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This Week’s “Falling Knife”: Civmec

CivmecIt appears that if there is one place in the market that investors don’t want to be in right now, it is the mining and resources sector.

In fact they don’t even want to be near companies that are remotely associated with the sector. After all, with economic growth in China expected to slow, it is only natural that demand for commodities could soften.

It is little surprise, therefore, to see Civmec (SGX: P9D) unwanted. The shares are down 11% at S$0.75 over the last five trading days. It is our “falling knife” of the week.

Civmec floated on the Singapore market in the middle of last year. The April listing was a roaring success. Shares in the integrated construction company closed up 39% on its Initial Public Offering (IPO) price of S$0.40.

The company provides engineering services to the oil and gas industry. It also supports the mining industry and a host of other industries that include the chemical and power sectors and utility companies.

In May, the company posted a 10% decline in third-quarter revenues, which resulted in a 10% drop in pre-tax profit. Civmec blamed the fall on some projects nearing completion. Looking ahead, the company believes that the Oil & Gas sector remains strong. It also saw a significant increase in tendering activity in the Mining and Resources sector.

The market should find out soon enough whether Civmec has been able to weather the downturn in the commodities sector. With its fingers in a number of pies, the numbers that the company could post on 21 August may not look too bad.

However, whilst the underlying performance may be resilient, Singapore investors might want to brace themselves for a currency shock. Since April, the Australian dollar has fallen 11% against the Singapore dollar.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.