Australia | Jan 24 2007
By Chris Shaw
After a record profit result for the 2005 year HPAL (HPX) has delivered a flat result for 2006, but JP Morgan considers this a good performance by the company as the profit figure of $17.1m was 10% above its $15.5m forecast.
Following the result the broker has maintained its Neutral rating but lifted its price target to $2.01 from $1.85, the move reflecting some increases to its earnings forecasts in coming years.
These increases, with expected net profit in FY07 up 8% to $17.3m and in FY08 by 3% to $17.4m, reflect improved performance in the company’s key division, essential mail. Here management has been able to lift margins through achieving some cost savings and increasing productivity, the broker noting these gains were enough to offset ongoing pricing pressures.
UBS has reacted to the profit result in a similar way, lifting its profit forecast for FY07 by 4.3% to $18.3m and in FY08 by 7.2% to $19.6m, the FY07 forecasting being 7.7% above market consensus. This represents earnings per share of 16c in FY07 and 17c in FY08, compared to the JP Morgan estimates of 14.8c and 14.9c. Thomson One Analytics shows median EPS forecasts of 16c for both years.
The higher forecasts have driven an increase in UBS’s target price to $2.00 from $1.65, but like JP Morgan there is no change to its Neutral 2 rating. The FNArena shows only Aspect Huntley also covers the stock, rating it as Accumulate. Following the company’s profit result the average price target has increased to $2.00 from $1.75.
HPAL shares are slightly higher in early trading, as at 11.00am the stock was up 1c at $1.99.