Sunday, 21 December 2008

PWK Salvages PPC-1

Pipe Networks (PWK) announced on Friday that PPC-1, the proposed Guam to Sydney submarine cable system will go ahead as planned. A couple of weeks ago the project was in some doubt as the banks would not commit to the funding.

However, common sense prevailed and PWK management was able to bring together both customers and suppliers to work out a deal. The company reiterated previously announced guidance of NPAT of $11 for this financial year and said previously announced guidance for FY10 of NPAT of $17m would also be unaffected.

Obviously this is great news for shareholders, the stock has taken a beating on the back of fears that the project might not go ahead. As the company said:

"It is a testament to the commercial potential and importance of the project that an alternative agreement could be reached that side-stepped the debt markets for primary project financing. I congratulate the team who have been working tirelessly over the past three weeks to bring about this outstanding outcome."

If those aforementioned forecasts are met, this stock is currently very undervalued. Given Pipe's record to date, there is no reason to think they won't be. Whilst it is hard to look through the current economic malaise, for long term investors it is worth considering where this company will be in 5 years from now. With the PPC-1 cable giving PWK all kinds of expansion opportunities into the asian-pacific region, this is a company you will want to own.