Weekly Reports | Apr 09 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 April 2 to Friday April 6, 2018
Total Upgrades: 9
Total Downgrades: 3
Net Ratings Breakdown: Buy 44.54%; Hold 39.81%; Sell 15.65%
The balance between stockbrokers downgrading and upgrading their recommendations for individual ASX-listed stocks remains overwhelmingly positive, but underneath the surface, where valuations and earnings forecasts are being assessed and recalibrated, the outlook seems more mixed.
For the week ending Friday April 6, 2018, FNArena registered nine upgrades and only three downgrades in stock ratings, with none of the downgrades sinking to Sell. Stocks receiving upgrades to Buy include ANZ Bank, BHP and CSL, while all of G8 Education, GWA Group and ResMed were downgraded once to Neutral.
Funnily enough, the balance between Buy and Neutral ratings remained steady for the week as twelve changes in total amount to six fresh Buy ratings and an equal number of new Neutrals. The gap between total Buys and Neutrals for the eight stockbrokers monitored daily remains substantial at 44.54% and 39.81% respectively.
Perseus Mining is the only stand-out among stocks receiving a boost to their valuation/price target (+14%), with Crown Resorts second for the week at significant distance (+2%). None of the negative revisions comes near Perseus' increase, but the numbers are larger for larger decreases with G8 Education (-6%) at the bottom, followed by Platinum Asset Management, Estia Health and nib Holdings.
It's a similar story for changes to earnings estimates where Newcrest Mining tops the table for positive revision (+4%), followed at a distance by QBE Insurance whose 0.89% increase would normally not be worth mentioning. The negative side of earnings forecasts sees Orocobre suffering most (-4.6%), followed by G8 Education, Navitas and Platinum Asset Management.
Luckily for Australian investors, the negative balance for the week merely affects smaller cap companies while large cap names feature prominently among the rating upgrades. Unfortunately, Trump's negotiation antics with China are currently dominating news headlines, and this is weighing upon short term prospects for equities globally.
AUSTRALIA & NEW ZEALAND BANKING GROUP ((ANZ)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/4/0
The share price has declined around -6% in the year to date and Citi upgrades to Buy from Neutral. The broker believes ANZ, in particular, will be able to shift its dividend pay-out higher, to 80% by the second half of 2020 from the current 65%.
The CET1 ratio is forecast to remain above the 10.5% target despite around $7bn in share buybacks. Target is steady at $30.
AP EAGERS LIMITED ((APE)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 1/3/0
New car sales growth has improved and regulatory headwinds have been factored into the stock but the valuation holds Morgan Stanley back from being more positive on AP Eagers.
There is upside relative to FY17 on the removal of trading losses at sold dealerships, while the impact from regulatory changes has largely passed.
Rating is upgraded to Equal-weight from Underweight. In-Line industry view. Target is raised to $8.50 from $6.85.
BHP BILLITON LIMITED ((BHP)) Upgrade to Buy from Neutral by Citi .B/H/S: 5/3/0
Citi has upgraded to Buy from Neutral with a higher price target, $33 versus $32 prior, on the realisation the company's shale assets, which are up for divestment, might catch a higher price than previously thought.
On Citi's present calculations, based upon recent transactions inside the US shale industry, BHP's shale assets might attract US$14bn instead of US$10bn, while global upheaval due to rising risks from economic protectionism are believed to be overdone.