McMillan's Abbott boost

Citi has upgraded McMillan Shakespeare from sell to buy on the back of its confidence Tony Abbott will be the new prime minister in September.

This morning Citi Research upgraded its view on salary packaging and vehicle leasing administrator McMillan Shakespeare (MMS) to a buy from a sell.

The change in rating is based on Citi’s bold view that the Coalition will be victorious at the September 7 election. If Sportsbets odds, referenced by Citi, are anything to go by the coalition is a shoe-in come September.

McMillan has jumped in early trade at the thought of a change in government, with the stock tacking on over 80 cents to $11.08 in early trade. In just over an hour of trade more than 900,000 shares have traded hands, around half of the average volume over the past week as investors align with Citi’s views.

Who knew the view of one research house could move the market so convincingly in such a short time? This is made all the more astounding given the views are based on a political outcome – Australian politics has been far from predictable.

Of the other research houses following McMillan, only Ord Minnett has a buy, albeit a ‘speculative buy’.

Perhaps Initial concerns about the current government’s plans to change the existing fringe benefit tax laws were overdone. McMillan has gained over 30% after hitting a low of $8.13 on July 31.

Citi have a target price of $12.60, which is well below the $18.00 high McMillan was trading at before fringe benefit tax changes were announced (see John Abernethy's McMillan Shakespeare: tragedy or farce?).

McMillan report on 27 August.