Brokers who spruiked the dud float of McAleese Group were paid more than $5 million to underwrite the offering, according to the company’s prospectus.
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The underwriters, JP Morgan, Credit Suisse and Macquarie Group, all gave McAleese buy ratings after it floated in November last year.
As of Wednesday, Macquarie and Credit Suisse had downgraded McAleese to neutral ratings but JP Morgan maintained its ‘‘overweight’’ call.
It is believed that as lead underwriter Credit Suisse placed the largest tranche of stock.
In a glowing note to clients issued on January 13, Credit Suisse analyst Bradley Clibborn gave the stock a target price of $1.80, well above the issue price of $1.45. On Wednesday, it reached a record low of 44¢.
Describing McAleese as a ‘‘value play with upside through acquisitions’’, Mr Clibborn said the then share price of $1.54 represented a ‘‘compelling valuation’’ that was 30 per cent below peers who produced lesser returns.
Mr Clibborn gave McAleese stock an ‘‘outperform’’ rating despite noting as a key risk the fallout from a crash in Mona Vale, NSW, in October 2013, in which one of the company’s Cootes fuel tankers exploded.
Since the crash, which killed two people, McAleese has been under intense pressure from road safety authorities and suffered a series of earnings downgrades and restructures.
Mr Clibborn maintained his ‘‘outperform’’ rating in a January 30 note, issued after McAleese announced Cootes had lost $92.5 million worth of contract to haul fuel for Shell and BP.
He said McAleese would be able to reduce its costs to maintain its margins by sacking staff and through the ‘‘scaling down of maintenance facilities’’.
Macquarie analyst Andrew Wackett was similarly positive in a note issued on the same day, saying that the losses at Cootes were ‘‘expected to be largely offset by resources growth’’ and putting a target price of $1.72 on the stock.
On February 18, after McAleese unveiled a swingeing earnings downgrade, JP Morgan analyst Carolyn Holmes cut her target price for the stock to $1.13 but reiterated her ‘‘overweight’’ rating.
‘‘While this is immensely disappointing so early on in its listed life, we continue to see value in [McAleese] and truly hope we have seen the last of the contract losses,’’ Ms Holmes said in a note to clients.
Asked if JP Morgan’s position as underwriter influenced her rating of the stock, Ms Holmes said she did not speak to the press out of fear of being misquoted ‘‘so I don’t want to go there’’ and hung up the phone.
Mr Wackett declined to comment and Mr Clibborn did not return BusinessDay’s call.
