In the good books
CBA was upgraded to Neutral from Sell by Citi. B/H/S – 1/6/1. Citi observes Commonwealth Bank has underperformed over the last 12 months. While specific issues have been addressed, there are other limits to the outlook, such as falling retail banking profitability. The more modest valuation and the strategies that have been identified to provide upside, along with the prospect of capital returns, signals that a move back to Neutral from Sell is appropriate for the broker. Target is $72.
Incitec Pivot (IPL) was upgraded to Neutral from Underperform by Credit Suisse. B/H/S – 3/4/0. Credit Suisse observes that surplus cash is being used to reduce debt over the near term, creating options for larger scale reinvestment beyond FY19. The broker suggests the focus on downstream expansion in explosives appears relatively low in capital requirements and low risk. Credit Suisse upgrades to Neutral from Underperform. Target is raised to $4.02 from $3.37. The broker suggests earnings will be swept higher because of a tightening in fertiliser prices over the medium term and a gradual tightening in the explosives market.