Towards Financial Freedom
ASX Listing May Spur Revaluation
AusGroup announced it has secured additional works worth AUD13.6m in its Gorgon Project, boosting the total value of the entire contract to more than AUD80m. While the extension is positive, we believe investors are more focused on the group's potential relisting on the ASX. Its ASX-listed peers' P/Es are higher by 30%, 42% for P/B and 48% for EV/EBITDA. Maintain BUY with a TP of SGD0.66.
- Strong hints on positive revaluation on ASX relisting. In its RTO announcement issued two days ago, AusGroup stated that "as a result of the high levels of activity in natural resources in Australia, the mining services sector is considered to be a growth sector and is covered by a large number of equity research analysts in the Australian market place". It also added that "market participants are also more familiar with resources, and are attracted to the ASX-listed resource services companies".
- A potential 40% revaluation. As shown in Figure 3, the averages for AusGroup's peer group are 30% higher in terms of forward P/E, 42% higher for P/B and 48% higher in terms of EV/EBITDA multiple, which are the commonly-employed metrics in Australia. The average of these three valuation gaps is 40%.
- No reason to delay relisting. While the completion date of the RTO and simultaneous relisting has not been announced, there is impetus for AusGroup to hasten the process. The company aims to grow into a AUD1bn company, partly by merging with or acquiring Australian companies, and intends to use scrip as part consideration. As ASX-listed shares would be more readily accepted by target companies, an earlier relisting would enable the group to reach its target sooner.
- Moving towards ASX multiples as relisting draws near. As we see no reason for such a large valuation gap, AusGroup's valuation should shift towards its ASX-listed peers' as its relisting looms. A 40% revaluation from yesterday's close would imply a share price of SGD0.67, which is close to our TP of SGD0.66. Maintain BUY.
Source: OSK
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