Maybank Securities and UOB Kay Hian have maintained their positive views on Civmec following its recent earnings growth reported for FY2023.
For the year to June 30, the Australia-based engineering firm reported earnings of A$57.7 million, up 13.7% y-o-y, driven by all-round growth across its various business segments.
Shareholders are to be rewarded with a full-year dividend of 5 Australia cents per share, up by two thirds over the preceding FY2022 ended June 2022.
In his Aug 20 note, Maybank analyst Eric Ong, who has maintained his "buy" call, raised his target price to $1.05 from $1, which is pegged to 10x current FY2024 earnings, up from a valuation multiple of 9x previously.
Ong notes that Civmec was able to defend its margins as the company managed to eke out better efficiency.
However, Ong observes that the company will be more targeted in securing new wins, despite bouyant tendering activity across the various segments.
"We think Civmec is well-placed to capitalise on the government’s defence spending in the mid-long term," says Ong, adding that the company has built up an order book worth some A$1.15 billion as at June 30, up 10.6% y-o-y.
Ong notes that Civmec has been able to reduce its bank borrowings and has even turned into a net cash position with a balance of A$13.9 million, which should enable it to sustain its dividend payout ratio, thus providing a prospective yield of 5-6%.
Cheong believes that Civmec is well-positioned to win more major projects even as it becomes more selective.
In his note on Aug 30, UOB Kay Hian's John Cheong maintained his "buy" call and $1.23 tarte price, which is pegged to 11x FY2024 earnings estimate, versus just 8x currently.
Cheong notes that Civmec's Australia-listed peers are trading at an average of 15 x FY2024.