In the good books
Macquarie upgraded Harvey Norman (HVN) to Neutral from Underperform. Buy/Hold/Sell 4/2/2 Harvey Norman no longer reports quarterly sales data but feedback suggests a strong second half for the retailer, with the tailwinds of rising house prices, the May rate cut, improving consumer confidence and the Budget’s small business incentives. Ireland is also rapidly improving. The broker believes the good news is largely reflected in the share price but that the risk is to the upside over the next 3-6 months.
UBS upgraded REA (REA) Group to Buy from Neutral. Buy/Hold/Sell 5/2/3 UBS considers REA Group is cheap relative to its online peers. The market attributes almost no value to the international assets and the leads-based opportunity. The stock underperformed since the March quarter as slower revenue growth was affected by a number of factors the broker believes are transient but the long-term growth profile is intact. UBS upgraded on valuation grounds.
In the not-so-good books
Deutsche Bank downgraded BHP to Hold from Buy. Buy/Hold/Sell3/4/1 Now the de-merger of South32 (S32) is complete the focus for BHP turns to oil and copper and Deutsche Bank envisages difficulties with growth. Oil production will peak in FY15 because of a drop in US onshore volumes, conventional field decline and a lack of growth options. Moreover, for the first time in over a decade the company’s copper equivalent production growth is flat.
JP Morgan downgraded Southern Cross Media (SXL) to Underweight from Neutral. Buy/Hold/Sell 2/3/3 JP Morgan envisages challenges ahead for Southern Cross Media with continued ratings issues in metro radio and regional TV as well as the company’s high gearing relative to other Australian media operations. Advertising conditions are weak and there appears to be no quick fix. JP Morgan also notes a likely increase in the affiliation fee with Ten Network (TEN) from FY17 onwards.
Credit Suisse downgraded Sydney Airports (SYD) to Neutral from Outperform. Buy/Hold/Sell 3/4/0 Credit Suisse does not expect an uplift in distribution guidance at the first half results because of sensitivity around international aeronautical fee negotiations. Revenue estimates are trimmed on lower passenger growth and weaker retail revenue expectations although this is partly offset by lower financing costs. The risk/reward is considered balanced and the stock fairly valued so Credit Suisse downgrades to Neutral from Outperform.
JP Morgan downgraded UGL(UGL) to Underweight from Neutral and Macquarie to Underperform from Neutral. Buy/Hold/Sell 0/1/6 The operational update guided to FY15 earnings of around $47 million, lower than the broker’s forecasts of $60.1 million. The second half will be affected by further impairments and restructuring costs. The company has provided a guide to recovery but success is now dependent on execution and the broker notes risks include failure to win LNG maintenance contracts, delays in the ramp up of infrastructure building and delivery of Ichthys. Macquarie warns stability needs to be sustained and the Ichthys project is only 30% complete.
The above was compiled from reports on FNArena, 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.
