In the good books
CSR (CSR) Upgraded to Outperform from Neutral by Credit Suisse B/H/S: 3/1/2
Credit Suisse believes the time has come to consider whether CSR is too cheap, with a 6.8% gross dividend yield and buy-back supporting the stock price.
Broader macro risks should not be dismissed but the broker suggests the market is pricing in a far worse outcome to FY19. Hedging aside, if an investor believes the aluminium price will be higher next year, the broker is confident so, too, will be the share price.
The risk/reward balance now presents an opportunity and the broker upgrades to Outperform from Neutral.
Origin Energy (ORG) Upgraded to Equal-weight from Underweight by Morgan Stanley B/H/S: 6/2/0
Morgan Stanley’s house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.
Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.
Santos (STO) Upgraded to Equal-weight from Underweight by Morgan Stanley B/H/S: 4/3/1
Morgan Stanley’s house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.
Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.
Woodside Petroleum (WPL) Upgraded to Overweight from Equal-weight by Morgan Stanley B/H/S: 2/5/1
Morgan Stanley’s house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.
Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.
In the not-so-good books
AGL Energy (AGL) Downgraded to Underweight from Equal-weight by Morgan Stanley B/H/S: 2/3/1
Morgan Stanley downgrades to Underweight from Equal-weight as the current valuation is seen as too rich. Target price declines to $17.88 from $18.66.
Equally important, the analysts believe the market is too sanguine about the headwinds that lay ahead for utilities in future years.
It is Morgan Stanley’s view that all the drivers could be directionally more bullish for solar and battery take-up than the market currently thinks. Certainly, the analysts will be watching further developments closely.
Boral (BLD) Downgraded to Underweight from Equal-weight by Morgan Stanley B/H/S: 4/2/1
On Morgan Stanley’s analysis, the uplift in materials demand from infrastructure is less than the market expects. Hence, the broker downgrades Boral to Underweight from Equal-weight on a 12-month view.
The company has suggested the uplift in infrastructure will broadly offset other declines but the broker is not so sure and believes there are risks to this outlook.
Charter Hall (CHC) Downgraded to Neutral from Buy by UBS B/H/S: 3/1/2
UBS downgrades to Neutral from Buy largely on valuation but remains positive about several aspects of the business, including earnings revisions post the deployment of equity, increasing assets under management and strong capital flows for well managed, long-lease duration assets.
The broker forecasts FY16 earnings growth of 9.8%, at the top end of the guidance range of 8-10%. Earnings growth is expected to moderate in FY17 at 4%. UBS raises the target to $5.00 from $4.85.
Dexus Property Group (DXS) Downgraded to Lighten from Hold by Ord Minnett B/H/S: 2/1/3
Ord Minnett believes the recent share price rally has priced in the Sydney CBD recovery story and factored in further capitalisation rate compression. Hence the broker downgrades to Lighten from Hold.
Ord Minnett does not believe the market has balanced the recovery story against the medium-term lease expiries facing Dexus, which it suspects will create downward pressure on cash flow over the next three to five years.
Metcash (MTS) Downgraded to Lighten from Hold by OrdMinnett B/H/S: 4/1/2
The FY16 results missed OrdMinnett’s forecasts as convenience store operations weighed on the result. The broker observes the core supermarkets performed well.
The broker expects concerns over the competitive environment to weigh on the food business and this will be a drag on the share price. OrdMinnett also believes the Woolworths (WOW) Home Timber & Hardware is an attractive acquisition target and would support the Mitre 10 division.
Platinum Asset Management (PTM) Downgraded to Underweight from Equal-weight by Morgan Stanley B/H/S: 0/2/2
Morgan Stanley observes wealth managers are likely to gain an edge over asset managers as business models face disruption from managed accounts.
The broker downgrades Platinum Asset to Underweight from an Equal-weight rating as the risks of disappointing on flows are rising, compounded by a more mature retail business mix and below-peer gross sales.
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