On 20 December 2018, Integrated service provider Downer EDI Limited (ASX: DOW) announced that it had been awarded Parramatta Light Rail contract by the New South Wales (NSW) Government. Following this news, the share price of Downer fell by 1.685 percent, closing at $6.42.
As per the contract, Downer will be building the Stage one of the Parramatta Light Rail project in a 50:50 joint venture with CPB Contractors and from this contract Downer is expecting to generate revenue of around $420mn.
Downer is already a leading provider of integrated services in Australia and New Zealand, and it has delivered multi-disciplined light rail, rail, roads, and infrastructure services to its customers in the transport sector in both the countries. Downer is known for working closely with its customers to help them succeed, and in this contract also Downer will work closely with the New South Wale Government to deliver safe and reliable services.
Being a leading provider of light rail services in Australia, Downer is looking forward to delivering the Parramatta Light Rail project which will make Parramatta a better-connected region due to the improved accessibility through light rails. It is expected that the Parramatta Light Rail will begin its passenger services in the year 2023. The stage1 of the Parramatta Light Rail is scheduled to start construction in 2019, and it will connect Parramatta CBD to several other significant regions of Australia.
On 19 December 2018, the company’s Board appointed Mr. Robert Regan as the Group General Counsel and Company Secretary effective, effective from 1 January 2019. On 1 November 2018, the company held its annual general meeting in which Mr. Fenn informed that in FY 2018 the company had met its guidance for the seventh year in a row by delivering NPATA of $295 million despite selling its freight rail business halfway through the year and a softer result from the mining business.
All six of the company’s service lines achieved revenue growth in 2018 which includes 31% increase in the revenue of transport service, 38% in Rail service, 18% in Utilities service, 20% in EC&M service, 4.5 percent in mining service and 3 percent in spotless service. In FY 2018, the company maintained a strong balance sheet with gearing at 22.7 percent and cash of around $1.5 billion. For FY 2019, the company is targeting consolidated NPATA of $335 million before minority interests.
At the AGM the company’s CEO Mr. Fenn also informed that the company would continue to benefit from major government investment in public transport in Australia and New Zealand, particularly light and heavy rail. Further, the company is also expecting more outsourcing of government bus networks.
In the last six months, the share price of Downer decreased by 5.09 percent as on 19 December 2018 and traded at a PE ratio of 54.010x. DOW shares closed at $6.420 with a market capitalization of circa $3.88 billion as on 20 December 2018.
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