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Why the Cimic Group share price is outperforming today

The Cimic Group Ltd (ASX: CIM) share price has surged ahead after the ASX-listed engineering and construction group announced a second major contract win this month.

The CIMIC share price raced up 4.3% today to become the fifth best performing ASX stock on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

Only the New Hope Corporation Limited (ASX: NHC) share price, TPG Telecom Ltd (ASX: TPM) share price, Webjet Limited (ASX: WEB) share price and Saracen Mineral Holdings Limited (ASX: SAR) are ahead.

Not all construction stocks are performing well though. The big jump in CIM’s share price coincides with a slump in the Lendlease Group (ASX: LLC) share price, which hit a fresh 52-week low today.

Contract Wins

CIMIC said that its subsidiaries, UGL and CPB Contractors, have been picked by Taswater as the preferred contractor for its capital works program.

CIMIC estimates that the contract will reap $600 million in revenue for the group over four years as it builds water treatment plants, water networks, dams and water storage facilities in Tasmania.

“The unique combination of UGL’s expertise in the water sector and CPB Contractors’ experience in major project design and construction projects position us strongly to partner with Taswater to deliver world-class infrastructure to the communities of Tasmania,” said CIMIC’s chief executive Michael Wright.

UGL and CPB Contractors are currently working in partnership to deliver the Western Treatment Plant Stage Two Upgrade for Melbourne Water in Victoria, as well as numerous rail and infrastructure projects across Australia.

The contract win comes on the back of news that UGL’s joint venture has been awarded a 15-year contract to support the Royal Australian Navy’s Landing Helicopter Dock and Landing Craft Vessels.

The contract is believed to be worth around $1.5 billion to the JV and covers 14 vessels. UGL has a 50% share in the partnership.

Foolish Takeaway

We are in the midst of an infrastructure building boom but gaining exposure to this thematic hasn’t been so straight forward.

The plunge in Lendleases’ share price on the back of problems with a small number of infrastructure projects shows how difficult it can be to invest in this space.

Even with the strong outperformance in CIM’s share price today, the stock is still down 18% over the past year while Lendlease is down around 30% and the Downer EDI Limited (ASX: DOW) share price is over 7% in the red.

Motley Fool contributor Brendon Lau owns shares of TPG Telecom Limited. The Motley Fool Australia has recommended TPG Telecom Limited and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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