Adelaide Brighton

Tuesday 23rd August 2011

Adelaide Brighton (ASX: ABC) has been upgraded to buy from hold by Goldman Sachs, with a target price of A$3.40. GS reported that the first half ending 30 June 2011 was probably the low point in the current cycle for ABC's earnings, and the company has significant infrastructure and mining project work in the second half and in FY12.

GS expects that earnings in the core construction materials business should improve, while good returns and improved earnings are also likely to come from several internal growth projects.

Citigroup has also upgraded ABC from hold to buy, however its price target has been cut to A$3.18 from A$3.32.

ABC has just released its results for the six months ending 30 June 2011 which showed first half revenue of $507.9 million, down 2.2% as mining sector demand offset reduced residential activity. Net profit of $61.5 million was down 10.6%.

ABC reports that its earnings are typically higher in second half of the year, and factors contributing to this are: the resumption of sales to lime customer in the Northern Territory in late June 2011 and increased prices to a major lime customer in WA.

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Recommendation sourced from the IRESS software trading platform

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