Brambles (BXB) was upgraded to Outperform from Neutral by Credit Suisse and to Equal-weight from Underweight by Morgan Stanley. B/H/S – 3/5/0. First quarter revenue growth of 6% was ahead of Credit Suisse forecasts. Management has indicated that price increases offset the majority of the cost inflation Brambles experienced in the quarter. Judging from press speculation, Credit Suisse observes significant private equity interest in the IFCO RPC business the company is seeking to sell or de-merge. The broker raises the target to $11.50 from $10.90. First half guidance was in line with Morgan Stanley's expectations and this should move consensus estimates to more realistic levels. The broker believes inflation remains a risk, although conditions appear to be easing. The stock has outperformed the market by around 10% since just before its results, which Morgan Stanley believes reflects enthusiasm for the decision to separate out IFCO. Morgan Stanley raises the target to $10.30 from $9.90. Industry view is Cautious.
Domain Holdings Australia (DHG) was upgraded to Neutral from Sell by Citi. B/H/S – 2/3/1. Data suggest Domain's market share has stabilised in key regions, particularly Melbourne, which leaves the company well positioned for when market conditions normalise. The broker is forecasting a rapid recovery in Sydney listing volumes from FY20. The stock's PE still looks expensive in FY19, given a dip in earnings, but reasonable thereafter. It's still a premium to REA Group (REA) but Citi expects a more rapid recovery for Domain on a Sydney rebound.
Flight Centre (FLT) was upgraded to Neutral from Underperform by Credit Suisse and Macquarie, to Overweight from Equal-weight by Morgan Stanley and to Add from Hold by Morgans. B/H/S – 4/4/0. Credit Suisse notes guidance for FY19 is around -5% below market estimates and the cause appears to be an underestimating of the impact of labour costs in Australia as well as the absence of credit card surcharge revenue in the UK. Target is reduced to $43.67 from $44.17.