL’s engineering business is in relatively good shape and the company is projecting putting 1000 employees back on next year. That will place UGL well to grow revenues if the market recovers.
In any case, the DTZ sale funds will leave UGL financially much stronger to weather the current difficult industry conditions…and these kind of price levels should give the stock plenty of valuation support.
Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
