The below-mentioned industrial stocks have been making strong operational progress. Let’s take a closer look at the recent performance of these stocks.
Austal trading near to 52 weeks high price
Australia’s global shipbuilder, defence prime contractor, Austal Limited (ASX: ASB) has witnessed an increase of 75.20% in its share price over the last six months. The company’s stock is trading very near to its 52-weeks high price of $4.630, reflecting the confidence of the market in Austal’s future.
In FY19, the company earned an EBIT of close to $93 million and a net profit after tax of just over $61 million. The company’s US business was the main contributor to the FY19 results. ASB’s construction costs have improved and its US Navy customer awarded it with more contracts for both classes of ships. The Austal US President, Craig Perciavalle, has built a strong team which has led him to achieve excellent results in FY19.
It is only 20 odd years ago that the decision was made to set up Austal in the US and the company is now ranked amongst the largest Defence shipyards in the country.
Ships are being completed with improving margins, are of high quality and delivered on time. Craig is supported by the US Management Board of which the external members have substantial experience in US Defence contracting. The total of US Navy vessels completed, under construction and on order is now 19 Littoral Combat Ships and 14 Expeditionary Fast Transport ships.
The company’s Australasian business also contributed to last year’s profit performance. During the year, the company won several commercial ferry contracts which is satisfying in light of its significant investment in Asian facilities.
Austal Move to Vietnam
ASB’s move to Vietnam has been very successful so far. Austal has recruited an excellent mostly ex-Austal management team who had previously been building aluminium ships for the now defunct Strategic Marine company.
The company has already built a good local team of management supervisors and trades personnel. The company recently signed a contract for another large vessel for Mols to create continuity in the Philippines production program. Additional work to support its new facility in Vietnam and its operations in Henderson is a priority over the rest of the financial year to support FY21 and opportunities exist for both of these.
In FY2020, the company will be launching and delivering:
- 4 Guardian Class Patrol Boats.
- A 117m Trimaran for Fred Olsen to be based in the Spanish Canary Islands.
- A 82m Trimaran for Japanese Rail Kuyushi (JRK) which will run between South Korea and Japan and will be operational before the 2020 Olympics
- 2 Cape class patrol boats for Trinidad and Tobago (delivery post yearend)
Recently on 4 November 2019, the company announced that the future USS Kansas City (LCS 22) has successfully completed acceptance trials in the Gulf of Mexico.
At market close on 8 November 2019, ASB quoted $4.450 with a market cap of around $1.56 billion.
Monadelphous Group Limited (ASX: MND)
Leading Australian engineering group, Monadelphous Group Limited (ASX: MND) supplies multidisciplinary construction, maintenance and industrial services to many of the largest companies in the resources, energy and infrastructure sectors.
Monadelphous Group has two operating divisions (Engineering Construction and Maintenance and Industrial Services) working mainly in Australia, with overseas operations in New Zealand, China, Papua New Guinea, Mongolia, the United States and the Philippines.
In FY19, the company made significant progress in its markets and growth strategy to maximise returns from core markets, build an infrastructure business and deliver core services to overseas markets.
FY19 Highlights of MND
Record Revenue in Maintenance & Industrial Services– In FY19, the company reported record annual revenue performance for the maintenance & industrial services division, as activity levels expanded in the iron ore and oil and gas markets.
Strengthened Position in Infrastructure Sector– During the year, MND witnessed significant growth in revenue in both water and renewable energy markets. Zenviron, the company’s renewable energy joint venture, secured three new contracts, including the Moorabool South, Dundonnell and Cherry Tree wind farms.
Secured Major Maintenance Contract in Pilbara– Secured a major three-year contract with BHP for provision of general maintenance services in the Pilbara, valued at approximately $240 million.
Award of Major Resources Construction Contracts– During the year, the company was awarded with two new contracts with BHP for the South Flank project and, post year-end, secured contracts with Rio Tinto at its West Angelas iron ore mine and at Albemarle Lithium’s new Kemerton lithium hydroxide plant.
For FY19, MND reported EBITDA of $106.8 million, down by 10.3% compared to the previous year. The Board of Directors declared a final dividend of 23 cents per share fully franked, taking the full-year dividend to 48 cents per share fully franked, representing a dividend payout ratio of around 90% of reported NPAT.
Subsequent to end of FY19, the company completed an agreement to purchase the assets of iPipe Services, which provides specialist services to the coal seam gas sector, complementing Monadelphous’ existing services and enabling further expansion of its core offering to customers.
At market close on 8 November 2019, MND quoted $15.860, up by 2.987% intraday, with a market cap of ~$1.45 billion. In the past six months, the MND stock has provided a negative return of 14.49% (as on 7 October 2019).
Smartgroup Corporation Ltd (ASX: SIQ)
Salary packaging, fleet management and employee management services provider, Smartgroup Corporation Ltd (ASX: SIQ) completed its first six months of 2019 with positive financial performance, client growth and continued success in expanding its service offering.
During the year, the company made solid progress with the integration of acquired businesses while maintaining strong focus on operational excellence and improving customer outcomes.
H1 2019 Highlights:
- Revenue of $125.8m, up 3% vs pcp
- NPATA of $40.5m, up 5% vs pcp
- Net growth of c.5,000 salary packages and c.1,000 novated leases
- Fleet vehicles under management stable at c.22,000
- 3rd largest client now secured until 2022; now top 3 clients secured
- 180 clients now use two or more service offerings, growth of c.20% over the last 12 months
- 7 new partnerships, 5 signed in H1 2019
H1 2019 Results Summary (Source: Company Reports)
Major acquisition during half-year period
- On 1 April 2019, the Group acquired the novated leasing assets of Mylease from iNovation Pty Ltd for $6.9 million in cash, including $1 million retained in escrow;
- On 1 June 2019, the Group acquired Pay-Plan Pty Ltd and Set Leasing Pty Ltd (collectively, PayPlan) for $2.2 million in cash, including $700,000 retained in escrow.
Both acquisitions extend Smartgroup’s salary packaging and expanded leasing presence in the corporate and PBI sectors.
In the past six months, the SIQ stock has provided a return of 31.58% (as on 7 November 2019). At market close on 8 November 2019, SIQ quoted $11.150, down by 0.889% intraday, with a market cap of $1.48 billion. The stock traded at a PE multiple of 23.730x with an annual dividend yield of 3.78%.
McMillan Shakespeare Group (ASX: MMS)
Leading provider of salary packaging, novated leasing, asset management and related financial products and services, McMillan Shakespeare Group (ASX: MMS) is focussed on increasing earnings per share, improving the return on the capital employed in the business and increasing fully franked dividends paid to shareholders.
Recently in October 2019, the company completed its $80 million Off-Market BuyBack. The key outcomes of the Buy-Back are as follows:
(Source: Company Reports)
In light of recently scrutiny by Royal Commission into misconduct in the banking, superannuation and financial Services Industry, McMillan Shakespeare Group intends to continue to review its operations and products and engage with regulators, where appropriate, to ensure the needs of its customers remain our priority.
FY2020 update of MMS
- Market conditions continue to be challenging
- New car sales for Sept. quarter down 6.7% on pcp and have some impact on novated growth
- Some pressure on yields due to credit availability and insurance repricing
- Successful transition of Melbourne Health
- Continued new business wins
In the past six months, the MMS stock has provided a return of 26.11% (as on 7 November 2019). At market close on 8 November 2019, it quoted $16.410, down by 0.364% intraday, with a market cap of $1.37 billion. The stock is trading near to its 52 weeks high price of $16.970 at a PE multiple of 21.390x with an annual dividend yield of 4.49%.
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