Maybank Securities’ Eric Ong has maintained his “buy” call on Civmec P9D with an unchanged target price of $1.05 following strong contract wins for the Australian-based engineering company.
In his report dated July 2, the analyst notes Civmec’s recent contract wins valued at A$174 million ($157.06 million). This follows scope extensions for fabrication, manufacturing, construction and maintenance work across a range of sectors in Australia.
Ong views these developments positively in helping Civmec replenish its A$821 million order book, as at March 31.
Additionally, the analyst notes that the company secured a major contract for the supply, manufacture and offsite assembly of a shiploader for the Dalrymple Bay Terminal in Queensland, Australia. With manufacturing works undertaken at Civmec’s facility in Henderson, Western Australia (WA), the shiploader will be fully assembled and no-load commissioned offsite and transported via heavy lift vessel to the project site.
Ong identifies maintenance services as Civmec's next growth driver which currently accounts for around 20% of the company’s total revenue.
He adds that Civmec has recently renewed a number of contracts and work orders under existing terms and framework agreements across Australia.
“We understand plans for a new east coast maintenance hub in Gladstone are progressing well. This new hub would also create a new line of opportunity for its east coast based maintenance team,” Ong writes.
Due to the historically high levels of the company’s tenders, with total contract values of almost AU$10 billion, the analyst also highlights Civmec’s efforts in working with a range of clients on approved expansions, sustaining and maintenance opportunities.
“In our view, this provides significant opportunities for both order-book replenishment and potential earnings/margin improvement in the medium to long term,” says the analyst.
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Driven by the company’s steady order book momentum, he forecasts a revenue compound annual growth rate of 10% over the next three years for Civmec.
That said, downside swing factors identified by Ong include slower contract wins resulting in lower order book and unexpected margin pressure from rising raw material and labour costs.
As at 2.28pm, shares in Civmec are trading at 1.5 cents higher or up 1.81% at 84.5 cents.
