In the good books
OceanaGold (OGC) Upgraded to Hold from Sell by Deutsche Bank B/H/S: 0/1/1
Deutsche Bank has upgraded commodity price forecasts by an average 3% in 2016 and 6% in 2017. Of the larger upgrades, iron ore forecasts for 2017 are upgraded 7%, coking coal 25%, Newcastle thermal coal 27%, zinc 22%Â and manganese 37%.
The gold sector appears expensive to the broker based on a US$1,300-1,420/oz flat gold deck and weakening Australian dollar profile.
Sims Metal Management (SGM) as Upgrade to Hold from Sell by Deutsche Bank B/H/S: 2/4/1
Deutsche Bank increases iron ore price expectations significantly and now expects scrap prices to rise in FY17 Accordingly, the company should be able to achieve volume and price rises in FY17 and FY18, leading to margin expansion.
The broker notes the company has continued to cut costs as quickly as possible in order to smooth earnings and the sale or closure of the 13 identified facilities will provide further benefit in FY17.
In the not-so-good books
Nine Entertainment (NEC) Downgraded to Neutral from Buy by UBS B/H/S: 1/3/2
UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields. TV is qualitatively the broker’s least preferred media with audience declines still outpacing revenues.
UBS reduces TV forecasts because of the soft ad market outlook for FY17, cutting Nine’s earnings per share estimates by 27% and by 26% for FY18.
The broker downgrades to Neutral from Buy given the structural concerns. Valuation appears reasonable but UBS believes the risk to earnings is skewed to the downside.
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.
