Date of Report: 3 October 2024
Broker: UOB Kay Hian
Record Tender Opportunities
Civmec is currently experiencing historically high levels of tendering activities across its operations, with current priced opportunities approaching A$10 billion. The company is actively engaging with a diverse range of clients on approved expansion, sustaining and maintenance projects, as well as on a budgetary level for initiatives under feasibility studies.
Strong Orderbook and Revenue Growth
Civmec’s orderbook stands at A$821 million, ensuring a substantial portion of revenue is secured for the next 12 months, with some projects extending up to 2029. The company is focused on growing its service offerings and expanding its client base to capitalize on the robust pipeline of tendering opportunities across various sectors, including resources, energy, infrastructure, marine, and defense.
Recent Contract Wins
The company has renewed or signed new term and maintenance contracts with several key clients, which include:
- Providing engineering, procurement, and construction services for WesCEF to support brownfield projects.
- Supplying steel and pipe modules for Chevron’s Gorgon Carbon Capture and Storage (CCS) system.
- Installing structural, mechanical, piping, and electrical & instrumentation components for Pilbara Minerals on the P1000 expansion project.
- Establishing an umbrella services agreement to deliver construction services for sustaining capital projects for Rio Tinto facilities across multiple sites.
Investment Recommendation and Target Price
UOB Kay Hian maintains a “BUY” recommendation for Civmec, with a target price set at S$1.32. This valuation is pegged to an unchanged price-to-earnings (PE) multiple of 11x for FY2025, reflecting the company’s strong orderbook and positive outlook based on historical tendering activities.
Key Catalysts for Growth
Key events that could enhance Civmec’s share price include:
- Earnings surprises resulting from higher-than-expected contract wins and margins.
- Better-than-expected dividends.
- Potential takeover offers by strategic shareholders due to high barriers to entry in the defense sector.
