Company Name: AUSGROUP LIMITED
| Research House: DMG | Price Call: BUY | Target Price: 0.75 |
DMG & Partners initiated coverage of AusGroup, which provides services to the mining and oil and gas industries, with a ‘buy’ rating and a target price of $0.755, citing a positive industry outlook.
By 10:10 a.m., AusGroup shares were up 2% at $0.505, and have surged 60% since the start of the year, compared to the FTSE ST Industrials Index's 20.5% rise.
A record A$261 billion ($333 billion) has been committed towards capital expenditure in 98 major minerals and energy projects between 2012 and 2016 in Australia, DMG said, which will benefit AusGroup.
The brokerage expects AusGroup to see net profit growth of 29% on an average a year over the next three years, helped by improving net margins.
The company also said it was planning to spin off its operating subsidiaries in a listed entity on the Australian Securities Exchange.
“If this plan goes through, AusGroup shareholders stand to gain as the industry average forward price-to-earnings on the ASX is 10 times versus AusGroup’s 5.4 times today,” said DMG.
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