Emeco

Emeco has a reiterated Buy, High Risk recommendation and a share price target of $2.45 from sharemarket analyst Citi Investment Research. The stock has been sold off aggressively over the past week, and they believe this is due mainly to profit downgrades by other brokers. However they can find no reason to change our forecasts or view on the stock and there is no downgrade message coming from the company. Reasons for the other broker's downgrades include contract losses, weaker demand and freeing up equipment supply. The contract losses relate to the supply of gear to Rio Tinto in SE Qld where coal production is set to be cut due to lower demand from Tarong power station because of the drought. Emeco currently has 28 machines at the site, of which only 8-9 will be needed if the cut backs occur. To put this in context, Emeco has 1,000 machines in its rental pool. Given the typical 90-day warning on equipment returns, there is no impact on FY07E, and there is time/opportunity to redeploy the gear, probably at better margins (if it rains the gear may stay put). There has been negative news from the Coates Hire-owned Allied. This business is a poor cousin to Emeco, both in terms of quality of clients and state of the fleet equipment. As such, any read on the market is very specific to Allied. Furthermore it is bound to be suffering from the ongoing tight supply of tyres. Emeco is protected by its long term supply agreements with Goodyear, whereas Allied has always relied on the spot market.

Emeco (EHL) have a Buy 2 shares recommendation and a share price target of $2.30 from stock analyst UBS. Emeco has made a small European acquisition announcing the purchase of Euro Machinery and Euro Rental for e6.4m, of which e2.0m will be satisfied by scrip with the remainder paid in cash. The two businesses are involved in heavy equipment trading and rental respectively. A year ago EHL opened a procurement facility in Rotterdam. Todays' acquisition gives the group a vertically integrated procurement, trading and rental business in central Europe which we suspect can be grown rather quickly. While the impact on near term earnings is likely to be negligible we believe that this creates a sensible base for expanding into Europe. A previous Emeco (EHL) stock recommendation.

UBS has initiated coverage over the Emeco (EHL) stock with a Buy 2 recommendation with a share price target of $2.30. The broker expects demand to be strong over the next few years as mining capacity is expanded and new equipment is in short supply. Emeco is the largest player in Australia, Indonesia and Canada in the market for renting earthmoving equipment into the mining and civil construction industries. Emeco primarily focuses on renting used equipment into the mining industry. The stockbroker has a valuation of $2.20-$2.40 on the EHL stock.