southern cross equities says.............. buy

DJ MARKET TALK: Buy PanAust, Says Southern Cross Equities



0346 GMT [Dow Jones]

Buy PanAust (PNA.AU), says Southern Cross Equities after recent 1H results. Argues that consensus earnings upgrades are likely as PanAust's guidance of US$220 million-US$240 million EBITDA was based on copper remaining between US$3.00-US$3.25/lb, yet copper is currently US$3.41 and "appears more likely to be in the US$3.50 to US$3.75 range into year-end." Adds that even on current consensus copper price forecasts, brokers have PanAust growing EPS more than 40% in 2011, which would lower the p/e to 7x and EV/EBITDA to 5.7x. "I believe PanAust should be able to generate EPS of 7 US cents in 2011 (potentially more) and on that basis I am prepared to pay up to 10x for that leverage," says Southern Cross Equities director Charlie Aitken.

"Under the right copper price scenario, PNA is exactly the style of leveraged stock we could double our money in over the next few years."

Recommends buying PNA up to 70 cents. Latest up 4.2% at 61.5 cents. ([email protected])