Brokers Divided Over Sons Of Gwalia
Sydney Morning Herald
Friday February 22, 2002
One analyst's buy is another's underperform.
It's astounding how differently financial market players can interpret the same information.
Investors reading through some of the broker research released since the Sons of Gwalia results on Wednesday would have been forgiven for thinking all was well with the gold group.
As the share price fell another 4.7 per cent on fears over a weak second-half gold result, hedge book problems and tantalum price fears, several analysts were calling the stock a screaming buy.
BNP Paribas claims the negative response is unjustified and, with a share price target of $12 over the next year, believes the stock is a buying opportunity at its $7 price.
CSFB is also a big fan, saying it is far more comfortable recommending the company as a buy than most of its peer miners which, the broker claims, are ``enjoying premium pricing based on corporate expectations that may not eventuate".
While Sons of Gwalia's house broker JB Were cut its full-year earnings forecasts for 2002 by 12.2 per cent and values the stock at $9.20 a share, the broker was still standing by its client, claiming the share price has the potential to run to $12.66.
Less supportive is Deutsche Bank, which argues that the currency hedge book is a concern. It rates it an underperform and has a 12-month share price of just $7.
QBE in the clear
QBE Insurance appears to again have shrugged off any concern about the veracity of its claim estimates from September 11, as well as the latest concerns about the general insurance industry's use of ``financial reinsurance".
Rival Suncorp-Metway has not been so lucky. CSFB yesterday lowered its recommendation on Suncorp from a buy to a hold, citing the negative market sentiment on the sector from the HIH Royal Commission.
It can't have escaped investors' attention that former FAI chief operating officer Daniel Wilkie, whose name has cropped up regularly in the commission's investigations, is head of general insurance at Suncorp.
Wilkie will soon have his chance to defend himself in the witness box. But CSFB is more concerned about the heights to which Suncorp shares have rallied ahead of next Thursday's result.
This is a potentially testing period for the stock, given the price slump immediately after the full-year result last year due mainly to the bad second-half of the general insurance division (at that stage not including GIO).
The stock quickly regained ground when it disclosed much better than expected synergies ($240 million) from the GIO acquisition, but ongoing risks cited by CSFB include weak investment returns and maintaining returns in general insurance and margins in banking. Suncorp fell 5c to $14.30 (CSFB's valuation is $13.92). QBE rose 4c to $7.75.
Julia Ross still rising
Recruitment agency Julia Ross continues to go from strength to strength, with the share price up another 4c to $1.35 yesterday bringing its gain over the past couple of months to 42 per cent.
While much of the support was in anticipation of this week's solid interim result, and a little bit of it was optimism about an economic upturn, the X factor was possible bid interest.
ABN Amro, which is hosting an institutional lunch for the group today, said in a recent research note that there had been suggestions a multinational recruitment agency was giving Ross the once-over.
Chatting over lunch yesterday, Ms Ross said she knew of the rumours but had not received any approaches and did not know who the candidates might be. She holds 53 per cent of the equity.
Following an 18 per cent increase in net profit to $3.2 million for the six months to December, ABN Amro analyst Alex Mees had upgraded current full-year forecasts from $6.34 million to $6.59 million. The 12 month share price target has been increased from $1.30 to $1.59.
Mr Mees says the solid result was due to the strong focus on temporary placement services, which shielded the group from a drop in demand for recruitment services following September 11.
Profit takers hit W'field
Westfield Holdings experienced something unusual yesterday a drop in its share price solely related to the issue of new shares.
The shares fell from a high of $17.15 to a low of $16.51 before closing down 33c to $16.66.
Analysts could not explain the fall other than to say fund managers were looking to take profit after the recent rally.
Due to its somewhat hostile takeover battle for Rodamco's US shopping centres and the never-ending meetings and investor briefings, the board and directors have found it impossible to meet and sign off the accounts.
This has delayed the release of interim data to the market, causing some skittishness among investors that numbers were being changed, but that is not the case.
Revelations that Rodamco directors have given themselves very lucrative golden parachutes after the Westfield offer has not helped sentiment.
© 2002 Sydney Morning Herald