Collected Wisdom

This week we look at Nine Entertainment, Iluka Resources, Bank of Queensland and BT Investment Management.

Summary: Analysts see Nine Entertainment’s weaker quarterly update as a sign of a decline in free-to-air TV generally, while Iluka’s lowering of the Zircon reference point has not surprised those following the stock. Bank of Queensland’s half year result falls short of expectations.

Key take out: BT Investments increased funds under management impressed in the current market conditions, and analyst consensus remains a hold on the stock.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Nine Entertainment Co. (NEC)

Nine Entertainment came out with a quarterly update and it was not pretty. For the quarter television revenues were down by 11 per cent. The explanation for this? Too much rain and the West Indies folding faster than Superman on laundry day (thank you Seinfield). Nine’s summer flagship, the cricket, was marred by a 30 per cent loss of play due to rain but the quality of opposition was also blamed for people not tuning in.

Overall, Nine has flagged a drop in total free-to-air advertising spend and have downgraded guidance from a total market share from 38 per cent to 37 per cent. Management noted they would continue to tighten the belt and reported costs are expected to be down four per cent for the year.

Adverse weather and a B grade West Indies team aside, analysts see the decline as more of a structural decline within the whole business of TV. Despite this there are plenty of analysts who are positive on Nine, citing cuts to license fees and advertising spend on the upcoming election as a catalyst.

The current average 12 month price target for Nine is $1.46. The lowest of the price targets sits at $1.00. At the time of writing the share price sat at $1.10.

Investors are generally advised to hold Nine Entertainment Company at current levels.

Iluka Resources (ILU)

Iluka Resources has bitten the bullet and lowered the Zircon Reference Point by 10 per cent to $US950 per tonne. In the announcement Iluka also flagged zircon sales for 2016 may be down on expectations but did not say by how much. This has come due to competition and management also stated they may reduce production if necessary.

Analysts are not surprised by the downgrade as they had seen it coming, it was just a matter of when. Those positive on the stock see a potential uplift coming from rutile (used to make paint). Iluka commented favourable market conditions for the end of 2015 and start of 2016 and noted orders had been brought forward, the first time since 2012.

Right now Iluka the consensus has Iluka as a hold. Analysts are divided by the mineral sands producer with three buy calls, one hold and four sells. The average 12 month price target falls on $6.69, with the most optimistic set at $8.30 and the lowest at $5.50. At the time of writing the share price sat at $5.65.

Investors are generally advised to hold Iluka Resources at current levels.

Bank of Queensland Limited (BOQ)

Bank of Queensland released its first half numbers to the market last week and it seems to have been met with a collective groan from the analysts and the market. The result disappointed analysts, falling short of their expectations and the market reacted with a swift sell down.

The result has reflected the challenging environment for the banks. Surprisingly, BOQ decided to increase variable home loan rates by 12 basis points for owner occupied home loans and 25 basis points for investor loans. A handful of analysts saw this as a smart move getting the jump on the competition and giving BOQ a short-term earnings boost. By going first though, BOQ has opened itself up to the competition if the others do not follow suit.

The commentary for the second half for BOQ is equally uninspiring. With analysts expecting equally challenging conditions ahead it was widespread reductions in forward looking price targets. The average 12 month price target is now $12.34 with the most optimistic case set down at $13.10. At the time of writing the share price was $11.

It is interesting to note that despite predominantly negative commentary from analysts and marginal upside to the price target, the majority still call BOQ a hold.

Investors are generally advised to hold Bank of Queensland at current levels.

BT Investment Management (BTT)

Another quarter ends and that means it’s time for another quarterly funds under management (FUM) flow update by BT Investment Management. Netflows for the quarter were up $1bn. This increase equates to an increase in annualised fee revenue of $8.3m.

The increase in FUM was offset by negative performance with total FUM down by $500m because of it and the Australian dollar strengthening against the pound. This resulted in a loss of $3bn of FUM.

Analysts agreed the result was commendable given the current market environment. The diversity in the product offering from BT is believed to be the main attraction. Also receiving acknowledgement from analysts were the inflows and potential for growing inflows especially from the US to the UK based J O Hambro funds which is owned by BT.

Price targets have been lowered by analysts due to the impact of currency but the outlook is still favourable and BT almost becomes the only buy in this edition, but just falls short as the hold calls win out. The average 12 month price target is $10.45. At the time of writing the share price was $9.58.

Investors are generally advised to hold BT Investment Management at current levels.

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