CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

CIMIC share price volatile following Middle East exit

We look at the details behind CIMIC Group’s exit from the Middle East.

CIMIC Group share price in focus Source: Bloomberg

CIMIC Group (ASX: CIM) – a leader in mining, services and public private partnerships – yesterday saw its share price collapse.

The catalyst? The revelation that CIMIC would be exiting the Middle East region: specifically as it related to the company’s 45% interest in BIC Contracting (BICC).

The firm commented that it will instead focus its resources on opportunities across its core markets and geographies.

Yet the immediate impact of this exit is a significant one: with CIM set to ‘recognise a one-off post-tax impact of around $1.8 billion in its 2019 financial statements.’

'The aforementioned impact includes an expect cash outlay net of tax of around $700 million during 2020, as CIMIC's financial statements, representing all of CIMIC's exposure in relation to BICC,' the company further added.

The company has now initiated a ‘confidential M&A process' in relation to its BICC investment. These discussions remain ongoing.

CIMIC will not pay a final 2019 dividend as a result of this.

Do you own CIMIC Group shares? You can hedge your downside risk by trading CFDs now.

CIMIC share price: the investor response

With the type of bearish zeal one would expect from such news: investors bid CIMIC’s share price some ~20% lower yesterday; with its stock closing out the session at $28.030 per share.

In saying that, CIMIC's stock did rebound modestly today, rising 4.709%, at the time of writing.

Ultimately, it’s been a difficult year for CIMIC shareholders, with the company’s stock currently sitting towards the bottom-end of its 52-week high and low bound. At its 52-week peak, CIMIC traded at $51.50 per share.

It now trades ~40% lower than that.

Broker thoughts

As a result of this Middle Eastern exit, Macquarie has lowered their share price target on CIMIC to $32.49 per share, from $35.00 per share. The investment bank is currently ‘neutral’ on CIM – with a number of cash conversion uncertainties still hanging over the firm, noted analysts.

Interestingly, Macquarie further wrote:

‘We noted previously that CIM continues to guarantee BICC (Middle East) debt facilities and these had gone up substantially to US$862m in 1H19, up from US$631m at 31 Dec 2018 and US$326m at 31 Dec 2017.’

UBS took a similar view to Macquarie today – noting that the market had been concerned about CIM’s BICC exposure for some time now.

‘We see some positive in CIMIC deciding to put the Middle East venture behind it, as in CIMIC's core market the outlook remains strong,’ UBS analysts however said.

Like Macquarie, in response to this exit, UBS has reduced their share price target on CIMIC CIM – now at $30.41 per share – down from $35.80 per share.

Ready to start hedging? Open an account with IG today to get started.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.