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CIMIC Group shares fall despite new contract

CIMIC Group Ltd (ASX: CIM) shares have fallen lower this morning despite a new contract announcement from the construction group.

What did CIMIC announce this morning?

CIMIC’s subsidiary, CPB Contractors, has been selected as the preferred contractor for part of Perth’s METRONET program.

CPB will deliver the Yanchep Rail Extension and the Thornlie to Cockburn Link as part of the program.

The contract will be delivered in partnership with Downer EDI Limited (ASX: DOW). Interestingly, the Downer share price has edged higher on the news this morning while the CIMIC shares are sinking lower.

The alliance-style contract is funded by the Western Australian and Australian governments. CIMIC has said revenue to CPB Contractors will be confirmed at contract execution.

Works on this component of the METRONET project will commence in 2019 and are scheduled for completion in 2023.

CPB Contractors is currently also working on several major rail projects across Australia. These include Melbourne’s Metro Tunnel, the Sydney Metro, Brisbane’s Cross River Rail and the Parramatta Light Rail.

At the time of writing, CIMIC shares are down 0.12% at $32.75 per share in morning trade.

How have CIMIC shares performed in 2019?

It’s been somewhat of a disappointing year for shareholders, with CIMIC shares sinking lower in 2019.

CIMIC shares are down 23.64% since the start of January, which is disappointing in any year. However, the strong performance from the S&P/ASX 200 Index (INDEXASX: XJO) compounds the poor performance.

The benchmark Aussie index is up more than 20% this year after hitting a new record high earlier this year.

On the other hand, CIMIC shares have continued to slump lower after hitting more than $50 per share back in July.

The company boasts a market cap of $10.6 billion, which puts it firmly inside the ASX 50 and blue-chip territory. CIMIC’s 4.79% dividend yield is also nothing to be sneezed at in the low-yield environment right now.

However, investors haven’t been convinced by this morning’s contract announcement and I’d be watching CIMIC shares closely ahead of its next results release.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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