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Thursday, March 7, 2013

OSK-DMG sets 73-c target for AusGroup


OSK-DMG sets 73-c target for AusGroup

Analysts: Lee Yue Jer & Jason Saw 

AusGroup now has a record AUD4.5bn tender book, dwarfing the AUD0.6bn of tenders at Dec-12. 

The build-up of the tender book was due to the delays of the contract awards, and we expectAusGroup to convert about 20% of its tenders into firm contracts, providing good-margin work for 2H13 through FY15F. Further, this week Upstream noted that Ensco has been awarded the final Ichthys drilling contract.

AusGroup’s shares have come off 25% since its recent peak, and now trades at 6.9x FY13F EPS, 1.1x P/B, with an EV/EBITDA under 3.0x (based on current price of SGD0.50).

These are extremely compelling valuations for a company growing at 20% EPS CAGR to FY15F, ROE consistently above 15%, and a strong net cash position of SGD0.054 per share. We believe that the reaction to the poor 2Q13 results (which included one-off expenses and variation orders) is severely
overdone, and this is the time to enter. 

Our TP of SGD0.73 is based on 9x blended FY13F/FY14F EPS. BUY.

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