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Civmec - Maybank Research 2022-05-06: Underappreciated Defence Play

CIVMEC LIMITED (SGX:P9D) | SGinvestors.io CIVMEC LIMITED (SGX:P9D)

Civmec - Underappreciated Defence Play


Leading tier-1 contractor; initiate with BUY

  • We initiate coverage on Civmec (SGX:P9D) – a leading Australian construction & engineering services provider to the booming energy, resources, as well as defence and infrastructure sectors - with BUY and 12-month target price of S$1.00. This is premised on an undemanding 10x FY23E P/E, representing ~15% discount to its ASX-listed peers.
  • Civmec’s large order book of AUD1.15b should underpin the group’s earnings growth and decent prospective yield of 4-5% going forward.


Earnings growth backed by robust order book

  • In 1H FY22, Civmec secured several new orders and contract extensions worth AUD571m across its key sectors, boosting its order book to AUD1.15b as at end-Jan 2022. This sizable order book will help to secure the majority of the revenue planned for the next 12 months or so, with a portion of the outstanding order book extending as far as 2029.
  • We see room for Civmec to grow recurring income stream ( > 25% of total revenue) as its existing clients regularly outsource their maintenance services to the Group.


Beneficiary of Australia’s rising defence spending

  • Given rising geopolitical tension in the region, the Australian government has pledged to invest up to AUD183b by 2050 for continuous naval shipbuilding programme to modernise its fleet. Civmec is one of only two approved players (the other one being stated-owned ASC) to build the next-generation offshore patrol vessels for the Royal Australian Navy.
  • With a foothold in the high-entry-barrier defence business, this gives Civmec a strong competitive edge and could further support margins.


Expect more contract wins to drive rerating






Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2022-05-06
SGX Stock Analyst Report BUY INITIATE BUY 1.00 SAME 1.00



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