Weekly Reports | Sep 11 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 September 4 to Friday September 8, 2017
Total Upgrades: 9
Total Downgrades: 8
Net Ratings Breakdown: Buy 41.13%; Hold 42.72%; Sell 16.15%
It has taken the end of the August reporting season, and the usual lull in the first week thereafter, to -finally!- register a full week in which broker upgrades for individual ASX-listed stocks outnumbered downgrades, and it still remained a tight affair.
By Friday, 8th September 2017, FNArena's register showed nine upgrades versus eight downgrades. Senex Energy winning a tender in Queensland was sufficient for two upgrades to Buy. Regis Resources' share price refusing to retreat was good for two downgrades. Nine upgrades jumped to Buy with long troubled Wellard the only one that had to settle for Neutral/Hold.
Regis Resources and Suncorp were the sole recipients for downgrades to Sell.
As expected, things quietened down substantially for amendments to valuations/price targets and earnings estimates. Senex Energy enjoyed the largest jump in consensus price target, up by 15%, handsomely beating Monadelphous and a few others. On the flipside, Orocobre and Alacer Gold both saw declines by -3%-plus.
Positive changes are on average larger than negative ones.
The latter observation also goes for changes to forecasts. Ardent Leisure takes the honours for upward adjustment with a big leap (+300%), followed by Orocobre, Macquarie Atlas and Webjet. On the negative side, NextDC suffered a blow of -30%, beating Senex Energy, Beach Energy and Baby Bunting.
It should be a relatively easy-going week ahead, with analysts now starting to prepare for out-of-season corporate results, starting with Myer on Thursday.
AUTOMOTIVE HOLDINGS GROUP LIMITED ((AHG)) Upgrade to Add from Hold by Morgans .B/H/S: 5/1/1
Industry data has shown the Western Australia new vehicle sales grew by 4.2% in August, the second month of positive growth in four months. The company faced a number of challenges in FY17 relating to finance impacts from tightening consumer credit conditions and declining vehicle sales.
Morgans suspects the risk/reward is now to the upside. The broker likes the strong exposure to an eventual upswing in the WA economy and believes it's only a matter of time before trading conditions improve. Rating is upgraded to Add from Hold, target is $3.60.
BABY BUNTING GROUP LIMITED ((BBN)) Upgrade to Add from Hold by Morgans .B/H/S: 2/2/0
The exit of another competitor in Queensland, Bubs, is an opportunity for Baby Bunting, Morgans believes. There is the potential to take on a couple of the leases where Baby Bunting does not have a presence.
In the short term the clearance of Bubs stock may impact sales growth for Baby Bunting and, therefore, margin but the broker believes the market will look through this for the medium-long-term.
Rating is upgraded to Add from Hold, as it is a reminder of the company's strengthening competitive position and the strong growth that is still on offer. Target rises to $1.96 from $1.80.
HANSEN TECHNOLOGIES LIMITED ((HSN)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 1/1/0
Ord Minnett upgrades to Buy from Accumulate. The stock has significantly de-rated through 2017 and is now trading at levels that are lower than at any point since the broker started coverage.
Ord Minnett suspects the stock is now set to deliver a strong cash result in the first half. As Hansen is typically a mean reversion business, the broker envisages 15% upside to base case.
Price target is reduced to $3.93 from $3.98.
SUNCORP GROUP LIMITED ((SUN)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/2/2
Citi analysts have upgraded to Buy from Neutral in response to recent share price weakness. Target price is kept at $14. The analysts find Suncorp shares have by now fallen far enough to account for the FY18 margin headwinds.
Also, at present level Citi thinks the shares offer an attractive entry point to gain leverage to the improving Australian general insurance market. The banking operations should stay reasonably strong, the analysts add.
They see better value on offer than in Insurance Australia Group ((IAG)).
See also SUN downgrade.