Calibre Group’s horror run since listing last month turned around this week with the stock soaring on the back of buy recommendations by the brokers that handled the float.
The engineering company’s shares enjoyed an 18 per cent boost yesterday as UBS and Goldman Sachs initiated research coverage, arguing the stock had been oversold because of market volatility within the iron ore sector.
UBS said Calibre had been hit by a perfect storm of negative factors that drove its price down to as much as 40 per cent below the float price of $1.63.
In the same period, its contracting peers’ share prices fell an average of 13 per cent.
Expansion delays by major clients BHP Billiton and Fortescue Metals Group along with macroeconomic jitters had plagued the WA contractor since its August 2 debut.
Calibre’s stock fell 17 per cent in a single day last week when Fortescue announced cutbacks.
This week’s revival also came as managing director Rod Baxter was conducting a roadshow promoting Calibre to brokers in east coast capitals.
Goldman Sachs said its recommendation was based on the view that BHP and Rio’s expansion plans would continue and that Calibre’s high exposure to iron ore would diminish over time.
The broker said the key risk was further falls in the iron price leading to those miners revisiting their plans. UBS also identified the possibility of miners taking engineering work in-house.
UBS set a 12-month price target of $1.95 while Goldman Sachs has gone for a more cautious $1.45 goal.
Calibre’s stock closed up 18.5¢ to $1.19.
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CGH Price at posting:
$1.18 Sentiment: Buy Disclosure: Held
