Maas Group (ASX:MGH): Why investors should keep a keen eye on it in FY26!

It is a tough time to be a construction company, but Maas Group (ASX:MGH) hasn’t fared that bad all things considered. This company, which is roughly double its IPO price, recorded another good FY25 result, and investors took note of it. But the company is still very reasonably priced.

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Meet Maas Group

Maas Group is an industrial company that offers property development services, construction materials and equipment. Being vertically integrated in this way enables the company to capture additional margin opportunities, cost synergies and provides the ability to mitigate risks across all points of the business cycle.

Maas’ clients include regional councils, state governments and several key construction companies, including Lendlease and Fulton Hogan. Projects to which Maas has contributed include the WestConnex, the Brisbane Cross River Rail and the Melbourne Metro Tunnel – in each instance providing equipment. But it also undertakes work in regional areas, especially in NSW.   

It is based at Dubbo and is named after its founder Wes who retains a stake of over 50% in the business. Wes played for South Sydney and started the business after his career, commencing with one Bobcat and a tipper truck. The business first focused on civil construction and plant hire, but gradually expanded into supplying construction materials. Key to its success was virtual integration which was possible due to the business’ cash flows. It has also been acquiring land for residential development, particularly in regional NSW.

Maas Group listed just before Christmas 2020 in a deal that capitalised the company at $529.9m. It is now capitalised at more than $1.5bn.

A good performance since listing

Since its listing Maas has had minimal disruption to its operations due to COVID-19 and has benefited from several factors, including government stimulus, the resources boom and strong demand for regional property. Many companies benefited from just one of these factors, but Maas has gained from several factors all at once because of its broader exposure.

Furthermore, it has not been as badly impacted by supply chain issues as some of its peers, again a testament to its broader exposure, but also to its strategic acquisitions. For instance, the Dubbo-based Astley’s Plumbing and Hardware business which the company singled out as one that would provide supply chain security in relation to building materials.  

In FY21, Maas achieved $283.4m in revenue, a $39.7m NPAT and $75.9m EBITDA on a pro forma basis, all up by an average of 22%. In FY22, it made $539.1m (up 90%) and made a $61.6m NPAT (up 77%). In FY23, it made $801m in revenue (up 49%) and a $68.9m profit (up 13%). Then in FY24, the company made $881.9m in revenue (up 11%) and an $84.3m profit (up 22%). It paid a dividend of 6.5c per share, reflecting its policy of a 20-40% NPAT payout.

Sounds good doesn’t it? Granted, the revenue growth was slower in FY24 than the preceding years, but we’d still take that in light of the industry’s struggles. Of course, different divisions have had different fortune. Earnings in construction materials and commercial real estate were solid, but residential real estate has been struggling due to reduced land settlements.

FY25 results were within guidance, but NPAT falls

In its most recent results, Maas made $997.4m revenue (up 13%) and $219.4m EBITDA (up 4% and capping off 28% CAGR in 6 financial years). But its NPAT retreated by 7% to $78.5m and its EPS by 12% to $0.227. During FY25, the company made several acquisitions that expanded its reach into new areas and into new capabilities. The construction materials and commercial real estate businesses saw >30% EBITDA growth, but civil construction and hire EBITDA fell 35% due to renewable and transmission project delays and Residential real estate EBITDA fell 9%. The company paid a 7c per share dividend across the year, representing 8% growth and within the 20-40% of its profit threshold.

The company warned that renewable energy project delays would improve and this would boost not just the civil construction and hire business, but its already solid construction materials division. It also said pent up housing demand, low rental vacancies and ongoing rate cuts could help too. The company’s guidance for FY26 was not specific but promised ‘continued solid revenue and profit growth’ due to the aforementioned factors as well as full year contributions from earlier acquisitions. More specific guidance was promised at its AGM.

Consensus estimates call for a $4.90 per share share price, a 15% premium. For FY26, analysts expect $1.2bn revenue, $268.44m EBITDA and $0.29 EPS, all of which were up over 20%. For FY27, analysts expect $1.3bn revenue, $302.3m EBITDA and $0.36 EPS, the first two of which are up 12% with the latter up over 20% again. These estimate place the company at 8.5x EV/EBITDA, 15x PEG and 0.6x PEG.

Our view of Maas Group

We acknowledge construction sentiment is quite low at the moment and this is a big risk with the stock as interest rates have risen so much and remain elevated. But we take heart in the fact that while construction companies are dropping like flies, Maas Group is thriving.

Other risks include safety issues and ESG impacts. But we take heart in the fact that it is developing a number of sustainability initiatives such as sustainable asphalt production, recycling concrete production and a new trial to use hybrid hydrogen as fuel replacement.

The bottom line is, this is an impressive company that is thriving at a time many of its peers are not and if it can make hay while the sun wasn’t shining, surely it can when the sun is shining (i.e. with lower interest rates and with the issues plaguing the construction sector lessened). So keep your eye on Maas!