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Could Civmec Limited Extract Value From Australia?

Seven Industrial Stocks listed on the Singapore Stock Exchange report at least one fifth of their income from Australia.

Economic growth in Australia is dependent heavily on the mining sector and also the agricultural sector. The bulk of the products are exported to East Asia. Together the mining and agricultural sectors account for around a-third of the Australian economy.

Two of the seven industrials with an Australia focus are involved in the provision of services to the oil, gas and mineral resources sectors. They are Civmec Limited (SGX: P9D) and AusGroup Limited (SGX: 5GJ). AusGroup failed to make profits last year and it does not pay a dividend. So it can be quickly discounted as a value share despite being priced at around its book value.

Civmec on the other hand is more profitable and has seen its revenue grow over the last few years. Its Price-to-Earnings ratio is currently below the market average at 12.6. However, it is priced at two and a half times its book value. Additionally, with a dividend yield of only 0.9%, Civmec is probably too expensive for value hunters.

Whilst mining and agriculture represent a significant slice of the Australian economy, the dominant sector is the services sector, which accounts for roughly two-thirds of GDP.

Low Keng Huat Limited (SGX: F1E) which began life as a general building and civil engineering company in Singapore also manages deluxe hotels in Australia. The company which has a value of nearly half a billion dollars is priced at its book value. It pays a dividend of 4.5%. However, this comes at a price of over 20 times company earnings.

Finally, a look at the second smallest of the seven companies Sinwa Limited (SGX: 5CN) reveals a whopping 10% dividend yield. That may convince investors to overlook the slightly above average earnings multiple of 17.

The company has a capitalisation of just S$80m. This prices the company at a 20% discount to its book value. However, Sinwa’s debt cannot be ignored. For a relatively small company, debts of around S$20m could be significant.

A look at the fundamentals of these companies could suggest that there is little in the way of true value. Whilst you might like to think that there is value to be had, intrepid value investors might be more patient and wait for the right opportunity.

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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 contributor Adam Kuo doesn’t own shares in any companies mentioned.