Emeco Holdings Limited– Upgrade On Rating By Goldman Sachs

  • Oct 16, 2018 AEDT
  • Team Kalkine
Emeco Holdings Limited– Upgrade On Rating By Goldman Sachs

Emeco Holdings Limited (ASX: EHL), heavy earthmoving equipment company, shares have been upgraded to a ‘buy’ rating from ‘hold’ rating by Goldman Sachs, with a price target of $0.47 with the leading bank initiating coverage of the company. For the first time since FY13, in September Emeco made its way to the top 200 and in August the company announced a return to profitability. Also, in August 2018 noting the “continued improvement of Emeco’s credit profile” Moody’s Investors Service, recently upgraded Emeco’s corporate family and senior secured debt ratings to “B2”, previously it was B3, and upgraded Emeco’s outlook to positive from stable.

On 16 October 2018, the company released its annual report in which the company reported profit for the first time since FY 2013. Following the release of this news, the share prices of the company witnessed an intraday increase of 4.545 percent as on 16 October 2018.  In FY18, whilst continuing to strengthen the balance sheet, Emeco’s focus has been on executing the growth strategy and driving operational efficiencies. 

Emeco has recently made two significant acquisitions. The Force acquisition significantly increased Emeco’s scale by providing Emeco with 179 high quality, low hour machines to complement the Emeco fleet. Due to the increased scale and continued cost reduction initiatives, the operating EBITDA margin increased by 440 bps to 40.2 percent. Driven by further increases in utilization and rates, additional retail maintenance services, the Company expects to see additional growth in revenue and earnings in FY19, and also a full year contribution from Force and the completion of the acquisition of Matilda may help.

In FY 2018, company’s total comprehensive profit for the year was $8.27 million compared to the loss of $181.47 million in FY 2017. The Company is expecting additional growth in revenue and earnings of FY 2019, driven by further increases in utilization and rates, additional retail maintenance services, a full year contribution from Force and the completion of the acquisition of Matilda.

In the past three months the share price of the company decreased by 4.35 percent as on 15 October 2018, traded at a PE level of 76.740x. EHL’s share traded at $0.345 with a market capitalization of $1.05 billion as on 16 October 2018. (AEST 4:00 PM).

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