Weekly Reports | Jan 22 2018
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 January 15 to Friday January 19, 2018
Total Upgrades: 10
Total Downgrades: 17
Net Ratings Breakdown: Buy 40.79%; Hold 42.52%; Sell 16.69%
The Australian share market has started the new calendar year in pretty much the same fashion as it travelled through 2017; brokers are issuing more downgrades than upgrades while main indices continue to lag international peers, but underlying the trend in earnings estimates remains solid and positive, albeit mostly carried by miners and energy companies.
Plus ça change, plus c'est la même chose.
For the week ending 19 January 2018, FNArena registered ten upgrades in recommendation versus 17 downgrades. Lithium miner Orocobre received two upgrades during the week, only one to Buy. Other stocks receiving upgrades to Buy include Bellamy's, Flight Centre and Westpac.
Among the downgrades we find NextDC, OZ Minerals and South32 (all three twice), while Orocobre also received one downgrade, as did Independence Group, Santos and Vocus. The latter three downgrades were to Sell.
Orocobre also sits prominently on top of the week's table for positive revisions to price targets, followed by Platinum Asset Management, Beach Energy and Whitehaven Coal. They all enjoyed increases of at least 10%. Negative adjustments for the week are scarce and small.
The table for positive changes to earnings estimates is heavily overweighted by resources stocks and it shows via big increases with iron ore miner Mount Gibson on top, followed by Ardent Leisure and then a whole raft of mining stocks. The flipside shows more variety, but also much smaller amendments, with Tabcorp leading the negative side, followed by Beach Energy, Michael Hill and Graincorp.
The week ahead brings us the first corporate financial results ahead of the busy February reporting season, alongside continued December quarter production updates from miners and oil and gas producers. It appears local investors are once again adopting a cautious approach while awaiting further developments.
During the week past investors witnessed positive announcements from Bellamy's and Sirtex Medical; might this be an indication of things to come?
BELLAMY'S AUSTRALIA LIMITED ((BAL)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0
The company has provided a strong trading update and, with the benefits of cost management, has materially upgraded FY18 earnings guidance for the second time.
Morgans sets forecasts at the top end of guidance ranges, upgrading EBITDA forecasts for FY18 and FY19 by 29.9% and 44.5% respectively, and has greater conviction in the company's growth outlook.
Rating is upgraded to Add from Hold. Providing CFDA registration is approved the broker expects FY19 and FY20 should be strong years for the company. Target is raised to $14.70 from $9.95.
BT INVESTMENT MANAGEMENT LIMITED ((BTT)) Upgrade to Add from Hold by Morgans .B/H/S: 3/3/0
First quarter funds under management were up 2.4%, predominantly driven by fund performance. Morgans upgrades to Add from Hold, believing the company's diversified exposure supports a solid medium-term outlook.
The previous Hold rating was based on a short-term view to assess first-quarter flows. Target is raised to $12.28 from $11.96.
FLIGHT CENTRE LIMITED ((FLT)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/2/4
UBS lifts FY18-21 estimates for earnings per share by 5-10%. The broker is more confident in the 3-5 year gross profit targets. Estimates are also closer to the company's target for 7% transaction growth and 2% pre-tax profit margin in FY20.
On the medium-term view, the broker believes Flight Centre is well-placed to outperform and upgrades to Buy from Neutral. Target is lifted to $53.60 from $47.50.
OCEANAGOLD CORPORATION ((OGC)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 5/1/0
Deutsche Bank notes commodities are trading well above historical real averages and marginal cost. Yet, global demand should continue to improve despite a softening in the Chinese property market. Deutsche Bank finds base metals more attractive than the bulk miners.
Upgraded gold and copper price forecasts have benefited OceanaGold for 2018/19. Deutsche Bank upgrades to Buy from Hold on valuation and the stock remains a top pick. Target is $3.70.