Weekly Reports | Feb 19 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 February 12 to Friday February 16, 2018
Total Upgrades: 25
Total Downgrades: 14
Net Ratings Breakdown: Buy 42.31%; Hold 41.07%; Sell 16.62%
Halfway through the February reporting season, time-wise, but hardly one quarter through the number of Australian companies scheduled to report financial performance this month, local stockbroking analysts are busy as bees upgrading and downgrading individual ASX-listed stocks.
For the week ending Friday, 16th February 2018, FNArena registered no less than 25 upgrades and 14 downgrades, with many related to financial reports released.
On the positive side, Breville Group, Origin Energy, Suncorp and Newcrest Mining all stand out with double upgrades in response to market updates. On the negative side, the limelight was stolen by Myer and South32, both good for two downgrades following disappointing performances.
Plenty of swings in updates for valuations and price targets, yet the table for positive revisions contains one a handful that seem worth mentioning. AWE ltd grabs top spot for the week with a gain of 12.8%, followed by Computershare, Cimic, Cochlear and CSL (otherwise known as the Four Cs).
Negative adjustments are heavy, with Myer taking the hardest hit (-23%), followed by Karoon Gas, AGL Energy, Wagners Holdings, South32 and SG Fleet.
The undeniable good news story is with analysts making amendments to earnings forecasts. Whereas the table for positive revisions shows large numbers, the flipside is hardly worth mentioning. Infigen Energy enjoyed the largest increase for the week, beating Mount Gibson, Woodside Petroleum, Insurance Australia Group, Mineral Resources, 3P Learning, and others.
Reporting season genuinely gathers steam in the week ahead.
AWE LIMITED ((AWE)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 0/4/1
Morgan Stanley upgrades to Equal-weight from Underweight given the corporate approaches for the company. Target price is upgraded to $0.95 from $0.45. Industry view: In-Line.
BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/5/1
First half results were just shy of expectations. UBS was impressed by the 10 basis points expansion in net interest margin. The bank is a price taker in most products but UBS believes its strong customer offering places it in a good position to reduce deposit costs relative to peers.
Forecasts are upgraded slightly based on the assumption the bank continues to focus on lowering funding costs. Given the fall in the share price UBS upgrades to Neutral from Sell. Target is $10.50.
BORAL LIMITED ((BLD)) Upgrade to Neutral from Sell by Citi .B/H/S: 4/2/0
Citi has passed no comment on Boral's actual result, rather concentrating on FY guidance. The broker has lifted EPS (and subsequently DPS) forecasts on the back of a reduced US tax rate, and this leads to a target increase to $7.32 from $6.94 and an upgrade to Neutral.
However, Citi has left its before-tax earnings forecasts unchanged post result, and notes the underlying performance in the business featured US margins going backwards despite a highly supportive construction environment. Where is the leverage? the broker asks.
See also BLD downgrade.
BREVILLE GROUP LIMITED ((BRG)) Upgrade to Buy from Hold by Ord Minnett and Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/2/0
Normalised H1 profit fell a little short of market consensus, as well as Ord Minnett's forecast, signal the analysts. But if one excludes a one-off tax charge, it was actually a minor beat.
Ord Minnett is projecting robust growth for H2, and acceleration in FY19 on the entry into new markets and successful launch of new products. Even the prospect of increased spending on marketing and R&D cannot temper their enthusiasm.
The most attractive feature of Breville's growth, states Ord Minnett, is that it is self-funded and global. Despite a premium valuation, Ord Minnett upgrades to Buy from Hold (that's two steps into one move). Target price jumps to $15.60 from $11.
First half results were ahead of Credit Suisse estimates. The broker has reviewed its thesis and notes sales growth is accelerating and the company is successfully cycling periods of strong launches of new product.
The broker suggests management is deploying capital wisely and upgrades to Outperform from Neutral. Guidance signals softer second half growth and the broker acknowledges the company will be impacted by the transition in Germany/Austria.
Target is raised to $13.50 from $12.70.
CIMIC GROUP LIMITED ((CIM)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 1/2/2
Credit Suisse expects 2018 net profit at the top end of guidance. The company is guiding for net profit of $720-780m, up 3-11% on 2017.
The broker upgrades to Neutral from Underperform with a new analyst assuming coverage of the stock. Target is raised to $45 from $28. The broker notes the tender pipeline is up 10% on 2017 and cash conversion remains solid.