A look at Four Engineering Services Players:  EVZ, GNG, MND, and ASB

Summary

• The engineering services industry has a critical role to play in the growth and development of an economy as it supports building infrastructure and job creation.
• GR Engineering Services Limited finalises funding for the Lake Way Project with Salt Lake Potash Limited.
• General Electric International Inc awarded Zenviron, in which Monadelphous Group has 55% stake, a contract to provide the Murra Warra Stage II Wind Farm in regional Victoria.
• Austal announced that the future USNS Newport (EPF 12) completed acceptance trials in the Gulf of Mexico.
• EVZ Limited anticipates FY2020 group revenue in the range A$65-66 million and an EBITDA between -A$0.1 million to -A$0.4 million.

The engineering industry plays a considerable role in the growth and development of an economy. The industry is responsible for creating multiple job opportunities by developing infrastructure. The contribution becomes more crucial for Australia, given the fact that the country is gradually recovering from the disasters over the past year, including bushfires, drought, and the most recent COVID-19.

Engineering services caters to almost all sectors and sub-sectors. Some of them include civil engineering, mining, and renewable energy.

Prime Minister Scott Morrison also talked about supporting construction jobs across Tasmania by investing A$46 million more to deliver infrastructure projects and critical road safety upgrades.

As per the PM, infrastructure would generate 66k direct & indirect jobs. These jobs would help in a 50% decline in Commonwealth assessment approval of significant projects.

In NSW, the state was granted A$100 billion budget for infrastructure pipeline over four years. The Australian government has also invested A$2 billion in the form of JobTrainer skill package to support mineral staff.

INTERESTING READ: Prime Minister Scott Morrison’s Plan on Economic Recovery – 5 Aspects to be Looked at

Statistics Report by ABS:

In a recent report published by the Australian Bureau of Statistics, the importance of quarterly Building Activity Survey and Engineering Construction Survey was highlighted in the estimation of the National Accounts.

A report released on 15 July 2020 by the ABS shows that the seasonally adjusted estimate for the total number of dwelling units started climbed 3.8% to 44,434 dwellings in the March quarter after a rise of 4.5% in the December quarter.

Also, the trend estimate for the value of total engineering construction work during the March 2020 quarter shows a decline of 0.8%.

DID YOU KNOW: June 2020 Witnessed a Drop in the Dwelling Approval

With this context, let us look at a few ASX-listed companies providing engineering services and their recent updates.

EVZ Limited (ASX:EVZ)

EVZ Limited is an industrial group which has a portfolio of specialist operations in the engineering services sector. The Company aims to offer innovative, superior solutions at a competitive price.

On 6 August 2020, the released earnings guidance for the full year trading period ending 30 June 2020. EBITDA for FY2020 is anticipated to be a loss in between A$0.1 million to A$0.4 million. The Group revenue is expected to lie in between A$65 million and A$66 million.

The preliminary FY2020 results are expected to release on 17 August 2020.

GR Engineering Services Limited (ASX:GNG)

GR Engineering Services Limited offers process engineering, design as well as construction services to the companies which belong to mining & minerals processing industries.

On 5 August 2020, GR Engineering Services regarding its earlier announcement made on 15 July 2020 related to the contracts with Salt Lake Potash Limited (ASX:SO4) announced that SO4 had finalised its funding for the Lake Way Project. As per the agreement, GNG would be engaged in the designing as well as the construction of the processing plant and non-process infrastructure.

The combined value of the project is around A$107 million, and the Company expect to realise the amount primarily in FY2021.

Saracen Awards New Work to GR Engineering:

Before the above contract, GR Engineering Services Limited was awarded additional work by Saracen Mineral Holdings Limited with a collective value of A$29 million.

The new projects awarded include:

• An EPC contract for the Thunderbox Paste Plant Project.
• An agreed variation for the Carosue Dam Operations Plant Expansion Project.

Monadelphous Group Limited (ASX:MND)

Australian engineering group Monadelphous Group Limited offers construction, industrial and maintenance services to the energy, resources, and infrastructure sectors.

Filing of Writ of Summons by Rio Tinto:

On 3 August 2020, the Company released an announcement where it highlighted that Rio Tinto Services Limited notified it on 31 July Rio Tinto filed a Writ of Summons in the Supreme Court of Western Australia against Monadelphous Engineering Associates Pty Ltd (MEA). MEA is one amongst the wholly-owned subsidiaries of Monadelphous Group Limited.

The claim was made by the Robe River Mining Co Pty Ltd and Pilbara Iron Pty Ltd concerning the fire incident which took place on 10 January 2019 at the Rio Tinto's iron ore processing facility situated at Cape Lambert, Western Australia. The writ by 3 August 2020 was not served on MEA.

MEA was engaged in performing maintenance shutdown services before the fire broke. Rio Tinto alleged MEA that MEA was in breach of the maintenance deal, thus causing the fire. Although the writ does not specify any damage, however, Rio Tinto individually informed MEA about its claim is for A$493 million in loss and damage.

MEA denies Rio Tinto's allegations and claimed losses. Further, the deal between Rio Tinto and MEA, which governed the maintenance work performed by MEA had exclusions & limitations of liability which will be relied upon by MEA in justification of the claim.

Zenviron Obtains Murra Warra Stage II Wind Farm Deal:

General Electric International Inc awarded Zenviron Pty Ltd, the incorporated joint venture Company in which Monadelphous Group has 55% stake a contract. Under this agreement, Zenviron would provide the Murra Warra Stage II Wind Farm in regional Victoria. It is anticipated that Zenviron will perform ~A$80 million of the works under the agreement.

DO READ: Stars from Diverse Sectors - Star Entertainment Group, Maca, Monadelphous

Austal Limited (ASX:ASB)

Austal Limited is Australia’s global shipbuilder and defence prime contractor. The Company focuses on the business of designing, constructing, and sustaining amongst the most advanced commercial and defence vessels in the world.

On 4 August 2020, the Company announced that the future USNS Newport (EPF 12) completed acceptance trials in the Gulf of Mexico. USNS Newport is the 12th Spearhead-class Expeditionary Fast Transport ship that is built by the Austal USA for the US Navy.

DO READ: Austal Starts with the Construction of its Largest Ferry

The Acceptance trial involved the execution of various test by Austal USA-led industry team while the vessel is under progress. This reflects to the US Navy the operation of the ship’s major systems and equipment. The Company considers the trials as the last significant milestone before the delivery of the vessel (scheduled for August 2020).

ALSO READ: ASX Defence-related Stocks and Investors’ Delight - ASB, XTE, DRO

Stock Information (as on 7 August 2020):