Azzet reports on three stocks that look oversold following price moving updates today.
Austal sinks after overstating its US earnings ~
Shares in Austal (ASX: ASB) were trading 22% lower by 2:10 pm AEDT (3:10 am GMT) after the shipbuilder fessed up to imponderables relating to previously stated earnings expectations by its U.S. subsidiary, Austal USA.
While the stock has clearly been dragged down by the overall market today – down over 1% – investors appear to have overreacted to an accounting gaffe that’s forced Austal to revise full-year earnings guidance.
Much of today’s overreaction may relate to a spate of recent accounts-related anomalies by other listed stocks, which have fashioned the market to think the worst and question management competence.
Unsurprisingly, the accounting anomaly - discovered while preparing its interim results – has made the market more dubious about taking U.S. accounts at face value.
In response to today’s guidance update, Citi has cut its target price for Austal by 12% to A$6.90.
After identifying a US$17 million (A$23.88 million) overstatement linked to its U.S. subsidiary, Austal has revised full-year earnings guidance to $110 million, down from the $235 million originally flagged at its October AGM.
Commenting on today’s update, management attributed the accounting anomaly to a double accounting blunder of incentives linked to construction milestones achieved during the manufacture of ships for the U.S. Navy in Alabama.
“These incentives had already been recognised in Austal USA’s forecast at full value for the remaining part of the program,” the shipbuilder said.
Prior to today’s update, the shipbuilder - Australia’s largest defence exporter, which holds contracts with the U.S. Navy worth $7 billion – was expected to deliver record earnings in FY26.
The revised $110 million forecast is now below the $130 million that the shipbuilder posted last year.
After being named the federal government’s strategic shipbuilder in 2024, Treasurer Jim Chalmers gave the green light for South Korean shareholder Hanwha to increase its stake from 9.9% to 19.9%.
Having allayed diplomatic concerns raised by Japan, the 19.9% cap [on Hanwha] could lead to the construction of eight Japanese-designed Mogami frigates at the Henderson shipyards south of Perth.
Despite the shipbuilder having a $15 billion-plus order book – following a string of new contracts for its operations in Western Australia (WA), Alabama, the Philippines and Vietnam – the share price is only up 28% in one year and is down around 40% in the last month.
Simply Wall St estimates an intrinsic value of approximately $20.22, suggesting the stock is trading at a massive 69% discount.
However, the average 12-month price target is approximately $7.72, implying an upside of about 18-22% from recent prices.
While Austal's current P/E of 29.2x is slightly above its "Fair Ratio" of 27.9x, it remains cheaper than the global Aerospace & Defence industry average of 46.7x.
Austal has a market cap of $2 billion; the share price is down 19% in the last week.
The stock’s shares are in a downtrend confirmed within multiple periods. In the near-term, the 5-day moving average lies beneath the 20-day moving average.
Consensus is Moderate Buy.
Nick Scali slides on disappointing 1H result
Shares in Nick Scali (ASX: NCK) were trading 17.2% lower after the furniture retailer’s first half result fell short of market expectations.
While there was a lot to like about today’s result, disappointing Australia and NZ written sales in January, up only 3.2% and well below the expected 11% has raised market doubts over the group’s ability to meet second half revenue forecasts.
Based on a first-half net profit of $41 million, which beat consensus by 8.7% and exceeded guidance of $37–39 million, the dividend increased to 39 cents per share, from 30 cents, payable 24 March.
Commenting on today’s update, CEO Anthony Scali told the market that the growth in statutory net reflected 13% growth in sales revenue in ANZ and the improvement in gross profit margin in both the UK and ANZ.
“We continue to grow our store network across ANZ with six new stores to be opened in FY26, and several new store opportunities currently under negotiation in the UK,” he said.
Key numbers within today 1H update included:
- 36.4% surge in group net profit to A$41 million.
- Revenue up 7.2% to $269.2 million.
- Earnings rose to $68.4 million from $50.7 million a year ago.
- ANZ statutory net profit of $46.6 million, up 36.7% on the previous year.
- ANZ written sales orders of $229.8 million, up 10.5%.
- ANZ revenue of $251.7 million, up 13.1% on 1H FY25 and 12.7% higher on an LFL basis.
- ANZ gross profit margin increased 150 basis points to 65.9%.
- UK statutory net loss after tax was in line with forecast at $5.6 million.
- UK gross margin was 59.2%, 14.1% above the 45.1% in 1H FY25.
- Total group earnings $96.6 million, up 18.8% from H1 FY 2025.
Looking forward, the retailer expects to open a further five new stores in Australia/NZ during the year, with additional opportunities currently being reviewed.
Meanwhile, the majority of the store refurbishment program within its recently acquired British store network is now complete.
Total written sales for the four Nick Scali-branded UK stores in January were $6.6 million.
The share price jumped from $20.87 on 18 December to around $24 on Christmas Eve following a trading update in which 1H revenue for Australia and NZ was expected to be 10% - 12% more than the previous year, higher than the previous guidance of 7% - 9%.
As a result of the revenue growth in Australia and NZ, statutory net profit after tax for the group in the first half of FY26 was expected to be in the range of $37 million - $39 million, compared to guidance of $33 million - $35 million.
Nick Scali has a market cap of $1.6 billion; the share price is up 14% in one year and down 20% in the last week.
The stock appears to be in a long-term uptrend, confirmed by multiple indicators.
Specifically, both the 20 and 200-day moving averages are upward sloping and signal that the stock can be expected to continue rallying in both timeframes.
Consensus is Moderate Buy.
Sky Metals tanks after a capital raising to fund resource expansion
Shares in Sky Metals (ASX: SKY) were down 10.5% this afternoon after the junior developer and explorer resumed trading and announced a $20.5 million capital raising that resulted in the issuance of new shares at a discount to previous trading prices.
Directors of SKY have also committed $496,000, subject to shareholder approval.
The miner told the market it would issue around 132.2 million new shares at $0.155 per share - lower than the recent, higher trading levels – with the dilution in value for existing shareholders triggering today’s selldown.
The funds will be used to accelerate the development of its 100%-owned Tallebung Tin Project in Orange, NSW, including:
- Continued resource expansion and in-fill drilling to grow and increase confidence in the recently discovered high-grade tin-silver-tungsten zones.
- Delivery of an updated Mineral Resource Estimate next quarter to underpin development studies. Bulk sampling and metallurgical test work to optimise processing and ore-sorting pathways.
- Environmental studies and approvals to support upcoming mining feasibility studies and advance the Doradilla Project.
Commenting on today’s update, SKY CEO Oliver Davies told the market that pivotal capital raising puts Sky in a very strong position to accelerate development of the Tallebung Tin Project.
He also reminded investors that today’s capital rising heralds an important period of growth and development, with Tallebung leading the portfolio as a unique near-term tin production opportunity and a key driver of Sky’s next phase of value creation.
Recent drilling and surface sampling activities at the miner’s Tallebung tin project identified significant extensions of the known mineralisation, outlining new mineralised positions east and southeast of the current footprint.
Exceptionally high-grade tin and silver intercepts in the first batch of new drill results included intercepts of 3m at 604 grams per tonne of silver, 0.68% tin from a depth of 24m, 8m at 59.4 grams per tonne of silver, and 0.26% tin from a depth of 49m, among many more.
Extensional drilling has intersected prospective quartz-vein structures beneath an extensive soil sampling anomaly, confirming the potential for repetitions of the Tallebung mineralisation to the southeast.
Following these recent market updates, Davies told the market that with tin and silver prices reaching record highs, now is an outstanding time to be reporting such impressive early results from its ongoing multi-rig drilling program at Tallebung.
Tin has surged above US$53,000/t on the London Metals Exchange – more than four times the copper price – highlighting the exceptional value of high-grade tin discoveries such as this.
“The high-grade intercepts from the southern and central parts of the deposit reinforce Tallebung's status as a premier near term development opportunity, particularly against the backdrop of rising tin, silver and tungsten prices,” he said.
Sky Metals has a market cap of $141 million; the share price is up 230% in one year and up 32% in the last month.
The stock appears to be in a strong bullish trend, confirmed by multiple indicators.
Consensus is Strong Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
