Company Name: AUSGROUP LIMITED
| Research House: DMG | Price Call: BUY | Target Price: 0.755 |
DMG & Partners initiates AusGroup at Buy with $0.755 target.
“AusGroup has effected a turnaround that has gone unnoticed by the market,” it says, estimating it trades at 6.6x historical and 4.9x forward P/Es. DMG forecasts 29% net profit CAGR for the next three years, noting fiscal-FY12 net profit of A$23.3 million ($29.8 million) was its highest ever.
“With a strong earnings growth profile, AusGroup joins our top picks with a high potential to double in two years.” DMG notes its forecasts are based on conservative FY13-15 net margin estimates of 4.3%-5.2%, compared with AusGroup’s price target increase to 6%-7%; it notes net margins have improved over the last four quarters. It says the industry backdrop is strong, with a record A$261 billion committed to capex for 98 major mineral and energy projects between 2012-2016, with another A$243 billion in uncommitted capex for 295 potential projects.
It notes its target price is based on 9X FY13 EPS, undemanding compared with Civmec’s 19x P/E. “We expect both the earnings growth and multiples re-rating to drive a massive share price outperformance.” The stock is up 20.7% at $0.495.
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