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Diploma Group Secures $16M Construction Agreement

Diploma Group (ASX:DGX) has executed a binding Heads of Agreement with Sirona Capital Management Pty Ltd to construct a $16 million Quest Serviced Apartment development on Pakenham Street, Fremantle.

This follows on the company winning two construction contracts valued at $40 million earlier this month.

It also validates Proactive Investors belief that the company has the potential to continue building its construction book in the near-term.

Development Details

The development will consist of 73 rooms with 122 keys over 5 levels plus basement to be integrated with an existing 1920's heritage fa├žade.

The project, designed by architects Bollig Design Group is expected to commence forward works in September 2014 with a completion date of March 2016.

Diploma will work collaboratively with the design team on an exclusive basis over the coming months to achieve the target construction price at which time a formal construction contract will be entered into.

Recent Contract Wins

The agreement follows on the company winning two construction contracts valued at $40 million earlier this month and three contracts worth $66 million last month.

Diploma is building a total of 123 apartments - the Empire Apartments in Perry Lakes, Perth - under the $40 million contracts.

The three contracts consist of a $17 million contract for the construction of a development of 34 residences and office space in Mount Pleasant for new client Norup+Wilson, a $38 million appointment to construct 109 apartments, and an $11 million Quest Serviced Apartment development.

Analysis

While not yet a formal construction contract, the binding Heads of Agreement to construct a $16 million Quest Serviced Apartment development on Pakenham Street, Fremantle, is a step forward towards building Diploma Group's construction book.

This promises to be value accretive on confirmation, supporting its future results.

Proactive Investors retains its share price target of $0.047 - $0.054, and expects the contract wins to keep coming for Diploma in the near-term.

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.