2 Diversified Gainers on ASX – ASB, BLD

  • Jul 22, 2019 AEST
  • Team Kalkine
2 Diversified Gainers on ASX – ASB, BLD

Stocks of ASB and BLD have provided positive returns over the period of one, three and six months. Let’s dive deeper into these two diversified stocks, with one involved in the manufacturing of vessels and the other being a supplier of building materials.

Austal Limited (ASX: ASB)

Austal Limited (ASX: ASB) is an Australia registered company primarily involved in the manufacturing, supporting and designing of the high performance vessels. It is also a world leader in fast ferry technology for commercial and military ships. Austal limited was officially listed on ASX in 1998. Today, on 22nd July 2019, the company via release communicated that Allan Gray Australia Pty Ltd and its related bodies corporate have made a change in their substantial holdings with a voting power of 7.32% as compared to the previous voting power of 8.68%. In addition, the change of interests of substantial holder occurred on 17th July 2019. In another announcement dated 25th June 2019, the company outlined that it had successfully delivered the 10th Independence Class Littoral Combat Ship to the United States Navy. Additionally, the LCS 20 will be the 18th LCS (Littoral Combat Ship) to join the fleet.

Furthermore, the company elaborated that it has five Small Surface Combatants, which are presently under construction at the company’s Alabama shipyard. The small surface combatants include:

  • The Kansas City/LCS 22, which is in the preparation phase for sea trials.
  • The Canberra or LCS 30 and Savannah/LCS 28 modules, which are under construction.
  • The ongoing assembly for Mobile (LCS 26) and Oakland (LCS 24).

Moreover, the company is contracted to deliver 14 Expeditionary Fast Transport vessels for the United States Navy. However, the company delivered 10 Expeditionary Fast Transport vessels into service with two additional vessels are in the different stages of the construction.

As per the release dated 14th June 2019, S&P Dow Jones Indices announced that Austal Limited has been added to S&P/ASX 200 Index, effective from 24th June 2019.

Key Insights from New Zealand Investor Presentation

A world’s leading Aluminium Shipbuilder reported revenues of $851 million in 1H FY19 and order book of around $5.2 billion. In the 1H FY19, the company’s operating revenues have increased across all of its shipyards. ASB is preparing a proposal for the United States Navy FFG(X) program. This program demonstrates a huge growth opportunity for the company in the United States of America, with more sophisticated and bigger ships. The company reported EBITDA and EBIT of $60.7 million and $40.4 million in 1H FY19 as compared to $43.8 million and $26.5 million in 1H FY18.

The company reported gross margin, EBITDA margin and operating margin of 9.1%, 7.0% and 4.3% in 1H FY19, reflecting Y-o-Y growth of 0.9%, 0.6% and 0.8%, respectively. The company’ net margin stood at 2.8% in 1H FY19, witnessing a rise of 0.4% on a Y-o-Y basis. This implies that ASB is effectively converting its top line into the bottom line. The company’s current ratio amounted to 1.66x in 1H FY19, which is up 37.8% on Y-o-Y basis, which indicates that Austal Limited is improving its position in order to meet its short-term obligations.

Outlook: The company is exploring new applications for Expeditionary Fast Transport vessels variants. Austal Limited anticipates FY2019 EBIT to be around $92 million. Looking at the revenue guidance, the company expects group revenues to be consistent with its prior guidance, which was in the range of $1.8 billion to $1.9 billion. The company is projecting earnings before interest and taxes to be minimum $105 million in the fiscal year 2020.

At market close on 22nd July 2019, the stock of Austal Limited traded at $4.030 per share, reflecting a fall of 2.421%, with a market capitalisation of $1.46 billion. Coming to the stock’s past performance, it has produced returns of 28.26%, 64.54% and 97.61% for one month, three months and six month period, respectively.

Boral Limited (ASX: BLD)

Boral Limited (ASX: BLD) is a supplier and manufacturer of construction and building materials. In the year 2000, it was officially listed on ASX. Recently, the company via a release dated 21st June 2019, highlighted its agreement with Mirvac. BLD had entered into a property management and development deed related to its Scoresby site, located in Victoria. As per the terms of the agreement, Mirvac will be responsible for managing the urban development of the 171-hectare site over a multidecade period.

Additionally, the company anticipates earnings before interest, tax depreciation and amortisation of around $66 million by the fiscal year 2026, of which around $3 million to be included in FY2019. Moreover, the company has estimated additional earnings from the development of Wantirna South (also known as Scoresby) from FY2027 through to expected project completion in 2035.

Change in Substantial Holdings: Recently, in another announcement, the company updated the market that BlackRock Group and its subsidiaries have changed their substantial holdings in the company with a voting power of 7.02% as compared to the previous voting power of 6.01%.

Key Takeaways from Investor Presentation: The company has approximately 670 operating sites with around 8,700 contractors, with Boral Australia being a robust and well placed business. In the 1H FY19, the company reported EBITDA of $485 million. Boral is focused on continuing to improve its business and is providing strength to its businesses for the present as well as future by developing a culture, with an emphasis on safety, which will maximise the company’s performance and underpins the business rationale. Boral is implementing effective pricing practices and customer orientation throughout all of its businesses.

The company reported gross margin and EBITDA margin of 32.1% and 15.2% in 1H FY19 as compared to the industry median of 36.6% and 21.9%, respectively. The company’ net margin stood at 6.5% in 1H FY19, witnessing a rise of 0.3% on a Y-o-Y basis. This implies that BLD is effectively converting its top line into the bottom line. The company’s current ratio amounted to 1.84x in 1H FY19 against the industry median of 1.59x. This showcases that Boral Limited is well positioned to meet its short-term obligations in comparison to the broader industry. The company posted return-on-equity of 3.3% in 1H FY19, demonstrating a rise of 0.1% on a Y-o-Y basis. It delivered asset-to-equity ratio of 1.60x against the industry median of 1.69x.

Outlook: The company’s priorities for 2H FY19 are to decrease the costs via Operational Excellence programs, which includes Supply Chain Optimisation. The company further added that the Organisational restructure provide refocus on priorities and development opportunities. The second half results of the company are primarily within its anticipations, with property on track to deliver approximately $30 million in the fiscal year 2019.

At market close on 22nd July 2019, the stock of Boral Limited traded at a price of $5.430 per share, reflecting a fall of 2.513%, with a market capitalisation of $6.53 billion. Boral’s stock has produced returns of 4.31%, 13.91% and 6.50% for one month, three months and six month period, respectively.


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