Broker actions have been heavily weighted towards downgrades so far this week, following AGMs and divestment announcements.
JP Morgan upgraded Pacific Brands (PBG) to Neutral from Underweight. The company will divest its Brand Collective division for $39 million to various parties. JP Morgan believes this will remove a distraction for management and simplify the business. The broker considers the recent revenue growth is a positive development but is concerned the business is repositioning at a time when gross margins are under pressure from the currency. (see downgrade below)
In the not-so-good books
Credit Suisse downgraded iiNet (IIN) to Neutral from Outperform following the AGM, which revealed continued subscriber growth but also increasing costs. Credit Suisse is downgrading earnings forecasts by 5% following the strong performance of the stock over the year to date. The broker continues to expect the small cap telco sector will benefit from industry consolidation and this should underpin iiNet.