Buy, Sell, Hold – what the brokers say

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The brokers must have all collectively headed back to work this week, as there have been many actions in just the first half of the week. Next Monday’s Buy, Sell, Hold – what the brokers say will have a full list of analyst actions but here are the highlights – which is still quite an extensive list.

In the good books

Morgan Stanley upgraded BlueScope Steel (BSL) to Overweight from Equal-weight. Steel spreads are continuing to improve and growth in FY16 is being priced in. BlueScope is one of Morgan Stanley’s preferred building material stocks and the rating is upgraded to Overweight from Equal-weight.

Macquarie Group (MQG) was upgraded by Morgans to Add from Hold and to Buy from Neutral by UBS following an upgrade in its guidance for the financial year. Morgans believes the upgraded guidance alleviates market concerns regarding MQG’s equity and lending exposures in the commodities space. Underpinning the UBS upgrade is the fact the analysts believe Macquarie has stuck to a conservative forecast.

UBS upgraded both National Australia Bank and Westpac to Buy from Neutral following a review of the sector. UBS expects investors will support NAB’s turnaround strategy and that Westpac has the strongest credit underwriting process of the banks.

Deutsche Bank upgraded Origin Energy to Buy from Hold following a sector report. Due to the delay in response to lower oil prices from the industry, the stockbroker is anticipating continued downward pressure on prices in H1 2015, to be followed by a mild recovery only in H2. The analysts have grabbed the opportunity to revisit their sector preferences. Origin is seen as more defensive, but undervalued nonetheless.

Deutsche Bank upgraded Virgin Holdings to Buy from Hold. Deutsche Bank has updated fuel forecasts for Virgin Australia and also consolidated Tigerair Australia as a fully owned subsidiary from the second half. The broker now expects FY15 underlying profit of $92.7m and upgrades.

In the not-so-good books

UBS has downgraded ANZ Banking Group to Neutral from Buy. UBS suspects many investors are struggling for high conviction alternatives, with a patchy economy and an increase in volatility. Although the banks’ absolute valuations are not cheap, the broker considers a further re-rating is possible. ANZ is downgraded as excess liquidity and the rising cost of connectivity continue to pressure returns from Asian wholesale banking.

Morgans downgraded (CRZ) to Hold from Add. Falling vehicle listing volumes are a near-term risk to earnings momentum, in the broker’s view. Most of the fall is attributed to the boycott on new vehicle listings imposed by five of the largest manufacturers. Short-term competitor activity and market cycles could mean reports lower-than-expected growth in FY15 and FY16.

JP Morgan has downgraded Woodside (WPL) to Underweight fro Neutral. JP Morgan notes Woodside was one of the strongest performers among global oil names over 2014 on the back of a strong dividend stream, production and balance sheet. The balance sheet may stay secure but the broker suspects a falling dividend will drive underperformance.

The above was compiled from reports on FNArena, which tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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