Civmec Limited (CVL SP)
Company Update (Updated 1 March 2021)
A value stock with strong fundamentals and growth opportunities
- E1H22 financials: Outstanding results. Civmec’s revenue rose 27.4% YoY to A$389.3mn in 1H22, while net profit after tax jumped 50.4% YoY to A$22.6mn. Even though gross margin declined slightly by 0.5ppts to 10.8% in 1H22, the overall strength in bottom-line was due to prudent cost spending, with admin expenses decreasing slightly by 0.4% to A$9.2mn, and other expenses declining 93% to A$0.1mn in 1H22.
- Key drivers. Expansion of Maintenance and Capital Works division which provide recurring income; Increased Australian Infrastructure and Defence budget/spending to provide more opportunities for contract wins; Buoyant commodity demand amidst inflationary market conditions to drive Capex spending from customers.
- While we maintain an OUTPERFORM recommendation, we revise our TP down to S$0.79 due to the overall de-rating of valuation multiples across the sector. Our updated TP is now based on 10.0x FY2022F P/E, down from 12.0x we had previously.
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