In the good books
1. SENEX ENERGY (SXY) was upgraded to Hold from Lighten by Ord Minnett
Ord Minnett adjusts oil price forecasts for the March quarter which leads to a lift in forecasts for the June quarter to US$70/bbl, and US$65/bbl for the remainder of 2019 and 2020. The broker upgrades Senex Energy to Hold from Lighten based on valuation. Target is raised to $0.40 from $0.34. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
In the not-so-good books
1. BLUESCOPE STEEL (BSL) was downgraded to Equal-weight from Overweight by Morgan Stanley
The recovery in steel prices at the beginning of 2019 has stalled, Morgan Stanley observes. The broker still envisages steel prices will support strong earnings and cash flow but in the short term are unlikely to trend higher. The broker adjusts estimates for earnings (EBIT) across FY19 and FY20, raising by 3.4% and downgrading by -7.1% respectively. One event that may provide a positive catalyst is a formal announcement of a North Star expansion. The broker considers this highly likely to proceed as the returns are potentially attractive. Rating is downgraded to Equal-weight from Overweight, and Morgan Stanley would look for steel price momentum to re-start before becoming a buyer again. Target is reduced to $17 from $18. Industry view: Cautious.
2. CSR (CSR) was downgraded to Neutral from Outperform by Macquarie
Macquarie notes the US market is experiencing incremental improvement and low single-digit growth is considered the most likely outcome for housing starts in 2019. Home builders remain cautiously optimistic entering the spring selling season. Meanwhile, Australian housing starts are estimated to fall to around 150,000 in 2020. The broker downgrades CSR to Neutral from Outperform as the rally in the stock has rebalanced the risk/reward. Target is $3.45.
3. DOMAIN HOLDINGS AUSTRALIA (DHG) was downgraded to Underperform from Neutral by Macquarie
Macquarie downgrades Domain to Underperform from Neutral. This follows the recent rally in the stock. The target is $2.70. The broker notes properties are taking longer to sell on average and the combination of school holidays, a late Easter and then Anzac Day will mean activity in April is likely to be very subdued. Beyond this, the broker finds the market difficult to call. The main focus going forward will be execution in Victoria, in the broker’s view, and the company’s ability to leverage the broader platform of Nine Entertainment (NEC).
4. OIL SEARCH (OSH) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett adjusts oil price forecasts for the March quarter which leads to a lift in forecasts for the June quarter to US$70/bbl, and US$65/bbl for the remainder of 2019 and 2020. Based on valuation the broker downgrades its recommendation on Oil Search to Hold from Buy and raises the target to $8.65 from $8.60. The broker suggests the sector is now becoming fully valued. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
The above was compiled from reports on FN Arena. The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. 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 regard to your circumstances.