In the good books

For upgrades, please see Buy, Sell, Hold – what the brokers say from 1 September.

In the not-so-good books

CYBG PLC (CYB) Downgrade to Neutral from Outperform by Macquarie B/H/S: 1/2/1

Macquarie remains positive on UK banks and believes the fears over Brexit are overdone but considers the CYBG valuation stretched and positive surprises limited.

Hence, the rating is downgraded to Neutral from Outperform. Target is steady at $4.66.

The broker expects to receive more details on where the bank can deliver value when it hosts the investor briefing later this month.

GATEWAY LIFESTYLE GROUP (GTY) Downgrade to Neutral from Outperform by Macquarie B/H/S: 1/1/0

Gateway’s FY16 result was close enough to Macquarie but FY17 guidance has fallen short. There was not a lot of explanation but the broker notes prior FY17 settlements guidance of 292 has been lowered to 275.

Macquarie still likes the manufactured housing estate thematic and notes Gateway still has plenty of capacity for acquisitions, but the FY17 outlook has surprised, and prompted a downgrade to Neutral. Target falls to $2.40 from $2.94.

MIRVAC GROUP (MGR) Downgrade to Neutral from Buy by UBS B/H/S: 2/4/0

UBS is downgrading to Neutral from Buy on valuation terms after the stock has risen 22% in three months versus the A-REIT 200 index rise of 4%. The stock remains the broker’s preferred exposure in the sector.

UBS is looking for more comfort around apartment sales in the next six months and minimal settlement defaults, along with no macro prudential surprises and the sale of the Collins office development. Target rises to $2.27 from $2.13.

RETAIL FOOD GROUP LIMITED (RFG) Downgrade to Sell from Buy by UBS B/H/S: 0/2/1

FY16 results were in line with expectations, supported by coffee. UBS notes foot traffic continues to struggle to grow and only Donut King and Gloria Jeans grew franchisee sales.

The company has acquired Hudson Pacific Corp, a dairy processing, baking and food service distribution business. The synergies are not as clear as the coffee acquisitions and the broker requires more analysis of the potential.

After a strong share price performance UBS considers the forecast shareholder return is now negative and downgrades to Sell from Buy. Target rises to $6.00 from $5.45.

VITA GROUP LIMITED (VTG) Downgrade to Hold from Add by Morgans B/H/S: 0/1/0

FY16 results were ahead of expectations, driven by a combination of like-for-like revenue growth and store acquisitions.

Morgans considers the outlook is very strong with the potential for scale benefits in the longer term and the company has a well defined strategy.

Rating is downgraded to Hold from Add on valuation. Target is raised to $5.20 from $4.80.

WELLARD LIMITED (WLD) Downgrade to Hold from Buy by Deutsche Bank B/H/S: 0/2/1

FY16 results highlighted the company is in breach of its working capital facility and likely to breach certain covenants, Deutsche Bank warns.

Earnings were in line with guidance, being affected by the inability to pass through the historically high cattle prices to traditional customers in Indonesia and Vietnam. While the company is increasing its source of cattle form South America, conditions are likely to persist in the short to medium term, Deutsche Bank believes.

The broker downgrades to Hold from Buy and reduces the target to 30c from 75c.

Earning forecast

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