Post by ferryfast admin on Jan 25, 2008 17:24:34 GMT -5
Austal Ltd (ASB) $2.23 > www.austal.com/
Tim Blue
The Australian
www.theaustralian.news.com.au/story/0,25197,23058700-23634,00.html
Jan. 16, 2008
SHIPBUILDER Austal has broken a lot of hearts over the years as its share price has gone up and down on the tides of broken promises and busted contracts. It disappointed again in November when the US Navy cancelled an order for a shore-hugging warship, which must put a ding into earnings and a question mark over its newish US yard.
Perhaps more work will be found but the market thinks that is unlikely. Yet Macquarie Capital and UBS both have buys on it with $3.45 and $3.85 targets respectively in 12 months.
The US order was for a second littoral combat ship, to operate in shallow waters in mine counter-measure and anti-submarine warfare. The first - an Austal prototype based on a trimaran hull - is still in the running to be chosen by the US Navy as the basis for a 55-vessel fleet of the type to be built over the next decade. The boat is 70 per cent complete and due for launch within a few months.
Austal is General Dynamics' sub-contractor and is competing with another consortium led by Lockheed Martin to design and build the fleet.
The deal for the second prototype fell over when the General Dynamics team was asked to change from a cost-price contract to a fixed-price incentive contract. Chairman John Rothwell maintains the 55-vessel program is very much alive and well.
"We have lots of confidence we will win a good share of the vessels," Rothwell said at the time. "We put our price in to General Dynamics, and the navy and General Dynamics just couldn't agree."
Austal meanwhile has finished a $350 million contract to build 14 patrol boats for the Royal Australian Navy as well as ferries for Turkey and Oman. Altogether it should have a strong first-half profit and balance sheet, according to Macquarie Capital. "We estimate the US yard will be flat out for at least the next 10 months finishing the first littoral combat ship and a second Hawaiian ferry.
"Any gap in its order book for the US yard for the financial year 2009 could be filled by a high-speed vessel, commercial work or another littoral combat ship if one comes out of the current US budget process."
Criterion has for too long been dazzled by the US Navy promise. Even at this price, it's still only a hold.