MARKETS SPECTATOR: Continue with CSL, take Ten
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Credit Suisse is the latest to come to the party, upgrading the stock to outperform from neutral, with a target price of $60.50, up from $54. Without getting into too much medical jargon, Credit Suisse said that after CSL's R&D briefing it had increased its earnings forecasts by 4 to 9 per cent over the period. The broker commented that CSL's R&D portfolio offers significant broad-based optionality, which it sees as a real positive.
Ten Network Holdings
The big corporate news for the week has been the Ten Network capital raising, the second raising in just six months. While most brokers recommend avoiding the stock, Credit Suisse has gone out on a limb, upgrading the company to an outperform rating from neutral, with a target price of 33 cents.
Highlighting its investment case, the broker views the opportunity as a high risk speculative buy. Firstly, Credit Suisse believes the capital raising removes the financial risk that has been overhanging the stock recently, with the funds being used to restructure the business, specifically to improve content agreements, programming, marketing and agency deals.
Secondly, "while operational risks remain, this appears priced in. We do not expect Ten's commercial revenue share (currently 21 per cent versus 25 per cent last year) to materially deteriorate further from this point. While a recovery to 25 per cent appears unlikely in the short term given Ten's relatively weak position in sport content and increased competition from rival networks in reality television, risks appear slightly skewed to the upside over the medium term”, Credit Suisse said in a research note.
Thirdly, Credit Suisse thinks the likelihood of Ten being acquired has increased, given Ten's improved balance sheet and share price.
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