Buy, Sell, Hold – what the brokers say

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Brokers were a lot more active this week but are still finding bargains in the reduced share prices that volatility has brought. At least one broker is also a lot more optimistic about the retail outlook too.

In the good books

Macquarie upgraded Coca Cola Amatil (CCL) to Neutral from Underperform. The broker remains cautious on Coke, given the ongoing trend of lower local fizzy drink consumption and sugar pricing pressures. However longer term, the broker sees earnings forecasts as no longer demanding, given Coca Cola's cost-cutting efforts and the upside potential in Indonesia.

Downer EDI (DOW) got three upgrades this week, from Neutral to Buy by Citi and UBS, and from Neutral to Underperform by Credit Suisse. Citi sees positives from Downer EDI's intention to acquire Tenix, which specialises in the provision of operations and maintenance services to the utilities sector. The analysts see the deal as EPS accretive in FY15, plus it also improves the quality of earnings, expands DOW’s range of capabilities and comes with further attractive growth prospects. Credit Suisse considers the acquisition of Tenix Australia for $300 million shows financial discipline has been relaxed to allow for an offensive move to capitalise on the privatisation of state-owned power distribution assets. UBS estimates the acquisition to be 6-9% accretive in FY15-16, largely attributable to the low cost of debt from Downer EDI's new committed bank facility.

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