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Austal Limited (ASB) - Growing Confidence In US Margin

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Solid performance from the US last financial year did two things. It underpinned $58.7m group underlying EBIT in FY17 and gave ASB the confidence to upgrade margin guidance for US shipbuilding from 5-7% to 6-8%. US ships’ revenue in FY17 was $849m, so it implies a meaningful uplift. It offsets current weak earnings in Australia and the Philippines, where work transition has impacted revenue and profit recognition. There is cause for optimism for both these regions given significant recent intake of ferry contracts and upcoming potential naval work. We expect a marked earnings pick-up in FY19, a year which could see all three regions delivering in tandem. It helps lift our valuation to $1.96 (prior $1.80) and brings us to upgrade to buy (prior hold).

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+61 8 9224 6888

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+852 3557 4888

 



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