ASX:ASB
Austal Ltd
Investment Summary
The fund managers believe that Austal Ltd (ASB) is strategically positioned due to its strong ties with government-backed defence contracts, reflecting secure long-term revenue streams. With a recent share price increase of 13.7%, they note that ASB's specialization in combat and patrol vessels places it advantageously amid rising global military tensions. Notably, contracts worth US$152 million and US$450 million from the US Navy and General Dynamics Electric Boat are expected to bolster Austal's future earnings through maintenance contracts, providing more predictable revenue. Despite some recent share price fluctuations attributed to profit-taking, the company continues to expand its capabilities in defence and commercial construction. Key investments in autonomous technology further enhance its competitive position. Following substantial US government funding and a significant contract, Austal's market capitalization rose by approximately $200 million, reinforcing its operational capacity. Overall, the fund managers see potential for sustained order growth and a positive trajectory for Austal's earnings, projecting a recovery in performance as the company navigates shipbuilding constraints.
Commentary From The Managers
Endeavor Asset Management
28 Feb 2025
$4.25
- Endeavor Asset Management exited their position in shipbuilder Austal (ASB) after a strong share performance.
- The company's first-half FY25 results highlighted a robust cash position and accelerating earnings momentum.
- This financial performance acted as a catalyst for broader investor recognition.
- After the results, the stock reached a fair EBIT multiple based on near-term opportunities.
- Consequently, they seized the chance to lock in gains by selling at $4.09 per share.
- This represented a substantial return from their initial purchase price of $2.83 per share.
Endeavor Asset Management
31 Jan 2025
$3.83
- Austal Ltd. (ASB) has rallied 24% following a significant US$450 million contract from General Dynamics.
- This contract funds a facility for producing submarine modules, enhancing Austal's operational capacity.
- Market capitalization increased by approximately $200 million, reaching $1 billion.
- The contract yields an A$670 million infrastructure benefit.
- Endeavor Asset Management initiated a position at $2.84 per share, recognizing market undervaluation.
- U.S. Navy and other defense agencies face shipbuilding constraints, particularly in submarine production.
- Domestic shipbuilders like Austal benefit from regulations that prohibit overseas construction of military vessels.
- Endeavor expects sustained order growth for Austal, driving revenue and margin expansion.
- Improved earnings quality may lead to a re-rating of ASB shares.
- Austal currently trades at 15x consensus FY26 EBIT, with shares up 35% since the initial investment.
Endeavor Asset Management
30 Nov 2024
$3.15
- Austal's shares declined in November, likely due to profit taking after a recent strong rally.
- Austal was a bottom contributor to the portfolio during this period.
- Despite some cost challenges, the company continues to secure new contracts.
- Austal is expanding its capabilities in defence and commercial vessel construction.
- Strategic investments in autonomous vessel technology aim to enhance its competitive position.
- Diversification into steel shipbuilding is part of Austal's strategy.
- Endeavor Asset Management is monitoring Austal's efforts to improve efficiency and project execution.
- There is anticipation of a potential turnaround in performance.
Endeavor Asset Management
31 Oct 2024
$3.31
- Austal Limited (ASB) was the Growth Equities Portfolio’s top performing investment in October, achieving a 13.7% share price increase.
- ASB is an Australian owned defence contractor specializing in vessel platforms like combat ships, patrol vessels, and submarines.
- The business model typically involves upfront capex requirements and long government backed contracts, leading to variable returns on capital.
- Heightened global military tensions have positioned Austal as a leading supplier to the US and Australian governments.
- Recent contracts awarded include $152 million from the US Navy and $450 million from General Dynamics Electric Boat, supporting submarine production goals.
- Endeavor Asset Management believes ASB is well positioned for future maintenance contracts, which could enhance its earnings stability and quality.
Endeavor Asset Management
31 Oct 2024
$3.31
- Austal Limited (ASB) was a top performer in October, with a 13.7% increase in share price.
- ASB is recognized as a best in class Australian-owned defense contractor specializing in vessels such as combat ships and submarines.
- The business model is capex heavy upfront with long-term government-backed defense contracts.
- Given rising global economic and military tensions, Austal is positioned to supply defense vessel requirements to the US and Australian governments.
- Recent contracts awarded include a US$152 million contract from the US Navy and a US$450 million contract from General Dynamics Electric Boat.
- These contracts support the US Navy’s goal of producing one Columbia-class and two Virginia-class submarines annually.
- Endeavor Asset Management believes ASB is set to benefit from lucrative maintenance contracts for these submarines.
- The anticipated maintenance contracts may lead to more predictable and higher quality earnings compared to ASB's historical performance.
Endeavor Asset Management
30 Sept 2024
$2.91
- Endeavor Asset Management initiated a position in Austal Limited (ASB).
- ASB is a shipbuilder with significant exposure to defence contracts.
- The fund manager highlights an interest in sectors with secure long-term revenue streams.
- Government spending is a key driver for these revenue streams.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.