Did a bit of homework and thought I'd share it:

• Tattarang (Andrew Forrest) currently hold about 20% of the register at an average price of $1.97.
• Copia Investment Partners have just under 10% at $1.81.

I keep these things in mind when assessing the probabilities of M&A ever eventuating. Twiggy will have a very long-term mindset so is unlikely to acquiesce to any bid that "fairly" prices that company but I still think someone like Hanwha is in a position to pay overs and extract value in the long run.

Maintaining the $3.03 price target for now and will lightly add to the position below $2.20 and more at $2.00 assuming no thesis break.

There has been extensive reporting in the AFR about Hanwha's interesting in acquiring the shipbuilder first really hitting the papers in July 2023. Since then, the valuation has oscillated between $800m and $1bn.

Hanwha is a Korean conglomerate that in 2023 acquired a controlling stake in Daewoo Shipbuilding & Marine Engineering.

In December 2023, MINDEF R. Marles signaled that any sale would have to pass security considerations. Reporting yesterday has Marles saying that the Albanese government has no concerns with the bid. The same article quoted an "estimated offer" of around $1.5bn, which would be a significant premium to the current market valuation of around $860m and a higher offer than originally quoted on 11 April (~$1bn).

If you're wondering why Hanwha would pay this much, I think the big three Korean shipbuilders are in an arms race, and Austal as AUKUS tailwinds not properly priced into their future along with possible undervalued assets around the world. The contracts are of strategic advantage to Hanwha over their main domestic competitors like Samsung Heavy Industries. It also gives them global yards to handle other orders they might have, especially if Austal is under-utilized.

I guess what I'm saying is, don't price this like an Aussie small cap, price it like you're a huge Korean shipbuilder under pressure with a growing order book and aggressive competition.

Appendix

1. https://www.kedglobal.com/shipping-shipbuilding/newsView/ked202311260002
2. https://asia.nikkei.com/Business/Engineering-Construction/South-Korean-shipbuilders-fulfill-discounted-orders-to-lift-earnings
3. https://maritime-executive.com/article/korean-shipbuilders-orders-reach-12-year-high-adding-to-country-s-exports

I noticed Rep. Joe Courtney mentioned the role Austal might play in delivering Australia's submarine program capacity on ABC Insiders today. He was largely musing but bearing in mind the US government footed the bill for around half the capex into building Austal's steel ship building facility in Alabama (they have until now been an Aluminum hull specialist) it's an interesting thought starter.

I find myself thinking and talking more about tailwinds in this environment and having key US lawmakers thinking actively about your role in the landscape probably can't hurt (Bubs might be a notable exception). Lots of counter arguments too - fitsy it's very first order thinking plus even if they prove to be a big winner from increased Aust. defense spend I'm not sure how it would look to have a few companies getting a massive windfall from the taxpayer's purse.

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Austal had a bad day yesterday after being jilted by the Philippines Navy during negotiations to build Offshore Patrol Vessels. Evidently Austal thought their proposal was too good to refuse, particularly with the dowry of a Philippines-based ship building yard already delivered. Unfortunately their erstwhile partner decided there are plenty of other fish in the sea and is planning to play the field to fulfil their needs. Meanwhile Austal looks like having to downgrade its ambitions and settle for attracting some commercial ferry work to the Philippines shipyard. The market sympathised by lopping a good 10% off the share price.

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