CIMIC Group Limited

CIM Details

Annual Results of FY20 Declared: CIMIC Group Limited (ASX: CIM) engages in mining, construction, and mineral processing, engineering, environmental, telecom and operations and maintenance activities. CIM broadly operates in the resources, infrastructure, and property markets. As on 11^th February 2021, the market capitalisation of the company stood at ~$6.71 billion. In a recent announcement, the company informed of availing several maintenance contract extensions by UGL, part of CIMIC Group in the power sector effective from early April 2021. The company reported 20.3% decline in revenue from Group’s continuing operations to $10,571.1 million in FY20. It was due to late assignment of new projects owing to COVID-19 led outbreak. It registered statutory NPAT of $620.1 million for FY20 and positive EPS of 195 cents per share. CIM divested 50% sale of Thiess and earned net revenue of $2.1 billion during FY20. The company will use these funds to reduce debt and pursue strategic options. Net operating cash flow in FY20 stood at ~$265.2 million.

During the year, the company reduced its net contract debtors to $(294.7) million versus $1.3 billion on 31 December 2019, majorly due to Thiess divestment and Gorgon Jetty arbitration resolution. The company reported net cash of $190.4 million as on 31 December 2020. The company declared a final dividend of 60 cents per share (20% franked), representing a 62% payout on the results of 2H20.

Cash & Cash Equivalents Highlights, FY20 vs FY19 (Source: Company Reports)

Outlook: For FY21, NPAT is estimated in the range of $400-$430 million, subject to market conditions. The above outlook is supported by robust level of work-in-hand and favourable medium-term outlook across the Group’s core markets. CIM aims for a disciplined working capital management, a rigorous project delivery and risk management and sustainable cash-backed profits for FY21.

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

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of CIM gave a negative return of 9.74% in the past three months and a negative return of 10.70% in the past six months. The stock is currently slightly inclined towards its 52 weeks’ high level of $28.81. The stock of CIM has a support level of ~$18.493 and a resistance level of ~$23.052. We have valued the stock using the Price to Earnings based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Monadelphous Group Limited (ASX: MND), Lycopodium Limited (ASX: LYL), Service Stream Limited (ASX: SSM) to name a few. We believe that the company can trade at a slight discount as compared to its peer average, considering its declining top line in FY20 results, impact of COVID-19 on revenue slowdown, and negative net operating cash flow. Considering the current trading levels, dividend pay-out of 62%, robust liquidity position, higher ROE, and gross margin for 1H20, decent outlook, and valuation, we give a ‘Buy’ rating on the stock at the current market price of $20.850, down by 3.294% on 11^th February 2021.

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

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.