In a slow start to a week that has had little broker activity, most of the ratings movements were on miners and resource companies. Perhaps what was most interesting was what didn't happen. No broker actually upgraded or downgraded David Jones, following the Woolworths South Africa bid. However BA-Merrill Lynch moved to a No Rating, CIMB Securities retained a Hold, Macquarie is involved in the deal and so is therefore now restricted from making a recommendation and UBS retained a Hold rating. CIMB Securities moved its target price to $4 from $3 and UBS also moved to $4 from $2.85.
In the good books
UBS upgraded Arrium (ARI) to Buy from Neutral. The broker is revising earnings forecasts down by 4% in FY14 to reflect a lower effective iron ore price and higher Australian dollar. UBS continues to see upside risk to base steel-led earnings but mining will still drive earnings in the near term. The rating is upgraded to reflect the current valuation, following the underperformance so far in 2014. The broker thinks the market is attributing little value to an eventual turnaround in steel.
UBS upgraded Panoramic to Buy from Neutral. UBS has increased 2014 nickel price forecasts by 14%. On a valuation basis, Panoramic has benefited most from the upgrades because of a short mine life. Free cash flow estimates have been lifted by 281% for FY14 and 148% for FY15.