In the good books
BEACH ENERGY (BPT) was upgraded to Add from Hold by Morgans
Morgans believes the Beach Energy share price represents significant value at the current level. The recent sideways drift in oil prices has contributed to demand uncertainty. Additionally, there has been speculation that future spot price falls could influence negotiations for price resets on Beach Energy legacy contracts. However, the broker expects a clear difference in price between long-term contracts and the spot market. Morgans expects the next major catalyst will be the upcoming full year result, which will incorporate an updated five year outlook for asset development and revised reserve estimates. The rating is increased to Add from Hold. The target price is $1.66.
TPG TELECOM (TPG) was upgraded to Overweight from Equal-weight by Morgan Stanley
Morgan Stanley notes the newly merged TPG Telecom has the potential and capital to play disrupter and believes the company can compete against the larger telcos like Telstra and Optus. The broker points towards a stronger product suite, higher growth options and a stronger balance sheet but also highlights risks like the National Broadband Network (NBN) pricing that is impacting TPG Telecom’s fixed-line profit. Investors willing to wait 2-3 years for the synergies to play out fully can expect target price upside, comments the broker. Morgan Stanley upgrades its rating to Overweight from Equal-weight with the target price increasing to $10 from $6.85. Industry view: In-line.
TREASURY WINE ESTATES (TWE) was upgraded to Overweight from Equal-weight by Morgan Stanley
Treasury Wine Estates’ had inventory worth $2bn on its books at the end of the first half and Morgan Stanley estimates its realisable value at circa $4bn, most of it from the luxury category. The broker expects the group to return to FY19 earnings in FY22. Since the de-rating was triggered by headwinds within the US business, the broker believes a sustained re-rating will require more confidence in management’s ability to stabilise the US business. The short-term outlook remains disrupted but downside risk is limited owing to the group’s asset backing. Morgan Stanley upgrades its rating to Overweight from Equal-weight with the target price increasing to $13.50 from $12.50. Industry view: Cautious.
In the not-so-good books
WHISPIR (WSP) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett downgrades to Hold from Buy as the share price has rallied almost 30% over a week with no obvious news or developments. A strong result is expected in August and the broker is positive about the longer term but the current valuation offers little upside. Target is steady at $2.80.
The above was compiled from reports on FNArena. The FNArena database tabulates the views of seven major Australian and international stockbrokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
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