Macmahon downgraded by Hartleys

Brokerage Hartleys has downgraded its recommendation for Macmahon Holdings Ltd from Buy to Hold due to relative valuation.

In a brokers report today, analysts at Hartleys said shares in Macmahon (MAH) are trading at 32 per cent premiums to the fiscal 2009 average price to earnings ration of its peers.

"In an equity market with plenty of opportunities, MAH could struggle to see further multiple expansion," Hartleys said.

The broker added that, leaving aside the prospect of corporate activity, Macmahon will need to secure additional contracts for its share price to rise from current levels.

"We estimate MAH requires contract wins to full 24% of our FY09 and 65% of FY10 revenue estimates," the broker said in the report.

"Although MAH should win the additional work required to meet our estimates, we think the company will need to substantially beat our (and the market) estimates for the share price to trade significantly higher.

"Given the global macro uncertainty, we consider it is difficult to imagine significant upside surprises to current expectations for infrastructure and mining spending."

Hartleys have left its profit growth estimates for Macmahon at 28 per cent to $62.3 million on the back of revenue of $1.55 billion, up 25 per cent on the previous corresponding period.

"There is no doubt that FY09 looks strong for MAH, but we believe the strong earnings are already priced into the share price," Hartleys said.

Macmahon has a 12-month price target of $1.37, down from the previous $1.77.

Shares in Macmahon closed down 13.5c lower at $1.445.