Austal Limited

ASB Details

1HFY22 Financial and Operational Summary: Austal Limited (ASX: ASB) is involved in the designing, manufacturing, and support of high-performance vessels for commercial and defence customers globally. During 1HFY22, ASB posted the highest EBIT figure in spite of the expected decrease in revenue. The earnings result showcased an ability to continuously improve its shipbuilding processes to efficiently achieve key milestones and successfully deliver shipbuilding and sustainment programs across US and Australasia operations.

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: The company’s operation could be impacted by any macro-economic events like COVID-19. The company is exposed to foreign currency risk as it has operations in multiple geographies.

Outlook: ASB expects continued strong EBIT margin for FY22, which would be supported by increased operational efficiencies and risk mitigation in its USA shipbuilding and support segments. This is signalling to strong conversion of earnings from its order book of $2.2 billion.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of ASB is trading below its 52-week low-high average of $1.610 - $2.580, respectively. The stock has been corrected by ~4.34% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average P/E multiple, considering macroeconomic uncertainties, forex headwinds, etc. For the purpose of valuation, peers such as Electro Optic Systems Holdings Ltd (ASX: EOS), PTB Group Ltd (ASX: PTB), and Quickstep Holdings Ltd (ASX: QHL) have been considered. Considering the expected upside in valuation, decent performance in 1HFY22, decent order book, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.925, as on 03 March 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

ASB Daily Technical Chart, Data Source: REFINITIV 

Electro Optic Systems Holdings Limited

EOS Details

New Satellite Design: Electro Optic Systems Holdings Limited (ASX: EOS) is in designing, developing and production of advanced electro-optic technology devices and systems for the space and defence markets. As announced on 25 February 2022, EOS’s wholly owned subsidiary SpaceLink has attained a new, smaller, communication satellite design which enables accelerated profitability at a significantly reduced cost.

FY21 Financial Summary: During the year ended 31 December 2021, the company witnessed decent performance, supported by rising revenue and improving EBIT performance depicted by the below picture:

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: The company’s financial performance could be impacted by negative movement in foreign currency. In addition, any change in technology may impact its business growth.

Outlook: The company seems to be well-positioned to support allies currently under intense national security pressure. EOS is optimistic about attractive SpaceLink opportunity, whereby it invested $37 million in SpaceLink to ramp up engineering and business development.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of EOS is trading near to its 52-week low level of $1.725, offering a decent opportunity for accumulation. The stock of EOS has been corrected by ~18.51% in the one three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ median EV/Sales multiple, considering rising revenue, and business margins, etc. For the purpose of valuation, peers such as Quickstep Holdings Ltd (ASX: QHL), Orbital Corporation Ltd (ASX: OEC) and PTB Group Ltd (ASX: PTB) have been considered. Considering the expected upside in valuation, decent performance in FY21, attractive outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.760 as on 03 March 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

EOS Daily Technical Chart, Data Source: REFINITIV 

BSA Limited

BSA Details

A Quick Look at 1HFY22: BSA Limited (ASX: BSA) provides contracting services to subscription TV and telecommunication companies who require satellite and telecommunication installation services. During 1HFY22, the company experienced growth in revenue, supported by the lifting of COVID-19 related restrictions with higher-margin complementary revenue (reactive work). In addition, the demand has been subdued over the past 24 months in most maintenance sectors, with a significant backlog of delayed recurring service work.

Financial Highlights (Source: Analysis by Kalkine Group)

Key Risks: BSA’s operational and financial performance could be impacted by the disruptions in the available liquidity as its operations require an ample amount of capital. The company is exposed to a risk arising from the uncertainties in relation to the COVID-19 pandemic.

Outlook: By F24, the company is targeting revenue of $750 million and EBITDA margin in the range of 6%-8%. This would be mainly backed by a combination of organic growth in the existing market and execution of inorganic growth initiatives.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of BSA is trading at par to its 52-week low level of $0.105, offering a decent opportunity for accumulation. The stock has been corrected by ~45.99% in the past one month. The stock has been valued using an EV/EBITDA multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/EBITDA multiple, considering the COVID-19 disruptions and losses in business. For the purpose of valuation, peers such as SG Fleet Group Ltd (ASX: SGF), Millennium Services Group Ltd (ASX: MIL), Uniti Group Ltd (ASX: UWL), and others have been considered. Considering the expected upside in valuation, improving debt to equity ratio, decent liquidity position, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.105, down by ~16.001% as on 03 March 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BSA Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined:

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.