In the good books
AGL ENERGY LIMITED (AGL) Upgrade to Accumulate from Hold by Ord Minnett B/H/S: 5/2/0
With heightened market volatility, driven by concerns about commodity prices, Ord Minnett is more favourably disposed towards Australian utilities, given predictable earnings and cash flow yields.
AGL is raised to Accumulate from Hold, as it enjoys leverage to improving retail margins and increasing wholesale electricity prices.
Target is raised to $20.00 from $15.60.
APA GROUP (APA) Upgrade to Buy from Hold by Ord Minnett B/H/S: 6/2/0
With heightened market volatility, driven by concerns about commodity prices, Ord Minnett is more favourably disposed towards Australian utilities, given predictable earnings and cash flow yields.
Hence, the broker upgrades APA to Buy from Hold as it is envisaged winning business from ongoing infrastructure development.
Target raised to $10.50 from $8.70.
[1]AUSNET SERVICES (AST) Upgrade to Accumulate from Hold by Ord Minnett B/H/S: 4/4/0
With heightened market volatility, driven by concerns about commodity prices, Ord Minnett is more favourably disposed towards Australian utilities, given predictable earnings and cash flow yields. The broker upgrades its rating to Accumulate from Hold because of AusNet’s solid dividend coverage and attractive valuation. Target is raised to $1.62 from $1.40.
DUET GROUP (DUE) Upgrade to Hold from Lighten by Ord Minnett B/H/S: 2/5/1
With heightened market volatility, driven by concerns about commodity prices, Ord Minnett is more favourably disposed towards Australian utilities, given predictable earnings and cash flow yields. The broker upgrades DUET to Hold from Lighten and raises the target to $2.35 from $2.30.
MAGELLAN FINANCIAL GROUP LIMITED (MFG) Upgrade to Buy from Hold by Ord Minnett B/H/S: 2/1/1
Funds under management were maintained over January, despite the choppy markets and falling Australian dollar. Despite this, Ord Minnett observes the stock has declined around 20% in the year to date.
The broker continues to envisage upside risk from new retail relationships and new product launches and an increasing allocation to global equities by Australian investors. Headroom is now emerging relative to valuation, so the broker upgrades to Buy from Hold. Target is raised to $24.84 from $20.72. See also MFG downgrade.
In the not-so-good books
DOMINO’S PIZZA ENTERPRISES LIMITED (DMP) Downgrade to Hold from Add by Morgans B/H/S: 1/5/0
A review of the general retail sector ahead of results season has Morgans forecasting a solid Christmas period, giving way to a tougher time in 2016. The broker is a stock picker in the sector, looking for reliable earnings, strong market position and reasonable valuation.
Morgans expects another solid result from Domino’s but no great surprises, given a recent update. Target rises to $61.58 from $60.60 but rating pulled back to Hold from Add on valuation.
MAGELLAN FINANCIAL GROUP LIMITED (MFG) Downgrade to Neutral from Outperform by Macquarie B/H/S: 2/1/1
Ahead of reporting season and in the wake of Dec Q funds flow data, Macquarie has reviewed wealth management stocks under coverage. Magellan downgraded to Neutral on valuation. Target rises to $21.91 from $21.53. See also MFG upgrade.
[2]ORIGIN ENERGY LIMITED (ORG) Downgrade to Hold from Accumulate by Ord Minnett B/H/S: 4/2/1
With heightened market volatility, driven by concerns about commodity prices, Ord Minnett is more favourably disposed towards Australian utilities, given predictable earnings and cash flow yields. However, the broker lowers the rating on Origin to Hold from Accumulate as most of its upside is considered to be leveraged to oil prices. Target is reduced to $5.45 from $6.40.
PERPETUAL LIMITED (PPT) Downgrade to Neutral from Outperform by Macquarie B/H/S: 1/7/0
Ahead of reporting season and in the wake of Dec Q funds flow data, Macquarie has reviewed wealth management stocks under coverage. Perpetual downgraded to Neutral, with the broker noting the global strategy has to deliver above benchmark performance. Target falls to $41.10 from $46.20.
PROGRAMMED MAINTENANCE SERVICES LIMITED (PRG) Downgrade to Hold from Buy by Deutsche Bank B/H/S: 1/3/0
The company’s update, with FY16 guidance of $65m and FY17 of $100-110m, signals worse-than-expected conditions in some parts of the business. Deutsche Bank had assumed the shutdown and maintenance business would be more resilient. The broker believes the FY17 guidance is optimistic, given the pressures in mining and oil & gas. With no catalyst to close the valuation gap and given the short-term risks, Deutsche Bank downgrades to Hold from Buy. Target is reduced to $1.70 from $3.60.
Earnings Forecasts
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