Acquisitions And Market Expansion Will Strengthen Business From FY '25

Key Takeaways

• Strategic acquisitions and new geographical expansion are poised to significantly increase revenue and enhance margins in construction materials and real estate.
  
• Anticipated contributions from renewable energy projects are expected to drive growth in civil construction, potentially boosting future earnings.
  
• Delay in renewables and infrastructure projects, coupled with setbacks in construction, poses risks to cash flows, earnings, margins, and revenue growth.

Catalysts

Together with subsidiaries, engages in the provision of construction materials, equipment, and services for civil, infrastructure, and mining sectors in Australia, Vietnam, Indonesia, and internationally.

• The construction materials acquisitions, which were completed ahead of schedule, are expected to contribute significantly starting in the second half of FY '25 and beyond, indicating a step change in growth which should increase revenue and earnings.
  
• The establishment of new hubs in Wollongong and Canberra offers expansion into new geographic markets and the Greater Melbourne network is being optimized, which will likely enhance margins and increase revenue potential.
  
• The full-year contributions from recent acquisitions and synergies should further drive construction materials growth, increasing their dominance in earnings contribution and potentially improving net margins.
  
• The easing interest rate cycle is expected to stimulate residential settlement growth, creating positive impacts on revenue from the residential real estate segment.
  
• Delayed renewable energy projects are expected to begin contributing in FY '26, providing substantial opportunities for growth in the civil construction and hire segment and potentially boosting future revenue and earnings.

MAAS Group Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MAAS Group Holdings's revenue will grow by 15.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.7% today to 9.5% in 3 years time.
• Analysts expect earnings to reach A$133.0 million (and earnings per share of A$0.37) by about May 2028, up from A$70.4 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as A$116.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.7x on those 2028 earnings, down from 20.3x today. This future PE is greater than the current PE for the AU Construction industry at 16.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.92%, as per the Simply Wall St company report.

MAAS Group Holdings Future Earnings Per Share Growth

Risks

• The company is experiencing delays in important renewables projects such as the Central West Orana RES, which could impact earnings timelines and cash flows, reducing immediate revenue expectations.
  
• The civil construction and hire segment has seen project setbacks and unexpected losses, impacting overall earnings and suggesting execution risks and uncertainty that could affect net margins.
  
• Earnings from the construction materials segment could be pressured by a softer overall construction market, limiting the company's ability to implement price rises and potentially affecting margins and revenue growth.
  
• Construction activity remains relatively soft, which may restrict further price increases and affect both revenue growth and net margins. This also highlights competitive pressures in key markets.
  
• A delay in infrastructure and renewable energy projects represents a significant risk to future cash flows and revenue generation, given the importance of these projects to the company's future growth strategy.

Valuation

• The analysts have a consensus price target of A$4.716 for MAAS Group Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$5.19, and the most bearish reporting a price target of just A$3.8.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$1.4 billion, earnings will come to A$133.0 million, and it would be trading on a PE ratio of 19.7x, assuming you use a discount rate of 7.9%.
• Given the current share price of A$3.95, the analyst price target of A$4.72 is 16.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.