A look at the Materials Sector- CIM, BAP, PGH

  • Jan 23, 2020 AEDT
  • Team Kalkine
A look at the Materials Sector- CIM, BAP, PGH

The materials sector comprises of stocks for companies that are involved in the discovery, processing and development of raw materials. The sector includes companies which are engaged in processing chemical products, metals and mining, refining, and forestry products. These companies normally supply materials to construction activities, thus are sensitive to business cycles and generally thrive when the economy rises.

The S&P/ASX200 Materials index was trading in the red on 23rd January 2020, as the index witnessed a fall of 95.70 points and was placed at 14,664.40 (AEDT 01:31 PM). We would now have a look at some of the ASX listed Material Sector Stocks.

S&P/ASX 200 Materials Performance (Source: ASX)

CIMIC Group Limited (ASX: CIM)

About the Company

CIMIC Group Limited is engaged in the business of construction, mining and minerals processing, public-private partnerships, engineering and other services.

Update on BICC strategic Review

The company has completed an exhaustive review of its investment for 45% non-controlling stake in BIC Contracting in the Middle East. The company has decided to exit its presence in the region and has commenced negotiations with potential acquirers for a part or whole of its stake in BICC.

The company will recognise a one-time, post-tax impact of $1.8 billion in FY 2019. The company has decided not to declare a final dividend for FY19.

CIMIC Group’s UGL Secures $180m In Mining Sector Contracts

UGL has acquired contracts to deliver maintenance, shutdown and project services for its clients in the mining sector. These latest contracts will result in a collective revenue to UGL of roughly $180 million and is expected to be completed over a three-year period, delivering electrical, mechanical, instrumentation and entry services for shutdowns, maintenance, and maintaining capital projects.

Key highlights of the contract:

  • Maintenance, shutdown and project services across multiple sites and with multiple clients in the Bowen Basin in Queensland;
  • A three-year contract to provide multi-discipline services for Alcoa across the Wagerup and Pinjarra sites in Western Australia.

These contract awards show UGL’s position as a market leader in the Australian mining industry for the supply of electrical and instrumentation, maintenance and mechanical access services.

Ventia signs an agreement to purchase Broadspectrum

Ventia, CIMIC’s 50:50 investment partnership, has signed a deal with Ferrovial S.A. to buy Broadspectrum, subject to customary closing conditions and regulatory consents. Broadspectrum and Ventia are collaborating with each other to provide infrastructure services and provide a range of maintenance and operational services, to a broad selection of government clients and private sector and their clients. The combined group is anticipated to create revenue in surplus of A$5 billion. The acquisition is for an equity value of A$485 million.

Stock Performance

The stock of CIM is currently trading at $28.070 per share on 23 January 2020 (AEDT 12:50 PM), down by 19.754% from its previous closing price. The company has a market capitalisation of $11.32 billion as on 23 January 2020. The total outstanding shares of the company stood at 323.73 million, and its 52-week low and high is $27.800 and $51.500, respectively. The company has given a total return of 7.47% and -1.91% in the time period of 3 months and 6 months, respectively.

Bapcor Limited (ASX: BAP)

Bapcor Limited is engaged in the business of sale and distribution of motor vehicle aftermarket parts and accessories, automotive equipment and services and motor vehicle servicing.

Bapcor’s CFO Retires

Bapcor’s Chief Financial Officer and Company Secretary, Greg Fox, has announced his retirement by the end of FY20. Greg has been the company’s CFO since February 2012 and has been involved in the development of the business over the last eight years. Whilst Greg will retire as Chief Financial Officer and Company Secretary, he will continue to assist the business in a part time consulting capacity with some of the strategic development opportunities that are underway. A process to select a successor as Chief Financial Officer is underway, with the assistance of the Executive Search firm, Egon Zehnder.

Stock Performance

The stock of BAP is currently trading at $6.270 per share on 23 January 2020 (AEDT 12:50PM), up by 1.129% from its previous closing price. The company has a market capitalisation of $1.76 billion as on 23 January 2020. The total outstanding shares of the company stood at 284.54 million, and its 52-week low and high is $5.320 and $7.525, respectively. The stock has given a total return of -11.21% and 0.64% in the time period of 3 months and 6 months, respectively.

Pact Group Holdings Limited (ASX: PGH)

Pact Group Holdings Limited is a top supplier of speciality packaging solutions, servicing both industrial and consumer sectors. The company focuses in the supply and manufacture of rigid metal and plastic packaging, contract manufacturing services, material handling solutions and recycling and sustainability services.

Pact Intends to Divest Its Contract Manufacturing Division

The company has started a sale process in respect of its Contract Manufacturing division and has appointed Citigroup to assist in the sale process. The company’s Contract Manufacturing division, which includes the combined businesses of Jalco, Pascoe’s and Australian Pharmaceutical Manufacturers is a leading supplier of contract manufacturing services in Australia for the home care, personal care and health and wellness segments. This segment reported sales of $372 million and EBITDA of $25 million in FY19.

Overview of Contract Manufacturing Segment:

  • Leading supplier of contract manufacturing services in Australia for the home care, personal care and health and wellness segments;
  • Extensive service offering including product development and innovation, manufacturing, packing and promotional services;
  • Attractive customer portfolio which includes major brand owners, supermarkets and hardware stores;
  • Manufacturing capability for powders, liquids, aerosols and therapeutic nutraceutical products;
  • Broad product portfolio including laundry detergents and softeners, home cleaning products, insecticides, skin care products, hair care products, vitamins and supplements;
  • The breadth of its innovation and manufacturing capability is unique with hundreds of products in development.

The company has taken a detailed strategic review of its business, including a review of its portfolio. Contract Manufacturing is an attractive business that enjoys leading positions in sectors with strong growth potential. Nevertheless, the company’s achievement over the extended term is reliant on its capability to produce organic growth and revamp margins in the main packaging business while increasing its materials sustainability and handling businesses. Selling Contract Manufacturing will make simpler the portfolio and improve the company’s focus on making improved returns in the remainder of the businesses. Importantly, divestment will strengthen its balance sheet and improve the financial flexibility.

Stock Performance

The stock of PGH is currently trading at $2.770 per share on 23 January 2020 (AEDT 01:08 PM), up by 2.214% from its previous closing price. The company has a market capitalisation of $932.22 million as on 23 January 2020. The total outstanding shares of the company stood at 343.99 million, and its 52-week low and high is $2.080 and $4.100, respectively. The stock has given a total return of 7.54% and -3.21% in the time period of 3 months and 6 months, respectively.


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