Australia-based engineering firm Civmec posted 1HFY2025 earnings of A$26.5 million ($22.59 million), down 16.9% y-o-y, which missed the expectations of UOB Kay Hian and Maybank Securities.
Revenue for the six months ended Dec 31, 2024 increased by 2.2% y-o-y to A$502.9 million. However, the company's gross margin dropped by almost 1.2 percentage points to 11.1% due to a shift in business mix and higher depreciation.
UOBKH’s analysts John Cheong and Heidi Mo, along with Maybank’s analyst Eric Ong, point out that delays in the timing of key project awards and the re-scheduling of projects had resulted in a 20.9% q-o-q decline in Civmec’s order books to A$633 million as at end-2024.
On the positive side, despite the lower earnings, Civmec has maintained its dividend payout at 2.5 Australian cents per share, translating to a payout ratio of 48%.
The analysts interpret this as Civmec’s sustained confidence in its own balance sheet and outlook. The company is actively tendering for new projects worth around A$12 billion, suggesting a vibrant level of activity.
However, Civmec has observed shifts in market conditions due to nearing national elections and increased geopolitical tensions. These external factors might result in contract delays well into 2HFY2025 which will lower activity levels.
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Along with a downgraded call of “hold”, UOBKH’s Cheong and Mo have also lowered their target price for this stock to 98 cents from $1.40; Maybank’s Ong, meanwhile, rates this counter “hold” along with a reduced target price of 89 cents, from $1.20 previously.
Civmec’s Singapore quoted shares dropped 2.29% to change hands at 86 cents.
