Analysts see strong growth potential, despite near-term risks
SINGAPORE: DBS Group Research has raised its target price for construction and engineering company Civmec to S$0.92, citing the stock’s current trading price of S$0.64 as a significant discount compared to its peers. Analyst Paul Yong believes that Civmec’s higher earnings growth and strong margins justify the revised target.
Yong highlighted that Civmec’s FY2022 net profit of A$50.8 million (S$48.4 million) exceeded consensus expectations, driven by record revenues of A$809.3 million. With a healthy orderbook of approximately A$1 billion and improving project margins, Yong argues that the company’s current valuation is not reflective of its growth prospects.
Civmec’s diversified revenue streams from both private and public sector capital expenditure were also noted as key strengths. Additionally, the company’s expansion plans, particularly in Gladstone, Queensland, were seen as positive for future growth.
The rising number of lithium and hydrogen energy projects in Australia presents another opportunity for Civmec, as the company benefits from established partnerships with industry giants like Rio Tinto and Chevron. Civmec has recently secured a major contract to build a refinery for electric vehicle batteries, which is set to be completed in 2024.
Despite the positive outlook, DBS has maintained a “buy” recommendation, forecasting higher margins for Civmec but with a more conservative stance on revenue growth. Risks to the company’s performance include potential contractions in private capital expenditure and the ongoing labour supply shortage in Australia, which has yet to fully recover from the pandemic.
As of 3.22 pm on Friday, Civmec’s shares were trading flat at S$0.64.
