Ausdrill downgraded

Gains in gold have helped perk the share price.

The commodities market hasn’t quite turned yet but the outlook isn’t as grim as it was when we last updated Ausdrill (see Mining services update HY2015). Back then, profits were falling, debt looked scary and the outlook dark. Thanks to rising gold prices, Ausdrill’s largest commodity exposure, and decent cash flow generation, Ausdrill's share price has jumped 78% to 48c. This is well above our buy price and, as we have repeatedly warned, this is a poor quality business in a lousy quality sector. As a result of share price gains, we are downgrading to HOLD.



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