The Austal (ASX:ASB) share price is flat despite major acquisition

The Austal Limited (ASX: ASB) share price has fallen flat today following an announcement to expand its Australian support business.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Austal Limited (ASX: ASB) share price has fallen flat today following an announcement to expand its Australian support business.

From market open, shares in the global shipbuilder reached an intra-day high of $3.27, but have since retreated. At the time of writing, the Austal share price is down 0.9% to $3.16.

New support business

Austal advised it has entered an agreement to acquire Australian-based BSE Maritime Solutions. The new deal will see Austal build on its growing support business to service vessels on Australian shores.

BSE Maritime Solutions is a leading ship repair and support business that operates in defence, commercial, tourism and luxury vessels. The company has dockyards in both Cairns and Brisbane, Queensland. Current customers include Australian Border Force, BAE Systems, Thales and Svitzer.

The takeover aligns with Austal strategic direction to develop its support segment. Revenue from servicing vessels jumped at an annual rate of 28% over the past four years to reach $360 million in 2020. The ongoing revenue stream is considered an integral part alongside Austal's shipbuilding operations.

Agreement terms

Under the acquisition, Austal will purchase BSE Maritime Solutions for $27.5 million. The purchase will be funded from Austal cash reverses, which held a total of $272.4 million at the end of June.

Austal expects the new business will generate earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million in FY21. This will then rise to $11 million by FY25 as more contracted Austal ships are delivered to the Australian government.

The agreement is scheduled to be completed by the end of November.

What did the CEO say?

Commenting on the new deal, Austal CEO David Singleton said:

BSE Maritime Solutions is a quality business and its acquisition aligns with our stated strategy of growing our support division, adding further scale to our operations on the east coast of Australia in addition to our existing support services at Henderson, Cairns, and Darwin.

In particular, the acquisition provides Austal with dockyard and ship lift capability in the north- east region of Australia – including the Pacific's largest mobile boat hoist, capable of moving 1120 tonnes – supporting our existing and future customers and reinforcing our commitment to grow in the region.

It further enhances our in-service support capabilities, currently provided across multiple facilities in Cairns, for the Austal designed and constructed Cape-class and Guardian-class Patrol Boats.

About the Austal share price

The Austal share price has been relatively stagnant over the past 6 months, hitting its resistance level of around $3.50. With a market capitalisation of $1.13 billion, shares in Austal reached as low as $2.25 in March. Prior to the COVID-19 pandemic, the company broke an all-time high record of $4.99 in November.

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Female miner in hard hat and safety vest on laptop with mining drill in background.
Broker Notes

Experts reveal 2 buys and 1 sell in the ASX 200 materials sector

And they're not all mining companies, either.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Betmakers, Cettire, Johns Lyng, and Vulcan shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A smiling miner wearing a high vis vest and yellow hardhat does the thumbs up in front of an open pit copper mine.
Broker Notes

Why Macquarie expects this ASX All Ords copper stock to soar 48% in a year

Macquarie forecasts another big year of gains ahead for this ASX All Ords copper stock. But why?

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Broker Notes

How much upside does Macquarie expect for Steadfast Group shares?

The broker has given its verdict on this blue chip.

Read more »

Female miner standing smiling in a mine.
Broker Notes

Why Macquarie predicts Pilbara Minerals shares could surge 71%

Macquarie forecasts a big rebound ahead for Pilbara Minerals shares. Let’s find out why.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Share Market News

Down 90% from its 2021 peak, can IDP Education shares turn around?

Is this beaten down stock a buy? Let's find out.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Share Market News

5 things to watch on the ASX 200 on Thursday

Will the market continue to rise? Let's find out.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Broker Notes

The smartest Australian stocks to buy with $250 right now

$250 to invest? Check out these stocks that brokers rate as buys.

Read more »