Austal rides military spending wave, defying market slump
US President Donald Trump's policies that have rattled stocks around the world are benefiting Australian shipbuilder Austal, analysts said on Wednesday.
Shares of the company, which supplies defence and commercial vessels to the Australian and US navies among other clients, surged 35 per cent in the three months ending March, clocking their best quarterly gains in nearly two years since June 2023.
In contrast, the broader benchmark lost about four per cent on concerns of stretched valuations among financial stocks and the fallout from US tariffs.
The surge in Austal's shares comes amid Trump's call asking Australia and other US security allies to increase defence spending. Australia said last week it would bring forward AU$1 billion ($630 million) in defence spending in its federal budget.
"With higher defense spending and an increased sense of need for autonomy in all domains, we could see more order activity for Austal from Australia," said Dhierin-Perkash Bechai, Aerospace Analyst at Seeking Alpha and the Aerospace Forum.
"That is also driven by a sense that China may become more aggressive in the region amidst a fallout between the US and its closest allies."
Austal grew its order book to a record AU$14.2 billion by 2024-end, 11 per cent growth from six months ago.
The company's two shipyards in the United States insulate it from Trump's potential import tariffs, which have roiled global markets lately, further boosting Austal's allure for investors.
These shipyards make smaller combat vessels, surveillance ships and modules for nuclear-powered and nuclear-armed submarines.
"Investors are looking for companies that are able to win business in the US, but without tariffs and/or sacrificing growth ambitions elsewhere," said Nicholas Sundich, an equity analyst at Pitt Street Research.
Recently, South Korean conglomerate Hanwha bought a 9.9 per cent stake in Austal, nearly a year after the shipbuilder rebuffed its AU$1.02 billion takeover bid. The acquisition underscores foreign interest in the company.
(Reporting by Aaditya Govind Rao in Bengaluru; Editing by Shinjini Ganguli)
