ASB’s key client is the US Navy, and the US delivered nearly 90% of segment EBIT in 1H20. We think this provides some stability, visibility and defensive qualities in an uncertain world. Sharp share price falls puts ASB on trading metrics now more attractive relative to peers (our key sticking point previously) and we upgrade to BUY (prior HOLD). Our valuation falls to $4.00 (prior $4.40) reflecting comps trading metrics. Coronavirus aside, a key risk is the FFG(X) tender outcome due later this year, although we would expect Mobile to remain a busy shipyard in the longer term regardless of this outcome.
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