Decmil Group gets awarded with its first wind project for $72 million

Construction company, Decmil Group Limited (ASX:DCG), wins $72 million contract from the leading global wind energy company Vestas for the balance of plant works at the Warradarge Wind Farm in Western Australia. The news sent the stock price to climb up by 1.17% to trade at $0.865 on 7 March 2019 (2:12 PM AEST).

Decmil’s scope of work reportedly includes the design and construction of the civil and electrical balance of plant for the 51 turbine wind farm including wind turbine bases, 55km of access tracks, site cabling, switch room and substation. As per the scheduled timeline, the work is expected to be completed by September 2020, commencing immediately.

The contract underscores the expansion of Decmil Group in the renewable sector with the first wind project that is located 200kms South of Geraldton. On the financial front, the project is to be funded and developed by Bright Energy Investments (BEI), a partnership between Synergy and the private sector, told Decmil.

Moreover, the Group has identified a significant number of opportunities in its forward work pipeline for Fiscal 2019, 2020 and 2021. With the diverse sector exposure, Decmil has seen major project opportunities in the transport sector across Australia and New Zealand, including D&C Rail Bridge Alignment for Avon Bridge in Victoria and D&C Road upgradation for South Gippsland Highway Upgrade by MRPA.

In the interim financial result for the six months ended 31 December 2018, Decmil reported Group EBITDA of $9.3 million and C&E EBITDA from continuing operations of $10.6 million compared to $1.6 million in the previous corresponding period. C&E revenue from continuing operations up 97% on 1HFY18 to $273.4 million, delivering Group’s gross margin percentage of 9.5% for 1HFY19.

The Board also declared the interim dividend of 1 cent per share, payable on 27 March 2019 to the shareholders present on the company’s registry as on the record date of 8 March 2019.

After witnessing the long-term growth in Western Australia’s Iron Ore and LNG construction projects, Decmil has achieved business stabilisation and diversification in the recent year. Now, the company aims to base its growth drivers for FY20 and FY21 on Infrastructure (Transport, Defence, Corrections, Education), Resources (WA Iron Ore & LNG/CSG) and Renewables (Solar & Wind) sectors.

Outlook

For FY19, Decmil Group Limited has committed to achieving the revenue of ~$650 million. The company stated that diverse capability, sector exposure and tier 1 client base providing longer forward revenue visibility and higher quality of earnings than in prior years.

Decmil’s current work in hand for FY20 stands at over $400 million, reflecting the potential for further revenue growth in FY20. It stated that Fortescue’s Eliwana and Rio Tinto’s Koodaideri projects are coming to the contractor market in 2019 along with new upcoming projects emerging in the WA onshore LNG sector which are expected to provide opportunities from FY21.

DCG stock last traded at a Price to Earnings multiple of 29.900 x with a market capitalisation of $203.64 million. Over the past 12 months, the stock has fallen by 24.00% despite a massive positive price change of 21.28% in the past three months.

Also Read: Decmil McConnell Dowell JV Announced Preferred Tenderer For Mordialloc Freeway Project

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