Buy, Sell, Hold – what the brokers say

Editorial director of Switzer
Print This Post A A A

Mining and engineering related companies featured heavily in the broker updates for the first half of this week, as many companies in these sectors released quarterly performance updates.

In the good books

In one of the very few upgrades so far this week, CIMB Securities upgraded mining equipment provider Emeco Holdings from Neutral to Outperform. The broker says the stock is being priced in expectation of a necessary equity raising. But in an update on the company’s debt facility amendment, management said the company was generating strong cashflow, which would facilitate further reductions in debt through FY14.

In the not-so-good books

Macquarie downgraded Bradken (BKN) to Neutral from Outperform, following the company’s market update. Management reiterated FY14 guidance but although the mining outlook (80% of Bradken revenue) continues to weaken, oil and gas (10%) remains strong. The broker sees earnings skewed to the second half and believes the dividend yield can be sustained, but it has downgraded to Neutral on valuation.

Citi downgraded Lend Lease (LLC) from Buy to Neutral, following a company update. Australian engineering is expected to face margin pressure in FY14 but a number of road and rail projects should underpin earnings. Meanwhile the development business is well positioned, and Lend Lease is looking for projects in Asia and the US to expand growth beyond the local pipeline.

BA-Merrill Lynch downgraded Mirvac (MGR) to Neutral from Buy, following its first quarter update and an increase in the share price to the broker’s target $1.85. The original decision to rate it a Buy was based on an expected turnaround in the development return on investment capital to at least 10% in FY14 from 4% in FY11. The broker says this was re-affirmed by management at the quarterly update and is now fully reflected in the share price.

JP Morgan downgraded Origin (ORG) to Neutral from Overweight, following a review of the Victorian energy retail market. The broker found that AGL was the only provider that had eased off on discounting, while Origin had increased the practice, suggesting the competition war will continue into 2014. Earnings forecasts for both AGL and Origin were cut as a result.

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.

Also in the Switzer Super Report:

Also from this edition

View More Articles