Buy, Sell, Hold – what the brokers say

Editorial director of Switzer
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At the tail end of reporting season, one company managed to draw opposite reactions from brokers, and banks got a good going over by BA-Merrill Lynch, which acted on three of the Big Four.

In the good books

BA-Merrill Lynch upgraded Commonwealth Bank (CBA) to Neutral from Underperform. The broker likes that CBA is the least leveraged to institutional lending of its peers. BA-Merrill Lynch believes the company is positioned to deliver attractive returns, despite growth in credit, given its ability to manage revenue and cost outcomes.

National Australia Bank (NAB) was also upgraded by BA Merrill Lynch – from Underperform to Buy – on forecasts of a UK exit by the group (which now only accounts for 12% of NAB equity). This provides for a major re-rating opportunity, not shared by the other Big Four and NAB is now the broker’s favourite.

Regis Resources (RRL) was upgraded to Overweight from Neutral by JP Morgan, after the company announced an increase in profit after tax for the financial year just ended of 168% to $200.7 million. But JP Morgan’s upgrade followed a review of all gold stocks, with Regis winning out on quality. Two brokers retained Neutral or Hold ratings on the stock after the results announcement, with another keeping it at outperform, however Credit Suisse saw fit to downgrade (see below).

In the not-so-good books

ANZ was downgraded to underperform from Buy by BA-Merrill Lynch. The broker believes returns offshore are now under pressure and would prefer a focus at home. A competitive Asian market could be difficult for the bank.

UBS downgraded Downer EDI (DOW) to Neutral from Buy, which means the broker now has no Buy recommendations in the sector. It believes that the operators/miners are a more attractive leverage to commodity price strength.

JP Morgan downgraded Computershare (CPU) to Neutral from Overweight on the back of the expected internalisation of customer management systems by a major client – Australian Power & Gas. The ACCC approved AGL’s bid for Australian Power & Gas (AGK), which currently outsources to Computershare.

Credit Suisse downgraded Regis Resources (RRL) to Underperform from Outperform. The FY13 result was in line with the broker’s estimates, but the rating was downgraded on the back of the rally in the share price.

The above was compiled from reports on the FNArena database, 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.

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.

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