ASB, QHL, DOW: Why are these ASX defence stocks on investors’ radar?

4 min read | May 09, 2022 06:40 PM AEST | By Priyanka Payal

ASB, QHL, DOW: Why are these ASX defence stocks on investors’ radar? — Image source: © Antonmatveev | Megapixl.com

Highlights

Australia is one of the largest arms importers in the world.

The country's defence expenditure for the 2022–23 financial year will rise by 7.4% to AU$48.6 billion.

The US tops the list when it comes to military spending, followed by China and India.

Defence and defence spending is one of the most crucial subjects for any country and Australia is no different. It is to be noted that the Morrison government had announced in its annual budget statement on 29 March that Australia's defence expenditure for the 2022–23 financial year will rise 7.4% to AU$48.6 billion (USD36 billion).

Meanwhile, amidst the growing geopolitical tension and risks posed by China and Russia, the Morrison government has planned to boost the number of uniformed personnel to almost 80,000 by the year 2040.

Prime Minister Scott Morrison stated that the government's investments in Australia's national security spanned across air, land, sea, space and cyber capabilities. It is often said that a country's national security is determined by its defence preparedness and the recent Russia-Ukraine crisis has shown how uncertainty is the only sure thing in the current scenario.

Notably, Australia is one of the largest arms importers in the world. The COVID-19 pandemic and the resultant disruption to international supply chains have shown how vital it is for Australia to have its own local defence industry.

In this article we will discuss about three ASX-listed defence stocks that have been in the news recently. The three stocks are - Austal Limited (ASX:ASB), Quickstep (ASX:QHL), and Downer EDI Limited (ASX:DOW).

Image Source: © Jurand | Megapixl.com

Austal Limited (ASX:ASB)

The shares of Austal Limited traded 3.940% lower at AU$1.950 per share on ASX at 3:28 PM AEST today.

Austal Limited is an ASX-listed shipbuilder and defense prime contractor with a market capitalisation of AU$734.57 million. In the last one year, shares of Austal Limited have fallen 20.08%, while the stock is down 1.52% year-to-date (YTD).

Recently, the shipbuilder secured an AU$324.6m fixed–priced incentive (contract option) from the US navy concerning the purchase of Austal's 16th Expeditionary Fast Transport (EPF).

EPF 16 will be the third ship with enhanced medical and aviation capabilities. Austal USA has already delivered 12 EPF ships to the Navy since 2012 and is presently constructing EPFs 13, 14 and 15 at the company's shipyard in Mobile, Alabama.

Quickstep (ASX:QHL)

The shares of Quickstep Holdings Ltd traded 4.166% lower at AU$0.460 per share on ASX at 3:16 PM AEST today.

Quickstep is an ASX-listed Australian company that manufactures carbon fibre composites for the defence, aerospace, automotive, and other manufacturing sectors. The company has a market capitalisation of AU$34.38 million.

In its H1 FY22 results, the company reported revenue growth of 14%, while the underlying profit before tax grew by 82% during this period.

Quickstep shares have fallen 14.81% in the last one year, while the stock is up 2.22% YTD.

Downer EDI Limited (ASX:DOW)

The share price of ASX-listed integrated service company Downer EDI Limited traded 1.263% lower at AU$5.470 per share on ASX at 4:11 PM AEST today. The company has a market capitalisation of AU$3.74 billion. In the last one year, Downer EDI Limited shares have fallen 4.04%, while the stock is down 10.47% YTD.

Downer provides base upgrade services to the Australian Defence Force, the New Zealand Defence Force and other government agencies.

The company's shares have been on investors' radar after it announced last month that it was picked by the Department of Defence to deliver the Planning Phase of the Australian Defence Force's proposed Riverina Redevelopment Program. The Planning Phase, which is expected to be completed in late-2023, will generate a revenue of $30 million for Downer.

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