CONSTRUCTION and engineering services provider Civmec reported on Wednesday (May 10) a 20.2 per cent year-on-year increase in net profit for its third quarter, despite lower revenue.

 

Net profit for the three months ended Mar 31 rose to A$14.6 million (S$13.09 million) from A$12.1 million in the year-ago period, the company said in a business update filed to the Singapore Exchange.

 

Its revenue for the third quarter fell 2.7 per cent to A$187.8 million, from A$192.9 million in Q3 FY22.

 

Civmec said the group secured several new contracts as well as contract extensions during the quarter, and maintained a &ldquo strong order book&rdquo of close to A$1.2 billion.

 

For the nine-month period ending Mar 31, Civmec&rsquo s revenue grew 4.2 per cent on year to A$606.6 million. Net profit for the nine months rose 23.4 per cent to A$42.9 million.

 

UOB Kay Hian&rsquo s John Cheong has kept his &ldquo buy&rdquo call and $1.10 target price on Civmec, following news that the Australia-based contractor has won A$100 million worth of new contracts, bringing its order book to A$1.2 billion.

 

One of the contracts is to build and assemble 25 tanks for lithium producer Albermale Lithium, described as a &ldquo blue chip&rdquo customer of this industry.

 

Driven by growing demand for electric vehicles, whose batteries need lithium, Australia expects exports of this metal to grow four-fold to A$19 billion come 2028, which makes this on par with thermal coal.

 

In addition, Civmec, chaired by James Fitzgerald, also one won its single largest maintenance projects in the aluminium sector from Queensland Aluminium, thereby adding to the stream of recurring income which it has been trying to grow.

 

In a mark of the company&rsquo s confidence, it doubled its interim dividend for 1HFY2023 ended Dec 31 2022 to 2 Australia cents, underpinned by stronger operating cash flow of A$67 million, putting the company in a net cash position for the first time since 2016.

 

From Cheong&rsquo s perspective, this higher dividend payout, plus a stronger orderbook, are indications of positive earnings prospects.

 

&ldquo The company is focused on securing projects that will allow it to generate good returns, optimise its workforce and enable it to keep replenishing its orderbook,&rdquo writes Cheong in his April 5 report.

 

The $1.10 target price is pegged to 11x FY2023 earnings, which is 1 sd below its five-year mean. Civmec&rsquo s peers are trading at an average of 12x historical earnings.

 

&ldquo We think the current valuation of 6x FY23F PE is attractive, given its strong growth profile of 10% three-year EPS CAGR for FY22-25 and huge orderbook,&rdquo notes Cheong.

 

Dual-listed construction and engineering services provider Civmec Ltd has announced earnings of A$28.2 million ($26 million) in its 1HFY2023 ended December, 25% higher than the previous corresponding period.

 

This is the seventh consecutive half that company has reported increased profits, its chairman James Fitzgerald says in a statement.

 

The increased earnings is due to higher revenues and improved gross margins in the period, as well as decrease in finance costs following through to the bottom line.

 

Revenue for the 1HFY2023 increased 7.6% y-o-y to A$418.9 million on the back of increased activity levels and the timing of projects revenue recognition.

 

Gross profit for the period increased 22.8% y-o-y to A$51.8 million, reflecting the increase in revenue and improvement in gross profit margins from 10.8% to 12.4%.

 

Administrative expenses increased by 8.8% in 1HFY2023 compared to 1HFY2022 mainly due to increase in IT cost and employee benefits resulting from the company&rsquo s increased activity. Meanwhile, finance costs reduced by 36.7%y-o-y in 1HFY2023 reflecting the lower levels of borrowings and lower interest rates payable on bank debt following repayment of the senior secured notes in Nov 2021.

 

As at Dec 31, Civmec&rsquo s order book stood at A$1.7 billion. &ldquo The company&rsquo s continued order book growth and good visibility of upcoming projects from clients, coupled with our increasing client base for maintenance work, puts it in a strong position to continue delivering sustainable growth for our shareholders,&rdquo says CEO Patrick Tallon.

 

The board has declared an interim dividend of 2 Australian cents per share for the period.

CONSTRUCTION and engineering services provider Civmec : P9D +0.88% announced on Monday (Jan 9) that it has secured a A$330 million (S$304 million) contract for mining company Rio Tinto&rsquo s Western Range Project.

 

The iron ore project, located at the Paraburdoo site in the Pilbara region of Western Australia, will include the construction of a new Run of Mine (ROM) pad, primary cruising facility, overland conveyancing circuit, as well as modifications to the coarse ore stockpile and downstream conveying system.

 

Civmec added that the package of works will utilise most of the company&rsquo s in-house capabilities.

 

Said chief executive officer Patrick Tallon: &ldquo The fact that we will be utilising our manufacturing facilities to supply our construction site teams, across several disciplines, strongly aligns with our business model to provide multi-disciplined solutions for our clients.

 

&ldquo This allows us to start the new year with an order book in excess of A$1.15 billion.&rdquo

 

Off-site work will begin immediately and mobilisation to the site is due to commence in mid-2023. The project will employ more than 400 people on site and is scheduled for completion in the first half of FY25 ending Jun 30, 2025.

 

According to management, there is good visibility of upcoming projects for existing clients.

 

Civmec is off to a good start, with 1QFY2023 ended September results in line with Maybank Securities analyst Eric Ong&rsquo s expectations.

 

Civmec&rsquo s 1QFY2023 net profit after tax jumped 31.3% y-o-y to A$14.2 million ($12.91 million) on solid performance across all operating sectors, writes Ong. 1QFY2023 earnings account for about 27% and 26% of Maybank and consensus&rsquo full-year estimates respectively.

 

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 &ldquo buy&rdquo on Civmec with a lower target price of 94 cents from $1 previously, &ldquo given the depreciation of the Australian dollar&rdquo .

 

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. &ldquo We think margins should continue to expand with greater economies of scale, and higher contribution from the maintenance segment,&rdquo 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. &ldquo There are also a number of large contracts that the group is actively tendering for work commencing from end-FY2023.&rdquo

 

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&rsquo 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.