In the good books
Credit Suisse upgraded ANZ (ANZ) to Outperform from Neutral. Buy/Hold/ Sell 4/2/2 The more positive view reflects improved valuations for both the bank and the sector. ANZ offers relative value and growth and is the best sector play on US monetary tightening, Australian dollar depreciation and the recent strength in New Zealand.
Macquarie upgraded Caltex (CTX) to Neutral from Underperform and Citi to Buy from Neutral. Buy/Hold/Sell 2/4/1 As the first half comes to a close for Caltex, Macquarie anticipates the company’s result release will include an outlook highlighting lacklustre underlying marketing growth. However, as the management-imposed window for acquisition opportunities closes, the broker believes there is a prospect of capital management. The fall in the Caltex share price since the Chevron exit has brought the stock back to reasonable value, the broker suggests. Citi considers recent share price weakness a function of Chevron’s sell down being recycled through the market. The broker considers Caltex a well-run business and optimised post the Kurnell shut down.
In the not-so-good books
JP Morgan downgraded IAG to Underweight from Neutral and Macquarie to Underperform from Neutral following the IAG’s strategic hook-up with Berkshire Hathaway. Buy/Hold/Sell 0/6/2 JP Morgan estimates the revised guidance following the deal implies a 6.5% dilution to earnings for FY16 from the deal alone. The prospects for the stock centre on the use of the capital that was raised. Until that is clear, the broker believes downside risk for the share price prevails. Macquarie says current insurance market conditions remain challenged and premiums remain under pressure.
Credit Suisse downgraded Ten Network Holdings to Underperform from Neutral. Buy/Hold/Sell 1/2/4 The company will raise up to $154 million with the issue of $77 million in new equity to Foxtel and a $77 million entitlement offer at the same price of 15c a share. Foxtel is expected to hold a 14.2% stake. The deal removes immediate funding pressure and improves the ability to maintain ratings but Credit Suisse downgrades because of the dilutive impact of the capital raising.
JP Morgan downgraded Woolworths (WOW) to Underweight from Neutral. Buy/Hold/ Sell 0/3/5 JP Morgan analysts have cut their target to $24 (was $28.25) and pulled back their rating to Underweight from Neutral. The direct catalyst is the premature departure of the CEO, news that came with yet another profit warning. The analysts now believe the turnaround strategy comes with a lot of risk and uncertainty and consensus expectations are heading south yet again. A new CEO, yet to be found, further adds to uncertainty.
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.
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