Australia | Apr 19 2007
By Rudi Filapek-Vandyck
The broker community has remained quiet on Tasmanian salmon company Tassal Group (TGR) since we last highlighted that the company’s shares were believed to have significant upside potential.
That was in October last year (see Weekly Analsis – A Near Perfect Score Card).
Only three of the ten experts we monitor on a daily basis currently cover the stock, and as far as our information goes neither Macquarie nor Merrill Lynch have bothered to formally issue an updated report on Tassal since last year.
Shareholders need not panic though as the latter has finally updated its views and thoughts and it would seem that things have only further improved since the broker initiated coverage in mid-2006.
Tassal is included on the broker’s freshly initiated list of ten small cap stocks that carry the highest conviction for the year ahead. FNArena does smell a bit of copy cat practice as strategists at GSJB Were have been running a High Conviction list for months, although not specifically for small caps.
Merrill Lynch simply cannot find enough superlatives when it comes to “the largest producer and marketer of Atlantic Salmon in Australia”. The forecast is that all the good things put in practice by Tassal management will translate into a three year CAGR in EPS growth of circa 43.0%.
The broker has revalued the shares at $3.96. This is still modest considering the analysts’ DCF (discounted cash flow) calculation, believed to potentially capture the “true longer term value” of the company, stands at $4.79.
Merrill Lynch’s revised target of $4.00 takes a position at the top of the market, suggesting a total return of some 43%.
ThomsonOneAnalytics shows the current mean EPS expectation for FY07 is for 14c. The median price target stands at $3.22. These figures are calculated on the basis of three expert views.
FNArena’s average price target stands at $3.25 but is made up of Merrill Lynch’s $4 and Macquarie’s yet to be updated $2.50 target. GSJBW, the third expert in our database who actively covers the stock, doesn’t set price targets.
All three experts in our database rate the stock as Buy/Outperform which concurs with a highly positive rating on Thomson.