Rinker

Rinker (RIN) has had their US$11.7 billion takeover bid extended by Cemex to to 7pm on April 27,2007. Shares in RIN have slumped about 7 percent from their mid-February highs as investors exited the stock on fears that Cemex would walk away from the takeover deal. Stock analyst Macquarie Research Equities continues to believe that the current bid is too low, and Cemex will have to increase the bid if it wants Rinker's assets. The extension of the offer should not come as a surprise given the delay in the Department of Justice's decision on competition issues in the US. The only certainty at this stage is that the bid of $US13.00ps is too low, which at current exchange rates translates to A$16.25ps. Taking synergies into account, the stock analyst believes that a bid above A$20.00 is a fair price for RIN given the strategic nature of its assets. To this end, Cemex will have to increase the bid if it wants Rinker's assets. If Cemex were to walk away, analyst thinks the stock will come back but they are confident that it will fall into the A$17-18ps range. MRE maintain their outperform broker call on Rinker. The 4Q07 result looks like it is going to be weak but with volumes crashing, this should not come as a major surprise. Future pricing will be more important, particularly if volumes remain down. The real focus over the next few months will be the CEMEX bid. The analyst feels Rinker did enough in the 3Q07 result to ensure a bid above A$20.00ps is achieved.

Macquarie Research Equities have a Quant Model (quantitative alpha model) which "looks at a combination of earnings revisions, composite valuation, price momentum, earnings certainty, consensus recommendation and changes in consensus recommendation." They note the following for this week:

UBS have rated the Rinker (RIN) stock with a Neutral 2 recommendation with a share price target of $14.90, falling by $2.65. The analysist note that cyclical risks are continuing to rise and have noted that it is too early to buy the stock.

Macquarie Research Equities (MRE) have retained their Outperform recommendation for Rinker (RIN) with a 12 month price target of $24.50. MRE believes that Rinker "continues to offer good upside to investors. MRE think there is earnings upside risk to the markets numbers and mid-year price increases will significantly help in ensuring upgrades come through. Capital management or a large acquisition will also drive positive sentiment." Rinker shares are listed on the Australian Stock Exchange (ASX) under stock code RIN. Check your charts.

Macquarie Research Equities (MRE) maintains a preference for stocks with offshore growth exposures via the current resources boom. MRE favours the following Australian listed stocks: BHP Billiton (BHP), Rio Tinto (RIO) and Woodside Petroleum (WPL). MRE are also overweight international industrials in tight oligopolies (a market is dominated by a small number of sellers) like Rinker (RIN), Brambles (BIL), Aristocrat (ALL) and CSL Ltd. MRE also views the banking sector as a defensive part of a portfolio.