In the good books
Myer (MYR) Upgrade to Neutral from Underperform by Credit Suisse B/H/S: 4/1/2. First quarter sales were better than the broker expected, up 3.9% on a like-for-like basis. Guidance was re-affirmed and if sales growth continues at a similar rate the broker expects upside to guidance. The broker upgrades the retailer because of a weak share price and better sales momentum.
Technology One (TNE) Upgrade to Outperform from Neutral by Macquarie B/H/S: 1/1/0. Technology One reported a 16% increase in profit for 2015, in line with Macquarie’s forecast. The final dividend is up 10% and a 2c special will also be paid. Client migration to the cloud is the company’s medium term driver, the broker notes. Cloud migration is not without its risks, but the broker sees considerable leverage to be realised from new products, providing Tech One with the opportunity to up-sell clients to stickier and/or higher value solutions.
In the not so good books
The A2 Milk Company (A2M) Downgrade to Underperform from Outperform by Credit Suisse B/H/S: 1/1/1. Credit Suisse has reviewed its risk/reward assumptions after a 26% rally in the stock over the past week. The broker respects management’s expertise and execution to date in Australia, but confidence that this can be duplicated elsewhere requires further evidence.
Primary Health Care Limited (PRY) Downgrade to Neutral from Buy by Citi B/H/S: 2/4/2. The company’s trading update translated into a profit warning and Citi analysts have responded with a downgrade. The analysts point at pathology revenue growth, which is ahead of Medicare market data, yet below Primary’s expectations.
South 32 Limited (S32) Downgrade to Neutral from Buy by UBS B/H/S: 5/2/0. South32 is downgraded given the challenging outlook for key commodities. Aluminium is expected to follow the steel industry trajectory, where expanding low-cost Chinese production exports surpluses around the world. UBS has downgraded long-term price forecasts for both aluminium and alumina.
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.
