Ausgroup

Ausgroup: Ausgroup's 3QFY14 net loss of A$1.3m y/y from profit of $0.1m, while revenue tumbled 47% to A$73m, in tandem with the group's ongoing strategy to significantly downsize its services in the mining sector and shift towards the oil & gas sector, with a focus on longer-term asset maintenance. Order book spiked 83% to A$395m from a low base, and we estimate it may provide work for up to 9-12 months. As anticipated, management sees increased opportunities arising from LNG construction and maintenance projects in Australia and expect the trend to continue over the next 12-24 months. There has been mixed views on whether the decade-long mining boom in Australia has reached an end. On one end, industry experts say its far from over, given that demand would be supported by the ongoing urbanisation in China, while the other side of the fence highlights the rapid drop in new projects and its value, underpinned by the lower investment into the industry. Meanwhile, the group's widely anticipated tie-up with Ezion is expected to produce mutual benefits for both parties. With Ezion now the single largest shareholder of AusGroup (6.74%), the latter could be roped in to help develop Port Melville in Australia's Northern Territory and use it as its logistic base in future, while Ezion could concentrate on growing its core liftboat business. At $0.44, Augroup trades at 1.13x P/B and is loss-making.