Is the Infrastructure Sector Poised for a Significant Boom?

With the latest federal budget detailing substantial investments to modernise transport networks, enhance urban infrastructure, and improve regional connectivity, is Australia's infrastructure industry on the verge of a major boom?

Which companies are making significant moves?

The signs suggest that this might be the case. Recently, several significant corporate acquisitions, such as Seven Group Holdings' purchase of Boral earlier this year, have indicated notable consolidation within the industry. Additionally, CSR's 62-year tenure on the ASX concluded with a $4.3 billion takeover approved in June 2024.

Major players are making significant moves, and if this trend continues, as I believe it will, the logical question becomes who's next? Here are three ASX-listed stocks that all exhibit the characteristics of potential takeover targets in this space.

Monadelphous Group (ASX: MND)

This leading engineering company has a strong presence in resources, energy, and infrastructure and is well-positioned to benefit from the government's recent investment initiatives. In its half-year results for 2024, MND increased revenue by 5.8 per cent, with a net profit of $30.1 million. Although the share price has been steadily rising since 2022, it has experienced a decline of around 17 per cent over the last year, presenting an opportunity to acquire the stock at a discount.

NRW Holdings (ASX: NWH)

NWH offers a wide range of services, including civil, mining, and urban infrastructure. The company's recent acquisitions and expansion into new markets have enhanced its capabilities, making it attractive to major players. NRW Holdings expects revenue of $2.9 billion for FY2024 and with the share price recently surpassing the January 2023 high, buyer support is strong, limiting potential medium-term downside risk for those looking to invest.

MAAS Group (ASX: MGH)

MGH is a diversified industrial group with interests in construction materials, civil construction, and real estate. The company's strategic focus on regional infrastructure projects aligns well with the government's investment priorities. MAAS Group reported revenue of $805 million and a net profit of $66 million for FY23. Given its growth trajectory and regional focus, MGH could be an attractive target for larger companies looking to expand their footprint. The share price has recently corrected by 20 per cent, making it an appealing option at current prices.

What were the best and worst-performing sectors last week?

The best-performing sectors included Real Estate, up 1.74 per cent, followed by Consumer Staples, up 1.44 per cent and Health Care, up 1.12 per cent. The worst-performing sectors included Materials, down 2.24 per cent, followed by Information Technology, down 1.81 per cent and Energy, down 0.52 per cent.

The best performing stocks in the ASX top 100 included James Hardie, up 9.59 per cent, followed by Reliance World Corporation, up 7.73 per cent and Reece Limited up 6.98 per cent. The worst-performing stocks included Paladin Energy down 9.58 per cent, followed by Domino’s Pizza, down 6.49 per cent, and South 32, down 5.52 per cent.

What's next for the Australian stock market?

With the All-ordinaries Index recently breaking through to a new all-time high, the pressing question was whether sellers would step in to halt further gains. The answer was continued buying, which propelled the market over one per cent higher last week.

As a result, July is now witnessing the strongest single month this year, and we're only halfway through. So, what's next? Previously, I identified 8,400 to 8,600 points as potential resistance levels, and this could still be relevant in the short term. However, given the market's current strength, it's prudent to revise the long-term upside targets.

Considering the sideways movement since March and previous price cycles, a projected target of 9,000 points now seems very plausible. Supporting this projection is the fact that the materials and energy sectors have yet to experience significant upward momentum. Although there were signs of an upward move last week, they haven't sustained it this week.

If these sectors are merely taking a brief pause, then I expect further explosive upside movement in the coming weeks. Additionally, the healthcare sector has also broken through to new highs this week, which is excellent news for our market. As I mentioned last week, if you aren’t prepared for the explosive move ahead, you might miss the best opportunity of the year to secure substantial profits.

The good news is, it's still not too late, but time is ticking so make sure you're ready to capitalise on the fantastic opportunities the market is offering right now.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.