Broker actions so far this week have been driven by some end of season results updates and strategic announcements from companies. A restructure notice from Nufarm prompted two brokers to upgrade, while David Jones’ half-year results prompted further talk of a Myer merger and an upgrade and a downgrade.
In the good books
Credit Suisse upgraded Nufarm (NUF) to Outperform from Neutral and UBS upgraded to Neutral from Sell. The company is restructuring the Australian business with $13 million in cost savings to be achieved by FY16. Credit Suisse expects working capital management to improve, with fewer warehouses to stock. UBS’s upgrade follows a period of underperformance in the share price. UBS believes the review of the Australian operations should align the company better for the upcoming challenges. UBS has incorporated the savings, plus a modest turnaround in margins over the next three years, to reflect better seasonal conditions.
CIMB Securities upgraded Adelaide Brighton to Hold from Reduce. The market appears to be factoring in the worst-case scenario after the company announced it could be about to lose one of its biggest customers. The stock is trading 14% lower after the announcement, and CIMB considers it now to be fairly valued and therefore raises the rating to Hold from Reduce.