Solid quarter; raising FY22-24E EPS by 1-3%
Civmec’s 3QFY22 NPAT of AUD12.1m (+35.7% YoY) slightly beat our and
street expectations. This took 9MFY22 earnings to AUD34.7m (+45% YoY)
and accounted for c.77% of MIBG/consensus full year estimates. We raise
our FY22-24E EPS by 1-3% given the better-than-expected margins.
Nevertheless, we keep our 12-month TP at SGD1.00 (still based on an
undemanding 10x FY23E P/E) to track the weaker AUDSGD exchange rate.
Maintain BUY.
New contract wins and orderbook remains robust
Revenue for the quarter rose 4.9% YoY to AUD192.8m, mainly due to the
timing of revenue recognition on projects. EBITDA margin expanded by
1.3ppt to 11.9% on easing labour constraints to service its existing
construction projects in Western Australia (WA). During 3QFY22, the Group
received several new orders and contract extensions across all segments
worth AUD110m. We expect continued replenishment to its order book of
AUD1.07b (as at end-Mar 2022) with strong tendering activity amid rising
capex, particularly in the energy and resources sectors.
Henderson dry dock a positive for defence sector
In Mar 2022, the Australian Government announced an AUD4.3b investment
to develop a large vessel dry dock in Henderson WA. It will provide an
alternative to the only other naval assigned dry dock located in New South
Wales. We think this is a positive development for Civmec as there will be
potential opportunities for the group to be involved in the construction of
the new dry dock and associated infrastructure. When completed, this also
opens up possibilities for its growing defence segment with the build of
more and larger vessels within the site.
Forms alliance arrangement with Serco
The Group recently formed an alliance arrangement with global defence
contractor Serco in joint pursuit of the LAND-8710 contract. Both
companies aim to deliver the next generation in assured amphibious
capabilities for the Australian Defence Force (ADF). If awarded, this will
be delivered under a new JV company, the Australian Maritime Alliance
(AMA). We reckon the move would boost Civmec’s credentials as an
emerging defence player with the continued expansion of its sovereign
naval shipbuilding and sustainment capability