Despite recent rain events and covid impacts, brokers remain confident on the outlook for
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-Diversification leads to a high rate of winning tenders
-Real estate will be a key growth driver
-Post-covid migration to regional areas benefits the group
Macquarie believes the success of this strategy is shown by the company's sector leading earnings (EBIT) margin of 21% (FY21 pro forma). It's estimated peers in the ASX-listed Construction Materials sector and the
The company operates across four business segments:
This diversified offering underpins a high tender-win rate across all segments, explains the broker. Importantly, the largest segment (
Demand for the group's services within its four business segments is primarily driven by infrastructure activity, building activity and mining production, explains Macquarie, which recently initiated coverage of the company. Strong growth over time is attributed to a combination of organic business growth, investment, and acquisitions of complementary businesses, quarries, and residential and commercial development assets.
Having listing on the ASX in early December last year at a float price of
Not long after listing, Morgans forecast an EPS compound annual growth rate (CAGR) of 22% for the founder-led business, driven by material growth in quarry sales volumes and increased residential sales. The broker is attracted to positive industry tailwinds and further upside potential from accretive M&A.
Moelis, not one of the seven brokers updated daily in the FNArena database, expects the Real Estate segment to be the key growth driver in coming years.
The broker retained its Buy rating and
The group's regional edge over competitors
As part of an overall national infrastructure pipeline in excess of
Macquarie believes
The group has land holdings in Tamworth, Rockhampton, Bathurst and Orange, which all have populations similar Dubbo (where the company commenced operations) and could enter larger regional cities around
Moreover, the expected infrastructure pipeline in
The post-covid migration away from cities to regional hubs has supported the group's significant land bank, points out Morgans. In addition, a relative absence of Tier 1 contractors in regional locations is expected to leave the group well placed to win contracts and grow market share.
Real Estate
After attending
In addition, the group has a large pipeline of Commercial and Industrial assets that will provide a combination of development profits, ongoing income (assuming some retention of interests) and pull-through demand for its other divisions (along with demand from residential house construction).
As a result, the analyst forecasts the Real Estate segment will comprise around 39% of group earnings (EBITDA) in FY24 and become the main earnings contributor.
Nonetheless, Morgans reminds investors real estate is a cyclical business and growth of the wider
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