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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 25 July 2014
    • 21
    • CBA Commonwealth Bank business sales indicator | 2:18 AM
    • AQA Aquila Resources quarterly activity report | 2:19 AM
    • 22
    • Anika Foundation Luncheon Address by Glenn Stevens, Governor, to the Anika Foundation Luncheon, Sydney | 1:03 AM
    • RBA Panel participation by RBA assistant governor (financial markets), Guy Debelle, at the 2nd Latin American Australia Investors Forum, Sydney | 2:17 AM
    • 23
    • ABS ABS Consumer price index for June quarter | 1:00 AM
    • SGM Sims Metals strategic review presentation | 1:02 AM
    • BHP BHP June quarter report | 1:02 AM
    • PSA Petsec Energy - June quarter results released | 1:54 AM
    • CQ Functions, Queens St, Melbourne Four companies to present updates and investment opportunities (Altona Mining, Arafura Resources, Bassari Resources, Excelsior Gold). CQ Functions, Queens St, Melbourne. | 2:17 AM
    • 24
    • OGC Oceana Gold Q2 results | 1:00 AM
    • MQG Macquarie Group AGM | 1:01 AM
    • PSA Petsec Energy hosts an investor and media conference call about its June quarter results | 1:01 AM
    • AGO Atlas Iron - June quarter report. | 1:02 AM
    • NCM Newcrest Mining quarterly production report | 2:18 AM
    • HIA HIA Summit - Guest speakers include Dianne Spaulding from the non profit Housing Association of Northern California, and Counterpoint Communications Inc's Bob Ransford, Sofitel, Phillip Street, Sydney. | 2:23 AM
    • Peppers and Rogers Group Peppers and Rogers Group founder Don Peppers talks about making better decisions with Data/business management. Hilton, George St, Sydney. | 3:18 AM
    • 25

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Featured Comment

The big-four banks are ripe for a share-price pullback after stellar gains in the past few years.

Five themes to buy now

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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