Brokers are decidedly more positive now interim reporting season is practically over. There haven’t been too many actions in total this week but there seem to be more upgrades than downgrades overall.
In the good books
Morgans upgraded iiNet (IIN) to Add from Hold. Morgans has taken a closer look at the telco and expects margin expansion and subscriber additions will lead to a re-rating in the second half. For contrarian investors, the broker considers the current share price weakness represents an opportunity to buy a quality company on undemanding metrics. Buy/Sell/Hold 3/2/3
UBS has upgraded Sirtex Medical to Buy from Neutral. The company is about to release its key results on the SIRFLOX study, which is designed to determine whether SIR-Spheres can be elevated to a first line therapy in liver cancer. Other data in the lead up to the study has been positive and UBS is encouraged by its review of previous trial findings. Buy/Sell/Hold 1/1/1
Macquarie upgraded Westpac to Neutral from Underperform. Macquarie considers new technologies could enable the major banks to grow small-medium enterprise banking. This opportunity should offset mortgage regulatory pressures for Westpac. Macquarie upgrades on the basis that the bank has an opportunity to increase its penetration in SME banking. Buy/Sell/Hold 2/4/2
In the not-so-good books
Morgans downgraded Ardent Leisure (AAD) to Reduce from Hold. The retirement of the company’s highly respected CEO surprised the broker. The timing of leadership change is considered less than ideal, with a major change in strategy underway in health clubs. Morgans notes the CEO replacement, board member Deborah Thomas, has a lack of operational leisure experience which engenders a cautious response, although acknowledges her wealth of marketing and event management expertise. Buy/Sell/Hold 0/1/4
Deutsche Bank downgraded Crown Resorts to Hold from Buy. Deutsche Bank has reduced earnings forecasts again, to reflect a lower contribution from the Melco JV. The broker now expects the Macau market to decline by 30% in 2015 following a weaker-than-expected Chinese New Year. There has also been an adverse mix change with low end players replacing the high end. Buy/Sell/Hold 4/1/3
Morgan Stanley downgraded Scentre Group to Underweight from Overweight. Morgan Stanley used a tactical trading idea to announce it has downgraded the rating for Scentre Group to Underweight from Overweight. The stockbrokers is of the view lower funds from operations (FFO) and Net Asset Value (NAV) growth will drive a gradual de-rating for the securities. Buy/Sell/Hold 1/3/3
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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