The accounts of CIMIC's controlling shareholder Hochtief, which owns 71 per cent of the Australian group, appeared to "contradict" information released by CIMIC, Mr Robison said.

"Contrary to CIMIC's comments at the first quarter that there was a a 28.5 per cent improvement in operating cash flow, our assessment of Hochtief's accounts implied that operating cash for Asia Pacific (which largely consists of CIMIC's activities), actually deteriorated around 19 per cent year on year."

Defying downward trend

He also noted that CIMIC's margins were "defying" the downward trend seen at other construction companies, rising to 7.8 per cent in the first quarter, despite troubled projects such as Macau's Wynn Palace, which could see the company hit with liquidated damages, and the Royal Adelaide Hospital, which is behind schedule.

"CIMIC has reported its best margin in at least 10 years at a time when all external signs (including cashflow) point to it potentially having material project issues," Mr Robison said. "Generally, more problem projects do not equal record margins even if parts of the project portfolio are performing."

CIMIC's success in winning a high number of public infrastructure projects, such as contracts on WestConnex, was also worrying. "In general, high win rates when market dynamics are competitive, historically correlate with low bid prices, at the very least typically implying that more risk has been taken."

"This may or may not be true of CIMIC's current situation but we note that industry feedback continues to suggest that CIMIC has been bidding aggressively, perhaps increasing the risk that some bids may have been underpriced."

Morgan Stanley has previously raised questions about CIMIC's troubled Middle Eastern joint venture, the Al Habtoor Leighton Group, warning that the joint venture was not paying interest on its loans from the Australian construction group.


"This suggest to us that the book value of CIMIC's loans to Al Habtoor may need to be reviewed," Mr Robison said.

Morgan Stanley has a price target of $12.40 on CIMIC. The bank has lowered its calendar 2016 forecast for CIMIC's net profits after tax by 14 per cent to $420.9 million and also dropped its 2017 and 2018 profit forecasts.

CIMIC, which reports half year results on July 20, has guided investors to expect net profit in the range of $520 million to $580 million for the full year.

​Other analysts have also previously questioned CIMIC's disclosure, as well as its poor corporate governance and generous salary package for chief executive Marcelino Fernandez Verdes, who benefits from a rising stock price.

Mr Fernandez Verdes has 1.2 million "share appreciation rights" that give him a cash payment reflecting the increase in CIMIC's share price from a base price of $17.71 to the price on the trading day before the rights, which started vesting in March, are exercised.

If the rights had been exercised at CIMIC's closing price of $36.24 on Wednesday, Mr Fernandez Verdes would have made $22.2 million.

Hochtief is majority-owned by Spanish construction company Grupo ACS. Some analysts believe ACS has been positioning for a full takeover of CIMIC and Hochtief.

CIMIC declined to comment.

