ASB - Austal Limited

In response to a suggestion to look at ASB for a break-out entry.

ASB: Thanks. I looked at this at the 1.90 and 2.10 (BO levels), but declined to buy. I've traded this successfully in the past (huge trend up), but it's prone to large spikes down. Not suitable (imo) for a tight exit stop, but trending up solidly. Great weekly chart since the BO back at 1.00.

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The ASB share price has had a wild ride over the last 6 years, reading thru the latest Allan Grey quarterly, they have a piece on Austal and a brave chart of the share price and their position size over time.

https://www.allangray.com.au/b/wp-c...-Gray-Australia-Quarterly-Report-Jun-2016.pdf

Contrarian investing, not everyone's cup of tea...balls of steel!
~

Following a spate of positive announcements, ASB has had a great run. Quite possibly, the US election has also helped, seeing that both candidates seemed committed to lift spending on military hardware. In vote-catching speak "Make America great again."



It does appear though that most of the promises have already been factored in, and ASB is pulling back from $2 resistance. Maybe close a gap or even two?
I'm off, waiting for the chart to show me the next support level.

Another breakout could come about soon. I'll set the alert for Break-and-hold $1.88.

Looks as though Austal, is spreading its wings, hopefully they keep the W.A shipyard going.

https://thewest.com.au/business/man...r-austals-new-vietnam-shipyard-ng-b881039640z

They have shown promise and resilience, but continue to lack growth, hopefully this turns the corner.

I don't hold ASB

This came up on my radar this weekend, Trawler and we're approaching a psychological resistance level.

A significant capitulation in SP in December 2015 resulted in a multi year grind to get up and over the the $2 mark.

But I quite like the shape of it now, chartwise. There is some negative divergence on some indicators but if you look at the last week or 2 of of trading bars there has been a bit of uncertainty and then a clear signal with Friday's bullish candle stepping up over the noise at 2.35.

So this takes us to an interesting trading level. Will we stall again below $2.50 or will the bulls come out?
Friday's action was reasonably strong. I thank now that ASB has pushed this high, there will be an attempt at the old highs. I might take a bite this week.

About ready to breakout again?

currently up 11% on earnings update
https://www.asx.com.au/asx/share-price-research/company/ASB

I bought in 2 weeks ago. Currently looking at where it closes to determine if I sell by end of day.

ASX Announcement today
1/05/2020 9:25:11 AM US Navy Frigate Program awarded to Austal competitor (uploaded)



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A mate was big into Austal years ago, another company that is always on the cusp of greatness, maybe the Australian Government could show a bit of patriotism and use them.

sptrawler said:

A mate was big into Austal years ago, another company that is always on the cusp of greatness, maybe the Australian Government could show a bit of patriotism and use them.

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but on the same day:
Construction of the six Capes for the RAN will commence immediately at Austal Australia’s Henderson, Western Australia, shipyard with deliveries scheduled from September 2021, then successively through to mid-2023.

Shipbuilder receives $350 million lifeline to construct six new patrol boats during COVID-19

https://www.abc.net.au/news/2020-05...t-navy-patrol-boats/12204238?section=business

Dona Ferentes said:

but on the same day:
Construction of the six Capes for the RAN will commence immediately at Austal Australia’s Henderson, Western Australia, shipyard with deliveries scheduled from September 2021, then successively through to mid-2023.

Shipbuilder receives $350 million lifeline to construct six new patrol boats during COVID-19

https://www.abc.net.au/news/2020-05...t-navy-patrol-boats/12204238?section=business

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There you go, they must have been reading ASF.
I havent checked on them since I finished work in 2011 and I remember the work mate saying they were around $2.40 and about to take off.
It would be great if Australia actually did make some ships, it was a while ago State ships were the go.

Seems to be a bit of a trend Breaker.

Reportably Profitable.

On my watch list.

Big contract win for ASB announced today.

Austal Limited (ASX:ASB) is pleased to announce Austal USA has been awarded a contract with a potential value of US$3.3 billion (A$4.35 billion), for the detail design and construction of up to 11 Offshore Patrol Cutters (OPC) for the United States Coast Guard (USCG).

The first vessel has been contracted by the US Coast Guard, with options for a further 10 vessels.

Construction is expected to commence in 2023.

Construction of the 110-metre OPC’s will take place at Austal USA’s new US$100 million steel shipbuilding facility in Mobile, Alabama.

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This is the sort of contract that is likely to lead to other large US based contracts down the track due to the high profile of the client and the size and scale of the contract. A great outcome for ASB and the market in loving it with the ASB share price up 22.5% so far today.

Results not yet out (sometime this week?); with ASB building on that big contract win, there was an update on Friday:
Austal has upgraded its forecast FY2022 EBIT to $120.7 million, subject to audit..

Austal executives charged with fraud on US navy projects​

The Securities and Exchange Commission accuses Austal USA’s former president, Craig Perciavalle, its current director of financial analysis, Joseph Runkel, and former director of the Littoral Combat Ships program, William Adams, of orchestrating an accounting fraud scheme from 2013 to 2016.

They artificially reduced cost estimates required to complete certain shipbuilding projects for the US Navy by tens of millions of dollars to meet Austal USA’s revenue budget and revenue projections.

The directors allegedly knew that Austal USA’s shipbuilding costs were rising and higher than planned, but they directed others to arbitrarily lower them.

- can of worms. Haven't been following ASB, but there have been stories of a Congressman wanting the company barred from competing in USA. Big money, especially as the defence spend is expanding.

Congressman Neal Dunn, who sits on the US Congress’ powerful new committee on China has said he wanted Australian company Austal stopped from building part of the nuclear-powered Virginia class submarines that are central to AUKUS Mr Dunn told the AFR that he wanted to speak to US Ambassador Kevin Rudd about the issue.

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“We would like to see our Navy completely disengaged from Austal,” Mr Dunn said.

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One I've thought about from time to time but never got close to buying. Usually noticed it well after it took off.

Another separate issue mentioned in the AFR:
"The Australian company is already under pressure in the US after concerns from a member of Congress that the company’s ties to Chinese groups place US naval security at risk."

A less than tempting long term chart? Current rally after the downtrend looking weak so far.
Decade Monthly

I am afraid their down down trend might carry on
When you think we have just decided to borrow and spend half a trillion on us flowing tin can,have an open war in Russia to empty the west pocket and equipment and going to see Taipei fall within a decade, this stock should be aiming for the sky.
What do you think @Sean K if you do not mind me pinging you on that one?

For transparency, the Plato Global Alpha Fund has been short Austal Ltd since the 6th of April, 2022.

One of the key motivations for being short was a high number of Red Flags. Plato has developed 100+ Red Flags to identify both potential landmines to avoid on the long side and potential short opportunities.

Most companies have zero or one Red Flags. Austal Ltd has nine, outlined below, which led us to initiating a short position.

Red Flag 1: Historic breaches of disclosure laws​

In 2022, the Federal Court of Australia ordered Austal Ltd to pay AUD$650,000 after finding the company contravened continuous disclosure laws.[1]

Austal Ltd admitted, and the Federal Court concurred, that in FY2016 the company had failed to disclose a probable profit write-back in excess of US$90 million. As any serious investor will tell you, there is always one more cockroach in the kitchen, and so it has proved for Austal.

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Red Flag 2: Very poor board rating​

Any organisation is only as good as the oversight provided by those at the top. An appropriate nautical metaphor might be that the fish rots from the head.

The failure to disclose likely profit write-downs in 2022 we believe was indicative of poor governance and oversight. Other than the chairman, the board has entirely turned over since 2016 when the disclosure breaches occurred. The current board consists of the chairman, the CEO, and four independent directors. The chairman is not independent and the nor is the lead director.[2]

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Of the independents it is not clear from the Austal home page that any have direct experience in the shipbuilding industry with the exception of Lee Goddard who has only been on the board for three months.[3]

Red Flag 3: Very poor audit rating​

We always keep an eye on the quality of a company’s audit. Not all income is created equally. If the audit process or report is poor, a haircut should be applied to reported income. The presence of accounting controversies, and the level of risk oversight and disclosures are key. In 2018, proxy advisory firm Ownership Matters, said Austal Ltd. did not disclose enough information about a Tax Office assessment for its 2017 accounts.
In 2021, a top US Austal executive resigned after an external investigation found the company had built Navy vessels with parts that did not meet military specifications, and underestimated costs.

Red Flag 4: Worst possible Institutional Shareholder Services (ISS) score for overall governance practices​

ISS provide industry leading governance evaluations based on audit quality, board composition, compensation practices, and shareholder rights. Austal received the worst possible score from ISS which did not exactly fill us with confidence.

Red Flag 5: A positive dividend, and negative operating cashflow​

Over the last twelve months, Austal Ltd paid out AUD$28.9m in dividends. Meanwhile, cash flow from operations (CFO) was negative AUD$13.7m. We are almost always bearish on companies with negative CFO, let alone if management thinks it is a good idea to be simultaneously paying out a near record dividend.

Red Flag 6: Health & Safety record​

Austal USA has been fined in the past for health and safety violations including improperly labelling hazardous chemicals and allowing workers to be overexposed to copper fumes. Back in 2013 in Australia, the Department of Fire and Emergency Services responded to a hydrogen sulphide gas leak at Clarence Beach Road in Henderson. A spokesperson for St John Ambulance said seven people at Austral ships were affected by the chemicals.

Red Flag 7: Historic cybersecurity breaches​

In November, 2018, Austal Ltd admitted that hackers had breached its defences and gained access to ship designs. Not a great look for a defence company… The attack resulted in an investigation by the Australian Cyber Security Centre, the country’s peak body. The post-mortem investigation revealed that passwords were bought on the dark web. The hackers probably should have saved their money. According to news-sources in 2020, the passwords were Password123 or Austal123…[4] this all speaks to poor internal controls and governance.

Red Flag 8: No insider buys in over 12 months​

According to both Reuters and Bloomberg Insider Transactions, there have been no purchases of Austal stock in over a year from the chairman, CEO, or any of the board of directors. In February 2022, non-executive independent director Michael McCormack purchased a mere $13,840 worth of shares, but even that was an exercise of rights. Before that you had to go back to June, 2021 to find a meaningful share purchase by a board member ($214,000 worth of shares).

Red Flag 9: Fund ownership is dominated by index-like funds​

The largest fund invested in Austal is the Statens Pensjonsfond Utland or SPU (The Government Pension Fund of Norway) which holds 1.96% of the company – the SPU is currently invested in some 9228 listed companies. The second largest fund investor has 1919 holdings, and the third has 1473. Almost all of the massive passive index funds are represented in the top ten holders. While that can sometimes be the case due to the sheer size of these funds, the almost complete absence of truly active managers in the top ten of the shareholder register is an obvious cause for concern.[5]

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qldfrog said:

I am afraid their down down trend might carry on

Austal USA executives Craig Perciavalle, Joseph Runkel and William Adams charged with fraud over US Navy projects

The company builds ships for the US Navy and is working on parts of the nuclear-powered Virginia class submarines that Australia is to purchase under the AUKUS agreement.

www.afr.com

When you think we have just decided to borrow and spend half a trillion on us flowing tin can,have an open war in Russia to empty the west pocket and equipment and going to see Taipei fall within a decade, this stock should be aiming for the sky.
What do you think @Sean K if you do not mind me pinging you on that one?

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Not sure of the Chinese ties and eventual effect, or the apparent non-disclose of cost overruns and fraud, but they have a long history of their ships not being up to scratch. It took a very long time to bring the LCS into service and then the first production run was cancelled due to poor performance only for a change of partnership and further orders. Not sure how they're running now. Apparently the Patrol Boats are pretty good. They are probably in the running for more smaller, faster, gun boats into the future, like the proposed corvettes for our Navy, which might drop out of the DSR. Will be another littoral combat ship for our coast line and through the archipelagos to the north. So, potentially more orders for allies through the pacific. I've never thought of investing in it. It doesn't dig stuff up out of the ground.