Overall activity from stockbroking analysts has quietened down a lot in September as the seasonal lull in between a busy reporting season and the upcoming AGM season is often taken as an opportunity to chill out and maybe even enjoy a short holiday.
We find positive movements for TPG Telecom in anticipation of yet another solid financial result, and as analysts start incorporating contribution and synergies from the acquired iiNet operations. Upmarket retailer, OrotonGroup, attracted one upgrade post its results.
In the good books
BEACH ENERGY LIMITED (BPT) was upgraded to Outperform from Neutral by Macquarie Buy/Hold/Sell: 3/3/1 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 dollars costs. The broker’s sector multiple has risen as a result, as has the broker’s rating for Beach.
OROTONGROUP LIMITED (ORL) was upgraded to Neutral from Sell by Citi Buy/Hold/Sell: 1/2/0 FY15 was a very painful exercise for Oroton, but FY16 should be a significantly better with earnings before interest and taxes expected to nearly treble (from arguably a low base). Citi has set a new target price of $2.55 (was $2.10). The company has its currency exposures hedged and Citi believes the pressure on margin experienced in the year past should not repeat itself this year.
TPG TELECOM LIMITED (TPM) was upgraded to Buy from Sell by Citi Buy/Hold/Sell: 3/1/2 The sector is readying for the grand broadband battle in coming years and Citi analysts have come to the conclusion that TPG Telecom is ready for it. Helped by the acquisition of iiNet the broker is anticipating EPS compound annual growth rate of 30% to FY18. At face value, migrating to NBN Co, away from Telstra copper, means higher access costs and lower gross margins, but Citi believes TPG management can offset this.
In the not-so-good books
BILLABONG INTERNATIONAL LIMITED (BBG) was downgraded to Neutral from Overweight by JP Morgan Buy/Hold/Sell: 0/3/0 JP Morgan suspects the trading environment in the company’s biggest market, the US, has worsened, based on the results from rivals. Despite the ongoing turnaround story, the risk/reward proposition is not deemed compelling enough to become more constructive on the stock at this time.
Earnings Forecast
FNArena 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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