Page 3 - Private Wealth Specialist Growth SMA (Balanced) PDF Factsheet

Sell TPG Telecom Ltd

We struggle with the catalysts for upside from here, with continued challenges and not enough wins
over the last twelve months or so. Earnings growth over the next 2 years doesn’t have enough
certainty attached to it, which has meant the stock has been failing our systematic screens more
recently.

We believe that continuing to own the stock would be a slow burn, with valuation that is fair-to-high,
and with earnings growth forecast not strong or certain enough. The company is only part of the way
through a multi-year simplification plan, with potential positives, but plenty of execution risks remain.
The company is also in the middle of a very large capital expenditure cycle to upgrade IT systems, 5G
rollout and the simplification plan, which has weighed on results in the short to medium term. Whilst
this investment is positive for the long-term execution risks and cost over-runs remain a concern.

Buy Worley Ltd (WOR)

Worley Ltd (WOR) is an Australian headquartered global engineering company. The business provides
project delivery, asset services and consulting to the energy, chemicals, and resources sectors. Worley
offers comprehensive engineering services throughout the project lifecycle, which includes planning,
development, operations, maintenance, and decommissioning. The company employs a large
workforce of engineers and consultants to tackle complex technical challenges for its clients. Recently,
Worley has shifted its focus towards sustainability, aiming to derive 75% of its revenue from
sustainability-related projects by 2026. This includes initiatives in decarbonization, renewable energy
sources like offshore wind and hydrogen production, as well as carbon capture and storage
technologies. The company has a global presence, operating in multiple regions including the
Americas, Europe, the Middle East, Africa, and Asia-Pacific.

Our View

- Strong pipeline of work ahead, which is largely essential due to the climate transition
- Persistently screening high in our systematic process, with attractive earnings growth and at a
reasonable valuation
- Most recent results provided guidance for low double-digit growth ahead
- WOR expects FY25 growth to come from a high proportion of higher-margin sustainability
related work.
- Sustainability-related work is 51% of the pipeline and increased QoQ in 4Q.
- This work is not slowing and is supportive of earnings growth
- Competition is very low for project tenders.