In the good books
AMP (AMP) was upgraded to Overweight from Equal-weight by Morgan Stanley. B/H/S – 4/3/1. Morgan Stanley believes AMP offers deep value and a potential path to rebuilding its brand. Elevated uncertainty, fear and speculation around the future of the company’s business model appear overdone to the broker. Morgan Stanley believes the company’s resilience will likely surprise and upgrades to Overweight from Equal-weight. Target is reduced to $4.50 from $5.75. Industry view: In line.
Fletcher Building (FBU) was upgraded to Neutral from Underperform by Macquarie. B/H/S – 2/4/0. The company has completed its NZ$750 million entitlement offer, which Macquarie believes will provide a firm platform on which to execute its strategic objectives. The broker believes the company’s move to consolidate its product and geographic spread will be well received. More about this strategy will be learned in June. Target is raised to NZ$6.54 from NZ$5.30.
In the not-so-good books
Asaleo Care (AHY) was downgraded to Underperform from Neutral by Credit Suisse. B/H/S – 0/1/2. Credit Suisse observes the share price has rallied and presents an opportunity to take some profits. The broker downgrades 2018-20 estimates for EPS by -3-16% because of persistent increases in pulp and fluff costs. Critical to the broker’s estimates is the assumption that sales growth will continue beyond 2018, as management is taking action to rejuvenate tissue sales. The company has reported declining sales for the past three years. Rating is downgraded to Underperform from Neutral. Target is reduced to $1.30 from $1.35.
Boral (BLD) was downgraded to Underperform from Neutral by Credit Suisse. B/H/S – 4/1/1. Credit Suisse suspects fly ash earnings will be disappointing. While the US fly ash business has many attributes of a great investment, the broker believes industry success at redirecting easily available supply to high-value applications is approaching a limit. Credit Suisse suggests growth expectations for North America are too high and downgrades to Underperform from Neutral. Target is reduced to $6.40 from $7.45.
Santos (STO) was downgraded to Sell from Neutral by Citi. B/H/S – 1/2/2. Now that Santos has rejected Harbour Energy’s higher offer, Citi analysts suggest the company narrative will shift towards growth in the coming months. They also point out, the fact that Harbour Energy said it wasn’t impressed from the due diligence “complicates” things just a tad more. As Citi has reverted back to a Sum-of-the-Parts (SoTP) methodology to value the shares, including long-term oil priced at US$55/bbl, the rating falls to Sell from Neutral. New price target is $5.30.
The above was compiled from reports on FN Arena. The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
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