The $800m LAND 8710 Phase 1 Australian defence tender is a major opportunity for Austal to fill its pipeline post its Cape Class and Guardian Class programs expected to be completed in FY24, the broker suggests. Austal is not however the only bidder.
But a consortium of Navantia and Rheinmetall has not been selected, which leaves only BMT as competition, unless there are others as yet unknown.
The broker estimates the market is only affording Austal a 3x forward PE for its shipbuilding business, which is a big discount to US peers. Buy and $3.35 target retained.
Sector: Capital Goods.
Target price is $3.35.Current Price is $2.17. Difference: $1.18 – (brackets indicate current price is over target). If ASB meets the Citi target it will return approximately 35% (excluding dividends, fees and charges – negative figures indicate an expected loss).
