Transfield given the nod

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Yesterday Transfield Services Limited (TSE.AX) was awarded a second contract to roll out fibre optic cables for the NBN Co in Sydney.

Transfield announced it had been awarded the $170 million contract which comprised Passive Fibre Network design, construction and build drops in central and southeast Sydney with a potential value of up to $300 million. Despite the news, shares in the company closed lower at $1.82.

In a bid to boost rollout around the country, the NBN Co is looking to award companies secondary contracts to reduce the likelihood of another downgrade in its network delivery forecasts, already downgrading it from 286,000 to between 155,000 and 175,000 homes by June 30 this year.

After being awarded $159 million in contracts for its infrastructure business in early March, it was again rewarded this month with a 10-year $190 million contract with the Mornington Peninsula Shire in Victoria.

Transfield remains a diversified company with operations in asset management, maintenance and project management across many industries including mining, rail and public transport, water, power, telecommunications, facilities management and defence. Despite this, investors have shunned the company, with a 49% drop in its share value from this time 24 months ago.

After flat first-half FY13 results, investors responded with an 8.5% sell off, slowly snowballing the company downwards. However, management believes that the flat results were the product of depreciation of assets and infrastructure costs and expects further gains in 2HFY13.

Foolish takeaway

Competitor United Gas Limited (UGL.AX) realised a 10% rise in share price yesterday when the company announced it seeks to split its engineering and property service businesses. Perhaps many of Transfield’s investors have jumped ship to UGL and Downer EDI Limited (DOW.AX) but it seems the luck might be starting to turn in Transfield’s favour.

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