It has been a busy Wednesday morning with brokers across the country upgrading and downgrading a number of shares on the Australian Stock Exchange.
All eyes will be on the following two companies after analysts put out positive notes on both companies.
a2 Milk Company Ltd (Australia) (ASX: A2M)
Leading stockbroker and financial services provider Bell Potter initiated coverage on a2 Milk today with a buy rating and placed a $1.81 price target on its shares. With the shares closing yesterday at $1.31, this price target implied upside of a massive 38% for investors. The market has reacted well to the news, with the shares up by around 6% in early trade.
Shares in a2 Milk have been on a tear in the last 12 months, climbing an astonishing 156%. The reason for this is largely down to the strong growth prospects the company has thanks to the popularity of a2 Milk’s infant formula brands a2 Platinum and Aptamil with Australia-based Chinese consumers.
Much like its rivals Blackmores Limited (ASX: BKL) and Bellamy’s Australia Ltd (ASX: BAL), its shares are trading at a premium to the rest of the market based on its Chinese growth potential. Because of this reliance I do see it as being a reasonably high risk investment, but the potential rewards justify the risk in my opinion.
Reliance Worldwide Corporation Aus P Ltd (ASX: RWC)
Reliance Worldwide came under the spotlight again today with news that Macquarie Group Ltd (ASX: MQG) has initiated coverage on it with an outperform rating. Brokers generally give outperform ratings to shares when they expect them to do slightly better than the market.
Analysts at Macquarie have set a target price of $3.25, just over 6% higher than yesterday’s closing price. They cited its strong market position in the plumbing industry and growth potential as being the reasons for the rating. This note appears to have been received well, with its shares up around 2% today.
For those unfamiliar with this relatively new listing to the ASX, Reliance Worldwide is the world’s largest manufacturer of push to connect plumbing fittings and specialist water control valves. The company generated net sales of $451.7 million in FY 2015, with 66% of sales coming from its Americas segment.
In my opinion, Reliance Worldwide would be a great long-term investment today. I believe its strong market position worldwide puts it in a great position to grow its earnings at a steady rate for the foreseeable future.