Stockbroking analysts are taking a break or at the very least they are publishing a lot less research than they did in the first ten weeks of the calendar year.
In the good books
Downer EDI (DOW) was upgraded to Hold from Sell by Deutsche Bank. Buy/Hold/Sell: 4/3/1 The earnings season underscored Deutsche Bank’s conservative stance on engineering contractors. The broker expects 2015 to remain challenging as mining capex reduces, oil and gas capex begins to slow and re-priced contracts start to affect earnings. Deutsche Bank upgrades Downer EDI on valuation grounds.
[1]Mineral Resources (MIN) was upgraded to Neutral from Sell by UBS. Buy/Hold/Sell: 1/3/1 The broker has lowered 2015 iron ore price forecasts to US$59/t from US$66/t. Earnings forecasts for Mineral Resources are subsequently lowered, although falling cash costs, driven by factors such as lower energy prices, provide a buffer. The company is well place for long term production growth but hampered in the near term by price weakness. On share price weakness, the broker has upgraded to Neutral.
Regis Resources (RRL) was upgraded to Outperform from Neutral by Credit Suisse, to Hold from Sell by Deutsche Bank and to Outperform from Neutral by Macquarie. Buy/Hold/Sell: 3/4/1 Continuing operational challenges and grade issues have been exacerbated by wet weather and this has reduced the company’s production guidance for FY15. Credit Suisse observes most of the trouble is again at the Garden Well operation while Moolart Well remains the company’s most consistent and robust mine. The broker upgrades to Outperform from Neutral on the back of the share price decline. The production data for January and February underwhelmed Deutsche Bank. Some issues appear to be short term but the biggest concern is, again, grades at Garden Well. Regis Resources enjoys tailwinds from the Australian dollar gold price, safety from hedging and exposure to the falling diesel price. The company believes guidance is still achievable but Macquarie has cut its production forecast for Duketon due to lower grades. This leads to lower earnings forecasts but the broker believes the share price hit on the announcement was overdone.
In the not-so-good books
BC Iron (BCI) was downgraded to Sell from Neutral by UBS. Buy/Hold/Sell: 0/2/2 The broker has lowered its iron ore price forecasts to US$59 and US$58/t in 2015-16 from US$65 and US$66/t previously. BCI’s price target is lowered to 36c from 54c and rating downgraded to Sell.
[2]Boral (BLD) was downgraded to Equal-weight from Overweight by Morgan Stanley. Buy/Hold/Sell: 3/5/0 Morgan Stanley is downgrading its industry view to In-Line from Attractive and its rating on Boral to Equal-weight from Overweight. The broker believes positive drivers in Australian building materials and steel with regard volume and price remain intact but these are reflected in valuations. Construction materials pricing is likely to result in margin improvement in FY16 but the broker considers this reflected in the price.
Capitol Health (CAJ) was downgraded to Hold from Add by Morgans. Buy/Hold/Sell: 0/1/0 Morgans observes the company has had a strong run since its capital raising and subsequent acquisitions. The move into the NSW radiology market is considered a logical expansion. As the share price is within 10% of the target at $1.11 the broker brings its recommendation back to Hold from Add.
Intrepid Mines (IAU) was downgraded to Neutral from Buy by UBS. Buy/Hold/Sell: 0/1/0 The company is seeking shareholder approval to undertake an on-market buy-back of up to 20% of the ordinary shares. UBS believes buy-backs are simply an alternative to dividends and that a profit must be first generated to consider payment of either. The broker disagrees with the use of the company’s cash for a buy-back and believes it should be held for future opportunities.
Earnings Forecast
[3]FNArena 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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