Buy, Sell, Hold – what the brokers say

Editorial director of Switzer
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Broker activity is still relatively subdued as we head into annual general meeting season. Analysts are probably still enjoying the change in government and keeping one eye on the US government negotiations,

In the good books

Macquarie upgraded SEEK (SEK) to Outperform from Neutral after a detailed review of Seek’s operating outlook. The broker believes that the domestic business outlook remains positive, on yield if not on volume, and leverage to any pick-up in the local employment market offers upside. In the international business, the broker sees a company well positioned for further growth. (Read Greg Fraser’s article on the company here)

Citi upgraded Oroton Group (ORL) to Neutral from Sell. The broker is forecasting a period of flat rental growth for retail, which should allow for a fall in Oroton’s rent-to-sale ratio. The broker warns competition is still the company’s biggest threat, but there is potential for improvement if excess cash is spent on an acquisition.

Deustche Bank upgraded Western Areas NL (WSA), to Hold from Sell following a better than expected production report for the first quarter. However the broker says that cash flow generation remains challenging.

In the not-so-good books

JP Morgan downgraded Cochlear (COH) to underweight from neutral, following the AGM where the company’s guidance did not meet the broker’s expectations. JP Morgan was hopeful the latest hearing solution from the group – N6, would be able to claw back some market share, but the announcement by the company indicates competition is a real concern.

UBS downgraded Iluka (ILU) to Neutral from Buy on the back of a slower than expected recovery in the titanium dioxide market and the broker also believes there is downside risk to the company’s earnings expectations for 2013.

UBS also downgraded OzMinerals (OZL) to Sell from Neutral following a weaker than expected September quarter production report. Output was 17,400 tonnes with cash costs of US$2.06/lb copper, up 6% quarter on quarter. Guidance for 2013 has been lowered to 70-75,000 tonnes of copper. With the exception of capital management, the broker believes the company has not delivered on its strategy proposed back in 2009.

The above was compiled from reports on the FNArena database, 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.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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