Civmec (ASX:CVL) to leapfrog in the growth race amidst infrastructure boom

Summary

  • Civmec caters to three high-growth sectors -- Resources, defense, and infrastructure.
  • The Company has an order book of ~A$1.15 billion as of January 2021 across all divisions.
  • During 1H FY21, revenue increased by 84% to A$306 million and profit surged to A$15 million, 88% higher than the corresponding period of the previous year.

The multi-disciplinary construction and engineering services provider Civmec Limited (ASX:CVL |SGX:P9D) provides its integrated services to the resource, energy, infrastructure, defense, and Marine sectors. The Company delivers turnkey services for the construction segments and includes numerous blue-chip clients.

The specialised services include fabrication, piping, and modularisation. Civmec has an impressive order book of over A$1.5 billion as of January 2021. The burgeoning infrastructure activities in Australia presents ample opportunities for the revenue growth.

Hay Point Wharf, Image Source: CIVMEC ASX Update, 11 February 2021

Shipping Industry: The federal government’s boost to shipbuilding for the Navy has also supported the domestic shipbuilding industry and may generate additional opportunities for the Company.

Civmec has an order for supply and processing of steel for 12 offshore patrol vessels for the Royal Australian Navy. The Company has come up with Hendersen Assembly facility to complete the project and the future shipbuilding contracts.

The assembly unit is located at a strategic location in close vicinity of the Country’s naval fleet.

Hendersen Facility Location Image Source: ASX Update, 11 February 2021

Energy Industry: In the energy sector, Civmec is involved in an upstream oil and gas project. The company is involved in the fabrication and assembly of buckle initiators. A total of 15 buckle initiators, weighing around 55 tonnes each, will be manufactured for the Gorgon Stage 2 project.

Image Source: CIVMEC ASX Update, 11 February 2021

Robust performance in H1 FY2021

Civmec generated a revenue of A$305.7 million during the first half of FY21. The revenue grew by 84% in comparison with the first half of FY20. The Net Profit After Tax (NPAT) for the period was A$15 million, recording a jump of 88% from 1H FY20. The earnings per share (EPS) also increased to 3 cents, 86.3% from 1HFY20.

Riding on the excellent result, Civmec announced an interim dividend payment of one cent per share.

Sector Wise Revenue Generation (Data Source: ASX Update, 11 February 2021)

The biggest contribution to the revenue came from the resource sector, which contributed nearly 83% of the total revenue. The energy sector contribution stood at 5%, while the remaining 12% came from the Infrastructure and Defense.

Outlook

The strong order book of nearly A$1.5 billion shows the potential for revenue growth in the future. The diversified portfolio of operations helps in mitigating the risk of sector saturation and any unexpected downward trends in a specific sector.

The infrastructure, mining, and defense domains are anticipated to witness significant investments in the future and will provide significant growth opportunity for the Company.

CVL closed at A$0.58 on 16 February 2021 with a market capitalisation of A$305.67 million.

All financial information pertains to Australian Dollars unless stated otherwise.

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