To drop or not to drop (out of the ASX 200), page-3

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kickst@rter

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04/07/16

22:17

Post #: 18191878
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Originally posted by KAR_Investor ↑

I have been tracking their place in the ASX200 over the last month. I do not hold them, but very much like the fundamentals of the company. Consequently I have been interested in taking a long position in ASB. I was aware of the shock testing in progress and, luckily, decided to wait until after the results were made public to purchase them. I, again, delayed my plans when I realised ASB's place in the ASX200 was under threat. As it stands, it is very likely that ASB will no longer be part of the ASX200 after the next rebalance. The ensuing sell off, from funds and individuals alike, will present an excellent buying oppourtunity.

Do not get me wrong, today's announcement is devastating for ASB. Although it is important to remember that this is not a long term issue. Profits from the LCS contract will be nowhere near initial forecasts but there is much more to ASB, in the long term, than just this LCS contract, with the US Navy. In the future, greater costs will be passed onto the navy and margins will, undoubtedly, be greater. If ASB become priced to reflect their current profit margins it will, again, present an excellent buying opportunity.

Interestingly, in the 6 months preceding today's announcement, 4 funds increased their holding or took up a long position in ASB. It goes to show that the issues are completely unprecented. Whether you take that as a positive or negative is up to your own interpretation. Does it undertone carelessness and a lack of diligence within the company?

Regardless, I am very bearish with ASB in the short term (few weeks). Long term, I like their prospects and think they are a good play for experienced investors with a strong nerve.

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I like your write up. I too like the long term prospect of the company. However as you said the short term SP trend looks challenging.

For now I will sit on the fence. Perhaps if the company expands into steel construction ships then the prospect of expansion and revenue growth will be worth buying into. Just in case I am too biased I will wait for the EOFY report.

ASB Price at posting: $1.11 Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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