Buy, Sell, Hold – what the brokers say

Editorial director of Switzer
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There were a couple of big movements by brokers this week, but mostly activity was slow, as analysts prepare for a busy few months with AGM and the banks’ reporting season.

In the good books

CIMB Securities upgraded BHP (BHP) to Outperform from Neutral following an in-depth study into structural cost increases across the world’s mining sector. New supply for most commodities is operating at relatively high costs, providing support for existing producers, and in Australia, production costs in coal and iron ore are poised to surprise on the downside.

UBS upgraded CSL (CSL) to Buy from Neutral. CSL has forgone any US price increase for 2013, which means its Privigen IVIG is priced 9% lower than the US peers. UBS estimates the company is planning around 12% FY14 volume growth, but if it grows US volumes faster, a 40% price arbitrage can be achieved.

In the not-so-good books

Transport and logistics group K&S Corporation (KSC) was downgraded to Sell from Buy by Deutsche and to Neutral from Outperform by Macquarie following a warning by the company that suggested first half profits could be down 55% on the previous first half. Deutsche had expected a 10% fall and Macquarie was also surprised. Management is still on the look out for bolt-on acquisitions but Macquarie thinks more attention is required on securing volume in core divisions.

Citi downgraded Oil Search to Sell from Neutral. PNG LNG JV partners (including OSH and Santos) are working on building a resource for the re-unitisation of PNG LNG. Citi calculates that Oil Search could end up getting a reduced share of the JV as a result, which means there is limited upside for the company. The broker also envisages significant appraisal risk, timing risk, and commercial risk in the final expansion stages of what could be a four train project.

The above was compiled from reports on the FNArena database, 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.

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.

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