In the good books
Macquarie upgraded Drillsearch (DLS) to Outperform from Neutral. Buy/Hold/Sell 4/2/0 Macquarie has cut its Aussie forecasts by 8-9% to US63c in 2016, US67c in 2017 and US75c long term. Domestic oil and gas producers reporting in Aussie see a net 37% earnings forecast upgrade as a result, albeit for some this is offset by US dollar costs. The broker’s sector multiple has risen as a result, as has the broker’s rating for Drillsearch, to Outperform.
UBS upgraded Rio Tinto (RIO) to Buy from Neutral. Buy/Hold/Sell 6/2/0 With iron ore appearing the better commodity into 2016 through supply side discipline, as opposed to oil, UBS upgrades Rio Tinto to Buy from Neutral. Looking at production guidance for 2015, the broker observes the majority of commodities are expected to reveal negative or near-flat production growth.
Only Pilbara iron ore is expected to add meaningful production growth this year.
Citi upgraded Transurban (TCL) to Buy from Neutral. Buy/Hold/Sell 5/2/0 Transurban has not escaped the broad market sell-off and Citi’s expected total return has risen to 15.7% on the weaker share price. This triggers an upgrade to Buy. Transurban is exposed to defensive assets in a tough macro environment and offers an attractive yield and distribution growth, along with a pipeline of growth options.
Macquarie upgraded Woodside Petroleum (WPL) to Neutral from Underperform. Buy/Hold/Sell 1/5/2 Due to its Aussie dollar forecast update oil and gas producers reporting in Aussie receive a net 37% earnings forecast upgrade. The broker’s sector multiple rises and Woodside is upgraded.
In the not-so-good books
Citi downgraded Origin Energy (ORG) to Neutral from Buy. Buy/Hold/Sell 5/3/0 Much has been made in energy circles of Santos’ (STO) high gearing levels, yet Origin’s credit rating is only one notch below Santos and gearing is materially higher. And unlike Santos, Origin has no plans in place to fix its balance sheet. Origin’s energy markets growth outlook is flat.
Credit Suisse downgraded Regis Resources (RRL) to Neutral from Outperform. Buy/Hold/Sell 3/4/1 FY15 profit was head of Credit Suisse forecasts, with higher gold sales reported. The outcome is considered reasonable, given the recurrence of operational issues that limited production, but the broker downgrades to Neutral from Outperform given recent share price gains.
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.
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