The Motley Fool

Decmil Group Limited sees 48% increase in revenues: Worth a look?

Construction and engineering firm Decmil Group Limited (ASX: DCG) has reported a 48% jump in first-half profits, despite tough conditions in the mining sector.

Here’s a summary of the results:

  • Revenues up 48% to $389.8 million
  • Net profit after tax down 4.9% to $24.3 million
  • Earnings per share slightly lower at 14.41 cents
  • Interim dividend of 4.5 cents per share, fully franked

Decmil says it has cash on hand of $58.4 million (and has just $2.8m in borrowings). The company says it continues to work on a number of projects for the Department of Immigration and Border protection (DIPB), Gina Rinehart’s Roy Hill iron ore project, Queensland Gas Co and Rio Tinto Limited (ASX: RIO).

Decmil also provides temporary accommodation services in Gladstone – the site of at least 3 current liquefied natural gas plants. As an aside, Fleetwood Corporation Ltd (ASX: FWD) is also building a temporary accommodation village at Gladstone.

Annualising those results above places Decmil on a P/E ratio of just 5.3x earnings and a fully franked dividend yield of 5.9%. That grosses up to 8.4% to include franking credits, before tax of course.

While those numbers may look tempting, the company’s outlook is somewhat sobering. Decmil’s traditional clients are in iron ore and the LNG sector. Iron ore prices have been smashed and clients are doing everything they can to slash costs – with contractors at the forefront of that.

Given the oncoming headwinds, Foolish investors may want to steer clear.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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