MARKETS SPECTATOR: Seven's mining drag

Morgan Stanley has cut its earnings estimates for conglomerate Seven Group Holding because of its exposure to the mining industry.

Morgan Stanley says its expectations that mining activity in Australia will slow over the next two years have prompted it to cut earnings forecasts for Seven Group Holdings.

Analyst David Evans expects Seven’s 2014 sales to be 19 per cent below 2013 revenue at $3.98 billion because of project deferrals. He expects no improvement in revenue in 2015. Evans forecasts net profit for the conglomerate to be $266 million next year, compared with $360 million this year.

Seven remains one of the few resource-linked companies – through its heavy equipment dealership and exposure to Chinese mining activity – not to have cut earnings forecasts. Company management has reconfirmed its estimate of 10-20 per cent net profit growth in 2013 over 2012.

Evans has cut his price target for the stock to $9 from $12. At 1148 AEST Seven shares were down 9 cents, or 1.3 per cent, to $7.04. The stock has declined 6.4 per cent in the last 12 months compared with the S&P/ASX200 Index, which is up 19 per cent in the same period.

The index fell 6.381, or 0.1 per cent, to 4804.90 at 1148 AEST.

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