2012 Media Releases

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of Perth-based civil and building construction company Decmil Group (ASX: DCG), with a Buy recommendation.

Research analyst Dominic Rose said, “Our positive rating of Decmil Group is predicated on the company’s strong leverage to the resources and energy capex cycle, the robust order book and pipeline of work, and management’s sound diversification strategy.”

“Decmil’s client base predominantly comprises the major energy and iron ore companies, providing a positive endorsement of the company’s core capabilities. For example, Rio Tinto recently awarded Decmil a five-year framework agreement for iron ore civil works. The company has strong exposure to Western Australian oil & gas and iron ore projects with a solid flow of contract wins during the past six months for blue chip clients.”

Deutsche Bank analysts believe Decmil is well place for growth considering the record order book valued at $500million as at February 2012, combined with a further $600million of tenders submitted, and a near-time pipeline estimated at $4billion. Importantly, this pipeline of opportunities sits within Decmil’s core customer base, within core markets and disciplines. 

Rose added “Management’s growth strategy focuses on organic growth in the core WA resources and energy markets as well as diversifying into Queensland coal and infrastructure. Additionally, in what has the potential to be a company transforming event, Decmil is transitioning into a build-own-operate village model via a joint venture. This Gladstone project is expected to provide the Group with a high-margin recurring income stream and provides a platform for further growth.”

Key downside risks include construction contract execution, a commodity market downturn, project delays, inclement weather, capacity constraints, competitive threats and risks around the JV project.

Decmil is a multi-disciplined design, civil engineering and construction company providing civil, infrastructure and building construction services to the Australian resources, oil & gas and government infrastructure sectors. Core capabilities include remote site accommodation, civil works and non-process infrastructure, focusing on major energy and mining clients and specialising in complex projects in remote locations.