ASB - Austal Limited

[McLovin]

Looks like the bankers got a bit nervous with respect to their US navy / fiscal cliff exposure?

The US Navy has been shrinking since the end of the cold war. I have no idea how many ships ASB sell but I do know that InCat (the Tasmanian super fast catamarans builder) can have their best or worst year depending on whether or not they sell a single ship. Their IP is outstanding but shipbuilding is a tough capital intensive business. You need to make large investments into PP&E, and then function on fairly lumpy sales. This gets worse the bigger the boats that you're building.

 

[skc]

The US Navy has been shrinking since the end of the cold war. I have no idea how many ships ASB sell but I do know that InCat (the Tasmanian super fast catamarans builder) can have their best or worst year depending on whether or not they sell a single ship. Their IP is outstanding but shipbuilding is a tough capital intensive business. You need to make large investments into PP&E, and then function on fairly lumpy sales. This gets worse the bigger the boats that you're building.

There's 10 JHSV and 12 LCS (2 already built) for the US navy. They probably sell 1-5 other ships in a year - small cat/trimarans and ferries.

Agree with the rest. It makes Austal a difficult investment despite its IP. And on hindsight they didn't have the right capital structure to support the nature of the business.

 

[Ves]

The US Navy has been shrinking since the end of the cold war. I have no idea how many ships ASB sell but I do know that InCat (the Tasmanian super fast catamarans builder) can have their best or worst year depending on whether or not they sell a single ship. Their IP is outstanding but shipbuilding is a tough capital intensive business. You need to make large investments into PP&E, and then function on fairly lumpy sales. This gets worse the bigger the boats that you're building.

Have you ever had a look at Carnival (CCV on the NYSE) by any chance? It's actually a pretty interesting study, in the same broader industry. Geoff Gannon has written some stuff on it if you want to skip to the meat of the whole picture.

 

[skc]

Have you ever had a look at Carnival (CCV on the NYSE) by any chance? It's actually a pretty interesting study, in the same broader industry. Geoff Gannon has written some stuff on it if you want to skip to the meat of the whole picture.

Isn't that the company with the Italian cruiser that sunk?

 

[trillionaire#1]

Isn't that the company with the Italian cruiser that sunk?

Costa cruises were the operators (carnival is the parent company i believe)

carnivals- SP dropped about 10 percent after the accident ,yet is up more than 25%since.

 

[Ves]

Isn't that the company with the Italian cruiser that sunk?

Yes - the articles were before this happened. They seem to generate pretty good free cash flow for a capital intensive business. I find it interesting for that reason - not that I would buy it.

 

[So_Cynical]

The US Navy has been shrinking since the end of the cold war.

My thinking on this and why Austal will prosper is that while the US Navy is shrinking its also up-scaling technologically and strategically...the days of the Battleship are over and for that matter cruisers are also pretty much redundant, the modern US navy will be smaller, lighter, faster, cheaper to operate and more manoeuvrable.

Littoral type combat ships and other fast alloy craft will be very much a part of the new US navy going forward, Austal is at the forward end of the curve and building what the US navy wants, in the US.

 

[McLovin]

Have you ever had a look at Carnival (CCV on the NYSE) by any chance? It's actually a pretty interesting study, in the same broader industry. Geoff Gannon has written some stuff on it if you want to skip to the meat of the whole picture.

Thanks, had a quick look but will read it in more detail later.

My thinking on this and why Austal will prosper is that while the US Navy is shrinking its also up-scaling technologically and strategically...the days of the Battleship are over and for that matter cruisers are also pretty much redundant, the modern US navy will be smaller, lighter, faster, cheaper to operate and more manoeuvrable.

Littoral type combat ships and other fast alloy craft will be very much a part of the new US navy going forward, Austal is at the forward end of the curve and building what the US navy wants, in the US.

You're probably right, I disagree that cruisers are redudant though. The main strike force of the US navy is it's carrier battle groups. One question, if China and India are the new threat for the 21st century then wouldn't the US need to be building blue water capacity rather than littoral? It's not like they're going to be able to get near those countries and any battle will likely take place out at sea.

Oh, and does any navy still run battleships?

 

[So_Cynical]

One question, if China and India are the new threat for the 21st century then wouldn't the US need to be building blue water capacity rather than littoral? It's not like they're going to be able to get near those countries and any battle will likely take place out at sea.

Oh, and does any navy still run battleships?

What will Naval warfare look like in the decades to come? will the Carrier task force still be relevant? How many (38 million dollar) drones does it take to sink a ($6.2 billion dollar) carrier? what's a 2 carrier 180 plane task force worth now? 50 or 60 billion? and what's it cost to run that?

Smarter, Smaller, Lighter, Faster, Cheaper is the future.

 

[So_Cynical]

Some good news for Austal today, business as usual.

Austal USA’s order backlog has grown by approximately US$681.7 million as a result of two additional Littoral Combat Ship (LCS) contract options being exercised by the United States Navy.

http://www.austal.com/en/media/medi...-Austal-LCS-Team-to-build-two-more-ships.aspx

Another 700 million worth of work to add to the backlog...just have to get those costs under control.

 

[pixel]

Some good news for Austal today, business as usual.




http://www.austal.com/en/media/medi...-Austal-LCS-Team-to-build-two-more-ships.aspx

Another 700 million worth of work to add to the backlog...just have to get those costs under control.

More good news today: Up the Earnings Guidance
Market likes to hear that. (So do I; topped up earlier, although there is a chance the gap might be filled.)

 

[piggybank]

The reliability of the Navy’s first three Littoral Combat Ships “has been degraded by frequent critical system failures” in early operations, the Pentagon’s chief weapons tester said. Testing in fiscal 2013 and analysis of data from fiscal 2012 “continued to identify deficiencies in the LCS” and “essential mission systems,” such as mine-hunting equipment, Michael Gilmore, the Defense Department’s director of operational testing, said in a section of his annual report obtained by Bloomberg News.

The report documents challenges the Navy is facing in producing the vessels, designed to operate in shallow coastal waters, and in defending its plans for the troubled ship after a Jan. 6 Pentagon directive to reduce the number of ships it purchases by 20 to 32. The initial plan to build 52 ships by 2026, in two versions made by Lockheed Martin Corp. (LMT) and Austal Ltd. (ASB), has drawn a growing list of questions about the vessels’ manning, mission, firepower, defenses and survivability as costs have soared amid Pentagon budget cuts. The total cost to develop and build the ships is currently projected at $32 billion.

If you want to read the remainder of the article, then click on this link:- http://www.bloomberg.com/news/2014-01-16/pentagon-said-to-order-cutting-littoral-ships-by-20.html

​

Up just over 5.5% to close @ 93c, it's highest close since November 2012.

​

 

[So_Cynical]

Up just over 5.5% to close @ 93c, it's highest close since November 2012.

So despite all the commentary the SP is striking higher and the up trend continues...my super fund position approaches break even...time + Quality wins again.

 

[pixel]

So despite all the commentary the SP is striking higher and the up trend continues...my super fund position approaches break even...time + Quality wins again.

I've been thinking along similar lines, S_C;
It;s probably some American interest groups that can't stand the thought of a non-US company doing as good, if not better a job.

The total cost to develop and build the ships is currently projected at $32 billion.

Shock Horror! That's about ten days' worth of bonds the Fed has been buying for years in the name of QE.

So far, the chart seems to suggest a breakout. If 93c becomes support, we should fast get back into the "Serious Stock" region above $1.

 

[beachlife]

So an article saying the boats have problems causes the stock to do that?

 

[So_Cynical]

(1st-September-2012) who knows when the SP will stop falling? i certainly don't...but i do get it right 80% of the time given a 6 months time frame.

I would reckon i have a 90% 'success' average when the time frame is pushed out to 2 years...as supported by today's share price action with Austal trading above $1 for the first time in 16 months, putting my ASB position in profit by about 3%.

Once again i was in way to early and once again rescued by a large average down combined with patience and no leverage costs, and the fact that Austal was and is a good company with a very viable business.

The orders just keep on coming.

http://www.austal.com/en/media/medi...-funds-two-further-Littoral-Combat-Ships.aspx

http://www.austal.com/en/media/medi...o-72m-High-Speed-Defence-Support-Vessels.aspx

 

[So_Cynical]

Part exit today @ 1.14 sold most of my expensive parcel ($1.41) and a few of my cheap parcel ($0.50) for a break even result, leaving the rest of my shares with an average price of 71 cents and an open profit of 60% ~ really should of loaded up at 50 cents.

Austal just continues to build its business, US Navy continues to re position its fleet and the world ship building industry continues its slow recovery...the picture below is of the newly launched Destroyer USS Zumwalt, NOT built by Austal and not an alloy ship but is a clear indication of the future direction of the US navy.

http://www.independent.co.uk/news/w...as-a-fishing-boat-on-enemy-radar-9257304.html
~

 

[So_Cynical]

A recently produced National geographic documentary about the US Navy's new Littoral combat ships, featuring the Austal built USS Independence.
~

 

[So_Cynical]

(13th-May-2014) Part exit today @ 1.14 sold most of my expensive parcel ($1.41) and a few of my cheap parcel ($0.50) for a break even result, leaving the rest of my shares with an average price of 71 cents and an open profit of 60% ~ really should of loaded up at 50 cents.

I totally sold out today @ $1.375 for a profit of around 95% ~ good result overall however my portfolio income is suffering due to holding so many non dividend paying stocks, time for a bit of rebalancing and i feel that with so many positive announcements for ASB over the last 16 months that its time for a run of negatives.

Good luck to the holders.

 

[pixel]

yesterday's gap closed to $1.91
resistance broken > $1.95
not much on offer sub-$2

I'm accumulating with a tentative target $2.12, the High of May 5th.
Stop = Close below $1.91