In the good books
Citi upgraded Caltex (CTX) to Buy from Neutral, and UBS to Neutral from Sell. Caltex delivered a half-year result broadly in line with July guidance. Citi reports the company is set for a capital return towards the end of calendar 2015 – most likely through an off-market buy-back. While the competitive landscape looks challenging, UBS believes Caltex is well placed to defend its position and upgrades to Neutral.
UBS upgraded CBA to Buy from Neutral following significant share price weakness. The analysts acknowledge the shares are trading at a premium vis-a-vis peers but given global turmoil and uncertainties, they prefer exposure to the higher quality in the local banking sector. Asset quality on the back of rising bad and doubtful debt charges remains their key concern regarding the sector.
Credit Suisse upgraded Coca-Cola Amatil (CCL) to Outperform from Neutral. Credit Suisse observes a turnaround in the first half with reduced downside earnings risk from further margin erosion. This supports earnings, dividend and valuation.
Deutsche Bank upgraded Medibank Private (MPL) to Buy from Hold and Morgan Stanley to Equal-Weight from Underweight. FY15 results were ahead of Deutsche Bank’s forecasts. Underlying gross margin expansion surprised the broker with a further 30 basis points expected in FY16. The broker upgrades FY16 and FY17 forecasts by 10% and 14% respectively. FY15 margins also surprised Morgan Stanley and with more assured FY16 guidance the broker upgrades to Equal-weight from Underweight.
Citi upgraded Oil Search to Neutral from Sell. First half profit was higher than Citi expected. Production costs were lower. The broker believes the company is doing well in controlling what it can in a low oil price environment. Given market weakness Citi now considers the stock fair value at a US$70/bbl long-term oil price. Relative to peers the broker considers the market is currently paying near full value for the LNG expansion.
JP Morgan upgraded Scentre to Neutral from Underweight following what proved a financial (interim) performance largely in line with expectations. The stockbroker found it was a solid performance, pointing at continued improvement in operating metrics. Scentre is selling four lower quality assets but has nevertheless reiterated distribution guidance. Estimates have been lifted.
UBS upgraded Westfield to Buy from Neutral. First half cash flow was ahead of UBS estimates. Portfolio metrics continue to be attractive. Net property income was below expectations because of the timing of asset sales and FX. In the broker’s view the valuation cannot be ignored and the rating is upgraded to Buy from Neutral.
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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