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With all of the terror spending by the Government and the build up of it’s defence assets, it got me thinking about Austal building ships for the US navy – the income will be in US dollars.
What are the experts thoughts on the stock as a medium to long term view?
It has had a bit of a rocky ride in the charts but appears to be kicking some goals in the US.
A: Thanks for the question.
I think you are right – Austal does seem to be kicking some goals. It has won some key US defence contracts, is seeking to develop a maintenance/service business that will provide an annuity style revenue, is paying down debt, and its order book is at record levels. Further, it should be a beneficiary of any further fall in the AUD.
The share price has had a good run in the last 12 to 18 months – so something to watch out for.
Not sure that I really like the “order” risk in their business (it is very lumpy) – if they can develop a service/repair business around the shipbuilding, the market will re-rate.
The 2 brokers who follow it (Macquarie and JP Morgan) have outperform/overweight recommendations respectively, with a consensus target price of $1.44. It is trading on a multiple of 10.3.
A stock to watch – and for me, maybe to buy in market weakness.
