Buy, Sell, Hold – what the brokers say

Founder of FNArena
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Stockbroker ratings changes for individual stocks remained pretty much in balance last week. Actions in the later half of the week were mainly driven by share price growth. JP Morgan has just returned from the US and liked what it saw with regard to Aristocrat product sales and UBS was upbeat on an acquisition by Sigma.

In the good books

Aristocrat (ALL) was upgraded to Overweight from Neutral by JP Morgan after the broker returned from a tour of the US where it received consistent feedback regarding improvement in Aristocrat’s product performance in both the “for sale” and participation segments. The broker expects the positive trend to accelerate, given the anticipation of upcoming releases.

Aurizon (AZJ) was upgraded to Outperform from Neutral by Macquarie. The broker thinks growth in the coal market will stall until better pricing emerges through a lower Australian dollar or a higher coal price. For Aurizon, this will reduce the capex needs associated with the rail network. Cash generation from limited growth should see yields move beyond the 60-70% payout, yet leave the balance sheet with capacity.

Sigma Pharmaceuticals (SIP) was upgraded to Neutral from Sell by UBS. Sigma has bought Victoria-based wholesaler, Central Healthcare, for $24.5 million, which brings more exposure to the growing hospital distribution business as well as the declining community pharmacy distribution business. Forecast earnings rise 1.7%. The acquisition otherwise appears to have drawn the broker’s attention to current market multiples.

In the not-so-good books

Graincorp (GNC) was downgraded to Underweight from Neutral by JP Morgan. The recent outperformance of the stock has lead to reduced valuation support and the broker thinks, with additional competition coming from the Qube (QUB) joint venture, it will take out Graincorp’s last remaining major regional monopoly.

Deutsche Bank has pulled back its rating for Stockland to Hold from Buy. The price targets drops by 10% to $3.83.

TPG Telecom (TPM) was downgraded to Neutral from Buy by Citi. Citi has evaluated TPG’s first half and expects a ramp up in subscriber growth from the FTTB (Fibre To The Basement) and NBN, with synergies from the integration of AAPT. But while the company looks well positioned for superior growth, the broker thinks the share price is reflecting the option value from FTTB and NBN and now looks fair value.

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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