Civmec is a construction and engineering services provider to the resources, energy, infrastructure, marine and defence sectors. In an Oct 27 note, Ong is maintaining “buy” on Civmec with a lower target price of 94 cents from $1 previously, “given the depreciation of the Australian dollar”.
Revenue for the quarter grew 15.6% y-o-y to A$228.3 million, underpinned by increased activity levels and the timing of project revenue recognition, notes Ong.
Ebitda margin improved by 0.4 percentage points (ppts) to 11.3% with some contracts nearing conclusion, while the group simultaneously ramped up activity on several new projects. “We think margins should continue to expand with greater economies of scale, and higher contribution from the maintenance segment,” notes Ong.
While its order book has decreased slightly to A$935 million as at end-September 2022, tendering activity across all sectors remained buoyant for work this financial year, writes Ong.
Civmec recently undertook a number of smaller maintenance contracts in the southwest of Western Australia for new clients. “There are also a number of large contracts that the group is actively tendering for work commencing from end-FY2023.”
According to management, there is good visibility of upcoming projects for existing clients and there is no indication that future project plans are likely to change despite the uncertain economic outlook.
Civmec’s joint venture arrangement with Serco, named the Australia Maritime Alliance (AMA), has submitted a tender for the LAND 8710 Phase 1A programme, constructing amphibious vessels for the Royal Australian Navy. A decision on the successful tenderer is anticipated to be made before the end of FY2023.
As at 9.26am, shares in Civmec are trading 1.5 cents lower, or 2.54% down, at 57.5 cents.
