Weekly Reports | Sep 04 2017
By Rudi Filapek-Vandyck, Editor FNArena
The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.
Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.
Period: Monday August 28 to Friday September 1, 2017
Total Upgrades: 13
Total Downgrades: 17
Net Ratings Breakdown: Buy 41.12%; Hold 42.91%; Sell 15.97%
And the final week of the August reporting season remained all but loyal to the familiar script: more downgrades than upgrades for ASX-listed stocks. For the week ending September 1st, FNArena counted 13 upgrades versus 17 downgrades.
Seven of the downgrades went to Buy, whereas 13 of the 17 downgrades moved to Neutral/Hold.
Caltex and Regis Resources received multiple ratings changes for the week. Caltex received one upgrade and two downgrades. Regis Resources received one of each.
Qantas enjoyed the largest increase to consensus price target, up by 16.9%, handsomely beating ERM Power (+10%), Medibank Private (+6.1%) and Perpetual (+6%). On the opposing side of the ledger GBST suffered the largest cut, down by -34%, followed by Trade Me (-10%), Speedcast International (-8%) and Orocobre (-6.3%).
The underlying trend remained intact: on average, positive adjustments tend to be weightier than negative amendments.
This also remains the case for changes to earnings forecasts where Caltex takes the crown for the week, followed by Village Roadshow, Ardent Leisure and Independence Group. All of these stocks, and others, started off with low expectations to subsequently experience massive re-adjustments to the upside.
There were some hefty cuts nevertheless and the heftiest of them all was for Resolute Mining (-43%), while Galaxy Resources, NextDC, Santos, South32 and GBST all suffered sizeable reductions.
The week ahead should see Lake Placid materialise in the local share market. At least as far as stockbroking analysts' activity is concerned. It has been a busy and volatile month of August.
ADAIRS LIMITED ((ADH)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0
FY17 results were in line with expectations following a recent upgrade to guidance. Morgans observes trading improved substantially into the end of the financial year and has continued into the start of FY18.
Guidance for $33-37m in EBIT for FY18 appears conservative to Morgans. The broker upgrades to Add from Hold and raises the target to $1.67 from $1.35.
ALUMINA LIMITED ((AWC)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 1/4/2
First half numbers were solid and ahead of Credit Suisse estimates. The broker updates for commodity price forecasts and 2017 guidance, which is largely unchanged.
Marginally higher cash costs are assumed. The dividend yield is attractive and there are reasonably undemanding valuation multiples. Hence, the broker upgrades to Neutral from Underperform. Target is raised to $2.30 from $1.70.
BLACKMORES LIMITED ((BKL)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/2/0
FY17 results were broadly in line with Ord Minnett. The broker believes a normalisation of one-offs and investment should lead to meaningful earnings growth. This view leads the broker to upgrade to Accumulate from Hold and raise the target to $115 from $110.
Ord Minnett believes the business faces near-term challenges related to distribution channels, pricing harmonisation and customer concentration which could lead to some volatility. However, the longer-term thematic of foreign consumer demand for Australian products should continue.
BT INVESTMENT MANAGEMENT LIMITED ((BTT)) Upgrade to Neutral from Sell by UBS .B/H/S: 2/4/0
While JO Hambro's FY18 performance fee outlook has improved slightly over the past two months, further slippage in underperforming funds continues to impede medium term prospects and suggest downside impact to EPS forecasts, comment UBS analysts.
UBS sees only 3% growth in FY18, although this is expected to improve to 8% over FY19 and FY20. UBS upgrades to Neutral from Sell and target reduced to $11.00 from $11.15.
CALTEX AUSTRALIA LIMITED ((CTX)) Upgrade to Accumulate from Lighten by Ord Minnett .B/H/S: 4/2/1
Ord Minnett upgrades to Accumulate from Lighten and raises the target to $35 from $28. The main reason for the changes includes a belief that refiner margins and transport fuel margins are likely to remain elevated.
Moreover, the broker has increased confidence in the opportunities in the convenience store business.
See also CTX downgrade.