Civmec - Maybank Research 2022-05-19: Go Defensive


Civmec - Go Defensive

Solid quarter; raising FY22-24E EPS by 1-3%

  • Civmec (SGX:P9D)’s 3QFY22 NPAT of AUD12.1m (+35.7% y-o-y) slightly beat our and street expectations. This took 9MFY22 earnings to AUD34.7m (+45% y-o-y) and accounted for ~77% of MIBG/consensus full year estimates.
  • We raise our FY22-24E earnings per share forecast for Civmec by 1-3% given the better-than-expected margins.
  • Nevertheless, we keep our 12-month target price for Civmec at S$1.00 (still based on an undemanding 10x FY23E P/E) to track the weaker AUD vs S$ exchange rate. Maintain BUY.

New contract wins and orderbook remains robust

  • Civmec's revenue for the quarter rose 4.9% y-o-y to AUD192.8m, mainly due to the timing of revenue recognition on projects. EBITDA margin expanded by 1.3ppt to 11.9% on easing labour constraints to service its existing construction projects in Western Australia (WA).
  • During 3QFY22, Civmec received several new orders and contract extensions across all segments worth AUD110m. We expect continued replenishment to its order book of AUD1.07b (as at end-Mar 2022) with strong tendering activity amid rising capex, particularly in the energy and resources sectors.

Henderson dry dock a positive for defence sector

  • In Mar 2022, the Australian Government announced an AUD4.3b investment to develop a large vessel dry dock in Henderson WA. It will provide an alternative to the only other naval assigned dry dock located in New South Wales.
  • We think this is a positive development for Civmec as there will be potential opportunities for the group to be involved in the construction of the new dry dock and associated infrastructure. When completed, this also opens up possibilities for its growing defence segment with the build of more and larger vessels within the site.

Forms alliance arrangement with Serco

Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2022-05-19
SGX Stock Analyst Report BUY MAINTAIN BUY 1.000 SAME 1.000