CIMIC Group Limited

CIM Details

Ventia Awarded Contract Extension: CIMIC Group Limited (ASX: CIM) is an Australia-based company, primarily involved in the operation of engineering-led constructions, mining, servicing and public private partnerships (PPPs). As on 7 October 2020, the market capitalisation of the company stood at ~$6.31 billion. On 28 September 2020, the company announced that Ventia, an independent partnership between funds managed by affiliates of Apollo Global Management and the CIMIC Group, has been awarded a 18-month extension for its NSW Land and Housing Corporation contract. This contract is expected to generate a base contracted revenue of $124 million for Ventia. In addition, Ventia has an opportunity to earn $160 million through additional programs, subject to proceeding with further approvals.

Thiess Awarded $340 million Contract Extension: On 25 September 2020, global mining services provider, Thiess, has been awarded a 18-month contract extension by Glencore to continue providing mine planning, design and execution, drill and blast, overburden removal and coal mining services at Mount Owen in the Hunter Valley, Australia. The contract is expected to generate revenue of $340 million to Thiess.

H1FY20 Results Highlights: During H1 FY20, the company reported a revenue of ~$6.2 billion, down by ~$0.8 billion on the previous corresponding period, due to temporary delay in the contract extension and slowdown of activities during the COVID-19 turmoil. Further, the company reported an operating profit of $534.6 million, PBT of $429.6 million and NPAT of $316.6 million, down by 8.6%, 6.9% and 5.1%, respectively. At the end of June, the company reported a robust balance sheet with substantial gross cash liquidity of $4 billion.

  H1 FY20 Financial Highlights (Source: Company Reports)

Outlook: The company is looking forward to maintain a decent balance sheet and renew pre-existed contracts and extensions over the remaining FY20.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company is focused on renewing of contracts and extensions to increase revenues from operations and to deliver benefit into the future. As per ASX, the stock of CIM has corrected by 17.85% in the past three months and gave a negative return of 3.25% in the past one month. The stock is trading below the average 52-weeks’ level. We have valued the stock using the Price to Earnings Multiple Based illustrative relative valuation and have arrived at a target upside of lower double-digit (in % terms). On a technical front, the stock of CIM has a support level of ~$18.30 and a resistance level of ~$28.48. Considering the current trading levels, modest long-term outlook and healthy balance sheet, we recommend a 'Buy' rating on the stock at the current market price of $20.18, up by 1.254% on 07 October 2020.

CIM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Boral Limited

BLD Details

Boral announces Board renewal: Boral Limited is an Australia-based company, which is engaged in the provision of building and construction materials. As on 7 October 2020, the market capitalisation of the company stood at ~$5.81 billion. Recently, the company announced the appointment of Rob Sindel and Deborah O'Toole as new independent non-executive directors effective 28 September 2020.

FY20 Results Highlights: For FY20, the company posted revenue on total operational basis of $5,728 million, marginally declined from $5,861 million in the pcp due to COVID-19, bushfire and flood disruptions. The EBITDA on total operations basis of the company witnessed a substantial decline to $821 million, down from $1,010 million in the pcp.at the end of the period, Boral incurred depreciation and amortisation of $492 million in FY20. During FY20, operating free cash flow was $631 million, and net debt was $2,580 million, as compared to $2,193 million in the pcp.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The company is focused on delivering divisional improvements initiatives to recover margin/reduce costs. The company’s immediate focus in FY2021 is to maintain a safe and careful response to ongoing COVID-19 developments.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company is focused on improving competitive positioning to improve earnings and growth in the near term and into the future. As per ASX, the stock of BLD gave a return of 106.99% in the past six months and a return of 26.06% in the last three months. On a technical front, the stock of BLD has a support level of ~$3.65 and a resistance level of ~$5.19. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in % terms). Considering the current trading levels, positive long-term outlook, and valuation, we recommend a ‘Hold’ rating on the stock at the current market price of $4.810, up by 1.477% on 07 October 2020.

BLD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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