DXL

Dyno Nobel have a reiterated Outperform Recommendation a $2.85 12 month share price target from stockmarket analyst Macquarie Research Equities. These analysts are bullish on the outlook for Dyno Nobel following the company’s AGM yesterday. They believe that the stock is trading at a 20-25% discount to its peer Orica (ORI), and see further upside to their Earnings Per Share (EPS) forecasts on the back of potential acquisitions and further strength in their key North American business.There was no specific outlook commentary, but as per CEO Peter Richard's address at the Macquarie Conference, the business is performing well and is on track to achieve 11% NPAT growth for FY07. The board is still "confident that the market will in time recognise the true value of our acquisitions, the Dyno Nobel Moranbah project and the wider product and services and particularly in developing economies such as China." Dyno Nobel also points to strong construction demand growth from China and India and global supply shortages due to under investment in exploration, and new project capital expenditure over the last decade fuelling the sustained long-term price outlook. The commodity price momentum is expected to underpin core business outlook in the medium term, the key drivers of growth being China and India. Dyno Nobel's North American business (85% of earnings) continues to perform well with Dyno Nobel still expecting 1–2% volume growth in 2007. This is a good outcome with strength in Western Coal, Canadian resource markets and metals and mining more than offsetting the 8% of revenues exposed to US housing. The 6–9% price rise in Initiating Systems and Packaged explosives is still sticking resulting in higher margins. Conditions remain strong in Australia as per ORI's recent Mining Services result. Dyno Nobel's Moranbah AN expansion is proceeding well and is expected to start up production in 4Q08. Dyno Nobel has previously flagged a potential hybrid instrument (~$250m) to partially fund Moranbah. DXL's re-entry strategy continues (eg recent Sasol JV acquisition, new business in Indonesia, PNG, Fabchem etc). DXL did not pursue a recent opportunity in Europe because pricing was too high, so DXL is remaining disciplined.

Dyno Nobel (DXL) have a reiterated Outperform share trading recommendation and an increased price target of $2.86 per share from analyst Macquarie Research Equities (MRE). Dyno Nobel (DXL) reports its 2006 result this Monday, on the 26th February. At this stage of the reporting cycle, many investors are looking at companies that have underperformed the broader market rally and have lagged their peers. One such stock that fits this bill is DXL. For the calendar year to date, shares in the explosives producer have risen 2.9 percent versus a return for the S&PASX 200 of 5 percent. MRE forecast 2006 group revenue of US$1.285bn, +8% on prospectus. This is expected to translate into Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) of US$202.5m which is +9% on prospectus and +53% on 2005, highlighting the strong performance of the business in 2006. This has been driven by strong end-markets and successful integration of the ETI and Maitland acquisitions and associated growth initiatives. North America and Australia are both contributors, with North American EBITDA forecast at US$173.2m (+6% on prospectus) and Australian EBITDA of $31.9m (+24% on Prospectus). This all translates into an MRE forecast pro forma Net Profit After Tax (NPAT) of US$92m, +11% on prospectus of US$82.8m and a final dividend of A$0.035ps (nil franking) based on a 45% payout ratio. MRE expect to see a strong improvement in 2H operating cashflow versus the US$17m reported in 1H, to around US$63. The improvement reflects an unwinding of the 1H’s seasonal working capital build and an improved performance from acquired businesses. DXL's North American business continues to perform well despite a weaker US housing market (8% of North American revenues), although 1H comparisons are likely to be tough due to an unseasonably mild US winter in 1Q06. MRE’s 2007 earnings assume 1–2% volume growth in North America which is less than FY06’s 3–4%, reflecting slower aggregates and coal markets. The other drivers are a benefit from the Mexico low cost platform, synergies from acquisitions (ETI etc), the start-up of the 150kt Cheyenne AN expansion from October 2007 and further profit growth in Australia (new business boosting volumes). The North America ammonium nitrate pricing environment is expected to remain rational, reflecting sector consolidation and balanced demand/supply. An amazingly strong US agriculture market (high corn prices, biofuels etc) is likely to see any “spare” AN solution diverted to urea production, thus tightening AN solution supply for the industrial market. There is potential for new acquisitions in “re-entry” regions such as Latin America, Europe and South Africa. DXL recently confirmed that it has total available debt capacity of A$450m from current and new facilities which will support the development of Moranbah (DNM) "well into 2007" in addition to other growth initiatives.

Dyno Nobel Ltd (DXL) have a retained Hold / high Risk share trading recommendation and have an increased share price recommendation of $2.75 (from 2.70) from analyst Citigroup Investment Research (CIR). However, Orica remains the analyst's pick remains their pick of the sector. Dyno's long awaited announcement that it is to proceed with its Moranbah ammonium nitrate plant was broadly in-line with CIR's expectations, albeit with less certainty in a number of areas. According to the analyst, Dyno shares the risk of cost over-runs with the contractor, with project "in the vicinity of $520m". In addition, Dyno is taking some exploration risk on gas supply, which is likely to have lowered the cost (albeit that contract not yet signed). Other risks include a labour agreement not yet inked, and the additional risk of a second hand ammonia plant. Hoever the analyst points to an upside: Dyno confirmed that its AN supply contracts also includes the supply of ancillary products and services to those customers. These contracts start phasing in over the next four years and are somewhat more positive than CIR expected. Project funding will be provided by additional debt facilities, internally generated cash flow and a proposed $250m hybrid issue. The final financing structure is yet to be resolved, but we believe it is becoming less likely that it will include a third party. Factoring in revised assumptions for Moranbah has resulted in reductions to CIR’s earnings forecasts for F07e and F08e of 6% and 10% respectively, reflecting project scope and financing, and a 9% increase to their F09e reflecting a faster than anticipated ramp-up.

The Non-Residential Cycle is churning and at the moment Macquarie Research Equities (MRE) believes that Australia is in the midst of an up-tick in engineering and non-residential construction spending. Wal King, CEO of Leighton has recently said, "With all of this activity and the opportunities still emerging, it really is difficult to recall a more positive environment for the group.

Dyno Nobel (DXL) have a maintained Outperform recommendation and a share price target of $2.73 from stock analyst, Macquarie Research Equities (MRE). According to MRE, "DXL is trading at parity to ORI on FY07 PER but is at a 9-14% discount to ORI on an EV/EBITDA and EBITA basis in FY07. DXL's 10.6x FY06 EBITA and 9.9x FY07 EBITA multiples are undemanding." MRE have also noted that the world's largest explosives company, Orica (ORI), have higher share prices after its annual profit have more than doubled as a result of strong resource sector demand.

Stock analyst Macquarie Research Equities (MRE) have retained their Outperform rating for the Dyno Nobel (DXL) stock with a share price target of $2.73. Key DXL company events to watch on the horizon according to MRE are "i) the finalisation of structure of potential QNB expansion including whether CSBP is involved, 2) potential acquisitions and other growth initiatives (ie Fabchem, Asian and Latin American re-entry), 3) October AGM."

ABN Amro have rated the Dyno Nobel (DXL) stock with a Buy rating with a share price target of $2.80. The company's profit was US$4.4 million higher than their forecast with strong volumes accounting for the better than expected outcome. Because of this unexpected outcome, the broker has raised their full year forecast by 8 percent to US$90 million. On the other hand, Deutsche Bank have rated the company shares as a Hold with a share price target of $2.40. Another broker has given Dyno Nobel an Overweight recommendation with a share price target of $2.85.