SGH shares climb as Morningstar hikes fair value 32%
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The news: Kerry Stokes’ SGH saw its shares rise in morning trade after Morningstar hiked its fair value estimates on the diversified operating company.
The numbers: SGH shares were up 2.4% to $50.42 at 12:15pm AEST. The stock is up around 20% over the last 12 months.
Morningstar upgraded its fair value estimate by 32% to $50 per share.
Senior equity analyst Mark Taylor said after reassessing values ascribed to SGH's surplus land and Crux and Longtom gas projects, Morningstar added a combined $7, or 18%, to its fair value. Lowering the cost of capital from 8% to 7.6% added around $4, or 11%.
The context: Taylor noted that SGH now favours codevelopment and leasing of land, rather than outright sale and development of energy projects, driving Morningstar's positive reassessment.
Morningstar also sees a favourable outlook for Caterpillar dealer WesTrac, underpinned by health forecast bulk commodity production. Meanwhile, Boral and Coates Hire can anticipate resilient, albeit decelerating, infrastructure and construction investment, Taylor said.
The source: Morningstar research
