Australia | Jan 16 2007
By Rudi Filapek-Vandyck
The interim results season is drawing closer and brokers such as Macquarie and Intersuisse have already started to look into their expectations and assumption for several individual stocks.
The traditional questions to be asked are who is likely to surprise and which stock may have been overlooked by the market and is therefore ripe for a re-rating? Macquarie analysts this morning singled out Specialty Fashion Group (SFH), formerly Miller’s Retail, stating this company is still far off from a possible re-rating.
Admittedly the company is facing a tough task in the consumer discretionary sector which continues to generate positive news into the new year. This morning upmarket retailer David Jones (DJS) raised its guidance for the first six months from 7.2% growth to 7.8% growth compared to last year on the back of a stronger than expected performance in December.
Preliminary indications by the likes of Harvey Norman (HVN) and Noni B (NBL) have been positive as well. Specialty Fashion Group’s history has been filled with several “false starts” and Macquarie believes investors will remain on the sidelines until it has become clear management can finally deliver.
The broker has gained some feedback from its own survey amongst unlisted retailers and it would seem that women’s wear retailing has been one of the tougher categories through the Christmas trading period, the analysts report. The message seems clear: don’t expect any miracles from Specialty Fashion Group this time around.
Macquarie is forecasting an interim result up around 5% on last year driven largely by lower interest charges following the sale of the discount variety business. Operationally, the result is expected to be down around 5% against what the broker believes is a strong reference period last year.
A similar exercise for Integrated Group (IWF) has led the analysts to cut their short term and medium term forecasts. But Macquarie remains positive on the company rating it Outperform on a longer term view.
Its positive view on SAI Global (SAI) was again reinforced with the company announcing a US based acquisition yesterday. Macquarie believes SAI Global should report a profit increase of some 48% next month. Unfortunately, when it comes to finding a possible re-rating candidate, the stock is already highly ranked by the major equity experts in the country with the FN Arena Sentiment Indicator showing a reading of 0.7, which is a clear positive. And yesterday’s announcement has not left the share price untouched either.
So no re-rating candidates just yet?
Maybe we’ll have to find our very first candidate outside the Macquarie stock universe as Intersuisse reports this morning it believes the upcoming interim result for equipment provider Emeco Holdings (EHL) should trigger a re-rating for the stock. It just happens to be that Macquarie has yet to commence coverage on the stock.
In anticipation of the release of Emeco’s half yearly results –which are forecast to meet IPO prospectus projections- Intersuisse has raised its recommendation to Buy from Accumulate.
The FNArena database of ten leading equity experts in Australia shows currently six out of these ten cover the stock and five out of them rate the stock positively. The exception is Aspect Huntley who has a Reduce recommendation.
At around 11.30am Specialty Fashion Group shares were trading slightly higher at $1.735, up 0.005. David Jones shares were more than 6%, 26c, higher at $4.33.
Emeco shares were up 1.5c at $1.685. The overall market was slightly positive.