In the good books
HUON AQUACULTURE GROUP LIMITED (HUO) Upgrade to Buy from Accumulate by Ord Minnett B/H/S: 2/0/0
On the back of continuing demand growth, reduced competition, and the option to export to prevent oversupply, Ord Minnett factors in higher wholesale salmon prices for Australia. This has a result of increasing estimates for the company’s operating earnings by 11% and 13% for FY17 and FY18Â respectively.
Rating is upgraded to Buy from Accumulate and the target to $5.86 from $5.31. The broker makes the stock its preferred pick in the salmon sector as it has greater upside potential thanks to higher leverage to wholesale prices.
In the not-so-good books
G.U.D. HOLDINGS LIMITED (GUD) Downgrade to Sell from Neutral by UBSÂ B/H/S: 0/3/2
UBS observes since the first half result the share price has appreciated by 23%. While momentum in automotive remains encouraging, the broker downgrades to Sell from Neutral on valuation grounds.
UBS observes both Brown & Watson and Ryco are on track for double-digit growth in FY17. Meanwhile, the earnings consistency of Oates is being challenged by margin pressure on the difficulty in securing price increases in the retail segment.
The broker believes a divestment of Dexion, and potentially Oates, could provide the cash to pay down debt and be deployed into further automotive acquisitions. Target is raised to $11.30 from $10.15.
Earnings forecast
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