Brokers Positive On Austin’s North American Expansion

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This story features WORLEY LIMITED, and other companies.
For more info SHARE ANALYSIS: WOR
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

Since acquiring Colt in Canada shares in mining supply and services group WorleyParsons ((WOR)) have barely looked back and Austin Engineering ((ANG)) is hoping its North American expansion move produces similar benefits in its case.

The company, which designs, manufactures and services equipment for the mining sector, has acquired Western Technology Services for US$19 million and Aspect Huntley expects the deal will deliver earnings upside immediately.

The group has lifted its earnings forecasts by 23% in FY08 and also increased its FY09 forecasts, the result being it expects earnings per share (EPS) of 19.7c this year and 26.7c next year.

The change reflects what it sees as the establishing of a platform in the North American market via the purchase, while also delivering it some new blue-chip clients such as Brazilian mining giant CVRD (soon to be renamed Vale).

Intersuisse is equally positive on the deal as the stockbroker notes the company’s competitive advantage comes in part from scale efficiencies, which the acquisition will provide. Intersuisse expects some immediate synergies to be generated from royalty payments, while it also sees scope for some cross-selling opportunities and improved geographic diversification for the group as it integrates the new operations.

The broker has also most identical earnings per share forecasts as Aspect Huntley and also rates the stock as Accumulate at current prices. It is worth noting Aspect Huntley’s rating comes despite the stock having risen by around 40% over the past month.

The gains are supported by management comments at the recent AGM that suggested earnings for the current year would be stronger than previously anticipated.

Citi rates the stock as Hold on valuation grounds but has also lifted earnings forecasts significantly, the result being its price target increases to $3.60 from $3.18. Even with the stock rising a further 4% or 14c today to $3.34 the broker’s price target implies additional upside.

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