In the good books
Caltex (CTX) Upgrade to Outperform from Neutral by Macquarie B/H/S 4/3/0
Macquarie refreshes its views on the company’s performance post the 2015 results. Expectations have been trimmed around margins on transport fuels.
While there are risks to 2016 earnings, the broker believes these will ebb, with the benefits from Tabula Rasa and Ampol likely to compensate for the medium-term marketing challenges.
Graincorp (GNC) Upgrade to Outperform by Credit Suisse B/H/S 2/1/1
After recent share price weakness Credit Suisse upgrades the business.
The broker believes the current share price more than adequately reflects downside to domestic storage and logistics volume and there is upside from a return to more normal grain trading and local growing conditions.
TPG Telecom (TPM) Upgrade to Hold from Reduce by Morgans B/H/S 1/3/1
First half results impressed Morgans, with strong growth and earnings from the recently acquired iiNet. Morgans upgrades earnings estimates by 11.5%.
The broker had previously assumed margin pressure under an NBN would be more severe but now expects TPG will pull sufficient costs out of iiNet in the medium term to offset this a little.
In the not-so-good books
Australia & New Zealand Banking Group (ANZ) Downgrade to Neutral from Buy B/H/S 5/2/1
ANZ is re-assessing its Asian strategy. UBS observes, while Asian revenue has grown, the cost bases are too high and growth has been very capital intensive.
The broker expects the bank to reduce its exposure further and, if product spreads do not improve, there is the prospect of a more significant pull back.
A capital release from a pull back in Asia is expected to help maintain the dividend. This is predicated on a soft landing in Asia, the broker highlights.
Ansell (ANN) Downgrade to Neutral from Buy by Citi B/H/S 2/6/0
The share price is up some 15% from recent lows but the global context remains fragile, leading Citi analysts to conclude risks are now more balanced, hence the downgrade.
Given the recent operational issues, a timely operational turn-around is not assured, highlight the analysts.
Dulux Group (DLX) Downgrade to Underperform from Neutral by Credit Suisse B/H/S 1/3/3
Credit Suisse suspects a softer outlook for demand is likely to drive the underperformance in the share price and this may also be the catalyst to unwind the stock’s valuation premium.
Short term, the broker believes the greatest risk to the stock is market expectations, which are considered to be unrealistic. The temptation to take profits is too great and Credit Suisse downgrades the stock.
Tabcorp Holdings (TAH) Downgrade to Neutral from Outperform by Credit Suisse B/H/S 2/2/3
Credit Suisse has reviewed the situation relating to the alleged payment to a politically exposed Cambodian consulting firm. The broker suspects the valuation implications are insignificant.
Although there is a longer-term value opportunity for investors, the broker suspect’s negative sentiment may surround the stock for some months. Rating is therefore downgraded.
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