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Earnings Commentary: AusGroup’s Strong Numbers A Sign Of Things To Come?
Earnings Commentary, Tradeable | 20 February 2013
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By: Simeon Ang
Articles (125) Profile

Talk of an end to the mining boom has created a bit of nervousness regarding the outlook of Australia. But in reality, resource companies such as AusGroup are still able to churn out viable financial report cards. This is evident in its latest financial report where AusGroup reported a 9.8 percent year-on-year increase in net profits.

The Numbers
On a year-on-year basis, AusGroup’s revenue for the half-year ended 31 December 2012 grew 11.8 percent (A$306.8 million versus A$274.4 million) on the back of increased revenue from the firm’s project and fabrication divisions. The company experienced increased activity on the back new project developments and expansions in both the oil and gas and mineral resources market. Net profit growth was slightly pared as the firm executed lower margin contracts as well as additional costs incurred during contract settlements. Net profit for 1H13 stood at A$9.1 million, a 9.8 percent improvement over 1H12’s A$8.3 million.

In conjunction of the release of its financial report, AusGroup also said that its order book as at 14 February amounted to a strong A$308 million. The strong pipeline of projects represents some visibility in terms of financial performance in the future.

Slew Of Contract Wins Boosts Immediate Future
Since the beginning of January 2013, AusGroup has begun to see gaining momentum on contract wins. This slew of contract wins have boosted the value of contract wins to at least A$62 million in the month alone. The latest contract development announced by AusGroup was an extension of an existing contract with Apache Energy in Australia.

In further support of AusGroup’s growing momentum of contract wins, Laurie Barlow, chief executive officer and managing director of AusGroup was quoted as saying, “(AusGroup) continues to experience a consistent level of demand for pricing and tendering requests. (AusGroup) expects these levels of pricing and tendering activity to continue as committed major projects enter their construction phase. This is expected to result in a strong project pipeline for FY2014 and beyond.”

ASX Dual Listing To Unlock Value?
Perhaps a pending development could grab the interests of value investors more. This development centers around the eventual dual listing on the Australian Stock Exchange (ASX). In an interview with analysts from OSK Research, the company’s management said that dual listing plans were proceeding smoothly even though no dates have been fixed yet.

In the absence of a fixed timetable however, analysts still feel the impetus for the dual listing will remain strong. This belief stems from an assumption and conclusion that AusGroup is currently undervalued. Comparing the two main pricing ratios between AusGroup and its locally listed peer, CIVMEC, we can obviously see the stark difference.

Source: Bloomberg, table comparing pricing ratios between AusGroup and CIVMEC

With some form of earnings visibility for investors in the form of a robust order book, could this pending dual listing unlock value for shareholders?

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Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

Please click here for more information about this author.

AusGroup  0.021 -0.001 -4.55%   
Business: Co mainly provides subcontract services to the oilfield equipment manufacturing co in South East Asia. [FY16 Turnover] Projects (62.2%), maintenance Services (28.5%), fabrication & manufacturing (5.5%), port & marine Services (3.8%).

Insight: Nov-17, 1Q18 revenue increased by 53.6% due to the... Read More
Civmec  -- -- --   
Business: An integrated, multi-disciplinary construction & engineering services provider. [FY18 Turnover] Metals & minerals (61%), infrastructure (19.5%), oil & gas (19.5%).

Insight: Aug-18, FY18, Co reported a net profit of $26.2m, ... Read More


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