In the good books
Citi upgraded OceanaGold to Buy from Neutral. The company is likely to acquire the Haile gold project in South Carolina via Romarco Minerals and, with a pull back in the share price, Citi upgrades. Citi expects the acquisition of Romarco will be approved by shareholders and incorporates Haile into models.
In the not-so-good books
Credit Suisse downgraded Brambles (BXB) to Underperform from Outperform. Credit Suisse now expects capital intensity to increase and margins to remain weak for a number of years. While management has suggested strong growth in the US pallet business could alleviate durability problems, this is of concern as it suggests a higher risk of pallet scrapping/write-offs. The broker’s positive view was partly based on the potential of new asset tracing technology but the company appears to have made less progress on this front than previously expected.
Morgans downgrades M2 Telecommunications (MTU) to Hold from Add. M2 Telecom and Vocus (VOC) have announced an all-scrip merger based on 1.625 Vocus shares for every M2 Telecom share. Morgans believes this will create a substantially stronger business with the benefits of infrastructure and distribution. There is a small chance TPG Telecom (TPM) will block the deal, as its balance sheet is now stretched after acquiring iiNet.
Morgan Stanley downgraded Origin Energy (ORG) to Underweight from Overweight. Origin Energy has announced measures to protect its balance sheet and will raise $2.5 billion in equity via a rights issue at $4 a share, targeting non-core asset sales up to $800 million as well as reducing capex and working capital. The action is sufficient to protect the credit rating and achieve stated debt reduction, in Morgan Stanley’s view, but comes at a cost to ordinary shareholders. Earnings per share and dividend per share are reduced substantially.
Morgan Stanley downgraded South32 (S32) to Downgrade to Equal-weight from Overweight. In a break from the usual process, Morgan Stanley is reviewing commodity price forecasts outside the end-of-year period. This has had a negative impact on most price targets. A lower Australian dollar provides an offset to some price downgrades. Major downward revisions are in iron ore, alumina, copper and thermal coal
The above was compiled from reports on FNArena 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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