In the good books
Credit Suisse upgraded Platinum (PTM) to Neutral from Underperform. Buy/Hold/Sell 1/2/1 The May funds under management balance was up 3.6% and up 25.4% over the year to May. This was stronger than Credit Suisse expected and leads to a 1.0% upgrade to earnings estimates. The share price is now 20% off its peak and trading at fair value so the broker upgrades.
Credit Suisse upgraded Westpac to Neutral from Underperform. Buy/Hold/Sell 3/3/2 The broker considers the worst of the sector de-rating has run its course and value is starting to emerge. Fundamental risks remain, but associated share price risks are diminishing. The broker views Westpac’s divisional restructure positively, with the potential for an announcement around a productivity-based restructuring program.
Morgan Stanley upgraded Santos (STO) to Overweight from Equal-weight. Buy/Hold/Sell 7/0/1 Morgan Stanley considers 2015 to be a transformational year with major capex giving way to free cash flow from the fourth quarter of 2015. A history of under delivering fuels bearish sentiment but the broker considers the bearishness is captured in the share price and the company has acted decisively to cut spending. Execution risks are low.
In the not-so-good books
Morgan Stanley downgraded Nine Entertainment (NEC) to Underweight from Overweight and Credit Suisse downgraded to Neutral from Outperform. Buy/Hold/Sell 5/2/1 In the wake of the company’s reduction to earnings forecasts for FY15, further gains in revenue share, and hence earnings, look difficult to Morgan Stanley. They have had a fundamentally bearish outlook on free-to-air TV assets in Australia for some time as advertising as a percentage of GDP is trending lower. Credit Suisse reduces FY15 earnings estimates by 6.0% to account for the trading update which lowered guidance to $285-290 million. The broker considers the size of the downgrade is a function of the extreme leverage that all TV stocks have to relatively small changes in market growth and share.
The above was compiled from reports on FNArena, which tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.
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