Cimic (ASX:CIM) share price lifts on confirmed Ventia IPO talks

The fact that Ventia is exploring ‘strategic options’ has been confirmed.

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The Cimic Group Ltd (ASX: CIM) share price is trading higher today after the company addressed recent media speculation about the future of its jointly-owned Ventia business.

At the time of writing, the construction conglomerate’s share price is trading 0.83% higher at $21.82.

Cimic’s update follows a story published by yesterday’s The Australian, as well as similar reporting by The Australian Financial Review, claiming Cimic and Apollo Global Management are pursuing an initial public offering (IPO) of services business Ventia.

Rumours confirmed

This morning’s update from Cimic confirms Ventia has appointed advisers to assist in reviewing strategic options – which may include an IPO. Cimic owns a 47.5% stake in the essential services provider.

In late May, the AFR reported Ventia had covertly tested investor appetites during April. Reportedly, those who attended secret pitches to major fund managers were made to sign non-disclosure agreements.

While it’s believed neither Cimic nor other major shareholder Apollo initiated these meetings, both parties will be pivotal in the next steps forward. Analysts estimate if Ventia were to spin off as a separately listed company, its valuation could be more than $3.5 billion.

How’s business?

Despite the impacts of COVID-19, Ventia managed to grow its revenue and earnings in 2020. The company increased revenue by roughly 42% to $3.22 billion. Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) climbed by more than 12% to $265.5 million.

In December 2020, Ventia was awarded two substantial contracts with Telstra Corporation Ltd (ASX: TLS) and Anglo American. These contracts totalled an estimated revenue of $786 million.

As one of the largest essential services providers across Australia and New Zealand, Ventia is familiar with servicing large-scale projects, including utility infrastructure, asset management and engineering.

Cimic share price under construction

It has been a bumpy past twelve months for the Cimic share price, which has fallen by around 19% during the period. However, the last couple of months have been fruitful.

A flurry of contract wins and maintained guidance have fortified shareholder confidence. Since 21 April 2021, the company’s share price has rallied by around 28%.

No doubt Cimic shareholders will be watching with anticipation to see whether Ventia’s IPO goes ahead.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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