In the not-so-good books
Credit Suisse has downgraded Asciano (AIO) to Underperform from Outperform. Credit Suisse suspects that to get ACCC approval of the Brookfield acquisition, there needs to be significant changes to the regulatory framework for Brookfield rail and the Dalrymple Bay coal terminal. This could change the risk/reward profile for Brookfield and require a lengthy process. Credit Suisse lowers its valuation of Asciano to a standalone basis and downgrades to Underperform from Outperform.
Citi has downgraded BHP Billiton (BHP) to Neutral from Buy. Citi analysts found BHP delivered a “solid” quarterly production report, but incorporating the latest commodity prices forecasts has once again triggered further reductions to profit estimates. This time, copper and coking coal are the main culprits, only partially offset by a mark-to-market upgrade for iron ore. Reductions in forecasts have triggered a fall in price target; $24 instead of $26. Rating has been downgraded to Neutral from Buy. On Citi’s calculations further cuts to capex would need to be made “given the progressive dividend policy appears to be sacrosanct”.
UBS has downgraded Mantra Group (MTR) to Neutral from Buy. The share price has appreciated 24% since the FY15 result and UBS observes, during this period, there has been continued downward pressure on the Australian dollar supporting the domestic travel market. Earnings are likely to be driven by growth in accommodation demand and new property additions to the company’s portfolio. With this in mind, UBS downgrades to Neutral from Buy. Target is raised to $4.00 from $3.84.
Citi has downgraded Newcrest Mining (NCM) to Neutral from Buy. Citi has downgraded Newcrest Mining to Neutral from Buy, following what the analysts label a “softer, as expected” quarterly performance. The downgrade itself, explain the analysts, is based on valuation. The shares are up 11% in October. The analysts highlight Australia’s largest gold producer (and copper) is in a much stronger position, both operationally and financially, than it was 12 months ago. Potential catalysts include AUD gold price, news of Cadia East ramp-up; mill throughput/recoveries and the optimisation study at Lihir.
Morgans has downgraded Newcrest Mining (NCM) to Hold from Add. The company’s September quarter production was slightly short of Morgans’ expectations. Maintenance issues tempered the upside but the broker expects a solid rebound in the December quarter. Morgans believes the company is in a comfortable position to reach the lower end of its 2.5-2.6m oz guidance. The broker downgrades to Hold from Add, given the stock is now trading close to valuation.
Citi has downgraded Regis Resources (RRL) to Neutral from Buy. Regis’ Sep Q production beat Citi’s forecast and costs came in lower. The broker has increased forecast earnings on a sight upgrade to gold price expectations. Sustained operational improvements at Duketon have seen Regis’ share price rally 33% in a month and 66% in six months, hence Citi is pulling back its rating to Neutral.
Credit Suisse has downgraded Regis Resources (RRL) to Underperform from Neutral. The company has made a strong start to FY16, Credit Suisse observes, with a solid production outcome in the September quarter. Credit Suisse believes the outlook has materially improved, driven by significant exploration success. The broker downgrades to Underperform from Neutral given recent share price gains.
Deutsche Bank has downgraded Regis Resources (RRL) to Sell from Hold. The September quarter is tracking ahead of FY16 guidance, with the beat driven by Rosemont and gold output 21% above Deutsche Bank’s forecasts. As Garden Well is incrementally improving the broker’s attention is now on the attempts to add to mine life. Results from Baneygo impressed Deutsche Bank and nominal exploration value is raised to $100m from $50m.
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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