Price target decreases & downgrades

New Hope Corporation (NHC)

Chart: Share price over the year to versus ASX200 (XJO)


Share Price: $5.67

Price target: $6.25 (Credit Suisse)

Broker Calls: Sell – Patersons

P/E: 26.34

Market Cap: $4,708 million

Hamza Habib from Patersons has a sell on takeover target New Hope Corporation. ‘This coal company has received several takeover proposals, which substantially pushed up the share price,’ he says, but warns that any deal is expected to take several months. On top of that, there’s also a distinct possibility there won’t be a takeover of NHC. ‘Investors are better off selling and taking their premium,’ says Habib. Meanwhile Credit Suisse has reduced its price target.

Richard Batt from Shadforths has a hold on Newhope. ‘In October 2011, the coal miner announced a formal process had been established for potential buyers to place bids for NHC,’ says Batt. However the share price has fallen more than 13 per cent from its highs following the announcement. Nonetheless Batt believes that investors shouldn’t be discouraged because the company has a strong balance sheet, plenty of cash and no debt. ‘It also has its own port and is in a better position than most coal miners to control its infrastructure requirements,’ he says.


Aurora Oil & Gas (AUT)

Chart: Share price over the year versus ASX200 (XJO)


Share Price: $3.01

Price target: $2.91 (JP Morgan)

Broker Calls: Sell – JP Morgan

P/E: 35.33

Market Cap: $1,239 million

With a stellar 884% gain over the past two years and a 118% gain over the 12 months to early December 2011, Aurora Oil & Gas had been in the news for all the right reasons. However recent share price weakness and the rolling off of the big gains from December 2010 and January 2011 means that Aurora is up a mere 6.8% over the past 12 months. And brokers think that there’s trouble on the horizon for this overpriced stock.

Although there were plenty of bullish brokers late last year, the stock has run hard and is approaching some of the brokers’ price targets. Of the bullish brokers, CommSec and Patersons’ price targets were hit in late December, only to then pull back through January.

Now it seems the bears are lining up to have their say. Citi, JP Morgan and Credit Suisse all have Sells or Underperforms on the oil and gas play, saying that the share price has run its course and investors need to be wary of what they believe is an overpriced stock.


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