Last week the prime minister unveiled an infrastructure spending package designed to fast-track approvals for 15 major projects, plus an additional $1.5 billion in spending. Included in the 15 large projects is the expansion of Olympic Dam, owned by BHP Group Ltd (ASX: BHP). Moreover, it includes a $10 billion freight rail project, the Marinus interconnector, and a range of other high-profile works.
This is not counting the spending already underway in Western Australia and other states. Aside from the potential to create jobs, the spending will also fund many construction and engineering companies. Below is a range of companies I have on a watchlist as potential beneficiaries of this spending.
Utility infrastructure
Service Stream Limited (ASX: SSM) is a great infrastructure services company. It grew out of the communications sector due to NBN spending. Today they are very active in the water, electricity and gas industries through acquisition and growth. Service Stream also has a 30% stake in the D4C consortium that has a 10-year contract with Sydney Water.
Parts and materials
No matter how this plays out, Boral Limited (ASX: BLD) is likely to see some benefit. Boral manufactures and sells infrastructure and construction materials in Australia and internationally. Thus, providing it access to stimulus packages globally. Boral has seen some hard years lately with stagnant sales and earnings growth. However, in recent days there has been a lot of excitement around the company.
Boral recently appointed a new CEO. One who, controversially, has a lot of experience from within the industry. In addition, Seven Group Holdings Ltd (ASX: SVW) recently took a 10% stake and is likely to take a board seat. Lastly, the company is undertaking a major review with Macquarie Capital and Flagstaff Partners.
Civil contractors
Of all of the civil engineering companies in Australia, I am leaning very strongly towards NRW Holdings Limited (ASX: NWH) as a key beneficiary. The approval’s fast track will impact the company’s Olympic Dam project contract. It is also likely to fast track a decision on the Bunbury Outer Ring Road project. This project is slated to cost $852 million in total and NRW is 1 of 2 proponents accepted to bid.
Foolish takeaway
The infrastructure spending stimulus across Australia is likely to create a mini-boom for construction, engineering and materials companies. While these 3 are the most probable beneficiaries, there will likely be a range of ASX companies lifted in the next 6 – 12 months.
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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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