In the good books
Oil Search (OSH) Upgrade to Neutral from Sell by Citi B/H/S 4/3/1
Citi is busy updating its commodity prices forecasts. Its global analyst team remains on the bullish side for crude oil. Citi’s forecasts are for crude to gradually recover to US$52/bbl by 4Q 2016, and further to US$60/bbl in 2017. For Oil Search the update has led to an upgrade.
Perseus Mining (PRU) Upgrade to Outperform from Underperform by Macquarie B/H/S 2/1/1
The company has released a revised life-of-mine plan for Edikan. This offers some improvements on the prior plan, Macquarie observes. Of most importance, it should allow sufficient cash flow for the company to consider going ahead with Yaoure.
The broker considers the merger with Amara and the new Edikan plan position the company to achieve its long-held ambition to develop a second mine. Yaoure should double production in FY21, Macquarie suggests.
In the not-so-good books
Beach Energy (BPT) Downgrade to Neutral from Buy by Citi B/H/S 1/3/1
Despite Citi’s bullish view on crude oil, Beach Energy is the sole stock that has received a downgrade in the wake of the broker’s commodity forecast update.
GPT (GPT) Downgrade to Underperform from Neutral B/H/S 1/4/1
GPT is popular with investors as a high quality, defensive real estate investment trust (REIT), but Credit Suisse notes GPT’s returns have meaningfully underperformed of late across all of retail, office and industrial. The broker believes super-regional malls are best placed to outperform at this stage in the cycle. Credit Suisse thus sees Scentre Group (SCG) as a better placed REIT at present and has downgraded the stock on valuation.
Rio Tinto (RIO) Downgrade to Sell from Neutral B/H/S 4/3/1
Citi analysts updated their prices forecasts for commodities and for the first time in a long while new forecasts went up, not down. But it’s not universal good news as the analysts remain bears on nickel, while retaining a sceptical view on bulk commodities once the strong steel restart/restocking in China has run its course. In Citi’s view, the iron ore crunch that was meant to happen in 2016 may just be pushed out to 2017.
South32 (S32) Downgrade to Neutral from Buy by Citi B/H/S 3/4/1
As noted above, the broker has revised their forecasts for commodities. For South32, the outlook for manganese is of crucial importance and here Citi believes prices have peaked, without likely going back to the lows seen earlier in the year. A bearish outlook for nickel has an impact too.
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