Goldman touch gives Aramex shares a lift

DUBAI // Don't bet against Goldman Sachs. That has been a good policy for investors of late, and a bullish report from an analyst with the American investment banking giant helped pushed Aramex higher yesterday. Goldman upgraded Aramex, the largest courier firm in the region, to "buy" from "neutral". It issued a new 12-month price target of Dh2.39, up from Dh1.98 that it announced in September last year. The stock closed yesterday at Dh1.61, a 1.9 per cent gain from Wednesday. It is up 85 per cent in the past year.

"Our revised 12-month target price implies 50 per cent upside potential," wrote Anuj Mehrotra, the Goldman analyst. "In our view, continued strong growth in freight volumes for the region should support earnings growth for Aramex over the next few years." NBK Capital, an investment bank based in Kuwait, also put a "buy" recommendation on Aramex in a note last month, putting a 12-month price target at a more modest Dh2.10.

Logistics and freight handling companies in the region have benefited from economic growth in the MENA region in recent years, spurred by high oil prices. And despite a fall in oil prices from last year's historic highs, trade volumes have bounced back lately, up 18 per cent in October compared with the same period in 2008, the International Air Transport Association says. Goldman raised its earning per share estimates by 17 per cent for this year and 19 per cent for 2011, and revenue estimates by 4 and 6 per cent respectively. To bolster its recommendation, Goldman noted that Aramex trades at a discount of 25 per cent relative to its own history and a 35 per cent discount to global peers.

"Given the - company's strong business model and track record, we believe the stock should gradually re-rate and trade in-line with its three-year average multiple," the analyst wrote. @Email:[e-mail]