JBWERE: It Might Be A Good Time To Buy Embattled Leighton

Leighton sharesLeighton shares the day the allegations were published.

Shares in Leighton Holdings have been getting hosed on the markets since the eye-popping allegations of bribery and corruption amongst management emerged earlier this month.

The day the allegations were first published in Fairfax Media the share price fell 10%. It’s now trading at around $17.20, down from $19.58 on October 2.

JBWere has a note out to Australian clients this morning saying high-risk investors might consider buying the stock. They explain:

Recent corruption allegations have hurt the share price. We think the broader turnaround story is intact and higher risk investors can take advantage of current sentiment and slump in share price. We note the allegations in the press don’t implicate current management and while uncertain, we don’t see material impact to underlying operations (ie prevention of tendering, significant punitive damages). We believe there are enough positives to drive value when the PR storm subsides: new strategic focus on margins (rather than revenue), diversified Asia-Pac order book relative to peers offsetting mining weakness, FY13 profit guidance reaffirmed multiple times, potential buyout from parent, low expectations for FY14 mean potential upside, clean balance sheet post asset sales.

Emphasis added.

There are disputes about which executives knew what and when, and some of this may well end up in court.

At the same time it’s an example of the extraordinary levels of bad publicity that huge companies can be capable of riding out in the eyes of the market.

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