A push to revive the Australian Economy, 5 Infra stocks under lens
Author : John Smith | Published On : 31 Aug 2021
Infrastructure, a broad industry with a wide exposure, has been at the helm of the nation’s rebuilding drive following the COVID-19 pandemic. Coronavirus pandemic has put a scar on the world economy, brought activities to a stand-still and proved to be a paradoxical riddle for the global economy. Australia has been successful at realising that the pandemic is not just a health crisis but also an economic challenge, as the Prime Minister spoke at the South Australian Liberal party’s annual general meeting in mid-2020.
Federal Government’s Infra Push
The Australian Prime minister has compared the ongoing pandemic to the hard and tough times during World War II and the Great Depression. While the resilience showed by the country has been commendable, the government realises the need for boosting infrastructure to combat and revive the economy from the pandemic. The country realises the importance of renewable power, gas, manufacturing and green infrastructure to provide income support and encourage environmentally-friendly development initiatives across the nation.
Talking about the remedial plans in response to the COVID-19 pandemic, The PM Scott Morrison said –
“Our plan is not just about providing the comforting support of record levels of income support. It’s also about the process of boosting and stimulating infrastructure projects and the skills investments.”
The 2021 Federal Budget included an AU$15.2 billion investment towards the prominent infrastructure projects, in line with the government’s decade-long AU$110 billion infrastructure investment program. The Federal Government’s efforts are towards boosting both jobs and productivity across Australia.
In addition to the pandemic, the bushfires proved to be a wake-up call for the investors and the Australian government. A major upsurge in renewable energy was witnessed across Australia as the renewable power accounted for 27% of the total electricity generation across the nation in 2020.
ESG Commitments: The Burgeoning clean energy opportunity
The Western Australia’s proposed AU$100 billion Western Green Energy Hub is placed at the centre of the clean energy push aimed at coverting solar and wind power into green fuels. The rising consciousness for sustainable investments is resulting in increased expenditure towards renewable power, hydrogen production, electric mobility and green infrastructure. In this article, we would discuss a few growth stocks from the infra space that have been outperforming the indices.
MPOWER GROUP (ASX:MPR)
Premium renewable energy and battery storage company, Mpower Group Limited (ASX: MPR) caters to the government and corporate entities providing modern and innovative on-grid and off-grid power solutions. The company is a specialist in renewable power, battery storage and microgrid verticals.
The company specialises in the development of utility-scale solar farms. In 2021, the company successfully delivered the Kadiana 5 megawatt alternating current (MWac) solar project in South Australia and connected it to the national electricity grid.
As of now, Mpower has developed over six operational 5 MW solar projects. Mpower targets to expand its renewable energy portfolio to 20 projects with a total capacity of ~100 MW, worth more than AU$150 million.
Mpower is also involved in the distribution of power and also provides innovative energy storage solutions. The company also benefits from the rising sustainable investments and government grants to support the renewable power sector.
MPR has delivered 150% and 35% returns on 52-week and a year to date (YTD) basis of 28 July 2021, respectively. MPR traded at AU$0.07 a share on 30 July 2021 with a market capitalisation of AU$15.96 million.
Clean TeQ Holdings Limited (ASX:CNQ)
Clean TeQ Holdings Limited (ASX:CNQ) is an innovative metals recovery and water treatment solutions company that provides specialised technical services to government and other organisations. The company focuses on delivering innovative water technologies including desalination, nutrient, and hardness removal, zero liquid discharge and waste treatment plants.
Clean TeQ Water, the spin-off from Sunrise Energy Metals Ltd (ASX: SRL) was listed on the Australian stock exchange only recently. It is to be noted that Clean TeQ Holdings was rebranded to Sunrise Energy Metals Ltd, and the utilities business was spun off so as to allow Sunrise to focus on its flagship Ni-Co-Sc minerals project in NSW.
During the year, CNQ has secured projects with sectors including municipal and industrial wastewater, surface water and mining process water. The company operates its offices and laboratories across Australia and Asia with a partner office in Africa.
The stock commenced trading on the ASX on 2 July 2021 and surged to the record price of AU$1.27 a share. CNQ closed at AU$0.91 a share on 30 July 2021 with a market capitalisation of AU$43.77million offering a return of ~51% since its recent listing.
Downer EDI Ltd (ASX:DOW)
Downer EDI Ltd (ASX:DOW) is one of the leading integrated services provider across Australia, New Zealand, Asia, America and others. Just recently, the company secured two contracts from NBN Co -- the N2P Evolution and National Broadband Network (NBN) for fixed wireless services contracts.
The company caters to diverse sectors including transportation, telecommunications and industrials. The company has been benefitting from the infrastructure development and construction projects which sparked off a rally in its shares. Last year, in response to the dismal mineral exploration scenario, the company exited its blasting services arm and sold, Downer Blasting Services. Currently, the company focuses on the strengthening of its capabilities in the defence sector and concentrates on its value chain in existing markets.
As part of Downer’s Urban Services strategy, the company plans to deliver environmental and social benefits such as transitioning to lower capital intensive and carbon-emitting business activities, in support of its decarbonisation pathway. The company has even identified opportunities and still holds capabilities in the renewable energy, hydrogen and infrastructure development for electric vehicles. Downer plans to expand its exposure in these trending segments.
DOW closed at AU$5.28 a share on 30 July 2021, offering a 52-week return of ~28.5%.
Worley Ltd (ASX:WOR)
Worley Ltd (ASX:WOR) is an Australian professional services giant that caters to the power, oil & gas, mining and the industrials domain.
The company supports the development of projects through its lifecycle and guides its customers to enhance the sustainability of the existing assets.
In the recent past, the contracting and infrastructure developer bagged numerous contracts benefitting from the infrastructure boost, rising oil & gas price and the burgeoning renewable energy sectors. Earlier in July, Worley secured a services contract with Red Sea National Refining and Petrochemicals Company for project management consultancy (PMC) and EPC services for a greenfield oil refinery and petrochemicals complex in Egypt. Earlier in July, the company was awarded the operations and maintenance contract for six wind farms by Pacific Hydro. In total, Worley will provide management, operations and maintenance services for 200 wind turbines and other equipment.
In the mining segment, Worley secured a detailed engineering and procurement services contract from Syrah Resources Limited (ASX:SYR) for expanding the production capacity at the operational Vidalia anode material production facility.