Stock Buy Call: AusGroup with price target of 0.71 by UOB Kay Hian

UOB Kay Hian said it has raised its 12-month target price for AusGroup Ltd, an engineering services provider for the oil and gas industry, to 0.71 sgd from 0.55 as its acquisition of Cactus Engineering & Trade Pte Ltd is expected to boost the group's earnings from the current financial year and onwards. Cactus is a Singapore-based company that specialises in manufacturing subsea well-head control equipment. "We expect Cactus to boost AusGroup's years to June 2007, 2008 and 2009 earnings by 50 pct, 72 pct and 91 pct respectively," it said. UOB Kay Hian raised its year to June 2007 net profit estimate for AusGroup to 19.9 mln aud, and sees the company's bottom line further improving to 26.2 mln the following year. The brokerage reiterated its "buy" recommendation for AusGroup, noting that the stock is trading at 5.8 times its year to June 2007 price to earnings ratio, and at 2 times price to book value, below the company's three-year compounded annual growth rate of 22 pct. At 3.43 pm, AusGroup was up 0.005 sgd or 1.39 pct at 0.365 on volume of 5. 41 mln shares.