In the good books
Billabong International (BBG) Upgrade to Accumulate from Hold by Ord Minnett B/H/S 1/2/0. The broker upgrades the stock, given the steep fall in the share price over recent months. First half operating earnings were ahead of Ord Minnett. Forecasts are revised up for FY16 and FY17 by 1.2% and 4.5% respectively. Longer term the broker is upbeat about the business.
Harvey Norman (HVN) Upgrade to Neutral from Underperform by Macquarie B/H/S 3/2/2. Harvey Norman’s result solidly beat Macquarie, and featured domestic industry-beating sales growth across various categories. The going was tougher offshore but for the first time since the GFC, each of the offshore centres posted a profit.
Harvey Norman was aided in the period by ongoing strength in local housing, the Australian dollar, and the demise of Dick Smith. While Macquarie expects housing to slow, the company’s efficiency initiatives will act as a buffer.
Platinum Asset Management (PTM) Upgrade to Neutral from Underperform B/H/S 0/4/0. First half results were in line with expectations. The broker downgrades forecasts by 3.0% in FY16 and by 11% in FY17 and FY18, largely reflecting marking to market. Inflows are expected to slow in the second half.
Without the benefit of reinvestment of distributions and the PAI raising, the broker suspects the company would have experienced net outflows in the first half.
Regis Healthcare (REG) Upgrade to Outperform from Neutral B/H/S 2/2/0. Regis delivered a solid all-round result, Macquarie suggests, in line with expectation. A 4.8% increase in operating places was translated into 15% earnings growth thanks to a consistent and disciplined strategy. The development pipeline will ramp up further in the second half and with the payroll tax headwind now cycled, Macquarie believes the outlook for growth is very positive.
Woolworths (WOW) upgrade to Outperform from Neutral by Credit Suisse B/H/S 1/2/5. First half results were poor, in Credit Suisse’s opinion. The dividend was reduced to 44c but the pay-out ratio should also have been re-set, the broker maintains.
The broker notes capital expenditure guidance is vague and new store development should be slower, to free up capital. The broker upgrades the business, largely based on the expressed, but yet to be realised, intentions of the chairman and incoming CEO.
In the not-so-good books
Oz Minerals Limited (OZL) Downgrade to Equal-weight from Overweight by Morgan Stanley B/H/S 3/5/0. The stock has performed well, exceeding Morgan Stanley’s expectations over the past 12 months.
Now, with the price target being reached and the share price outperforming the copper price, the broker believes it’s time to downgrade the stock. Copper prices remain the key driver of the stock for the next 6-12 months as work on the Carrapateena pre-feasibility is not due to start until 2017.
Perseus Mining (PRU) Downgrade to Equal-weight from Overweight by Morgan Stanley B/H/S 2/2/1. Perseus has made an offer for UK-listed Amara Mining at a significant premium, in Morgan Stanley’s view.
The broker also believes the benefit to Perseus, that of diversifying away from Edikan Gold Mine (in West Africa) will take years to realise.
Resolute Mining (RSG) Downgrade to Neutral from Buy by Citi B/H/S 0/1/1. Citi analysts anticipate earnings to level and then decline through FY17. This, they suggest, could coincide with a capex spend at the Syama gold mine (in West Africa0.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
