Company Trend Analysis - CIMIC Faces Tough Competition For International Growth Opportunities - AUG 2017

BMI View: CIMIC Group will face tough competition from as it expands its operations in Asia ' s fast-growing infrastructure markets , which will be crucial for the company to continue to grow revenues . The company ' s experience with PPPs, however, gives it an advantage as regional governments expand the use of such models to finance projects.

CIMIC's latest H1 2017 results show that it is gradually recovering from two consecutive years of declining earnings, with the bulk of new revenues coming from its acquisition of services company UGL in 2016. Additionally, the net profit margin has risen as the company continues to streamline and restructure its operations after a string of other acquisitions over the past several years.

We have a moderately positive outlook for CIMIC's growth prospects in the five years ahead, especially as the group is well-placed to grow its international business given the strong existing presence of constituent companies across Asia. Nearly 70% of CIMIC's revenues in 2016 came from its home markets of Australia and New Zealand but we believe that the group has significant growth potential from participating in Asia's faster-growing emerging markets. Indeed, given Australia's status as a developed, relatively saturated infrastructure market, overseas expansion is necessary for CIMIC to maintain and accelerate revenue growth over the coming decade. In pursuing that growth, however, we note that CIMIC will come up against tough competition from Chinese, Japanese and South Korean construction firms for infrastructure projects, especially as those companies are often supported by concessionary loans from their countries' respective policy banks and developmental finance institutions (DFIs).

Revenues In Recovery Mode
CIMIC - Semi-Annual Revenues and Net Income, AUDmn
Source: CIMIC Financial Reports, BMI

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