Australian Investment Blog

WHAT MATTERED TODAY

Some of the dogs started to bark today with a bullish broker upgrade for Telstra (TLS) underpinning a big day in that stock – adding +5% - - while the Lithium names including our own Orocobre (ORE) were also in the black - ORE the standout bouncing by +5.66%. Overall, the market was again weak in aggregate, weighed mostly by the banks with selling most aggressive in the morning Obviously the strength in Telstra underpinned the Telco’s while the Materials also did ok – on the flipside, Cochlear (COH) was hit hard, no news but some decent selling which implies someone with some volume keen to get off the train!

Overall the ASX 200 index lost -0.11%, or -7 points to 6016 while the DOW Futures are trading down -34pts at time of writing.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Broker Moves; A busy day for brokers today and it seems we sold our Webjet (WEB) position a day early – the stock rallying on the back of a Morgan Stanley upgrade with the broker keen on Hotel Trading Tailwinds apparently! The stock rallied as a result however in fairness, they’ve called the stocks pretty poorly…upgrading post the ~40% rally…

Here’s the current broker calls….

· Gateway Lifestyle Cut to Hold at Shaw and Partners; PT A$2.10

· Primary Health Downgraded to Sell at UBS; PT A$3.50

· Aurizon Upgraded to Buy at UBS; PT A$4.60

· NRW Holdings Rated New Buy at UBS; PT A$1.90

· Imdex Rated New Buy at UBS; PT A$1.70

· Ausdrill Rated New Buy at UBS; PT A$2.65

· Ausdrill Upgraded to Buy at Hartleys Ltd; PT A$2.72

· Monadelphous Rated New Buy at UBS; PT A$15.70

· Sino Gas Downgraded to Neutral at Macquarie; PT A$0.25

· APA Group Upgraded to Outperform at Credit Suisse; PT A$11

· Telstra Upgraded to Overweight at JPMorgan; Price Target A$3.30

· Adairs Upgraded to Add at Morgans Financial; PT A$2.50

· Webjet Upgraded to Equal-weight at Morgan Stanley

Telstra (TLS) $2.90 / 5.07%; we’ll cover more tomorrow however JP Morgan staying that they believe the potential upside from current levels outweighs downside – and they reckon a 25-30% dividend cut is priced in + a 25% decline in postpaid ARPU. They go on to say that investors are getting a free option on any strategy initiatives at this price, some of those might be a redirection of focus around the NBN (we think) – an announcement / more colour could be provided on the 20^th June at their strategy day. Better news (clearly) from TLS today and we remain keen on the ugly duckling!

Telstra (TLS) Chart

Primary Healthcare $3.54 / -8.29%; A change of analyst at UBS has caused a significant fall in Primary Health Care’s stock this morning, with the new lead having a materially different view from the old, dropping the rating to a sell, and the target 12.5% to $3.50. UBS noted that the stock was trading on PE of ~20x earnings, now lower after today’s move, with little growth trajectory and risk to profits – bulk billing changes, Fair Work Commission review into wages among other risks. The stock has dropped 9% today and is now trading around the revised target price.

We like PRY, although today’s move may lead to a breakdown technically. We flagged PRY as a potential takeover target back in May and today’s weakness could entice China’s Jhango Group into making a move.

Primary Health Care (PRY) Chart

OUR CALLS

We closed out of Fortescue (FMG) today after the stock breached our stop on close yesterday.

Have a great night

The Market Matters Team

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