For the three months to March, Civmec reported earnings of A$15 million, up 20% y-o-y, as it delivered higher margin projects.

Cheong notes that Civmec has built up an orderbook of A$1.2 billion, and is making improvements in efficiency.

“Civmec is increasingly regarded by its clients as the go-to contractor for reliable delivery and time-critical services,” writes Cheong in his May 24 note.

In a bid to generate a bigger proportion of recurring income, Civmec has been winning more maintenance contracts.

Relative to the clutch of oil and gas companies under UOB Kay Hian’s coverage, Civmec is a relative laggard. Its share price is up 22% year to date, versus these other stocks that have gained between 25% to 174%.

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This even as Civmec is deemed to have “superior financial metrics”, given its better yield estimated at 6% as well as a more attractive PE multiple, states Cheong.

Cheong’s revised target price of $1.23 is pegged to 11x forward FY2024 earnings. At current levels, it is trading at 7x. Its peers are trading at 12x.

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