Seven Group Holdings is the big mover on the market today, up by $1.00, or 8.9%, to $12.17 on the news that it has moved to 100% ownership of Coates Hire Group.
What the company said:
Managing Director & CEO of SGH, Ryan Stokes said:
“The move to full ownership of Coates Hire will enhance SGH’s position as a leading operator of industrial services businesses, with a strong macroeconomic environment and a positive outlook providing the potential for significant opportunities to be realised.”
Recent broker research
The move to full ownership of Coates looks to provide a substantial positive impact on earnings to Seven Group, so we may see valuations and targets updated.
Until then, it's worth noting that Deutsche increased their target significantly from $8.65 to $12.50 in their recent post-results report, maintaining their Hold rating, focusing on the better outlook for revenues from mining-related parts of the business.
“SVW delivered operating EBIT at the top end of guidance, reflecting the significant work management have undertaken to reduce costs and position the company well for a cyclical improvement, which is evident in the Infrastructure exposed segments within Coates and Westrac. The outlook for the mining-exposed businesses is improving, especially the equipment maintenance segment, with Westrac Product support sales growing 15% yoy. We see the sale of Westrac China for 15x EBIT as a very good outcome and a strong validation of the value of the Australian franchise. Guidance for 5-10% underlying EBIT growth is encouraging, with risk to the upside.”
Goldman Sachs also cover it, and increased their target post-results, from $11.20 to $12.25, and maintained their buy call:
“We raise our 12-month TP to A$12.25 (was A$11.20 prior), reflecting our improved outlook for Coates Hire and lower net debt on strong FY17 cash flow. Our SOTP-based TP reflects Seven Group’s conglomerate structure and assumes a 20% holding company discount (unchanged) to its investments. Our TP implies a total return of +0% vs. sector average of -15%. We maintain our Buy rating on a sector-relative basis.”
What Colonial First State said:
Seven Group was mentioned by Dawn Kanelleas from Colonial First State Global Asset Management in a panel thematic discussion on Livewire, who said that:
“In some instances, there are companies that are benefiting from a recovery in the mining segment, for example, Seven Group through the Caterpillar franchise, and through capital expenditure and usage of parts.”
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