AusGroup Rated Sell by Analysts

[Ed. Note – This article does not meet our new editorial guidelines, nor does the company mentioned meet our investment criteria. It will be removed from the site in the future.]

AusGroup Ltd (SGX: 5GJ) is the parent company of AGC and Cactus Engineering and Trading Pte Ltd. The Company was incorporated in Singapore under the name of on 9 October 2004. AusGroup Limited provides a range of fabrication and manufacturing, construction, scaffolding, insulation, painting, refractory and maintenance services to natural resource development companies. Its business can be classified in three segments: Major Projects, Fabrication and Manufacturing, and Integrated Services.

AusGroup is well positioned to exploit growth opportunities in the Australasian oil and gas and mineral resources markets. The company has approximately 1,400 employees and headquartered in Western Australia. The company having fabrication facilities in Australia and Singapore means access to excellent transport links and direct access to deepwater wharfage. It supports both upstream and downstream sectors in the oil refining, gas processing, liquefied natural gas (LNG) and subsea markets. It provides offshore construction services to oil and gas installation contractors. It also provides subcontract services to other companies in the South East Asia region through its fabrication and machining facility in Singapore.

The American Institute of Steel Construction said that “The United States structural steel industry annually supplies fabricated and erected structural steel framing to over 50,000 buildings through a network of producers, service centers, steel fabricators and erectors. Total industry employment is estimated to be in excess of 300,000 individuals in 4,000 firms. Total industry revenue in 2007 is estimated to be in excess of 20 billion dollars.”

It added, “Structural steel is the leading structural framing material in the United States, with a 56 per cent market share for non-residential and multi-storey (greater than 4 storey) residential construction. The market share for the closest competing material, concrete, is only 21 per cent indicating a market preference exceeding 2 to 1 for structural steel.”

Recent analysis of the global steel buildings market indicates that while 65-70 per cent of commercial structures in UK are built in steel, for the rest of Europe it is somewhere between 25-35 per cent. In the US and Japan, the figure is estimated at about 40 per cent. Comparatively, in India, less than one per cent of commercial structures are built in steel. Over the last few years, consumption of structural steel in developed countries like Japan and US has shown negligible growth while in UK it has declined. In comparison, China has emerged as a front runner.

AusGroup is a MSCI Singapore Micro Cap Index Company with over 1% weighting. The stock is trading at near its 52 weeks low S$ 0.39 with a market cap of S$ 187.5 million. Its trailing twelve month earnings per share is S$ 0.06 and price to earnings ratio 6.25 as on wall street journal website. In last few years the company had grown at appreciable rate. The revenue rose from S$487,133 in to S$ 821,121 in 2012. But in last few quarters the revenue is falling gradually. That’s why analysts are bearish on this stock. The stock is on sell rating by CNBC, The Wall Street Journal and Reuters. Investors are advise to stay cautious in this stock and avoid this stock.