I obtained a Pattersons report on AIE dated 30 April 2007 via my advisor at my broker. The report is very positive on AIE with a BUY recommendation and price target of 30c to 35c. Their recommendation is based on creation of value from a demerged construction business and a long term outlook on the recovery of the automotive division.
At a general meeting on 25 May 2007, shareholders will be asked to approve the demerger of the contruction and automotive divisions into separate companies. Current AIE shareholders will then hold shares in both entities, a 1 for 3 consolidation of AIE and a proportionate shareholding in Forge Group Ltd which is the proposed listed holding company of the construction business.
This will release the construction business from the current negative sentiment of the automotive industry and will enable both business to be valued more fairly relative to the peers in the respective industries.
Pattersons are very positive about the construction industry and expect near term upside. for Forge based on a full project pipeline and buoyany market conditions. Pattersons also expect an acquisition driven turn-around in value of "new" AIE to occur over a longer time frame.
Pattersons valued aiC (ie construction) at 16c per AIE share and aiA (ie Automative) at 9c per AIE share giving a combined value of 25c per share. Adjusted for after the planned demerger and 1 for 3 share consolidation the combined value would be 75c per share.
Pattersons have reduced their FY08 dividend forecast for AIE to be in line with FY07 at 3.5cps fully franked.
AIE Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
