Today we introduce a new table to Monday’s Buy, Sell, Hold – what the brokers say. The chart below shows the buy recommendations of brokers. Companies are only displayed in this table if at least 5 of the above mentioned brokers have a current position on the stock. A broker sentiment value of +1 means all brokers have a buy recommendation. The target price upside/downside is relative to the price at the time the table was updated.
The stocks with the largest target price upside this week are NextDC with 49.9%, Vocus Communications with 49.2% and Qantas with 40.1 per cent.
To see more, as well as the sell recommendations, check this link weekly.
In the good books
BLUESCOPE STEEL LIMITED (BSL) Upgrade to Buy from Neutral by UBSÂ B/H/S: 5/2/0
BlueScope has raised its first half earnings guidance, citing cost reductions, improved productivity, higher steel prices, higher US spreads and better organic growth as offsetting the soaring cost of coking coal. UBS notes Asian steel spreads are weak but appear to be bottoming.
As spreads normalise, the broker sees higher steel prices as likely in the face of the coal price. BlueScope is trading at a 25% discount to global steelmakers, which leads UBS to ask, is this the cheapest stock in the world? Upgrade to Buy. Target rises to $9.60 from $9.55.
FORTESCUE METALS GROUP LTD (FMG) Upgrade to Neutral from Underperform by Credit Suisse B/H/S: 2/3/2
Credit Suisse considers the balance of risks is improving fast and demand is better than expected. Given the broker is already an iron ore bear, and envisages only modest downside to base case prices, there is a positive risk skew for Fortescue.
Credit Suisse upgrades to Neutral from Underperform and now considers it risk to be underweight the stock, acknowledging another about face on its recommendation. Target is raised to $5.30 from $5.00.
NATIONAL AUSTRALIA BANK LIMITED (NAB) Upgrade to Outperform from Neutral by Macquarie B/H/S: 3/4/1
Macquarie continues to believe that a convergence in credit charges and the impact of higher amortisation expenses will be a drag on the bank’s FY17 earnings growth. Yet, the market appears to be aware of the issues which the broker believes are captured in the share price.
Given underlying trends and a simpler business model, the broker envisages scope for the discount to peers to close and upgrades to Outperform from Neutral. Target is steady at $30.00.
WESTFIELD CORPORATION (WFD) Upgrade to Buy from Neutral by UBSÂ B/H/S: 4/0/2
Westfield has underperformed A-REITs by 8% and the market by 14% over the last six months, UBS notes. Volatile forex markets, Brexit, rising bond yields, slower US spending and the shift to e-commerce have all conspired to weigh upon the shopping mall REIT story.
While e-commerce is a structural issue, a high quality portfolio, unparalleled development pipeline and proactive approach to in-mall technology should see Westfield outperform, the broker believes. The headwinds lead to a cut in target to $9.60 from $11.00 but this does not prevent an upgrade to Buy.
WOOLWORTHS LIMITED (WOW) Upgrade to Neutral from Underperform by Macquarie B/H/S: 0/3/3
Macquarie assesses the divestment of the petrol business and estimates a potential transaction value of $1.35bn. The transaction is complicated and could take time to finalise, particularly in relation to gaining approval from the ACCC.
The broker anticipates the divestment could be a catalyst and enable greater flexibility in the balance sheet. The main point from Macquarie’s perspective is the company’s ability to fund an accelerated store refurbishment program.
Rating is upgraded to Neutral from Underperform. Target rises to $22.23 from $20.56.
WESTERN AREAS NL (WSA) Upgrade to Outperform from Neutral by Macquarie B/H/S: 3/0/3
The business offers the greatest leverage to nickel in Macquarie’s coverage, as a 10% rise in nickel prices would drive around 30% increases to forward earnings estimates and 20% increases in valuation.
The broker observes a strong history of exploration success as the company has developed its core operating assets, Flying Fox and Spotted Quoll. The exploration potential at Cosmos is also significant for extending known resources and also for the region.
Macquarie upgrades to Outperform from Neutral. Target rises to $3.50 from $2.60.
In the not-so-good books
For downgrades, see Buy, Sell, Hold from Thursday 10 November.
Earnings forecast
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.
