Weekly Reports | Dec 03 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 November 26 to Friday November 30, 2018
Total Upgrades: 20
Total Downgrades: 11
Net Ratings Breakdown: Buy 46.29%; Hold 40.15%; Sell 13.56%
Stockbroking analysts continue to issue recommendation upgrades for individual ASX-listed stocks, and in large numbers. For the week ending Friday, 28th November 2018, FNArena registered no less than 20 upgrades for 20 separate companies; only three upgrades stranded at Neutral/Hold.
At the same time, FNArena also counted ten downgrades, for ten listed companies, of which six moved to Sell. Despite the broader market clocking off on three negative months in succession, it is not a one way street for investors. At least not if we can take guidance from analysts' moves.
Equally remarkable is the fact the trend remains negative for valuations and price targets. Historically, the share market usually shows a lack of positive momentum when valuations and forecasts are under pressure, as is currently the case (more on forecasts further below).
For the week, Qantas and Mineral Resources are the only ones worth mentioning regarding upside amendments to broker price targets, while there is plenty to pay attention to on the negative side with Automotive Holdings leading the pack, in a negative sense, followed by CYBG, BlueScope Steel, Janus Henderson, Unibail-Rodamco-Westfield, and others.
The picture looks a bit rosier when we overlook tables for revisions to earnings estimates. Despite a rough treatment in the share market, Aristocrat Leisure enjoyed the largest positive adjustment to forecasts for the week, followed by Suncorp, Brickworks, Qantas, and others.
Not so lucky, and leading a large contingent of negative revisions, was Unibail-Rodamco-Westfield, followed by Mayne Pharma, Automotive Holdings, Nine Entertainment, CYBG, others.
The calendar, previously populated with AGMs, EGMs, Investor Days and out-of-season financial results, is now looking decidedly more empty, which might translate into lesser action from stockbroking analysts too. Traders and investors alike will be keeping their fingers crossed this increases the odds for a broad based share market rally leading into end-of-year holiday season.
It has been a tough environment since late August in Australia.
ALS LIMITED ((ALQ)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/3/1
The first half net profit exceeded Ord Minnett's forecasts, particularly on the commodity side. The broker upgrades estimates by 8% for FY19 and by 5% for FY20.
While the share price has come under pressure because of a lack of margin expansion in life sciences and a forecast slowdown in sales growth, the broker notes the second half will cycle a weak comparable period.
Moreover, 30%-plus growth rates off a low base were always going to be unsustainable. Ord Minnett raises the target to $8.29 from $8.19. Rating is upgraded to Accumulate from Hold.
APPEN LIMITED ((APX)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/0/0
Tech sector valuations have been de-rated markedly across the globe, UBS notes, led by a correction for the Nasdaq. Yet Appen has upgraded FY18 guidance, leading the broker to upgrade its FY19 earnings forecast by 15%. The stock is now trading in line with its average PE but positive industry feedback and tailwinds support a positive view.
Appen appears to be strengthening its market position hence UBS upgrades to Buy from Neutral. Target rises to $16.00 from $15.65.
ACCENT GROUP LIMITED ((AX1)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0
The company has indicated like-for-like sales in the first 20 weeks of FY19 are up 2.5%. This is broadly in line with Morgans' estimates.
The broker had anticipated sales would slowdown after the FY18 result because of a reduction in clearance activity and the cycling of a strong result within Hype.
Online sales growth has been exceptionally strong as a result of the investment in this channel in recent years.
While December is an important month, the broker envisages upside risk to guidance, predominantly because of the material expansion of gross margin experience to date.
Rating is upgraded to Add from Hold. Target is reduced to $1.46 from $1.47.
BAPCOR LIMITED ((BAP)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/1/0
UBS observes commentary from retailers is becoming more cautious. Christmas is expected to be challenging, creating risks to forecasts.
Yet this appears priced into Bapcor. UBS has upgraded to Buy from Neutral and reduced the target to $7.05 from $7.10.
BLUESCOPE STEEL LIMITED ((BSL)) Upgrade to Neutral from Sell by Citi .B/H/S: 5/2/0
The company has reaffirmed first half guidance amid upbeat comments on demand conditions. The company acknowledges steel prices and spreads have moderated, which Citi believes implies a weaker second half.
Still, the stock has now priced in much of the expected moderation. Citi expects steel markets will stabilise and a further share buyback will be announced as well as approval for the North Star expansion.
Rating is upgraded to Neutral from Sell and the target is reduced to $14 from $15.
LINK ADMINISTRATION HOLDINGS LIMITED ((LNK)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/1/0
The company has had an eventful 18 months, with several large acquisitions, equity raising and regulatory changes. Credit Suisse estimates that M&A is the largest driver of growth and PEXA the most significant contributor.
Organic growth is also expected to contribute over coming years, driven by inflation-linked pricing and growth in industry fund members. The broker's analysis centres on FY22 earnings but the growth trajectory is unlikely to be even.
The pull back in the share price has increased the value appeal and the broker upgrades to Outperform from Neutral. Target is unchanged at $8.30.