The company has announced a $125m maintenance contract with VicRoads, though there are no changes to the broker's earnings estimates on news of the contract.
With value still on offer in its view the broker retains its Buy rating on the stock.
Target price is $5.50 Current Price is $4.69 Difference: $0.81 If DOW meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).
Credit Suisse 03/06/2010 1 Outperform $5.75 26.9%
The company held its annual investor day and new information leads the broker to suggest the issues with Reliance Rail finance requirements are likely to overhang the stock for the next 12-18 months.
The group's current contract issues lead the broker to suggest a capital raising is possible and it sees scope for a $250m equity raising at $4.00 per share.
There is enough value on offer for the broker to retain its Outperform rating but it notes the value gap is unlikely to be realised while contract and financial uncertainty remains.
Target price is $5.75 Current Price is $4.69 Difference: $1.06 If DOW meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).
Deutsche Bank 03/06/2010 1 Buy $6.00 32.5%
Target $6.00 (was $9.10). The company has announced some contract write-downs related to its Waratah trains PPP project and to reflect revised guidance the broker has cut its earnings forecasts.
The changes mean a reduction in price target but downside appears priced into the stock at current levels in the broker's view. Post the update the broker retains its Buy rating.
Target price is $6.00 Current Price is $4.69 Difference: $1.31 If DOW meets the Deutsche Bank target it will return approximately 28% (excluding dividends, fees and charges). Aspect Huntley 03/06/2010 3 Downgrade to Hold from Buy - -
Update database.
Current Price is $4.69. Target price not assessed.
Macquarie 03/06/2010 3 Neutral $5.40 19.2%
Following the company's Investor Day the broker retains its view the group's base business outlook is positive given strong bidding opportunities across the mining, engineering and rail operations.
A big issue remains operational delivery of the Waratah trains project and the broker concedes there is still risk of further delays and quality issues. This implies some uncertainty on the part of investors and so the broker retains its Neutral rating.
Target price is $5.40 Current Price is $4.69 Difference: $0.71 If DOW meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).
Citi 03/06/2010 1 Buy, High Risk $7.35 62.3%
After a chat with management post the company's recent downgrade, the broker is fairly confident that the company's core business is tracking well.
So while Citi admits it will take time for investor confidence to return following the downgrade, the broker believes the PPP rail execution risk is now more than priced in.
With the stock trading at 7x FY11 consensus earnings, Citi thinks the valuation looks attractive. The Buy call and $7.35 target price are maintained.
Target price is $7.35 Current Price is $4.69 Difference: $2.66 If DOW meets the Citi target it will return approximately 57% (excluding dividends, fees and charges).
JP Morgan 03/06/2010 3 Neutral $7.33 61.8%
Post the company's investor day and after the news of a $190m provision against the NSW Rail PPP project in FY10, the broker still believes there is significant upside to its average valuation of $7.33.
However, the broker also thinks there will be considerable and continued uncertainty around the performance of the PPP project, which will limit share price performance. Once the market regains confidence in the project, the broker thinks the stock will re-rate.
But this probably wont happen until well into CY11 and in the meantime, the broker thinks management's credibility will be questioned and that delivery on earnings expectations will be crucial in restoring confidence. Neutral maintained.
Target price is $7.33 Current Price is $4.69 Difference: $2.64 If DOW meets the JP Morgan target it will return approximately 56% (excluding dividends, fees and charges).
BA-Merrill Lynch 02/06/2010 1 Buy, Medium Risk $5.89 30.0%
Management had said the Waratah rail project was on track, and then comes a $190m write-down. Downer notes it has $40m of excess provisions and FY11 is expected to be strong, but risks still remain with rail, the broker notes.
The balance sheet and debt covenants look okay, but the broker will not rule out a raising. The sell-off yesterday was overdone in the broker's view but its target is slashed from $9.00 to $5.89. It's a Buy for the brave, the broker suggests.
Target price is $5.89 Current Price is $4.69 Difference: $1.2 If DOW meets the BA-Merrill Lynch target it will return approximately 26% (excluding dividends, fees and charges).
DOW Price at posting:
$4.56 Sentiment: None Disclosure: Held
(20min delay)
