In the good books
UBS upgraded DUET Group (DUE) to Buy from Neutral. The prospect of DUET’s acquisition of Energy Developments (ENE) are positive in the broker’s view. Not just financial synergies but gearing metrics should improve. DUET will inject around $150m in cash, which should lift Energy Developments credit rating to investment grade, in the broker’s opinion. UBS lifts distributions to management’s guidance and expects cover should improve post the acquisition.
In the not-so-good books
Credit Suisse downgraded Energy Developments Limited (ENE) to Neutral from Outperform rating. DUET (DUE) has offered $8 a share and entered into a scheme of arrangement. Credit Suisse considers the bid is a good price after a strong 12 months and there is a high probability of it succeeding.
Macquarie downgraded iSentia Group Limited (ISD) to Neutral from Outperform. The broker expects iSentia to beat its FY15 prospectus forecast through a strong performance in Australia and New Zealand, with Asian earnings remaining in line. Strong cash flow will reduce net debt and the broker expects a final dividend increase above the interim. iSentia has nevertheless strongly outperformed the ASX Small Industrials over the past 12 months so while raising its target to $3.81 from $3.50, the broker pulls back to Neutral.
Deutsche Bank downgraded Transfield Services Limited (TSE) to Hold from Buy. Deutsche Bank continues to believe in the company’s transformation and expects a strong FY15 result but downgrades its recommendation to Hold from Buy. Target is lowered to $1.56 from $2.03. Downside risks are envisaged to FY16-18 forecasts and the broker is concerned the amount of cost savings that will fall to the profit line. FY16-18 forecasts are downgraded 1-4%.
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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