SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://api2.sgx.com/sites/default/files/2022-03/Civmec-Chairman-CEO_0.jpg" class="editor-image img-responsive"></figure>
<div class="content-caption">James Fitzgerald, Executive Chairman (LEFT); Patrick Tallon, CEO (RIGHT)</div>
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<p>James Fitzgerald and Patrick Tallon, founders of dual-listed construction and engineering services provider Civmec Ltd, believe in a hands-on approach. The pair, who are long-time friends, advocate playing an active, visible leadership role in the daily operations of the organisation.<br><br>“There is no replacement for dedication and hard work. To get a company off the ground you must lead from the front,” noted Fitzgerald, Executive Chairman of SGX- and ASX-listed Civmec. “Leadership is all about trust and doing what you say you will, no matter what you do or look after.”<br><br>Tallon, Civmec’s Chief Executive Officer, agreed. “Regardless of what you do, you are in charge of your own actions and decisions, and it’s imperative to lead by example.”<br><br>At the same time, criticism is a natural part of leadership. “There will always be criticism and failure,” Fitzgerald pointed out. “Responding the right way, and learning from critique and setbacks, is what truly defines you as a leader. “<br><br>“The trick is to try not to repeat the same mistakes,” Tallon added. “We don’t delay decisions because of the possibility of failing. Instead, we share ideas with others before making the final decision. If something fails, we work hard to minimise the fallout.”<br><br>An integrated, multi-disciplinary construction and heavy engineering services provider, Civmec was established in 2009, before listing on SGX in 2012 and ASX in 2018.&nbsp;<br><br>The Group provides a wide array of vertically integrated services, including fabrication projects, modularisation, shipbuilding, site civil works, structural, mechanical, piping, electrical, instrumentation, industrial insulation and maintenance services to the Energy, Resources, Infrastructure, as well as Marine &amp; Defence sectors.&nbsp;<br><br>“Both Pat and I were familiar with the sectors Civmec operates in even before we started the company. We had more than 40 years of industry experience between the two of us by the time Civmec listed in Singapore,” Fitzgerald recalled.<br><br>“Having been in our respective trades for so long, we saw huge potential in offering a viable alternative to Australia’s ever-increasing reliance on importing fabricated steelwork for its various industrial needs,” he said.<br><br>“The alternative was to provide local expertise in fabrication, and create multidisciplinary service offerings that would address the cross-contractor interface issues that often existed in construction projects throughout the country back then.”<br><br>“We had a strong belief in training and developing people from the ground up,” Tallon noted. “This gave us confidence that the journey we were about to embark on would be successful. We also had a vision of harnessing cutting-edge technology to build a business with a turnover of more than A$300 million within three years.”<br><br>Civmec has since doubled its turnover - the Group reported a revenue of A$674.2 million for the financial year ended 30 June 2021, up 72% from the year-earlier period. Net profit was A$34.6 million, rising 98% from the previous period.<br><br><strong>Established Track Record</strong><br><br>Fitzgerald attributes the Group’s success to its established track record as a Tier-1 construction contractor for the energy, resources, infrastructure and defence sectors in Australia. This has kept the Group profitable through the years, enabling it to secure more projects from existing customers as well as opening doors to new clients.&nbsp;<br><br>“Our next engine of growth will be maintenance and capital works, which will give us&nbsp;recurring revenues, while we continue to take on construction jobs - our legacy bread and butter,” Fitzgerald noted.&nbsp;<br><br>“Many of the plants, facilities and infrastructure we have built and continue to build will require upkeep to ensure they remain shipshape over time. We can also take on capital works, including upgrading or even changing the use of some of these assets, if our clients have such requirements.”<br><br>The Group has invested substantial resources in defence, including putting in place relevant infrastructure, to position itself for existing and future opportunities that may arise from the Commonwealth of Australia.&nbsp;<br><br>“There’s a huge focus on enhancing the Royal Australian naval fleet. We see opportunities there for us as a sovereign shipbuilder and sustainment contractor as the need arises,” Fitzgerald added.<br><br>Civmec also sees huge potential in the renewable energy space, in particular hydrogen and lithium, Tallon said. “We’ve traditionally been involved in construction projects for companies behind fossil fuels. But with climate change driving demand for clean energy, energy companies are pursuing more hydrogen and lithium projects.”<br><br>There are about 60 hydrogen projects at various stages of construction or development in Australia and New Zealand, according to data from the Commonwealth Scientific and Industrial Research Organisation (CSIRO).&nbsp;<br><br>The arrival of the world’s first liquefied-hydrogen vessel in Australia in January 2022 to ship its maiden cargo to Japan marked the first time liquid hydrogen was transported by sea to an international market.&nbsp;<br><br>In addition, Australia is home to an increasing number of lithium plants, as lithium exploration and mining gain traction with electric vehicles (EVs) becoming more mainstream.&nbsp;<br><br>The Group recently won a major contract to build a refinery in Western Australia to convert lithium concentrate into a high-purity compound used for making EV batteries. The refinery is slated for completion in 2024.<br><br><strong>Diversifying Risks</strong><br><br>While the outlook is bright, there’s always competition in the industry, Fitzgerald acknowledged.<br><br>“As there are a number of contractors like us servicing many of the world’s leading energy and resources companies operating in Australia, we are up against competition to secure work,” he noted.&nbsp;<br><br>“We’re competing not only for work, but also workers. As you can imagine, ours is a labour-intensive business. Labour is no longer as readily available as it used to be because of travel restrictions and border closures brought about by the pandemic.”<br><br>Any sharp and sustained decline in demand for these natural resources could also pose a risk to the Group. “When oil prices collapsed in 2014-2015, energy majors slashed capital spending as production ground to a halt. Many service providers in the supply chain were hit badly during then and in the years that followed,” he recalled.<br><br>“That was one of the reasons we diversified into other sectors like infrastructure and defence. Doing so has given us exposure to both private and public spending. We see this as an important strategy - if private clients slow down their capex, public spending by the government will generally kick in to stimulate the overall economy.”<br><br>Another risk diversification strategy adopted by the Group was to expand the fabrication capacity of its flagship plant in Henderson, Western Australia.&nbsp;<br><br>“We installed what we call an assembly and sustainment hall - this is Australia’s largest undercover modularisation and maintenance facility, with enough space to house the equivalent of 12,000 passenger buses,” Tallon pointed out.<br><br>“With this facility, we can build and maintain large vessels, as well as complex modules for various energy, resources, and even infrastructure projects,” he added.<br><br>“This gives us leeway to take on projects from various industries, and from both private and public sectors. In that sense, we can spread our risks so we don’t become too dependent on any particular industry or sector during a downturn.”<br><br>For Civmec, health and safety rank at the top of its Environmental, Social, and Governance (ESG) considerations. “Our health and safety systems are ISO-certified. We also care for the mental well-being of our employees, especially at a time when the pandemic has curtailed physical contact,” Tallon noted.<br><br>“For the environment, we have an ISO-certified management system to help us identify, understand and handle environmental challenges. Our energy inputs are high, given the nature of our business. To be more environmentally friendly, we’re exploring the use of solar energy. For a start, within our upcoming facility at Port Hedland in Western Australia, we’re planning for it to be equipped with solar panels.”<br><br>While the day-to-day operations of the Group remain a dominant aspect of their lives, both Fitzgerald, 58, and Tallon, 52, make it a point to set aside time for family.&nbsp; Both have three children each, aged between 18 and 28.<br><br>“Always look after your health, your family and as best you can, those around you,” Fitzgerald noted.<br><br>“In this life you will always run into problems. Don’t make reactive decisions every time a problem occurs. Instead, let some time pass, and mostly you will find the problem isn’t as insurmountable as it might first appear.”<br><br>Last but not least, diligence and commitment are vital to working out the best outcomes for everyone. “Remember that there is no substitute for hard work,” Tallon added. “It’s often better to be sorry for doing it than to regret not having a go at it.”<br><br><strong>Civmec Ltd</strong><br><br>Civmec is an integrated, multi-disciplinary construction and heavy engineering services provider to the Oil &amp; Gas, Metals &amp; Minerals, Infrastructure and Marine &amp; Defence sectors. Headquartered in Henderson, Western Australia, Civmec has regional offices in Newcastle (New South Wales, Australia), Gladstone (Queensland, Australia), and Port Hedland (Western Australia). The company is listed on SGX (Singapore) and ASX (Australia). Its core capabilities include heavy engineering, shipbuilding, modularisation, SMP (structural, mechanical, piping), EIC (electrical, instrumentation and control), precast concrete, site civil works, industrial insulation, maintenance, surface treatment, refractory and access solutions.<br><br>The company website is: <a href="http://civmec.com.au/" target="_blank" rel="noopener"><strong>civmec.com.au</strong></a></p>
<p>Click&nbsp;<a href="https://www.sgx.com/securities/equities/BEZ" target="_blank" rel="noopener"><strong>here</strong>&nbsp;</a>for the company's StockFacts page.<br><br>For the half year ended 31 December 2021 financial results, click&nbsp;<a href="https://links.sgx.com/FileOpen/Civmec%20H1%202022%20Update%20Final.ashx?App=Announcement&amp;FileID=701980" target="_blank" rel="noopener"><strong>here</strong></a>.<br>&nbsp;</p>
<p><strong>About&nbsp;kopi-C: the Company brew</strong></p>
<p><strong>Text: Jennifer Tan-Stanisic</strong><br><strong>Photo: Company file</strong><br><br><em>kopi-C&nbsp;</em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>For previous editions of&nbsp;<em>kopi-C: the Company brew,</em>&nbsp;please click&nbsp;<a href="https://www.sgx.com/research-education/market-dialogues" target="_blank" rel="noopener">here</a>. &nbsp;<br><br>For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;<a href="https://www.sgx.com/jennifer.t@sgx.com" target="_blank" rel="noopener">jennifer.t@sgx.com</a>.</p>


James Fitzgerald, Executive Chairman (LEFT); Patrick Tallon, CEO (RIGHT)

James Fitzgerald and Patrick Tallon, founders of dual-listed construction and engineering services provider Civmec Ltd, believe in a hands-on approach. The pair, who are long-time friends, advocate playing an active, visible leadership role in the daily operations of the organisation.  “There is no replacement for dedication and hard work. To get a company off the ground you must lead from the front,” noted Fitzgerald, Executive Chairman of SGX- and ASX-listed Civmec. “Leadership is all about trust and doing what you say you will, no matter what you do or look after.”  Tallon, Civmec’s Chief Executive Officer, agreed. “Regardless of what you do, you are in charge of your own actions and decisions, and it’s imperative to lead by example.”  At the same time, criticism is a natural part of leadership. “There will always be criticism and failure,” Fitzgerald pointed out. “Responding the right way, and learning from critique and setbacks, is what truly defines you as a leader. “  “The trick is to try not to repeat the same mistakes,” Tallon added. “We don’t delay decisions because of the possibility of failing. Instead, we share ideas with others before making the final decision. If something fails, we work hard to minimise the fallout.”  An integrated, multi-disciplinary construction and heavy engineering services provider, Civmec was established in 2009, before listing on SGX in 2012 and ASX in 2018.&nbsp;  The Group provides a wide array of vertically integrated services, including fabrication projects, modularisation, shipbuilding, site civil works, structural, mechanical, piping, electrical, instrumentation, industrial insulation and maintenance services to the Energy, Resources, Infrastructure, as well as Marine &amp; Defence sectors.&nbsp;  “Both Pat and I were familiar with the sectors Civmec operates in even before we started the company. We had more than 40 years of industry experience between the two of us by the time Civmec listed in Singapore,” Fitzgerald recalled.  “Having been in our respective trades for so long, we saw huge potential in offering a viable alternative to Australia’s ever-increasing reliance on importing fabricated steelwork for its various industrial needs,” he said.  “The alternative was to provide local expertise in fabrication, and create multidisciplinary service offerings that would address the cross-contractor interface issues that often existed in construction projects throughout the country back then.”  “We had a strong belief in training and developing people from the ground up,” Tallon noted. “This gave us confidence that the journey we were about to embark on would be successful. We also had a vision of harnessing cutting-edge technology to build a business with a turnover of more than A$300 million within three years.”  Civmec has since doubled its turnover - the Group reported a revenue of A$674.2 million for the financial year ended 30 June 2021, up 72% from the year-earlier period. Net profit was A$34.6 million, rising 98% from the previous period.  Established Track Record  Fitzgerald attributes the Group’s success to its established track record as a Tier-1 construction contractor for the energy, resources, infrastructure and defence sectors in Australia. This has kept the Group profitable through the years, enabling it to secure more projects from existing customers as well as opening doors to new clients.&nbsp;  “Our next engine of growth will be maintenance and capital works, which will give us&nbsp;recurring revenues, while we continue to take on construction jobs - our legacy bread and butter,” Fitzgerald noted.&nbsp;  “Many of the plants, facilities and infrastructure we have built and continue to build will require upkeep to ensure they remain shipshape over time. We can also take on capital works, including upgrading or even changing the use of some of these assets, if our clients have such requirements.”  The Group has invested substantial resources in defence, including putting in place relevant infrastructure, to position itself for existing and future opportunities that may arise from the Commonwealth of Australia.&nbsp;  “There’s a huge focus on enhancing the Royal Australian naval fleet. We see opportunities there for us as a sovereign shipbuilder and sustainment contractor as the need arises,” Fitzgerald added.  Civmec also sees huge potential in the renewable energy space, in particular hydrogen and lithium, Tallon said. “We’ve traditionally been involved in construction projects for companies behind fossil fuels. But with climate change driving demand for clean energy, energy companies are pursuing more hydrogen and lithium projects.”  There are about 60 hydrogen projects at various stages of construction or development in Australia and New Zealand, according to data from the Commonwealth Scientific and Industrial Research Organisation (CSIRO).&nbsp;  The arrival of the world’s first liquefied-hydrogen vessel in Australia in January 2022 to ship its maiden cargo to Japan marked the first time liquid hydrogen was transported by sea to an international market.&nbsp;  In addition, Australia is home to an increasing number of lithium plants, as lithium exploration and mining gain traction with electric vehicles (EVs) becoming more mainstream.&nbsp;  The Group recently won a major contract to build a refinery in Western Australia to convert lithium concentrate into a high-purity compound used for making EV batteries. The refinery is slated for completion in 2024.  Diversifying Risks  While the outlook is bright, there’s always competition in the industry, Fitzgerald acknowledged.  “As there are a number of contractors like us servicing many of the world’s leading energy and resources companies operating in Australia, we are up against competition to secure work,” he noted.&nbsp;  “We’re competing not only for work, but also workers. As you can imagine, ours is a labour-intensive business. Labour is no longer as readily available as it used to be because of travel restrictions and border closures brought about by the pandemic.”  Any sharp and sustained decline in demand for these natural resources could also pose a risk to the Group. “When oil prices collapsed in 2014-2015, energy majors slashed capital spending as production ground to a halt. Many service providers in the supply chain were hit badly during then and in the years that followed,” he recalled.  “That was one of the reasons we diversified into other sectors like infrastructure and defence. Doing so has given us exposure to both private and public spending. We see this as an important strategy - if private clients slow down their capex, public spending by the government will generally kick in to stimulate the overall economy.”  Another risk diversification strategy adopted by the Group was to expand the fabrication capacity of its flagship plant in Henderson, Western Australia.&nbsp;  “We installed what we call an assembly and sustainment hall - this is Australia’s largest undercover modularisation and maintenance facility, with enough space to house the equivalent of 12,000 passenger buses,” Tallon pointed out.  “With this facility, we can build and maintain large vessels, as well as complex modules for various energy, resources, and even infrastructure projects,” he added.  “This gives us leeway to take on projects from various industries, and from both private and public sectors. In that sense, we can spread our risks so we don’t become too dependent on any particular industry or sector during a downturn.”  For Civmec, health and safety rank at the top of its Environmental, Social, and Governance (ESG) considerations. “Our health and safety systems are ISO-certified. We also care for the mental well-being of our employees, especially at a time when the pandemic has curtailed physical contact,” Tallon noted.  “For the environment, we have an ISO-certified management system to help us identify, understand and handle environmental challenges. Our energy inputs are high, given the nature of our business. To be more environmentally friendly, we’re exploring the use of solar energy. For a start, within our upcoming facility at Port Hedland in Western Australia, we’re planning for it to be equipped with solar panels.”  While the day-to-day operations of the Group remain a dominant aspect of their lives, both Fitzgerald, 58, and Tallon, 52, make it a point to set aside time for family.&nbsp; Both have three children each, aged between 18 and 28.  “Always look after your health, your family and as best you can, those around you,” Fitzgerald noted.  “In this life you will always run into problems. Don’t make reactive decisions every time a problem occurs. Instead, let some time pass, and mostly you will find the problem isn’t as insurmountable as it might first appear.”  Last but not least, diligence and commitment are vital to working out the best outcomes for everyone. “Remember that there is no substitute for hard work,” Tallon added. “It’s often better to be sorry for doing it than to regret not having a go at it.”  Civmec Ltd  Civmec is an integrated, multi-disciplinary construction and heavy engineering services provider to the Oil &amp; Gas, Metals &amp; Minerals, Infrastructure and Marine &amp; Defence sectors. Headquartered in Henderson, Western Australia, Civmec has regional offices in Newcastle (New South Wales, Australia), Gladstone (Queensland, Australia), and Port Hedland (Western Australia). The company is listed on SGX (Singapore) and ASX (Australia). Its core capabilities include heavy engineering, shipbuilding, modularisation, SMP (structural, mechanical, piping), EIC (electrical, instrumentation and control), precast concrete, site civil works, industrial insulation, maintenance, surface treatment, refractory and access solutions.  The company website is: civmec.com.au
Click&nbsp;here&nbsp;for the company's StockFacts page.  For the half year ended 31 December 2021 financial results, click&nbsp;here. &nbsp;
About&nbsp;kopi-C: the Company brew
Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C&nbsp;is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  For previous editions of&nbsp;kopi-C: the Company brew,&nbsp;please click&nbsp;here. &nbsp;  For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;jennifer.t@sgx.com.

Civmec: Engineering Resilient Long-Term Growth

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>CIVMEC LIMITED</h2>
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<h3>FIRING ON ALL CYLINDERS</h3>
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<p>Civmec’s 1HFY22 results were slightly above our expectations with overall revenue and profit coming in at A$389.4mln (+27% yoy) and A$22.6mln (+50% yoy) respectively. Net profit is at 52% of our full year estimate of A$44mln. The outlook for Civmec remains positive with a growing order book of A$1.19bln (+3% yoy) and strong tendering activity across all sectors. We continue to maintain a BUY recommendation and target price of S$1.05 based on an unchanged 12.0x FY22F P/E (1SD below five-year mean), representing a potential upside of 64.1%.</p>
<p>Gross profit for 1HFY22 came in at A$42.2mln (+22.3% yoy) as a result of an increase in revenue contribution from Civmec’s projects. Other income decreased 44.7% yoy to A$1.0mln, due to non-recurring insurance recoveries received for property damages in 1HFY21. Administrative expenses remained steady at A$9.2mln (-0.4% yoy).</p>
<p>For 1HFY22, finance cost decreased 3.3% yoy to AS$3.4mln, reflecting lower interest rates payable on bank debt following the redemption of senior secured notes in November 2021. Net gearing increased from 4.0% to 14.5%, a result of Civmec utilizing A$26.0mln worth of trade financing to be payable in the next year. Excluding this multi-option facility, net gearing of A$10.9mln stands at a healthy 3.5%.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




CIVMEC LIMITED




FIRING ON ALL CYLINDERS




Civmec’s 1HFY22 results were slightly above our expectations with overall revenue and profit coming in at A$389.4mln (+27% yoy) and A$22.6mln (+50% yoy) respectively. Net profit is at 52% of our full year estimate of A$44mln. The outlook for Civmec remains positive with a growing order book of A$1.19bln (+3% yoy) and strong tendering activity across all sectors. We continue to maintain a BUY recommendation and target price of S$1.05 based on an unchanged 12.0x FY22F P/E (1SD below five-year mean), representing a potential upside of 64.1%.
Gross profit for 1HFY22 came in at A$42.2mln (+22.3% yoy) as a result of an increase in revenue contribution from Civmec’s projects. Other income decreased 44.7% yoy to A$1.0mln, due to non-recurring insurance recoveries received for property damages in 1HFY21. Administrative expenses remained steady at A$9.2mln (-0.4% yoy).
For 1HFY22, finance cost decreased 3.3% yoy to AS$3.4mln, reflecting lower interest rates payable on bank debt following the redemption of senior secured notes in November 2021. Net gearing increased from 4.0% to 14.5%, a result of Civmec utilizing A$26.0mln worth of trade financing to be payable in the next year. Excluding this multi-option facility, net gearing of A$10.9mln stands at a healthy 3.5%.













(Non-SGX Report) CIVMEC LIMITED -  FIRING ON ALL CYLINDERS

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<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>Civmec Limited</h2>
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<h3>A value stock with strong fundamentals and growth opportunities</h3>
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<li><strong>Strong 1H22 financials.</strong> Civmec’s top and bottom-line grew 27.4% and 50.4% YoY respectively in 1H22 (YE 30 June 22). Basic and diluted EPS grew 50% YoY to 4.50 Aus Cents in 1H22.</li>
<li><strong>Key drivers.</strong> Expansion of Maintenance and Capital Works division which provide recurring income; Increased Australian Infrastructure and Defence budget/spending to provide more opportunities for contract wins; Buoyant commodity demand amidst inflationary market conditions to drive Capex spending from customers.</li>
<li>While we maintain an OUTPERFORM recommendation, we revise our TP down to S$0.79 due to the overall de-rating of valuation multiples across the sector. Our updated TP is now based on 10.0x FY2022F P/E, down from 12.0x we had previously.</li>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.

Civmec Limited



A value stock with strong fundamentals and growth opportunities







Strong 1H22 financials. Civmec’s top and bottom-line grew 27.4% and 50.4% YoY respectively in 1H22 (YE 30 June 22). Basic and diluted EPS grew 50% YoY to 4.50 Aus Cents in 1H22.
Key drivers. Expansion of Maintenance and Capital Works division which provide recurring income; Increased Australian Infrastructure and Defence budget/spending to provide more opportunities for contract wins; Buoyant commodity demand amidst inflationary market conditions to drive Capex spending from customers.
While we maintain an OUTPERFORM recommendation, we revise our TP down to S$0.79 due to the overall de-rating of valuation multiples across the sector. Our updated TP is now based on 10.0x FY2022F P/E, down from 12.0x we had previously.










(Non-SGX Report) Civmec Limited - A Value Stock with Strong Fundamentals and Growth Opportunities

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>CIVMEC LIMITED</h2>
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<h3>A CONSTRUCTION &amp; ENGINEERING POWERHOUSE</h3>
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<p>We initiate a BUY on Civmec with a target price of S$1.05, pegged to 12.0x FY22F P/E (1SD below five-year mean), representing a potential upside of 69.4%.</p>
<p>Strong, increasing order book. Civmec has experienced a steady increase in its order book since FY17, a CAGR of 24% from A$600mln in FY17 to A$1.15bln in Q1 FY22. The order book captures most of the revenue for FY22, with visibility all the way through FY29. Across its 3 operating sectors, projected capital expenditure in Australia is A$500bln over the next five years. Order book is expected to benefit in the coming years with an increase in forecasted capital expenditure of major resources clients and the Australian government pumping money into infrastructure and naval shipbuilding industries. Subsequent to Q1 FY22, Civmec was awarded in December a major construction contract in the resources industry and several infrastructure and maintenance projects, raising the total order book to above A$1.15bln.</p>
<p>Defensive company with recurring revenue streams. Civmec has ongoing projects in both the public and private sector, smoothing the cyclical fluctuations of the economy on the business. When the public sector is busy, the private sector is less busy and vice versa. Projects from the private sector include resources and energy players such as Roy Hill, FMG, Alcoa, Rio Tinto and BHP, with the public sector providing infrastructure and defence projects coming from the Australian government. Civmec is also spending A$10mln over next 14 months to establish a permanent facility in Port Hedland near the major commodity players. 20% of Civmec’s total revenue is recurring in nature, providing revenue visibility. This is expected to increase in the coming years as Civmec focuses on shipbuilding and long-term maintenance projects.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




CIVMEC LIMITED




A CONSTRUCTION &amp; ENGINEERING POWERHOUSE




We initiate a BUY on Civmec with a target price of S$1.05, pegged to 12.0x FY22F P/E (1SD below five-year mean), representing a potential upside of 69.4%.
Strong, increasing order book. Civmec has experienced a steady increase in its order book since FY17, a CAGR of 24% from A$600mln in FY17 to A$1.15bln in Q1 FY22. The order book captures most of the revenue for FY22, with visibility all the way through FY29. Across its 3 operating sectors, projected capital expenditure in Australia is A$500bln over the next five years. Order book is expected to benefit in the coming years with an increase in forecasted capital expenditure of major resources clients and the Australian government pumping money into infrastructure and naval shipbuilding industries. Subsequent to Q1 FY22, Civmec was awarded in December a major construction contract in the resources industry and several infrastructure and maintenance projects, raising the total order book to above A$1.15bln.
Defensive company with recurring revenue streams. Civmec has ongoing projects in both the public and private sector, smoothing the cyclical fluctuations of the economy on the business. When the public sector is busy, the private sector is less busy and vice versa. Projects from the private sector include resources and energy players such as Roy Hill, FMG, Alcoa, Rio Tinto and BHP, with the public sector providing infrastructure and defence projects coming from the Australian government. Civmec is also spending A$10mln over next 14 months to establish a permanent facility in Port Hedland near the major commodity players. 20% of Civmec’s total revenue is recurring in nature, providing revenue visibility. This is expected to increase in the coming years as Civmec focuses on shipbuilding and long-term maintenance projects.













(Non-SGX Report)  CIVMEC LIMITED - A CONSTRUCTION & ENGINEERING POWERHOUSE

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>Civmec Limited</h2>
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<h3>Strong fundamentals spearheading growth</h3>
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<li>Earnings beat. Civmec’s FY2021 net profit (YE 30 June 2021) surged 97% YoY to A$34.6mn, beating our estimates of A$33.5mn.</li>
<li>China’s iron ore appetite. Even though iron ore prices have been on a downtrend recently as Chinese policymakers attempt to cut steel production, China’s iron ore imports hit new highs in August, suggesting the country’s continued reliance on the commodity.</li>
<li>Mid and long-term drivers. Likelihood of increased contract wins as the Australian government ramps up on defence and infrastructure spending. Overall revenue supported by approximately 20% recurring income from maintenance and upgrading works. Buoyant commodity market to drive capex spending for miners.</li>
<li>We maintain an OUTPERFORM recommendation and revise our TP to S$0.90, based on an unchanged 12.0x FY2022F P/E.</li>
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<p><strong>2021 financial update: Outstanding results.</strong> Civmec’s revenue jumped by 72% YoY to A$674.2mn for FY2021 (YE 30 June 21) while net profit surged by 97.3% to A$34.6mn. Overall gross profit margin remained relatively flat at approximately 11%, whereas net profit margin increased from 4.5% to 5.1% YoY. Main revenue driver continues to be the Metal and Minerals sector which increased 66% YoY, making up 83% of total revenue for FY2021. Infrastructure sector’s revenue rose by 94% mainly due to the contribution from the OPV project awarded by the Royal Australian Navy, whereas revenue for the Oil &amp; Gas sector surged by 144%, amidst the rally in oil prices in 2021.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.






Civmec Limited



Strong fundamentals spearheading growth




Earnings beat. Civmec’s FY2021 net profit (YE 30 June 2021) surged 97% YoY to A$34.6mn, beating our estimates of A$33.5mn.
China’s iron ore appetite. Even though iron ore prices have been on a downtrend recently as Chinese policymakers attempt to cut steel production, China’s iron ore imports hit new highs in August, suggesting the country’s continued reliance on the commodity.
Mid and long-term drivers. Likelihood of increased contract wins as the Australian government ramps up on defence and infrastructure spending. Overall revenue supported by approximately 20% recurring income from maintenance and upgrading works. Buoyant commodity market to drive capex spending for miners.
We maintain an OUTPERFORM recommendation and revise our TP to S$0.90, based on an unchanged 12.0x FY2022F P/E.





2021 financial update: Outstanding results. Civmec’s revenue jumped by 72% YoY to A$674.2mn for FY2021 (YE 30 June 21) while net profit surged by 97.3% to A$34.6mn. Overall gross profit margin remained relatively flat at approximately 11%, whereas net profit margin increased from 4.5% to 5.1% YoY. Main revenue driver continues to be the Metal and Minerals sector which increased 66% YoY, making up 83% of total revenue for FY2021. Infrastructure sector’s revenue rose by 94% mainly due to the contribution from the OPV project awarded by the Royal Australian Navy, whereas revenue for the Oil &amp; Gas sector surged by 144%, amidst the rally in oil prices in 2021.















(Non-SGX Report) Civmec Limited: Strong Fundamentals Spearheading Growth

Singapore

Civmec Ltd. is an integrated multi-disciplinary construction and heavy engineering services provider to the oil and gas, mining and other industries, such as the infrastructure, utilities, chemical and power industries. The Company provides heavy engineering and other services including fabrication, site civil works, pre-cast concrete and maintenance services.

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Civmec Ltd (CVL SP)

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Singapore Exchange Ltd (SGX)

(Non-SGX Report) Civmec Limited - A Value Stock with Strong Fundamentals and Growth Opportunities

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Singapore Exchange Ltd (SGX)

(Non-SGX Report) CIVMEC LIMITED - A CONSTRUCTION & ENGINEERING POWERHOUSE

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) Civmec Limited: Strong Fundamentals Spearheading Growth

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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