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Tuesday 23

September, 2014 6:17 PM

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Stock upgrades & buys

Stock upgrades & buys

By Expert Panel 06.01.2012


 

Refer to the table below for the complete list of stocks.

Price target increased

Ausdrill (ASL)

CHART 

Chart: Share price over the year versus ASX200 (XJO)

 

Share Price: $3.12

Price target: $4.34 (Merrill Lynch)

Broker Calls: Buy - Lincoln, Merrill Lynch

P/E: 10.58

Market Cap: $946 million

The share price performance of Ausdrill (ASL) over the past five years is nothing short of extraordinary. The table below tells the story.

Ausdrill services both gold and iron ore miners with drilling, blasting, haulage, equipment hire, mineral analysis, contract mining and logistics. The company's clients include Kalgoorlie Consolidated Gold Mines, Gold Fields Limited and BHP Billiton in Australia and Africa.  It generates 60% of its revenue from gold miners, and the rest from the iron ore industry.

Some investors see the company's exposure to the gold sector as a hedge against further market turmoil this year.

ASL 5 Year Performance History

ASL
6/2007
6/2008
6/2009
6/2010 6/2011
Revenue ($m) 366.8 392.9 505.5 631 842.8
NPAT ($m) 27.5 35.3 40.7 48.3 73.4
EPS (Cents) 20.7 22.6 23.3 23.5 26.9
DPS (Cents) 8.9 10.9 10.9 11 12

 

ASL has increased revenue every year, with a significant jump of 200 million dollars between 2010 and 2011. 

So what do brokers think? Deutsche recently initiated coverage with a buy rating and a raving recommendation. The company’s fall order book, blue chip customers and earnings resiliency in the face of difficult circumstances – bad weather, currency and global economic turmoils – is reflective of a strong management team. RBS, Merrill’s, JP Morgan, Deutsche and Macquarie also have buy ratings firmly in place. Price targets range from Macquarie's $4.15 to Merrill's $4.34 - a 39% premium to Thursday's closing price.

Lincoln Indicators is another broker with a buy on ASL. "With a forecast increase in revenue of more than 20 per cent in financial year 2012, ASL looks set to take advantage of the booming global mining sector," says Lincoln. "ASL provides contract mining and drilling and blasting services to miners in Western Australia and Africa, and is in a position to post a record year." 

 

Upgrades

Emeco Holdings (EHL)

CHART 

Chart: Share price over the year versus ASX200 (XJO)

 

Share Price: $1.00

Price target: $1.23 (Morningstar)

Broker Calls: Buy - Macquarie

P/E: 9.91

Market Cap:  $628 million

Emeco Holdings (EHL) is a mining services company specialising in renting heavy earth moving equipment.  It is one of few companies on the bourse that reduced long-term debt in 2011. Its 5.7% dividend yield beats most term deposit rates. 

Peter Rae from Morningstar reckons EHL is a stock to watch, placing a buy on the mining services company. "EHL is benefiting from the resources boom, with increasing volumes of coal, iron ore and other metals leading to high utilisation rates for its earth moving equipment fleet," says Rae. "First half 2012 earnings are likely to be subdued in response to fleet expansion costs, but full year earnings should grow strongly as the benefits from the new equipment flow through to profits."

Rae is not alone in his bullish assessment - Merrill Lynch, RBS and Credit Suisse have buys on the company and Macquarie initiated coverage on EHL in the last two months of 2011 with a buy rating. Macquarie argues that  the stage is set for strong returns in coming years. Merrill Lynch has a $1.15 price target, while RBS has a $1.23 target price, believing there is little risk to current earnings.

Buys

Miclyn Express (MIO)

CHART 

Chart: Share price over the year versus ASX200 (XJO)

 

Share Price: $1.97

Price target: $2.35 (Austock), $2.30 (JP Morgan), $2.40 (Macquarie), $2.25 (Citi)

Broker Calls: Buy - Citi, Austock, JP Morgan, Macquarie

P/E: 9.33

Market Cap: $549 million

Singapore-based Miclyn Express listed on the ASX in March 2010 and like Mermaid Marine provides services to the offshore oil and gas industry (it has around 115 oil service ships that are chartered out on longer-term contracts). Since the 1970s Miclyn Express Offshore has been providing offshore vessel support services through all phases of the oil and gas cycle and marine civil construction, with a focus on shallow water projects. The company charters a fleet of more than 100 vessels. Vessel chartering has historically accounted for more than 90% of revenue.

Macquarie Capital, JP Morgan and Morgan Stanley were joint lead managers on the IPO with an issue price of $1.90, and unsurprisingly have buys on the stock now. Its shares went on a rollercoaster ride, hitting a 12-month low of $1.33 back in August last year before rallying to its current price of $2.00.

Macquarie recently increased its target price to $2.40 based on the completion of the final 50% purchase of WA offshore services company Samson Maritime, valuing the entire WA boat business at $47 million. Since the purchase, some 15% of the company’s revenue derives from Australia with the Middle East and South-East Asia more important revenue sources. Macquarie (note here that Macquarie Capital owns some 34% of the stock’s shares since listing) thinks that the deal will be 5% earnings accretive, with forecast earnings expected to rise 2.7% in FY12 and as much as 5% in FY13.

Meanwhile Deutsche Research Analyst Tim Plumbe believes that Miclyn provides an opportunity for investment in the recovering Western Australian oil and gas sector. "With a strong balance sheet and new vessels generating good returns, combined with Miclyn’s investment in Samson Maritime Services, Miclyn Express Offshore is well positioned to capitalise on future growth opportunities,” says Plumbe.

According to Plumbe, MIO’s competitive advantage lies within its strong relationships with key industry players and its fleet of specialised vessels which typically attract longer term contracts at a higher charter rate.

Downside risks for the company include a dip in the oil price, adverse currency movements, an aggressive competitive environment impacting vessel earnings, project delays and union activity impacting utilisation and implementation risk on Samson Maritime investment.

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Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.

 



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WHAT’S ON THIS WEEK

week 26 September 2014
    • 22
    • 23
    • ASX ASX annual general meeting | 5:35 AM
    • AOFM AOFM to issue $150 million of September 20, 2030 indexed Treasury bonds | 5:40 AM
    • TPM TPG Telecom full year results | 6:05 AM
    • KMD Kathmandu full year result | 6:06 AM
    • NUF Nufarm full year results | 6:09 AM
    • ANZ ANZ-Roy Morgan weekly consumer confidence survey | 6:46 AM
    • 24
    • HIA Housing Industry Association (HIA)-Cordell Construction Outlook Breakfast Series, with speakers Westpac chief economist Bill Evans, Cordell CEO Michael Hughes and HIA chief economist Harley Dale | 5:16 AM
    • RBA RBA Financial Stability Review | 5:42 AM
    • AOFM AOFM to issue $600 million of April 21, 2027 Treasury bonds | 6:10 AM
    • 25
    • HIA HIA-Cordell Construction Outlook Breakfast Series, with speakers NSW finance and services minister Dominic Perrottet, Cordell CEO Michael Hughes and HIA economist Harley Dale | 2:19 AM
    • SOL Washington H Soul Pattinson full year results | 5:41 AM
    • BKW Brickworks full year results | 6:05 AM
    • RBA RBA governor Glenn Stevens speaks at Melbourne Economic Forum at Melbourne University | 6:07 AM
    • ABS Australian Bureau of Statistics job vacancies for August | 6:09 AM
    • 26
    • AOFM AOFM to issue $1.5 billion of October 21, 2019 Treasury bonds | 2:18 AM
    • ACCC Federal Court directions hearing in the ACCC's case against Informed Sources and petrol retailers for alleged collusion | 2:18 AM
    • HIA HIA-Cordell Construction Outlook Breakfast Series with speakers CBA senior economist John Peters, Cordell CEO Michael Hughes and HIA economist Harley Dale | 4:59 AM
    • RBA Speech by RBA head of payments policy department, Tony Richards at the at the Chicago Payments Symposium | 5:42 AM
    • SYD Sydney Airport chief executive Kerrie Mather speaking at American Chamber of Commerice in Australia lunch | 6:08 AM

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Featured Comment

It is always a good sign when small-cap companies can grow in difficult markets by taking share off competitors.

Retail stock that's bucking the trend

Broker buys

  • ASX Code
  • Company
  • Broker
  • IREIressWilson HTM
  • RIORio TintoWilson HTM
  • CCPCredit CorpPhilip Capital
  • COECooper EnergyPhilip Capital
  • TLSTelstraMorgans CIMB
  • NABNAB LtdMorgans CIMB

Broker sells

  • ASX Code
  • Company
  • Broker
  • CGFChallengerWilson HTM
  • DLXDuluxWilson HTM
  • SMXSMS TechPhilip Capital
  • OKNOaktonPhilip Capital
  • SAISAI GlobalMorgans CIMB
  • EGPEchoMorgans CIMB

Central Banks Rates

  • RBA2.50%
  • FED0.25%
  • BOE0.50%
  • BOC1.00%
  • RBNZ3.25%
  • ECB0.15%
  • SNB0.00%
  • BOJ0.10%

Upcoming dividends

  • ASX Code
  • Company, Div., Franking
  • Ex-Div.
  • IBCIronbark Capital Ltd, 2c, 100%15/12/14
  • CYACentury Aus Inv Ltd, 2c, 100%10/09/14
  • MHIMerchant House Intl Ltd, 0.5c, 0%20/08/14
  • WICWestoz Inv Co Ltd, 4.5c, 100%07/08/14
  • OZGOzgrowth Limited , 0.75c, 100%07/08/14
  • SGTSingapore Telecom Ltd, 8.6c, 0%01/08/14
  • CUPCountplus Limited, 3c, 100%28/07/14

Eight brokers like these stocks

  • ASX Code
  • Company Name
  • Consensus Target
  • DOWDowner EDI Limited$5.78
  • FMGFortescue Metals Grp Ltd$6.89
  • ORAOrora Limited$1.51
  • RIORio Tinto Limited$81.22
  • CSLCSL Limited$73.30

Upcoming Floats

  • ASX Code
  • Company Name
  • Float Date
  • GVFGlobal Value Fund Ltd14/07/14
  • TPN3P Learning Ltd16/07/14
  • DXBDimerix Bioscience Ltd28/07/14
  • BALBellamys Aus Ltd30/07/14
  • ECO8Common Ltd22/08/14

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