Buy, Sell, Hold – what the brokers say

Print This Post A A A

There wasn’t much in the way of good news from brokers in the first half of the week, with most of the news being dominated by downgrades. Seven West Media was the only upgrade worth highlighting.

In the good books

UBS upgraded Seven West Media (SWM) to Buy from Neutral. Seven trampled on its TV rivals in April, which included the long Easter break. The network scored 42% share and the broker calculates the market is factoring in an expected 36% average in FY14, based on the SWM price. The shares have underperformed on fears Nine (NEC) is trying to fight back, but the broker feels this is leaving SWM undervalued.

In the not-so-good books

Citi downgraded Incitec Pivot (IPL) to Neutral from Outperform, following its interim result, citing a subdued second half outlook from management. IPL is beholden to DAP fertilizer prices and the Australian dollar and it appears the rally in DAP fertilizer prices has now petered out at the end of the Indian buying season.

UBS downgraded Dexus Property Group (DXS) to Neutral from Buy. UBS thinks investors will increasingly focus on office fundamentals and Dexus may be stuck, or used as a funding source given the key catalyst, the Commonwealth Property transaction, has passed. UBS also thinks underlying earnings growth may be soft in the FY14 results.

Macquarie downgraded Orica (ORI) to Neutral from Outperform. The first half result was soft, but in line with Macquarie’s expectations. The company is embarking on further cost cutting and efficiencies and the benefits of the review should be revealed at the FY14 results, according to the broker. Still, earnings momentum is negative and there are risks around the second half.

JP Morgan downgraded UGL (UGL) to Underweight from Neutral. JP Morgan thinks shareholders would be best served by a structural separation of DTZ and engineering but keeping the two businesses under one corporate umbrella. Nevertheless, management seems set on selling DTZ or pursuing a full de-merger in the broker’s view.

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.

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.

Follow the Switzer Super Report on Twitter

Also in the Switzer Super Report:

Also from this edition

View More Articles