Excerpts from Maybank report

Civmec Ltd (SGX: P9D)

• Civmec Ltd 2H22 profit exceeds expectations. 2H22 net profit jumped 42.8 YoY to AUD28.2m, beating our and street expectations.
• Excluding the write-back of AUD1.3m for the previous impairment/revaluation losses, FY22 core earnings of AUD49.5m came in at 105% of MIBG/consensus’ full-year estimates.
• The group declared a final DPS of AUD0.02, bringing total payout to AUD0.03 (+50% YoY). We raise our FY23-25E EPS by 1-2% on the back of a stronger net margin assumption.

We keep our 12-month TP at SGD1.00 (still based on 10x FY23E P/E) given the depreciating AUD against SGD. BUY.

Rising operating leverage with higher margins

Turnover for 2H22 rose 14% YoY to AUD419.9m, mainly attributed to increased activity levels and the timing of revenue recognition of projects.

GPM also improved by 0.6ppt to 11.6% on higher contributions from its marine & defence sector, as well as economies of scale. Going forward, we think margins should continue to expand as prices of raw materials have begun to stabilize or even decreased slightly.

This, coupled with tight control on Opex and lower finance costs following its refinancing in Nov 2021, should flow directly through to the bottom line.

Strong order book of >AUD1b provides visibility

Underpinned by robust contract wins across all sectors, we note that its order book remains on an upward trajectory (+3.3% YoY to AUD1.04b), of which the majority will be recognized in the next 12 months, with a portion of the secured order book extending as far as 2029.

Given the buoyant tendering activity and taking into account its labour availability, management is now more selective and focused on growing the proportion of recurring income earned from long-term maintenance contracts.

Civmec Ltd continues to invest for future growth

As workload in the Gladstone region of Queensland ramps up, Civmec recently acquired a 28,510 m2 land holding to establish a permanent
facility.

This will replace the leased facility it currently occupies and allow the group to expand its service offerings in the region. The plant will require capex of about AUD10m and be developed over the next 18 months.

Meanwhile, the group has bolstered its balance sheet with the upward revaluation of its freehold land and buildings by AUD37.1m, thus
increasing its NAV per share to almost AUD0.74 (+26.8% YoY).

You can find the full report here and the company website here