Project details. The project is for the fabrication of post metrology subsea spools for the first phase of the project which will commence immediately for a period of 12 months. This is expected to create work for 30 new staff based at the Australian Marine Complex. The A$2.5b GWF Phase 1 project is an extension of the North West Shelf project, and will develop the Goodwyn GH and Tidepole fields.
Small contracts have a way of growing. We are not worried about the small dollar value of this contract. In Australia, it is common business practice to enter into a project with a small amount of work, and later as the quality of work is deemed satisfactory, more contracts will be awarded to the contractor. We expect this contract to grow in the same pattern.
A$271.1m outstanding order book today. This is equivalent to about
4.4 months of work by our FY13F revenue forecast. Though slightly low, we understand this to be the period where contracts start flowing in. Case in point: At end-FY11 AusGroup had a A$264m order book, and went on to deliver A$632m of revenue in FY12.
Maintain Buy with TP $0.755. Our TP is based on 9x FY13F EPS, which we believe to be a conservative multiple for the 33% EPS growth we are projecting on top of last year’s record A$23.3m profit. Today’s close of $0.585 values AusGroup at a historical/forward P/E of 9.4x/7.0x, a P/B of 1.3x, and a FY13F EV/EBITDA of 3.0x.
In contrast, Singapore-listed comparable Civmec is trading at 19x historical EPS, and a P/B of 6.4x. We believe that there is plenty of upside for AusGroup to close these valuation gaps.
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