The steel industry is hardly the hot sector to be in thanks to the carbon tax, a depressed construction market and a property slowdown. But brokers aren’t shunning the steel industry just yet.

Merrill Lynch has upgraded struggling steelmaker OneSteel to a high risk buy as asset sales worth around $100 million and job cuts make inroads in its stretched balance sheet. Two days before Christmas, OneSteel rallied on speculation that a South Korean steelmaker was keen on buying it. JPMorgan has an overweight position on OneSteel and UBS places a Buy.

Super Retail Group is another surprise entrant this week considering the dire state of the Australian retail industry. Citi has upgraded the stock to a buy, as the company reports rising sales amidst the gloom – the bulk of sales coming from its regional stores profiting from cash-up miners, as well as a surge in buyers for leisure and hobby goods. The company retails auto parts and accessories, boating, fishing and camping goods through its Super Cheap Auto, Rebel Sports and Amart All Sports stores.

Some may be surprised to see iron ore explorer Gindalbe Metals in the table this week, which has lost almost 60% of its value in the past 12 months. Clearly, some brokers think the share price rout might have come to an end, with UBS placing a buy and MorganStanley with an overweight on the explorer.
 

Price Target Increases & Upgrades

Amcom Telecommunications (AMM)

Share Price: $0.85

Price target: $1.09 (RBS)

Broker Calls: Buy - RBS

P/E: 12.67

Market Cap:  $203 million

Amcom Telecommunciations (AMM) is one of the few stocks defying the downtrend, rising 24% year to date. Investors like stocks like Amcom because the company is not reliant on consumer spending, and aren’t buffeted by fears out of Europe or the US. Amcom is also benefiting from positive sentiment surrounding the telecommunications sector with stocks like market leader Telstra, up 16% this year.

Amcom owns and operates a fibre optic network providing internet and voice services to around 900 businesses and government. They also manage data centres and provide cloud computing services.

Morningstar recently upgraded Amcom to a buy, with a $1.15 price target. The stock’s currently trading at $0.85. RBS also has a buy on Amcom following its purchase of IT company L7 Solutions for $15 million. The acquisition should improve the company's ability to sell and manage cloud computing services. The broker thinks the deal is around 12% EPS accretive in FY13.

In September last year, MLC became a substantial shareholder in Amcom snapping up 13,247,496 shares, or 5.54%, of the company.

Buys

NRW Holdings (NWH)

Share Price: $2.71

Price target: $3.45 (MS)

Broker Calls: Buy - RBS

P/E: 11.49

Market Cap: $756 million

Civil construction and mining services company NWH Holdings is benefiting from the tailwind of strong resources demand. A strong order book and a healthy earnings outlook makes this stock a candidate for your watch list. Clearly, NWH is a stock for those with a positive outlook on commodities, believing that global growth will swing into action this year. A recurrence of the doom and gloom outlook  we experienced towards the end of last year, would place downward pressure on this stock.

NWH’s share price is up 13% year on year, and 31% for the past two years. The stock hit a high of $3.09 in April last year – but has exhibited much volatility, and indirection, since. In October last year, the stock retreated to $2.20 as global volatility hit commodities prices.

The company issued a positive guidance in November, and the market gave the stock the thumbs up. UBS, Deutsche and Austock have buys on NWH. Deutsche expects earnings growth to be solid over coming years, and recently lifted its earnings estimates for the company by 25% and 18% in Y13. RBS Australia has a buy, estimating that earnings will rise 22% in FY12-13.
 

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