Buy, Sell, Hold – what the brokers say

Founder of FNArena
Print This Post A A A

Changes in stockbroker ratings for individually listed stocks in Australia continue to be dominated by downgrades. The general theme amongst the upgrades seems to be relative underpricing for certain stocks. This time most downgrades are caused by non-exciting prospects (say the analysts) and recovering share prices, which may give investors an indication about the risks that are still very much present in this part of the share market.

In the good books

Dexus Property Group (DXS) was upgraded to Hold from Sell by Deutsche Bank. Deutsche Bank can see the benefits in the potential acquisition of Commonwealth Property Office (CPA), but above all, the share price has now retreated to near the stockbroker’s valuation and price target of $1.06, which triggered the upgrade to Hold.

Leighton Holdings (LEI) was upgraded to Hold from Sell by Deutsche Bank. Deutsche Bank’s upgrade is a valuation call. Expectations for the company in the three years ahead remain low, but the stockbroker believes this has now been all but priced in.

Stockland (SGP) was upgraded to Buy from Hold by Deutsche Bank. Deutsche Bank believes Stockland offers the most attractive growth profile in the sector for the coming three years.

Telstra (TLS) was upgraded to Neutral from Underperform by CIMB. CIMB’s upgrade looks a bit contradictory, as the stockbroker used the opportunity to emphasise the risks have actually increased, due to more expected delays for the NBN-roll out. But better industry dynamics for the mobile operations are currently providing enough offset, argues CIMB. The stockbroker has penciled in dividend increases to 29 cents next year, and further to 30 cents in FY15.

Treasury Wine Estates (TWE) was upgraded to Neutral from Sell by Citi. The broker suggests investors may have overlooked the benefits the Americas business will receive from a growing shortage of US wine grapes.

In the not-so-good books

Insurance Australia Group (IAG) was downgraded to Sell from Hold. Deutsche Bank has spotted early indications that the cycle for insurers is about to take a turn for the worse. Insurers probably have another good year in front of them, argues the stockbroker. Deutsche Bank has no ambition to accurately time the exact turning point and has simply decided to “act ahead of anyone else”.

Newcrest Mining (NCM) was downgraded to Hold from Buy by Deutsche Bank. Earnings prospects for gold miners are not exactly improving, notwithstanding a short-term bounce in the price of bullion. In the case of Newcrest, there remains limited visibility around implementation of the new strategy through FY14.

Sigma Pharmaceutical (SIP) was downgraded to Underperform from Neutral by Credit Suisse. Sigma has effectively issued a profit warning, even though FY14 is still expected to show some improvement on FY13. Credit Suisse has chosen to adopt a more cautious approach. In the absence of tangible signals of a pick up in sales and profitability, the rating has been pulled back to Underperform.

Whitehaven Coal (WHC) was downgraded to Neutral from Buy by UBS. UBS sees yet another year of losses ahead, on the back of softer coal price projections. Combine this with recent share price strength and it’s not difficult to see the reason behind the downgrade.
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.

Also in the Switzer Super Report:

Also from this edition

View More Articles