Changes to broker ratings in the past week
[1]Upgrades and downgrades by the eight brokers in the FNArena database were finely balanced in the past week. Nine ratings went up and nine went down. The net result was only a minor modification to Total Buy ratings in the FNArena database, which now stand at 44.76% versus 44.79% last week.
Upgrades
There were two stocks that boasted more than one upgrade over the period. Both Premier Investments (PMV) and WDS Limited (WDS) enjoyed two upgrades apiece. Premier was upgraded to Buy by both Citi and Deutsche Bank post its full-year result last week, with both brokers positive about the cost cutting work the company has achieved.
WDS is covered by only two brokers in the FNArena database and both of them lifted their recommendation to Buy on news the company has won a new contract with Origin Energy’s (ORG) Asia-Pacific LNG project (APLNG).
Sticking with the upgrades, Aquarius Platinum (AQP) was upgraded to Buy by Citi, with the broker noting additional upside to come from a lift in its platinum group metals forecasts. Interestingly, the stock was downgraded to Underperform by BA-Merrill Lynch the week prior with the broker noting that with Marikana and Everest now on care and maintenance, the company is reliant upon only two operating assets. Still, the stock remains positively regarded, boasting three Buys, one Hold and one Sell in the FNArena database.
G8 Education (GEM) was upgraded to Buy by BA-Merrill Lynch last week, the broker upbeat about the accretive upside from the purchase of another 16 childcare centres.
Orica (ORI) was upgraded to Buy by JP Morgan on news rival Incitec Pivot (IPL) had decided to defer the feasibility study for Kooragang Island, basically shelving its Australian East Coast ammonium nitrate plant ambitions for at least two years. The news reduces the risk of AN oversupply in the East Coast market, which is good pricing and margin news for Orica.
PanAust (PNA) and Perseus Mining (PRU) were both lifted to Neutral by BA-Merrill Lynch on the back of revisions to commodity price forecasts. Both remain positively regarded in the FNArena database.
Downgrades
Looking at the downgrade ledger in alphabetical order starts us off with Ampella Mining (AMC), which was downgraded on BA-ML’s view that in the current environment, investors are likely to be increasingly less interested in the type of long-dated developments the company is sitting on. The downgrade leaves the stock with one Buy, one Hold and one Sell in the FNArena database.
JP Morgan cut Bank of Queensland (BOQ) to Sell after the share price ran a little too high for the broker’s comfort and after forecasts and price targets were adjusted across the banking sector. The stock remains positively regarded in the FNArena database, with five Buys, two Neutrals and the new Sell call.
Drillsearch Energy (DLS) was downgraded to Neutral by UBS on the back of strong share price outperformance and on cuts to the broker’s FY13-15 EPS forecasts to account for the inclusion of the share placement plan in its model. The stock now has one Buy and one Neutral recorded in the FNArena database.
BA-Merrill Lynch downgraded Gindalbie Metals (GBG) to Sell from Buy after cutting the price target to $0.40 from $0.68 on new commodity price assumptions. Citi cut the stock to Neutral earlier in the month on the same rationale. The stock maintains a slightly positive rating in the FNArena database, with three Buys, one Neutral and now two Sells recorded.
GWA Group (GWA) saw Deutsche Bank lower its recommendation to Sell on more subdued housing start forecasts, while Newcrest (NCM) was cut to Neutral by JP Morgan, who cited the mounting number of production issues being experienced. The latter stock is now almost Neutrally regarded by the FNArena database, with two Buys, five Neutrals and one sell recorded.
Nufarm (NUF) saw Macquarie downgrade its recommendation to Sell, with the broker concerned about a flat outlook for the group’s Australasian business. The stock moves a little deeper into negative territory in the FNArena database, with just two Buys offset by four Sells and two Neutrals.
OZ Minerals (OZL) was another one of the victims of BA-Merrill Lynch’s commodity price revisions, with the stock cut to Sell from Neutral. The broker also cited production risk in 2013-14 as a concern. Three Buys, three Sells and two Neutrals keep the stock at a 0.0 reading on the FNArena Sentiment Indicator.
Lastly, Citi downgraded its recommendation on Rio Tinto (RIO) to Neutral last week on the broker’s belief that the upside for iron ore prices now remains “capped”. The new call is the company’s only blemish in the FNArena database, as it balances against seven Buy calls.
Changes to earnings forecasts (EF) in cents per share
[2]Note: FNArena monitors eight leading stockbrokers on a daily basis. The eight experts are: BA-Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, RBS and UBS.
Important information: 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. Anyone should consider the appropriateness of the information in regards to their circumstances.
Also in the Switzer Super Report
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- Lance Lai: A buying opportunity is emerging [5]