Weekly Ratings, Targets, Forecast Changes

Weekly Reports | Apr 08 2019

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

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.

Summary

Period: Monday April 1 to Friday April 5, 2019
Total Upgrades: 4
Total Downgrades: 9
Net Ratings Breakdown: Buy 42.25%; Hold 42.72%; Sell 15.02%

Investors wondering as to why the Australian share market has found adding more gains a tough ask since mid-February need not look any further than at last week's tally for recommendation upgrades and downgrades by the eight stockbrokers monitored daily by FNArena.

For the week ending Friday, 5th April 2019, FNArena registered only four upgrades, and three of those stopped at Neutral/Hold. There were nine downgrades, and four of those went to Sell.

One week is not a great indicator, but within the context as is, this one might prove its value to prove a point: right up here, many stocks start suffering from a lack of oxygen.

Equally noteworthy: many a bond proxy has seen its share price rally hard in 2019, but analysts seem rather reluctant in downgrading their ratings.

Overall news flow has been quiet in weeks past, so little surprise not much is happening in the table for positive revisions to price targets with only Magellan Financial (+4.35%) and shipbuilder Austal (+3%) worth mentioning. The negative side has more names on show, but only Pilbara Minerals, Kathmandu Holdings and Viva Energy REIT are worth pointing out.

A lot more is happening in terms of positive revisions for earnings estimates, though it's predominantly a resources-led affair, with ResMed, Ansell and Graincorp notable exceptions. The flipside reveals many more industrial names, but Pilbara Minerals suffered the most, followed by EclipX Group, Senex Energy, Incitec Pivot, and Kathmandu Holdings.

With resources companies preparing to start releasing quarterly production updates, the centre of attention might well remain theirs, but then Bank of Queensland ((BOQ)) is likely to announce a cut to its interim dividend and this might awaken a few to the dangers that come with a weak domestic economy; or at least certain parts of it.

Upgrade

AIR NEW ZEALAND LIMITED ((AIZ)) Upgrade to Buy from Neutral by UBS .B/H/S: 1/2/1

UBS believes investors will increasingly turn their focus to the potential for earnings to recover and generate strong cash flow from FY20. The broker's conviction is lifted by the recent announcement of a cost reduction program, more conservative network growth and the re-timing of fleet orders.

The broker lifts forecasts for FY19 by 2% in FY20 by 17%. Rating is upgraded to Buy from Neutral. Target is raised to NZ$2.90 from NZ$2.55.

FORTESCUE METALS GROUP LTD ((FMG)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 2/4/2

Deutsche Bank has upgraded its rating for Fortescue Metals to Hold from Sell, while lifting its price target to $7.70 from $4.90. The decision comes after more news about iron ore supply disruption from Rio Tinto.

Having been too sceptical about iron ore, the analysts readily admit they are hereby falling on their iron ore sword. Another positive concerns the dividend potential which, in Deutsche bank's words, is significant and near term tangible.

INDEPENDENCE GROUP NL ((IGO)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 1/5/0

The company has provided an update on the nickel sulphate pre-feasibility study. No capital or operating expenditure estimates were provided.

Macquarie upgrades payability assumptions to reflect the company's improved negotiating position in talks with offtake partners. As a result, rating is upgraded to Neutral from Underperform. Target has risen to $4.90 from $4.00.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 0/1/3

A positive rebound in markets should mean the company benefited from fund flows in the first quarter, which Credit Suisse expects will be up 6%. However, fund performance remains weak and the third month of outflows emerged in February.

The broker is now forecasting net outflows in the second half of -$600m. Credit Suisse upgrades to Neutral from Underperform as the share price has fallen -15% during March. Target is reduced to $4.70 from $4.90.


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