Ann: H1 FY24 Results Presentation, page-16

.47 Target Price

TAKING THE GOOD WITH THE BAD

TheRyans Corner windfarm projectresulted in an unexpected set back, which was brought to account in the 1H24 result. DCG incurred a .5m loss on this legacy project caused by capacity constraints associated with the supply of aggregate from the project’s quarry.

We believe that supply risk wasnot factored intothe original contract signed up under previous management. When supply from the project’s only quarry was disrupted due to weather, the necessary alternative supply arrangements resulted in cost overruns and project loss. The contract has been completed and the matter has been settled with the client.

HOMEGROUND'S OCCUPANCY RATES ARE REBOUNDING

The outlook for DCG’s Homeground Gladstone worker accommodation asset (Homeground) has greatly improved with improving occupancy rates due to ongoing investment in energy and infrastructure projects. We believe increased occupancy rates will persist into the future. DCG has suggested an EBITDA contribution of .1m as part of their overall guidance for FY24, with a .4m profit achieved in 1H24.

The Homeground asset is no longer a current asset held for sale and is carried as a non-current asset at a valuation of m (previously m). We believe it has a replacement cost of c.0m. The Homeground asset partially supports the NAB m multi-option facility and DCG’s m bonding facility.

Previously our forecasts made no allowance for Homeground.Figure 1 shows our upgraded earnings which include expected positive contributions from Homeground offset by a downgraded revenue outlook for the construction and engineering division.

DIVERSIFICATION ENHANCES OUR POSITIVE INVESTMENT THESIS

We maintain our 47¢ PE based price target implying a FY25 multiple of 8.5 times. DCG continues its disciplined execution of its construction strategy. We expect 2H24 will show uplift in gross margins to above 10%. We currently forecast 9% beyond this suggesting further risk to the upside. The Homeground asset is becoming increasingly valuable to the group and we are only forecasting occupancy rates at 50% of the levels forecast by consultants AEC Group.

1		Decmil Group Limited (DCG:ASX) - Earnings update - we maintain ourBUY Recommendation and
2	Decmil Group Limited (DCG:ASX) - Earnings update - we maintain ourBUY Recommendation and $0.47 Target Price TAKING THE GOOD WITH THE BAD TheRyans Corner windfarm projectresulted in an unexpected set back, which was brought to account in the 1H24 result. DCG incurred a $6.5m loss on this legacy project caused by capacity constraints associated with the supply of aggregate from the project’s quarry. We believe that supply risk wasnot factored intothe original contract signed up under previous management. When supply from the project’s only quarry was disrupted due to weather, the necessary alternative supply arrangements resulted in cost overruns and project loss. The contract has been completed and the matter has been settled with the client. HOMEGROUND'S OCCUPANCY RATES ARE REBOUNDING The outlook for DCG’s Homeground Gladstone worker accommodation asset (Homeground) has greatly improved with improving occupancy rates due to ongoing investment in energy and infrastructure projects. We believe increased occupancy rates will persist into the future. DCG has suggested an EBITDA contribution of $5.1m as part of their overall guidance for FY24, with a $1.4m profit achieved in 1H24. The Homeground asset is no longer a current asset held for sale and is carried as a non-current asset at a valuation of $63m (previously $57m). We believe it has a replacement cost of c.$200m. The Homeground asset partially supports the NAB $40m multi-option facility and DCG’s $19m bonding facility. Previously our forecasts made no allowance for Homeground.Figure 1 shows our upgraded earnings which include expected positive contributions from Homeground offset by a downgraded revenue outlook for the construction and engineering division. DIVERSIFICATION ENHANCES OUR POSITIVE INVESTMENT THESIS We maintain our 47¢ PE based price target implying a FY25 multiple of 8.5 times. DCG continues its disciplined execution of its construction strategy. We expect 2H24 will show uplift in gross margins to above 10%. We currently forecast 9% beyond this suggesting further risk to the upside. The Homeground asset is becoming increasingly valuable to the group and we are only forecasting occupancy rates at 50% of the levels forecast by consultants AEC Group.

I guess we can take the view that Blue Oceans is talking this up. We are two and a half years from the 2026 results announcement. I would be happy with $0.47c by August 2026.