In the good books
Charter Hall Group (CHC) was upgraded to Overweight from Underweight by Morgan Stanley. B/H/S – 3/2/0. Morgan Stanley envisages upside for Australian property stocks over the next 12 months. The broker focuses on those with better risk-adjusted returns and more visible catalysts and sees more than 10% upside to the real asset business of Charter Hall. Strength in retail flows, ongoing execution and accelerating earnings growth in FY19 and FY20 are the factors driving outperformance. Target is raised to $7.60 from $6.95. Industry view is Cautious.
Sims Metal Management (SGM) was upgraded to Outperform from Neutral by Credit Suisse. B/H/S – 3/3/0. Sims has downgraded first quarter earnings guidance due to a weaker performance form its Sims Adams recycling JV, a result of lower volumes and challenges in selling low-grade "zorba" (unseparated mix of non-ferrous metal scrap). It is not clear whether this is due to competition or weaker scrap prices. The JV will now look to install new zorba processing equipment to lift grades. Credit Suisse suggests the downgrade is a hit to management's credibility given recent assurance that selling zorba would not be a problem. Target falls to $14.45 from $14.80 but rating upgraded to Outperform with no explanation, but most likely because of a recent share price fall.