ASB’s 1H19 EBIT of $40.4m met expectations, and the Company maintains guidance for FY19 revenue of $1.9b. We assume a US shipbuilding margin in the 7-8% guidance range longer term, but factor in a dip in 2H19 due to the high level of early stage construction. Reasons to remain positive include US performance (recent construction and sustainment awards provide strong US Navy endorsement), a return to profit and significant commercial work in Australasia, and a solid balance sheet. Regulatory investigations are a cloud, but have an historic focus. We maintain a BUY on a $2.55 valuation (prior $2.45).
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