The Australian government's recent decision to leave negotiations dead in the water with French defence contractor Naval Group has cast concern on the sustainability of its workforce. Fortunately, Adelaide-based shipbuilder ASC has offered its help to workers who might be impacted by the fallout — leaving ASX investors wondering if the company is listed.
This follows Prime Minister Scott Morrison announcing a new alliance with the United States and the United Kingdom, known as AUKUS, on Thursday. As part of the alliance, Australia will do away with its previous plan of a $90 billion diesel-powered fleet made by Naval Group, in place of a new nuclear-powered fleet.
The sudden bombshell decision has left uncertainty for the 350 people employed by Naval Group in South Australia. That's in addition to a further 40 people who had relocated to France in anticipation of the multibillion-dollar contract.
Image source: Getty Images
A shipbuilder in unknown waters
Plans for nuclear submarines weren't the only thing announced by the government last week. Rather, the government also revealed a plan to extend the life of all 6 Collins Class submarines and retain full cycle docking of the fleet at Osborne, South Australia. In short, ASC will now be responsible for the extensive maintenance and upgrade of several submarines.
Additionally, in an announcement, the company noted it would work with the government to "support, train, and grow the workforce needed to build Australia's nuclear-powered submarines". However, the government hasn't decided who will construct the newest fleet.
It appears the company is busier than ever at the moment. Following the Naval news, ASC broadcasted it could take on workers impacted by the contract scrapping. In fact, ASC chair Bruce Carter stated, "We will welcome them into ASC if they want to come here. We need every single person, hands on deck, at the moment."
The positive developments for ASC has ASX investors looking for ways to capitalise. Though, at this point, the 36-year-old shipbuilding company is not tradeable on the public market. Instead, it is wholly owned by the Australian government. The last of its privately-owned shares were acquired by the government in the year 2000.
How much are ASC shares worth?
Given that ASC is not a publicly listed company, it is difficult to know how much ASC shares are worth. Luckily, the company shares its annual reports with the public. So, let's take a look at the most recent one.
The company's annual report for 2020 (for the year ending September 2020) shows ASC made $675.9 million in revenue during FY20. Meanwhile, its after-tax earnings came to $22.6 million. For comparison, global shipbuilding company Austal Ltd (ASX: ASB) pulled in $1,572 million in revenue and $81.1 million in earnings in FY21.
Currently, Austal is trading on a price-to-earnings (P/E) ratio of 7.7 times, giving it a market capitalisation of $616.6 million. However, the global aerospace and defence industry trades on an average of 29.8 times earnings.
Based on this, if ASC was a public company, it could be valued somewhere between $174 million to $673 million.
Can you invest in ASC on the ASX?
As we've pointed out, ASC is government-owned and not listed on the ASX. However, there are alternative investments available to keen defence investors. As previously mentioned, Austal is an ASX-listed shipbuilder that would likely give an investor close resemblance to ASC.
On the other hand, there are many other listed companies operating in defence more broadly. For example, these include Electro Optic Systems Ltd (ASX: EOS) and Droneshield Ltd (ASX: DRO).
