FN Arena Broker Call Headlines - 20 Apr 2012

Reported by FN Arena
Friday, April 20, 2012

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- ARISTOCRAT LEISURE LIMITED

JP Morgan rates as Downgrade to Neutral from Overweight (3) - To reflect outperformance over the past six months JP Morgan has downgraded to a Neutral rating on Aristocrat.

While there are some positive trends emerging in the company's markets the broker suggests further EPS upgrades are needed for the stock to push higher.

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- REDFLOW LIMITED

RBS Australia rates as Buy (1) - Target $0.55 (was $1.62). Redflow has announced a further restructuring including management changes and cutting costs and to reflect the update RBS has adjusted its model. Changes in forecasts mean a cut in price target.

While the company requires additional capital to continue in RBS's view there is upside if the new strategy plays out and to reflect this the broker retains a Buy rating.

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- OIL SEARCH LIMITED

BA-Merrill Lynch rates as Buy, Medium Risk (1) - Studies at the P'nyang site (Oil Search 38.5%) suggest a 50% greater resource than the broker had factored in.  While not guaranteeing sufficient supply for PNG LNG expansion, the case for expansion has improved "dramatically", the broker suggests.

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- WESFARMERS LIMITED

Citi rates as Neutral (3) - Coles has announced the re-launch of its Fly Buys program and Citi analysts seem pleased: they believe this is exactly what needs to be done to support the operational turnaround. The next phase, explain the analysts, is basket size growth, not customer count growth. The latter is important because on Citi's calculations, so far throughout this process basket size has remained stagnant.

Citi analysts suggest farmers needs a successful turnaround at Coles to keep momentum positive for group EPS growth. Citi is positive but also believes all of the potential has already been priced into the share price. Neutral rating maintained in combination with a $29.60 price target.

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- NUFARM LIMITED

Citi rates as Downgrade to Sell from Neutral (5) - Target price loses 5c to $4.45 and Citi has lowered its rating to Sell from Neutral as trading conditions in the Northern Hemisphere (Europe and the US) remain in sharp contrast to the supportive market for arm in Australia. As a matter of fact, Citi labels the Australian context "exceptional".

Earnings estimates have only been lowered by circa 3% but Citi doesn't think the shares deserve their current PE of around 14 given the subdued outlook.

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- SYDNEY AIRPORT HOLDINGS LIMITED

Deutsche Bank rates as Buy (1) - The broker has undertaken research to confirm that while a second ney airport is something worth setting land aside for now in order to service the future, current movements at the existing airport only reach regulated peak levels briefly each day. Movements could double over 20 years before a second airport is the only option, the broker suggests.

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- TELSTRA CORPORATION LIMITED

Citi rates as Neutral (3) - Telstra's prudent behaviour towards capital management was in line with Citi's expectations. The analysts like the operational momentum and the potential for capital returns but they also believe this has already been priced in. Neutral rating maintained, thus. Price target remains unchanged at $3.35.

Citi analysts note Telstra's preference for keeping dividends fully franked while management remains confident a new government will find it very hard to unwind the current NBN agreement in place.

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- AUSTRALIAN PHARMACEUTICAL INDUSTRIES

Macquarie rates as Upgrade to Outperform from Neutral (1) - The broker has upgraded its Aust Pharma FY13-14 earnings forecasts by 4-5% and increased its target to 43c from 32c in the wake of the earnings result. has reduced pharmacy discounts and improved its retail performance, leading to higher margins.

While regulatory risk always remain the broker believes the market is applying too much of a discount, particularly given the growth potential of the Priceline franchise. Upgrade.

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24/07/2014 10:16Sydney, Australia. 24 July,2014
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