Austock Downgrades Mac Airports

This story features MICROBA LIFE SCIENCES LIMITED. For more info SHARE ANALYSIS: MAP

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By Chris Shaw

The FNArena database shows Map Group ((MAP)), formerly Macquaire Airports, is generally rated positively by brokers covering the stock, as it currently scores five Buy recommendations and just two Hold ratings.

But Austock Securities is now not as positive on the shares as was previously the case, downgrading its rating today to Hold from Buy for a few reasons. The first is valuation, as it notes MAp shares have been significant outperformers over the past year or so, the stock returning more than 113% over the past 12 months.

The second reason is while Austock remains well above consensus with respect to traffic forecasts for MAp in FY10, it sees scope for a weaker euro to at least partially offset some of the expected kick to earnings from improved traffic levels.

As well, the stockbroker expects some of the cost cutting measures made going into the economic downturn will need be at least partially reversed, especially at Sydney Airport. So while service levels should improve there will an increase in operating expenses.

While there is little short-term earnings impact from its revisions, Austock has lowered its longer-term earnings per share (EPS) forecasts for MAp by around 5%, which brings is valuation down by a similar amount.

The changes mean Austock's price target has fallen to $3.60 from $3.80. In comparison, the FNArena database shows an average price target for MAp of $3.31.

Macquarie is one of those to rate MAp positively at current levels, seeing the stock as attractively priced to benefit from a general rebound in aviation, a view shared by Bank of America Merrill Lynch in support of its Buy recommendation.

UBS is more in line with the Austock view, its Neutral rating reflecting some concerns over the timing and extent of a recovery in the European economy. JP Morgan agrees a European recovery may take longer to return to trend growth levels but even allowing for this JPM sees enough value to rate the stock as Overweight.

Shares in MAp today are unchanged at $3.22, which implies upside of around 2.0% relative to the average price target in the database.

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