Austal’s FY21 result was in line with expectations, with margin improvement in the US offset by margin deterioration in Australasia, mainly due to low margin emergent support work in second half FY21.
While management guided to $1.5bn, tracking lower on FY21, Credit Suisse views this as conservative, with near-term opportunities that the broker thinks could be crystallised in second half FY22: Notably, the Offshore Patrol Cutter (OPC) program that Austal is bidding for which is expected to be awarded in fourth quarter FY22.
The broker has cut FY22 earnings estimates -16%, on lower US revenue contribution and lower margin in Australasia due to reduced throughput and low margin emergent work.
Credit Suisse downgrades Austal to Neutral from outperform and the target price is lowered to $2.25 from $2.75.
Sector: Capital Goods.
Target price is $2.25.Current Price is $2.12. Difference: $0.13 – (brackets indicate current price is over target). If ASB meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges – negative figures indicate an expected loss).
