In the good books
MACQUARIE ATLAS ROADS GROUP (MQA) Upgrade to Outperform from Neutral by Credit Suisse B/H/S: 4/2/0
The Supreme Court of Virginia’s positive ruling on toll increases clears the way for Macquarie Atlas’ 50% partner in the Dulles Greenway asset to start a sale process.
Credit Suisse suspects MQA will probably sell its stake as well but may keep the proceeds to finance an additional 10% stake in APRR, which could become available next year.
As the shares have fallen 13% since late August, the broker upgrades to Outperform from Neutral on valuation grounds. Target rises to $6.00 from $5.90.
PLATINUM ASSET MANAGEMENT LIMITED (PTM) Upgrade to Neutral from Underperform by Credit Suisse B/H/S: 0/2/1
The company has announced a buyback of 10% of equity, funded out of existing cash flow. Following a period of underperformance, Credit Suisse upgrades to Neutral from Underperform. Target is lowered to $5.25 from $5.65.
Credit Suisse assumes the company completes only half of the buyback and the buyback has a minimal impact on valuation, given excess cash was already valued. Fund performance remains weak over the medium term and the broker expects outflows to continue.
REA GROUP LIMITED (REA) Upgrade to Add from Hold by Morgans B/H/S: 2/3/2
The recent share price decline has meant the stock is now trading at a substantial discount to valuation and Morgans upgrades to Add from Hold.
While there may be a risk that paid depth ad volumes fail to grow at the 3% rate that is assumed, the broker envisages further volume downside is limited as sale listings are now at 15-year lows.
Morgans expects online share of total real estate marketing expenditure will continue to grow and as market leader REA will take a substantial share. Target is $60.97.
In the not-so-good books
MYER HOLDINGS LIMITED (MYR) Downgrade to Neutral from Buy by UBS B/H/S: 2/5/0
FY16 was Myer’s fourth transition year and UBS observes it appears to be the last. Profit was in line with guidance and consensus and the broker observes some positive signs such as improving cash flow and positive like-for-like sales.
Refurbishments, space rationalisation and new brands all provide scope to grow sales and EBIT into FY17 and beyond, UBS believes.
The rating is downgraded to Neutral from Buy, following the lift in the share price since May. Target is raised to $1.30 from $1.25.
Earning forecast
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