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SINGAPORE, May 31 (Reuters) - AusGroup Ltd. <AUSG.SI>, which
builds and maintains equipment for Australian mining and energy
companies, said it expects sales in the year to June 2006 to
"greatly exceed" a market forecast for a 28 percent rise, thanks
to China's huge appetite for natural resources.
Singapore-listed AusGroup, whose current order book of A$176
million ($134.2 million) stretches up to fiscal 2007, also
expects to announce new orders worth about A$100 million in the
next three or four months.
AusGroup's net profit in the year to June 2005 rose 33
percent to A$6.8 million ($5.16 million), while sales rose 24
percent to A$143.3 million.
Westcomb Financial Group, the only brokerage with a profit
forecast for AusGroup, sees profit rising 29 percent to A$8.8
million in fiscal 2006 as sales climb 28 percent to A$184.0
million.
"For fiscal 2006, sales could greatly exceed the analyst's
forecast due to the booming commodities sector, mainly driven by
demand from China," AusGroup Managing Director Stuart Kenny told
Reuters in an interview. He declined to give a specific forecast.
In the six months to December 2005, AusGroup reported a 40
percent rise in net profit to A$3.5 million as sales jumped 73
percent to A$104.70.
AusGroup shares, which were down about five percent in
afternoon trade, rose to close unchanged following Kenny's
comments.
BOOM TIME
Commodity prices have surged, driven by speculative buying and
strong demand from expanding economies such as China, the world's
largest consumer of iron ore.
Gold prices have hit new 25-year highs, while a host of other
commodities, such as copper, have also reached multi-year highs.
Analysts say this augurs well for AusGroup, given that it has
operations in Australia, which is the world's biggest exporter of
coking coal, the number two for steaming coal, gold and uranium,
and the third-largest exporter of aluminium and iron ore.
"Exploration and production activities are still very buoyant
and the market is still progressing very fast. This will drive
growth" for AusGroup, said Chew Sok Chuang, head of research at
Westcomb Financial Group, who rates AusGroup a "buy" with a price
target of S$0.56.
AusGroup, whose key mining clients include BHP Billiton Plc.
<BLT.L><BHP.AX> and Rio Tinto Ltd. Plc <RIO.AX><RIO.L>, derived
about 80 percent of total sales in fiscal 2005 from its mining
segment.
Kenny said that AusGroup, which has submitted bids for
contracts totaling A$423 million, is likely to bag new orders
worth about A$100 million.
"We are very confident of securing at least 25 percent of the
total contracts," Kenny said. "We expect to be notified of the
outcome in the next three to four months."
AusGroup's key competitor is engineering firm Monadelphous
Group Ltd <MND.AX>, which has over half the market for
Australia's mining industry. Kenny estimates that AusGroup has 30
percent of the market.
AusGroup is currently only present in Australia but with its
recently announced plans to take a 76.6 percent stake in
Singapore-based Cactus Engineering & Trading Pte Ltd (Cactus) for
S$15.3 million ($9.71 million), analysts say this could open up
new markets for the firm.
"The recent acquisition of Cactus will allow them to have a
foothold in Singapore and of course, from Singapore, they can go
into the neighbouring countries," Westcomb's Chew said.
Cactus, which provides engineering and repair work for oil
and gas companies, counts National Oilwell <NOV.N> and FMC
Technologies <FTI.N> among its clients.
builds and maintains equipment for Australian mining and energy
companies, said it expects sales in the year to June 2006 to
"greatly exceed" a market forecast for a 28 percent rise, thanks
to China's huge appetite for natural resources.
Singapore-listed AusGroup, whose current order book of A$176
million ($134.2 million) stretches up to fiscal 2007, also
expects to announce new orders worth about A$100 million in the
next three or four months.
AusGroup's net profit in the year to June 2005 rose 33
percent to A$6.8 million ($5.16 million), while sales rose 24
percent to A$143.3 million.
Westcomb Financial Group, the only brokerage with a profit
forecast for AusGroup, sees profit rising 29 percent to A$8.8
million in fiscal 2006 as sales climb 28 percent to A$184.0
million.
"For fiscal 2006, sales could greatly exceed the analyst's
forecast due to the booming commodities sector, mainly driven by
demand from China," AusGroup Managing Director Stuart Kenny told
Reuters in an interview. He declined to give a specific forecast.
In the six months to December 2005, AusGroup reported a 40
percent rise in net profit to A$3.5 million as sales jumped 73
percent to A$104.70.
AusGroup shares, which were down about five percent in
afternoon trade, rose to close unchanged following Kenny's
comments.
BOOM TIME
Commodity prices have surged, driven by speculative buying and
strong demand from expanding economies such as China, the world's
largest consumer of iron ore.
Gold prices have hit new 25-year highs, while a host of other
commodities, such as copper, have also reached multi-year highs.
Analysts say this augurs well for AusGroup, given that it has
operations in Australia, which is the world's biggest exporter of
coking coal, the number two for steaming coal, gold and uranium,
and the third-largest exporter of aluminium and iron ore.
"Exploration and production activities are still very buoyant
and the market is still progressing very fast. This will drive
growth" for AusGroup, said Chew Sok Chuang, head of research at
Westcomb Financial Group, who rates AusGroup a "buy" with a price
target of S$0.56.
AusGroup, whose key mining clients include BHP Billiton Plc.
<BLT.L><BHP.AX> and Rio Tinto Ltd. Plc <RIO.AX><RIO.L>, derived
about 80 percent of total sales in fiscal 2005 from its mining
segment.
Kenny said that AusGroup, which has submitted bids for
contracts totaling A$423 million, is likely to bag new orders
worth about A$100 million.
"We are very confident of securing at least 25 percent of the
total contracts," Kenny said. "We expect to be notified of the
outcome in the next three to four months."
AusGroup's key competitor is engineering firm Monadelphous
Group Ltd <MND.AX>, which has over half the market for
Australia's mining industry. Kenny estimates that AusGroup has 30
percent of the market.
AusGroup is currently only present in Australia but with its
recently announced plans to take a 76.6 percent stake in
Singapore-based Cactus Engineering & Trading Pte Ltd (Cactus) for
S$15.3 million ($9.71 million), analysts say this could open up
new markets for the firm.
"The recent acquisition of Cactus will allow them to have a
foothold in Singapore and of course, from Singapore, they can go
into the neighbouring countries," Westcomb's Chew said.
Cactus, which provides engineering and repair work for oil
and gas companies, counts National Oilwell <NOV.N> and FMC
Technologies <FTI.N> among its clients.
Agreed. Fundamentals are strong also in the correct industry! Vested.
Market is slightly bearish. All profitable comapnies would suffer a common fate of falling stock prices. I would suggest accumulating Ausgroup as prices has fallen to very attractive level. Investors might want to note that Ausgroup profitabilty is strongly linked to commodity prices. In an environment of high and rising commodity prices, this can only be beneficial for Ausgroup. Investors with the ability to hold this counter should slowly accumulate as this is a potential 58 cents counter. At this level, the room for upside in it's stock prices greatly outweighs the downside.
OOPS...AusGroup seems to look bearish. Yesterday's candlestick chart shows wednesday's rally being engulf by yesterday's trading.
Anyone has technical views of Ausgroup?