Introduction

In this detailed review of the financial performance of Civmec and its peers, UOB Kay Hian provides insights into the latest earnings, market outlook, and investment recommendations. The report covers Civmec’s half-year results, a comparison with its peers in Australia, Asia, and Singapore, and offers a deep dive into their financial metrics and future prospects.

Civmec (CIVMEC SP): A Mixed Bag of Performance and Prospects

Recommendation: Downgraded to HOLD

Target Price: S\$0.98 (previously S\$1.40)

Key Takeaways:

• Civmec’s 1HFY25 earnings of A\$27 million fell 17% year-on-year, representing 40% of the full-year estimate, primarily due to weaker net margins caused by start-up costs in its equipment manufacturing business and lower operating leverage.
• Revenue for 1HFY25 was A\$502.9 million, up 2.2% year-on-year, but the EBITDA margin dropped from 12.1% to 10.5%, and net profit margins slipped to 5.3% from 6.5% in the previous year.
• The company maintained its interim dividend at 2.5 Australian cents despite weaker results, reflecting confidence in its balance sheet. Civmec plans to maintain its full-year dividend at approximately 6.0 Australian cents, barring unforeseen circumstances.

Market Outlook:

• Civmec anticipates near-term softness due to project delays linked to the upcoming Australian election in May 2025. These delays are likely to result in reduced activity levels in the second half of FY25 and potentially extend into 1HFY26.
• Medium-term indications remain positive, with tendering activities at historically high levels. Current priced opportunities total nearly A\$12 billion, and the company aims to replenish its order book to A\$1 billion within the next 12 months (down from A\$853 million in FY24).

Key Projects and Developments:

• Civmec secured a significant project valued at A\$90-100 million for the design and construction of a major shiploader, reinforcing its position as a key Original Equipment Manufacturer (OEM) in Australia.
• The company’s infrastructure capabilities were further validated by its completion of the Boorloo Bridge project and its upgraded B4 accreditation, the highest level of bridge construction accreditation in Australia.
• Civmec also won the Australian Steel Institute National Steel Excellence Award 2024, highlighting its proficiency in steel fabrication.
• Progress on the ownership transfer of Luerssen Australia, including assets and staff tied to the SEA 1180 contract for the Royal Australian Navy, is on track, with a target completion date of 1 July 2025.

Financial Projections:

• Revenue forecasts for FY25, FY26, and FY27 were lowered by 24%, 22%, and 22%, respectively, to A\$840 million, A\$910 million, and A\$972 million due to project delays.
• Net profit forecasts for the same periods were trimmed by 36%, 31%, and 29% to A\$43 million, A\$49 million, and A\$52 million, with net margins adjusted to 5.1-5.4%.

Peer Comparison

The report also provides a comparative analysis of Civmec and its peers across Australia, Asia, and Singapore. Key financial metrics such as Price-to-Earnings (PE) ratios, dividend yields, and Return on Equity (ROE) are highlighted.

Australian Peers

• Monadelphous (MND AU): PE ratio of 20.6x for 2025 with a dividend yield of 4.3% and ROE of 15.7%. Positioned strongly in the sector but higher valuation metrics compared to Civmec.
• NRW Holdings (NWH AU): PE ratio of 11.6x for 2025 with a dividend yield of 5.0% and ROE of 19.4%. Offers solid financials and competitive valuation metrics.
• Imdex Ltd (IMD AU): PE ratio of 29.6x for 2025 with a dividend yield of 1.1% and ROE of 8.7%. Higher valuation metrics indicate premium pricing.
• Austal (ASB AU): PE ratio of 29.8x for 2025 with a dividend yield of 0.3% and ROE of 4.4%. Lower profitability metrics compared to Civmec.

Asian Peers

• ST Engineering (STE SP): PE ratio of 19.2x for 2025 with a dividend yield of 3.3% and ROE of 28.0%. Strong financials but higher valuation multiples.
• Sany Heavy Equipment (631 HK): PE ratio of 6.1x for 2025 with a dividend yield not available. Competitive metrics but lacks dividend transparency.

Singapore Peers

• CSE Global (CSE SP): PE ratio of 9.6x for 2025 with a dividend yield of 6.1% and ROE of 13.9%. Competitive valuation and strong dividend yield.
• Marco Polo Marine (MPM SP): PE ratio of 7.7x for 2025 with a dividend yield of 1.9% and ROE of 13.9%. Strong ROE but lower dividend payout.

Conclusion

Civmec’s recent performance reflects a mix of challenges and opportunities. While near-term softness is expected due to project delays, the medium-term outlook remains optimistic with a robust pipeline of tendering activities. The company’s solid dividend track record and strategic initiatives in the OEM and infrastructure sectors further enhance its appeal. However, the HOLD recommendation highlights the need for caution given the current uncertainties and reduced earnings visibility. Investors should also consider the comparative advantages and valuation metrics of Civmec’s peers when making investment decisions.