Cimic Group Ltd (ASX: CIM) has announced the finalisation of a contract with the State of Queensland which will deliver revenues to Cimic of $2.73 billion.
About Cimic
Cimic Group was formerly called Leighton Holdings. The company changed its name shortly after some bribery scandals emerged in the news and it was acquired by its majority shareholder, Spanish firm Grupo ACS. On a more positive note, Cimic is today a major international construction and mining contractor with brands like UGL, CPB Contractors, Thiess, Broad and Sedgman under its banner.
New Contract
Cimic Group companies Pacific Partnerships, CPB Contractors and UGL have reached an agreement with the Queensland Government to deliver the Tunnel, Stations and Development PPP package of Brisbane’s Cross River Rail project.
These subsidiaries will deliver tunnelling works, underground stations and ongoing maintenance services for South East Queensland’s largest infrastructure project.
Revenue to Cimic will be approximately $2.73 billion, with construction due to commence later this year.
Cimic CEO Michael Wright said, “Cimic Group’s integrated approach to PPP projects is based on our end-to-end capabilities across a project’s life cycle. As Australia’s premier rail infrastructure and services provider, we will finance, design, construct and maintain the new tunnels and rail stations, in partnership with the State Government, to deliver world-class rail assets and services for South East Queensland.”
Is Cimic a Buy?
Contracts like these are very encouraging and appealing and may make Cimic look like an attractive investment. While Cimic relies on receiving these large contracts, they’ve proven their ability to do so time and time again. When they do win the contract, the revenue streams can be significant. For this project, Cimic, through its subsidiary UGL, will provide maintenance for the next 24 years. That sort of long-term revenue is attractive as well.
With the share price down materially since April, it might be worth another look.
For other high-quality companies, have a look at the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
