Jacobs Penetrates Thailand - Analyst Blog

Jacobs Engineering Group Inc. (JEC) has signed a Memorandum of Understanding (“MOU”) with Thailand based PTT Maintenance and Engineering Company Limited (PTTME) for three years. Jacobs will provide services to PPT Chemical Plc (PTTCHEM), a holding company of PTTME under the alliance.

PTTME provides maintenance, engineering, construction and inspection services for the refining, petrochemicals and utility sectors in Thailand.

The consolidation would definitely enhance Jacobs’ revenues, which were in excess of $11 billion in the fiscal year 2009. Jacobs is one of the leading providers of professional, technical and construction services to industrial, commercial and government clients. Jacobs’ ongoing acquisition strategy will also help strengthen its position in the future.

Jacobs has a successful record of more than 33 acquisitions over the last 20 years. The Babtie acquisition (completed in August 2004) has provided many opportunities for Jacobs, including expansion into the U.K. market, organic infrastructure growth opportunities and entry into the rapidly-growing markets of Ireland and Eastern Europe.

Jacobs acquired a 60% interest in Zamel & Turbag Consulting Engineers (“Zate”) in March 2008 in order to expand its business in the Middle East. In the first half of fiscal 2010, Jacobs acquired Jordan, Jones and Goulding Inc. (JJG), a professional services firm to expand into the water and wastewater market.

However, the industry in which Jacobs operates is highly cyclical in nature and subject to significant fluctuations emanating from a wide variety of uncontrollable factors, including economic conditions and changes in client spending, particularly during periods of economic uncertainty.

A continuation or worsening of weak economic conditions or a reduction in government spending could have an adverse impact on the business, financial condition and results of operations. Thus, we reiterate our Neutral recommendation.