Business SummaryDecmil Group Limited (DCG) is a design, civil engineering and construction,accommodation services, manufacturing and maintenance company. DCG isfocused on delivering integrated solutions to clients in the Australian oil andgas, mining and infrastructure sectors. DCG has three main business sectorsbeing: Construction and Engineering works, Accommodation, and RenewableEnergy.

Construction and Engineering works: This business division involves thelarge and small scale concrete civil works on brown and greenfield projects inregional and remote areas; large scale implementation of industrialinfrastructure, including industrial buildings, processing plants, workshopsand storage facilities; app aspects of project development from design, sitepreparation and excavation to bulk earthworks, civil works and construction;government structure projects including office buildings, administrationbuildings and storage facilities; and the manufacture and installation of highpressure piping and tanking. The division operates through the company'swholly owned subsidiary being Decmil Australia Pty Ltd and EastcoastDevelopment Engineering Pty Ltd.

Accommodation: This business division is involve in the design andconstrict of permanent and temporary accommodation, including villages inremote areas; and the build, own and operate accommodation villages inremote areas. The division operates through the company's wholly ownedsubsidiary, Homeground Villages Pty Ltd.

Renewable Energy: This division looks into civil works for remote wind andsolar projects including site preparation, foundations and pilings. They alsoprovide Structural and mechanical installations including towers for windfarms and framing systems and PV modules for solar projects; and Specialistelectrical work for energy storage and distribution.

Latest ResearchBalance sheet under focus

Downgrade to Neutral/High Risk — Decmil’s share price has beennegatively impacted by issues with two of its largest contracts, SunraysiaSolar Farm (~$280 million contract) and NZ Department of CorrectionsModular Prisons (~$120 million). While Decmil’s management is optimisticthat contract issues could be resolved over

the next few months, we downgrade to Neutral/High Risk given i) we seepotential that the resolution of the contracts could take longer thanexpected; and ii) resignation of long standing CFO.

For more information see research 9 Jan 2020.

GICS - Capital Goods

Decmil Group Limited

ASX Code: DCG Price: $0.375 12 Mth Target Price: $0.63 Rating: Neutral - High

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

11 February 2020$90m239.3m$1.00$0.36

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral - High Risk$0.6363.6%14.8%78.5%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 14.0 18.0 21.0 17.0Profit (norm)* $m 14.0 18.0 21.0 17.0

EPS* ¢ 6.0 8.0 9.0 7.0EPS Growth % 0.0 33.3 12.5 -22.2P/E* x 6.4 4.8 4.3 5.5P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 3.0 0.0 4.0 3.0Yield % 7.8 0.0 10.4 7.8Franking % 0.0 0.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($000)2015A 2016A 2017A 2018A 2019A

Sales Revenue 665,387 293,232 278,070 341,853 663,276Total Revenue ex. Int. 666,260 299,836 304,068 341,608 663,276EBITDA 62,817 -69,434 -17,459 5,461 24,100Depreciation & Amort. -6,802 -6,666 -5,604 -2,903 -2,661Goodwill Amortisation -- -- -- -- --EBIT 56,015 -76,100 -23,063 2,558 21,439Net Interest 459 230 -687 -1,461 -1,910Profit Before Tax 56,474 -75,870 -23,750 1,097 19,529Income Tax -16,074 23,806 8,458 -521 -5,511Outside Equity Int. -- -- -- -- --Profit after Tax 40,400 -54,215 -16,272 -5,384 14,018Significant Items after Tax -120 -4,021 -12,075 -747 --Reported Profit after Tax 40,280 -58,236 -28,347 -6,131 14,018Preferred Dividends -- -- -- -- --

Cash Flow ($000)2015A 2016A 2017A 2018A 2019A

Receipts from Customers 732,384 329,086 303,708 315,662 564,656Funds from Operations 54,587 -23,653 -7,066 2,089 29,100Net Operating Cashflow 33,465 -20,362 -6,952 627 21,669Capex -5,668 -2,920 -1,346 -1,775 -1,283Acquisitions & Investments -925 -12,825 -- -- --Sale of Invest. & Subsid. -- -- -- 919 --Net Investing Cashflow -5,995 -14,587 24,715 -597 -1,026Proceeds from Issues -- -- -- 200 48,803Dividends Paid -21,923 -17,618 -6,833 -- -2,381Net Financing Cashflow -27,230 -9,522 -15,935 -180 46,083Net Increase Cash 240 -44,471 1,828 -150 66,726Cash at Beginning 59,308 59,548 15,077 16,905 16,755Exchange Rate Adjust. -- -- -- -- --Cash at End 59,548 15,077 16,905 16,755 83,481

Ratios and Substantial Shareholders2015A 2016A 2017A 2018A 2019A

Profitability RatiosEBITDA Margin % 9.44 -23.68 -6.28 1.60 3.63EBIT Margin % 8.42 -25.95 -8.29 0.75 3.23Net Profit Margin % 6.07 -17.76 -5.50 0.17 2.11Return on Equity % 12.65 -21.33 -7.28 0.28 5.96Return on Assets % 9.14 -16.07 -5.34 0.53 3.57

Debt/Safety RatiosNet Debt/Equity % -18.40 -2.34 -7.66 -7.70 -33.61Interest Cover x -122.04 330.87 -33.57 1.75 11.22

Top 5 Substantial ShareholdersThorney Opportunities Ltd 11.7%TIGA Trading Pty Ltd 11.7%Denis Criddle 11.6%Thorney Investments Group 10.9%Commonwealth Bank Group 8.6%

Balance Sheet ($000)2015A 2016A 2017A 2018A 2019A

Cash & Equivalent 59,548 15,077 16,905 16,755 83,481Receivables 47,827 29,517 34,950 43,672 74,272Inventories 15,782 15,846 11,914 28,882 65,102Other Current Assets 19,042 8,547 5,716 8,561 6,648Current Assets 142,199 68,987 69,485 97,870 229,503Prop. Plant & Equipment 39,040 37,753 10,425 7,565 9,994Intangibles 70,027 86,345 75,482 75,482 75,482Other Non-Current Assets 19,042 8,547 5,716 8,561 6,648Non-Current Assets 301,676 253,964 207,000 205,786 208,696Total Assets 443,875 322,951 276,485 303,656 438,199Interest Bearing Debt 784 9,373 824 859 4,456Other Liabilities 123,740 69,532 65,665 96,484 198,613Total Liabilities 124,524 78,905 66,489 97,343 203,069Net Assets 319,351 244,046 209,996 206,313 235,130Share Capital 161,705 162,254 163,384 165,832 216,858Reserves -- -- -- -- --Retained Earnings 157,646 81,792 46,612 40,481 18,272Outside Equity Int. -- -- -- -- --Total Shareholders Equity 319,351 244,046 209,996 206,313 235,130

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Alison Thompson

Directors

Mr Donald James Argent(Non-Executive Director)Mr William (Bill) Healy(Non-Executive Director)Mr David Saxelby(Non-Executive Director,Non-Executive Chairman)Mr Scott Criddle(Chief Executive Officer,Managing Director)Mr Andries (Dickie) Dique(Non-Executive Director)

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Decmil Group Limited

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