Brokers were mostly negative in the early part of the week with more downgrades than upgrades. Resources companies features on the downside as commodity prices dropped. However, BHP did get an upgrade, but that was mostly due to the recent share price rout.
In the good books
CIMB Securities upgraded BHP to Add from Hold. Notwithstanding reductions to earnings from cuts in iron ore price forecasts, CIMB upgrades in part due to the 9% fall in the share price since the result. The broker now reverts to a 100% net present value target derivation, in line with the Rio Tinto model. CIMB retains a preference for Rio Tinto, based on its more attractive earnings multiples and valuation.
CIMB Securities upgraded Sandfire Resources (SFR) to Hold from Reduce along with increases in the long-term copper price forecasts. Although the shorter mine life at DeGrussa captures less of this upside, from 2018 higher costs create greater leverage to the increased copper price.