In the good books
Beach Energy (BPT) was upgraded to Neutral from Underperform by Macquarie. B/H/S -1/3/2. Beach's March Q numbers were in line with expectations. FY production guidance has been narrowed to the middle of the range and capex guidance has been lowered. Capex deferrals and the divestment of 30% of Otway Basin could help fund the next phase of development, Macquarie suggests, unlocking undeveloped reserves and exploration upside on the back of recent drilling success. Valuation is closely leveraged to the oil price and higher prices lead to an upgrade to Neutral. Target rises to $1.20 from $1.05.
CYBG PLC (CYB) was upgraded to Neutral from Sell by Citi. B/H/S – 2/2/1. Following a noticeable weakening in the share price, down -13% year-to-date, Citi analysts believe risk is now more evenly balanced, hence why they have upgraded their view to Neutral from Sell. Citi retains a close watch on the outlook for Net Interest Margin (NIM), expecting downward pressure, but also suggests cost savings might provide compensation. There's ongoing potential for capital return, on Citi's projections. Target price not assessed.
In the not-so-good books
Fletcher Building (FBU) was downgraded to Neutral from Buy by UBS. B/H/S – 2/3/0. After the de-leveraging of the balance sheet through the $750m capital raising, UBS envisages less upside for equity holders and downgrades to Neutral from Buy. The price target is reduced to NZ$6.30 from NZ$7.60. This primarily reflects the increase in share count but operating earnings estimates are also lowered by -2-4%. The broker considers the capital increase an expensive, but probably necessary, move to improve the company's ability to negotiate with the USPP debt holders.