multiple million dollar contract, page-4

I am a long term investor in ASB and I write to add my views to the recent comments.

lloyd200710 - Seems to me there is now good interest in this stock with the share price in a good uptrend.

alannnnnnn - Every country has the duty to have a standing military because history has proven if it does not it will be invaded. So I do not believe it is immoral to invest in Austal because it is building boats for the USA Navy.

Pioupiou - In my view ASB is underpriced due to its poor performance over the last few years. These problems (loss at Henderson, loss on first and second JHSV's and too much infrastucture debt)have now been overcome and I look forward to significant increased profits over the next few years. Contrary to your statement I do expect higher profitability from Austals increasing revenue.

Seems to me the market is now pricing ASB with an underlying EPS in 13/14 of upto 10 cents and a PER of about 10 giving a current price of about $1. My analysis has ASB with an underlying EPS of well over 11 cents due to much improved earning at Henderson. But the big unrecognised factor is the Other Comprehensive Income shown on page 6 of the half year report. This multi-million foreign curreny translation should be added to the profit and loss to get a true picture of Austals earnings. I understand in future years the foreign ex will be added to the profit and loss.

My analysis has ASB having significant earning growth in 14/15 and 15/16 due to increased margins in USA, increasing work at Henderson and increasing work at the Service Division. The Philipines will plod along with low profits until such time as the large commercial ferry market recovers.

Now in 16/17 the JHSV contract with wind up but it is highly likely the USA Navy will order more JHSV's. The USA Navy are now experimenting using these boat as mine detectors and other Navies (Japan) are showing an interest.

The currest work for 10 LCS's will continue towards the end of this decade and then the extra 8 boats (4 for ASB and 4 for Lockheed Martin) will provide work for ASB into the next decade. Beyond that it looks increasing likely the Pentagon requirement "for a small boat consistent with the capabilities of a frigate" will be met with a modified LCS. That is a LCS modifed to be less modular with bigger guns and better sensors.

In my view ASB will be rerated by the market probably after the full year results. I think ASB, in line with other military suppliers should have a PER of about 12 and this will put the share price nicely higher.