There has been a lot of angst in the electronics retailer space given fears of major Dick Smith discounting, but analyst concerns have been easing somewhat over the impact on JB Hi-Fi. Recent share price weakness in aged care names due to regulatory concerns has led to one upgrade in the space on a longer-term value basis, while the withdrawal of Woodside Petroleum’s bid for Oil Search sees upgrades for both stocks.
In the good books
JB Hi-Fi Limited (JBH) Upgrade to Buy from Neutral by UBS B/H/S: 1/6/1
UBS believes JB Hi-Fi is more exposed to the Dick Smith (DSH) step up in promotional activity but the impact should be muted, given a large portion of discounted and impaired stock from the latter is lower quality than a unique private label product.
An irrational competitor creates a sales risk to earnings, the broker acknowledges but the issues at Dick Smith highlight the strength of JB Hi-Fi’s brands.
Oil Search Limited (OSH) Upgrade to Neutral from Sell by Citi B/H/S: 3/5/0
Woodside Petroleum (WPL) has aborted its attempt to add Oil Search’s PNG assets to its portfolio and Citi analysts have responded by upgrading their rating on the stock.
Regis Healthcare Limited (REG) Upgrade to Add from Hold by Morgans B/H/S: 1/3/0
Morgans upgrades the stock as share price weakness has created a buying opportunity and the broker retains a positive outlook on the aged care sector.
Woodside Petroleum (WPL) Upgrade to Buy from Neutral by Citi B/H/S: 1/6/1
Woodside Petroleum has aborted its attempt to add Oil Search’s (OSH) PNG assets to its portfolio and Citi analysts have responded by upgrading their rating on the stock.
In the not-so-good books
Broadspectrum Limited (BRS) Downgrade to Neutral from Outperform by Credit Suisse and Downgrade to Neutral from Buy by Citi B/H/S: 0/4/1
Ferrovial has made a $1.35 bid for the company, a 59% premium to the prior close, conditional on 50.1% minimum acceptance and FIRB (The Foreign Investment Review Board) approval.
Credit Suisse believes the offer opportunistic and, with the company having rejected a $2.00 a share bid a year ago, board support is considered unlikely. The broker also believes the chance of a competing bid is likely to be constrained by listed peers facing a number of their own issues, and the complexity of the company’s immigration contract.
Citi analysts also believes board support is unlikely for the current Ferrovial bid but cuts its rating given its recent share price jump.
Estia Health (EHE) Downgrade to Equal-weight from Overweight by Morgan Stanley B/H/S: 1/3/0
The acquisition of Kennedy Health Care is both earnings accretive – at 10% in fiscal 2017- and provides a foothold in NSW, Morgan Stanley maintains.
Nevertheless, concerns about a reliance on acquisitions and debt leads the broker to consider the stock is now fully valued.
Premier Investments Limited (PMV) Downgrade to Underperform from Neutral by Credit Suisse B/H/S: 2/3/1
The share price has appreciated and Credit Suisse downgrades the stock. The current price incorporates all foreseeable upside in earnings from expansion initiatives, in the broker’s view.
Platinum Asset Management (PTM) Downgrade to Underperform from Neutral by Credit Suisse B/H/S: 1/1/1
The share price is up 20% in the quarter to date and Credit Suisse expects inflows to slow from this point with the trust funds unlikely to benefit from reinvestment of distributions, as was the case in the September quarter.
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