MARKETS SPECTATOR: Building up Boral

Building materials supplier Boral appears to have appeased the market and is set to enjoy an entrenched uptrend, a view backed by the major broking houses.

The broking and research community have applauded yesterday’s announcement of restructuring at Boral, which probably explains the surge in price on massive volume.

Four out of five major brokers have upgraded the building materials supplier this morning while the fifth has retained its 'buy' rating and upped its target price by a whopping 28 per cent.

UBS has left its recommendation at buy but lifted its price target to $5.42 from $4.25 as the announced cost savings have seen big upwards revision in 2013 and 2014 earnings per share estimates.

Deutsche Bank and Credit Suisse both upgraded their ratings to buy from hold and 'outperform' from 'neutral'. Credit Suisse lifted its target price to $5.40 from $3.90 per share.

In its report, Credit Suisse said "despite the challenging conditions and outlook vagaries, we are pleased with this restructuring initiative. If successful, this should place the business on a better (perhaps superior) footing for the inevitable cyclical recovery”.

The broker is encouraged by what it is seeing in the US housing market as tremendous affordability and rising home prices drive a greater sense of confidence in the marketplace.

Elsewhere, Macquarie and Nomura have lifted their ratings to neutral from underperform and reduce respectively.

image

Source: Iress

From a technical perspective, there’s no arguing as to which way this stock is currently trending. It’s broken up through the downtrend and support (was resistance) lines on hugely increasing volume, which is exactly what you want to see from a stock in an entrenched uptrend.

The momentum is clearly flowing towards the upside and I think it will continue to do so for some time, testing levels well north of the $5 level. This is definitely a stock where one should be looking to buy the pullbacks.