Austal Limited

 

ASB Details
 
Delivery of 5^th Guardian Class Patrol Boat: Austal Limited (ASX: ASB) is in the business of designing, manufacturing and supporting of high-performance vessels for commercial and defence customers worldwide. As on November 12, 2019, the market capitalisation of the company stood at ~$1.58 billion. The company has recently announced the delivery of the fifth Guardian Class Patrol Boat to the Australian Department of Defence in less than 12 months. The company also announced that the future USS Kansas City has completed the acceptance trials in the Gulf of Mexico, which included comprehensive testing by an Austal USA-led industry team while underway, demonstrating to the Navy the successful operation of the ship’s major systems and equipment.
 
Record Result Across Metrics: During FY19, operating revenue of the company increased from $1,390.5 million in FY 2018 to $1,852 million, underpinned by strength of USA new vessel orders, expansion of commercial shipbuilding, revenue growth in the USA and favourable foreign exchange. EBIT (earnings before interest and taxes) and NPAT (Net profit after tax) of the company went up by 46% and 64%, and stood at $92.8 million and $61.4 million, respectively. This led to an increase in EPS by 62% to 17.6 cents.


Financial Performance (Source: Company Reports)
 
What to Expect: The company has provided guidance for FY20 wherein, it expects the group revenue not to be less than $1.9 billion and Group EBIT not less than $105 million. It has also increased the US Shipbuilding EBIT margin and expects it to come in the range of 7.5-8.5%.The company has also set its business priorities for the coming year and plans to expand its footprint in the US through participation in new USN programs. It also prioritises the group-wide cost efficiencies and to build ships through an expansion of R&D investment.

Stock Recommendation: At the current market price of $4.530, the stock is trading at a price to earnings multiple of 25.230x, higher than the industry median of 11.6x. The stock is available at an EV/EBITDA multiple of 10.4x as compared to the industry median of 6.7x. Over a period of six months, the stock of the company has risen 68.82%, and is currently trading close to its 52-week high of $4.630.  Thus, considering the stretched valuations, price movement in the last six months and current trading levels, we have an “Expensive” rating on the stock at the current price of $4.530, up 2.027% on November 12, 2019.

 
ASB Daily Technical Chart (Source: Thomson Reuters)
 
 
 

Monadelphous Group Limited

MND Details

Issue of Options and Notice of AGM: Monadelphous Group Limited (ASX: MND) is a diversified company, operating in the resources, energy and infrastructure industry. The market capitalisation of the company as on 12 November 2019 stood at ~$1.49 billion. The company has recently offered 2,450,000 unlisted options at an exercise price of $14.84. Annual General Meeting 2019 of the company is to be held on November 19, 2019 to discuss the financial and other reports.

Financial Highlights: Monadelphous Group Limited reported annual revenue of $1,608.3 million, with growth in maintenance and infrastructure, and lower levels of resources construction activity. The company also secured new contracts and extensions of $1.35 billion, including $400 million that were secured post 30 June 2019. During the year ended 30 June 2019, underlying NPAT (net profit after Tax) stood at $57.4 million as compared to $71.5 million in the prior period. This was mainly due to the company’s plant and equipment fleet renewal program over recent years, which resulted in an increased depreciation charge for the year, combined with a reduction in net interest earned.


Financial Performance (Source: Company Reports)

What to Expect From MND: It was mentioned that the return of more favourable core market conditions is expected to give a robust pipeline of the opportunities. The company also anticipates the maintenance activity in the resources market to remain strong.The company added that LNG prospects are expected to be favourable in the years to come.

Stock Recommendation: The stock generated a return of 15.90% on YTD basis and 6.89% in the past one month. The stock is currently trading below the average of its 52-week high and low of $12.510 - $20.070. Gross margin stood at 8.7% in FY19, reflecting a marginal rise from FY18 figure of 8.4%. Net margin of the company stood at 3.5%, higher than the industry median of 2.7%. This indicates that the company is managing its costs well and is capable of converting its revenue into profit. The return on equity during the year came in at 12.8% as compared to the industry median of 9.9%. Taking on account the current trading levels, margin scenario, decent prospects of the company, higher RoE, etc., we recommend a “Buy” rating on the stock at the current market price of $15.570, down 1.58% on November 12, 2019.

 
MND Daily Technical Chart (Source: Thomson Reuters)

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