Dyno Nobel Update

Submitted by Craig Strzelecki on 25 May, 2007 - 20:45

Dyno Nobel have a reiterated Outperform Recommendation a $2.85 12 month share price target from stockmarket analyst Macquarie Research Equities. These analysts are bullish on the outlook for Dyno Nobel following the company’s AGM yesterday. They believe that the stock is trading at a 20-25% discount to its peer Orica (ORI), and see further upside to their Earnings Per Share (EPS) forecasts on the back of potential acquisitions and further strength in their key North American business.There was no specific outlook commentary, but as per CEO Peter Richard's address at the Macquarie Conference, the business is performing well and is on track to achieve 11% NPAT growth for FY07. The board is still "confident that the market will in time recognise the true value of our acquisitions, the Dyno Nobel Moranbah project and the wider product and services and particularly in developing economies such as China." Dyno Nobel also points to strong construction demand growth from China and India and global supply shortages due to under investment in exploration, and new project capital expenditure over the last decade fuelling the sustained long-term price outlook. The commodity price momentum is expected to underpin core business outlook in the medium term, the key drivers of growth being China and India. Dyno Nobel's North American business (85% of earnings) continues to perform well with Dyno Nobel still expecting 1–2% volume growth in 2007. This is a good outcome with strength in Western Coal, Canadian resource markets and metals and mining more than offsetting the 8% of revenues exposed to US housing. The 6–9% price rise in Initiating Systems and Packaged explosives is still sticking resulting in higher margins. Conditions remain strong in Australia as per ORI's recent Mining Services result. Dyno Nobel's Moranbah AN expansion is proceeding well and is expected to start up production in 4Q08. Dyno Nobel has previously flagged a potential hybrid instrument (~$250m) to partially fund Moranbah. DXL's re-entry strategy continues (eg recent Sasol JV acquisition, new business in Indonesia, PNG, Fabchem etc). DXL did not pursue a recent opportunity in Europe because pricing was too high, so DXL is remaining disciplined.

Dyno Nobel Limited is listed on the Australian Stock Exchange (ASX) under stock code DXL. You can view their investor website here. DXL was listed on the ASX on 7 April, 2006. The Company is a manufacturer and distributor of commercial explosives in North America and Australia. Geoff Tomlinson is the Chairman of Dyno Nobel and the CEO is Peter Richards. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade DXL. Check your charts and good luck with your share trading!

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