Skellerup shares rise to four-month high on earnings outlook, Craigs upgrades stock to buy

Shares in Skellerup Holdings rose to a four-month high after the company yesterday beat its 2013 profit guidance and signalled higher earnings in the coming year, prompting brokerage Craigs Investment Partners to upgrade its rating to 'buy'.

Shares in the industrial rubber goods manufacturer jumped 4.3 percent to $1.47, their highest since May 1. Craigs upgraded its earnings forecasts for Skellerup for the next three years, increased its 12-month target price to $1.67 from $1.44 and raised its recommendation to "buy" from "hold".

Skellerup's earnings bounced back in the last two months of the 2013 financial year following two earnings downgrades. Chief executive David Mair said profit is expected to improve in 2014 as the company benefits from new products, improvements in delivery times and as demand improves on the back of an economic revival in key markets such as the US.

"The trading pattern for FY13 and management commentary suggests to us that the worst is now behind the company," Dennis Lee, an analyst at Craigs Investment Partners, said in a note. "The outlook is for an improvement in earnings in FY14."

Skellerup's Agri division, which manufactures and distributes products for the global dairy industry, is expected to continue the robust growth seen in the fourth quarter of 2013, Lee said. The company's industrial unit also expects to see a stronger performance in 2014, he said.

"Skellerup appears relatively inexpensive," Lee said.

BusinessDesk.co.nz

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