dividend announcement, page-6

Business Transformed – Upgrade to Buy

?? FY11 ahead of expectations
Ausenco reported FY11 NPAT of $26.4m, which was ahead of UBSe of $22.2m and guidance of $22-25m. The stronger than expected result was driven by better than expected operating margins of 8.7% vs UBSe of 8.2% and lower net interest expense. A final dividend of 9.8cps (35% franked) was declared.

?? Significant revisions to estimates
Post the FY11 result we have revised our EPS estimates by 19% in FY12, 6% in FY13 and 9% in FY14. Our revised estimates largely reflect our expectation of continued margin improvement, with our EBITDA estimates raised between c50-100bps across the forecast period.

?? Upgrade rating to Buy
The FY11 result demonstrates management’s strategy to build a sustainableearnings base that should support the business through the cycle. This is evidenced by the change in customer mix over the past 5 years, with 75% of revenues from globally diversified or major resource companies versus 37% in 2006. With work in hand of $447m, finalisation of $123m imminent and feasibility work on a pipeline of projects totalling c$18.7bn, Ausenco is well positioned to grow earnings in our view.

?? Valuation; PT raised to $4.50
Rolling forward our DCF valuation for the end of FY11 and incorporating our significant estimate revisions, our DCF derived valuation and price target increases to $4.50 from $2.50.