Collected Wisdom

This week we look at Macquarie, Woodside, Oil Search and Sigma Pharmaceutical.

Summary: An upgrade from Macquarie on its 2016 first half results has most analysts tipping the stock as a buy, while Woodside is rated a hold after Oil Search rejected its takeover bid. Mixed reviews on Sigma Pharmaceutical's results have kept it as a hold.

Key take-out: Analysts reckon Macquarie is demonstrating momentum thanks to a falling Aussie dollar and strong performance fees.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Macquarie Group Limited (MQG)

It doesn’t seem all that long ago when Macquarie felt like a dirty word and it was all too easy to take a shot at the “millionaires club” as the share price fell from close to $100. Today it is a different story as they gave guidance at the CLSA Investors’ Forum in Hong Kong.

The upgrade from the group of a 40 per cent increase in 1H16 profit on 1H15 has been predominantly due to benefits in a decreasing dollar and strong performance fees. They did note 2H16 figures will be in line with 1H16 as they expect lower performance fees with the short term market outlook looking uncertain.

Sentiment around MQG remains buoyant with analysts pleased to see the momentum has been kept up. Eight out of the nine surveyed have MQG as a buy and the only outsider is sitting with it as a hold.

The 12-month average price target sits at $88.78 with the most bullish target at $95.16 and the lowest at $78.87. At the time of writing the Macquarie share price was $77.23 implying a 13 per cent upside to the average twelve month price target.

  • Investors are generally advised to buy Macquarie at current levels.

Woodside Petroleum (WPL)

A lot has been written and the talking heads have filled a lot of airtime with Woodside’s proposed merger with Oil Search last week on September 8. To WPL’s disappointment the board of the PNG oil and gas producer unanimously rejected the proposal.

The rejection came as no surprise to analysts who noted OSH’s board choosing not to even meet with the potential suitor as a clear indication of their intentions.  

What does this mean as far as the consensus view is concerned? For Woodside it is doubtful they will up their offer and will continue on in a business as usual fashion and in the company's own release stated they would “continue to maintain a disciplined approach in relation to business development opportunities.”

The average 12-month price target for WPL is $32.62 with the uppermost target at $36 and the lower at $30. At the time of writing WPL’s share price was trading at $28.34 implying a 13 per cent upside to the average twelve-month price target.

  • Investors are generally advised to hold Woodside at current levels.

Oil Search Limited (OSH)

In regards to OSH it is also business as usual too. In their announcement rejecting the offer the chairman did comment: “If any proposals are tabled in the future that reflect compelling value for Oil Search shareholders, we will engage on them. Clearly this proposal falls well short of that test.”

The average 12-month price target for OSH is $8.38 with the uppermost target at $8.80 and the lower at $7.10.  At the time of writing OSH’s share price was trading at $7.23 implying a 13.7 per cent upside to the average 12-month price target.

  • Investors are generally advised to buy Oil Search at current levels.

Sigma Pharmaceutical (SIP)

Sigma Pharmaceutical released its half-year results last week on September 10. The pharmaceutical distributor received mixed reviews from analysts with some having SIP hit their numbers and others had them missing.

All analysts agreed Sigma’s recent acquisitions of Central Healthcare Services and Discount Drug Store had been a great success exceeding expectations. In the last three months the Sigma share price has experienced quite a sharp rise and a sharp decline and due to this fall it has left most analysts recommending SIP as a hold.

The average 12-month price target for SIP is $0.84 with the most optimistic outlook set at $0.89 and the pessimistic at $0.76.  At the time of writing SIP’s share price was trading at $0.75 implying a 10.7 per cent upside to the average twelve-month price target.

  • Investors are generally advised to hold Sigma Pharmaceutical at current levels.

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