Share to buy – Austral Limited

Austal Limited is a global defence prime contractor. The Group supplies vessel platforms such as the Littoral Combat Ship and the Joint High Speed Vessel to the United States Navy, an extensive range of patrol and auxiliary vessels to defence forces around the world, and installs and maintains military communications, radar and command and control systems.

Late last month, Austal (ASB) reiterated FY15 revenue guidance of $1.2bn from its $2.6bn order book at its AGM.


We see further upside to this number however, given a 5c fall in the A$ since the guidance was set.

ASB is increasingly becoming involved in the maintenance phase for its vessels which could develop into a material annuity style business over time.

ASB will be debt free by end-FY15 through boat sales, providing capacity for acquisitions.

On the technical front, we have a solid bullish structure in place for ASB, with the shorter-term EMAs crossed higher and the price action above the longer-term EMA filter, which is positive.

The stock is not yet in overbought territory, suggesting that momentum is still building and there remains room for the price action to move higher.

Yesterday’s signal was a bullish pin bar (candle with a long lower shadow highlighting the bulls’ willingness to bid up lower prices) providing us an opportunity to be buyers.

Whilst $1.40 appears to be a significant resistance level, longs can be initiated ahead of this region due to the strength of the aforementioned momentum in the price action.