MARKETS SPECTATOR: Who's under Macquarie's Marquee?

Macquarie's research arm has added Beach Energy and Oil Search to its buy list, while Mesoblast is a short-sell.

Macquarie Research has this morning updated its Macquarie Marquee Ideas, which represent the best alpha generating ideas.

The broker is making a number of key additions, including a forgotten yield play in SP AusNet. Macquarie believes the stock will continue to provide strong regulated revenue and EBITDA growth, despite relatively sluggish gas and electricity consumption. It also notes that the stock is currently yielding 7.7 per cent, which should help it to outperform moving forward.

Elsewhere, Macquarie has decided to delve into the energy sector, with the additions of Beach Energy and Oil Search to its buy list.

"Oil Search is trading in-line with its core net asset value, which we see as a good entry point given its low-risk upside from greater clarity around the Taza discovery, the ongoing near field appraisal programme and the growing potential for a third train in due course. Indeed, there is no other stock in the sector that can match Oil Search’s rich vein of catalysts and medium-term production growth,” Macquarie noted.

Regarding the addition of Beach Energy, Macquarie said it has recently upgraded Beach’s valuation by nearly 10 per cent and target price by 6.3 per cent after its recent investor day. While it is still early in the financial year, based on the September quarter run rate, Macquarie believes Beach Energy can comfortably deliver the bottom end of the 8.5 – 9 million barrels of oil equivalent production guidance range.

On the downside, Macquarie sees a short-sell opportunity in Mesoblast ahead of its big TEVA-oriented event. With TEVA due to update the market on its R&D strategy on December 11, the broker sees risk that TEVA may not be as bullish as its partner. Also, the large-scale phase 3 trial for its investigational heart failure product may be smaller and less definitive than what the market currently expects.

Commenting on its MMI portfolio, it believes there is further upside for CSL, David Jones and REA Group and more downside for Cabcharge (previously listed a short-sell), hence they all still remain Macquarie Marquee Ideas. Macquarie has also decided to remove Newcrest Mining from the MMI list due to its prolonged period of underperformance.