Total shareholder return
For all stocks, the recommendation is based upon the implied upside/downside to the target price plus the dividend yield, ie total return. An Add/Reduce recommendation implies upside/downside of 10% or more and a Hold recommendation less than 10%.
The target price is the level the stock should currently trade at if the market accepted the analyst's view of the stock, provided the necessary catalysts are in place to effect the change in perception.
If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value the target price will differ from 'fair' value.
Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should be interpreted flexibly.
Performance in this context generally reflects total shareholder return and the horizon is 12 months.
Fixed Interest recommendations
Add - The current credit spread and yield of the security compare favourably to peer securities and offers an attractive total return for new investors.
Hold - The security's current pricing reflects fair value relative to peer securities.
Reduce - The current credit spread and yield looks expensive relative to peer securities. Holders should consider alternative securities.
Overweight - On balance, the sector offers good value (for the level of risk) relative to other fixed interest sectors.
Neutral - On balance, the sector does not offer compelling value (for the level of risk) relative to other fixed interest sectors.
Underweight - On balance, the sector does not offer sufficient value (for the level of risk) relative to other fixed interest sectors.