Citi was disappointed with the FY21 guidance downgrade but assesses this was driven by circumstances beyond the company’s control. Some liquidated damages, caused by the pandemic, may also be retrievable in the future. The broker finds upside still exists to forecasts.
Citi maintains a Buy rating, calculating investors are paying only 3x FY22 EBIT for the shipbuilding business, which is a -77% discount to peers. This appears excessive given the multiple shipbuilding opportunities in the US, Australia and the Philippines.
Target is raised to $3.35 from $3.30. Citi also asserts the ASIC lawsuit is not a material headwind, noting the maximum financial penalty is likely to be $1-2m.
Sector: Capital Goods.
Target price is $3.35.Current Price is $2.33. Difference: $1.02 – (brackets indicate current price is over target). If ASB meets the Citi target it will return approximately 30% (excluding dividends, fees and charges – negative figures indicate an expected loss).