EHL – Macquarie rates the stock as Outperform

The latest updates from the Australian mining services sector indicate production-related activities domestically have seen little virus impact while internationally is mixed, the broker notes.

Exploration and non-essential activities are nonetheless more likely to be curtailed.  But in particular, iron ore and gold operations in WA are noted as being very strong. Guidance is being withdrawn in the sector because of virus risk, not impact, the broker notes.

Emeco Holdings’ rental equipment is more than 95% linked to production activities and more than 75% to gold, iron ore and coking coal. The company’s financing is hedged and the lower A$ is providing a benefit. Outperform retained, target rises to $1.50 from $1.25.

Emeco is the broker’s preferred stock in the sector, along with Mineral Resources and Seven Group Holdings.

Sector: Capital Goods.

Target price is $1.50.Current Price is $1.05. Difference: $0.45 – (brackets indicate current price is over target). If EHL meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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