Weekly Reports | Nov 11 2019
By Rudi Filapek-Vandyck, Editor FNArena
The FNArena database tabulates the views of seven major Australian and international stock brokers: Citi, Credit Suisse, 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 4 to Friday November 8, 2019
Total Upgrades: 4
Total Downgrades: 11
Net Ratings Breakdown: Buy 37.31%; Hold 46.32%; Sell 16.37%
More downgrades than upgrades and a community of stockbroking analysts that sees its ratings heavily weighted towards Neutral/Holds amidst a local share market that is characterised more by rotation and temporary mood swings than a clear direction.
These are the easy to draw conclusions when overseeing what is happening inside the world of stockbroking analysts reviews and updates.
For the week ending Friday, 8th November 2019, FNArena registered but four upgrades in ratings for ASX-listed entities against eleven downgrades. One of the upgrades, for Pendal Group, was met by two downgrades on the other side of the ledger.
Positive news is that three of the four upgrades moved to a Buy. On the flipside, only one downgrade moved to Sell (all others to Neutral/Hold). Pendal Group was the receiver of the sole fresh Sell rating.
CSR and Blackmores lead the week's table for positive revisions to price targets with both enjoying increases in excess of 6%. Zip Co, Pendal Group and Bapcor equally enjoyed notable increases. On the negative side, Charter Hall distances itself from the pack, but Flight Centre takes the week's biggest hit. All other negative amendments are rather small.
A lot of action can be seen in the week's overview for positive changes to earnings estimates. Zip Co claims the week's top spot, followed by National Australia Bank (surprise!), Xero and Orica. The week's table for negative revisions shows equally sizable adjustments with OceanaGold in the bottom spot, followed by CSR, Flight Centre, Blackmores and Medibank Private.
Out-of-season corporate results releases continue througthout the rest of the month in Australia.
COCA-COLA AMATIL LIMITED ((CCL)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/1/4
Ord Minnett reviews the stock, noting the Australian beverages division is poised to return to growth because of an increase in volumes and a positive mix on channel and product.
Also, while the Indonesian consumer segment is slowing the beverages industry is still performing well. The broker finds the valuation attractive and upgrades to Accumulate from Hold.
The next catalyst is expected to be the investor briefing on November 15. Target is steady at $11.
CSR LIMITED ((CSR)) Upgrade to Neutral from Sell by Citi .B/H/S: 1/1/3
Citi has upgraded to Neutral from Sell following an interim report that turned out "in line", with a special dividend surprise and rather soft guidance for FY20. Citi analysts suggest the strong share price response was likely due to short covering on the day.
Property earnings were stronger and there is expectation the domestic housing cycle might be about to turn, which should underpin further improvement. Falling coal prices could benefit the aluminium operations, suggest the analysts.
Target price jumps to $4.30 from $3.60. Citi does see a profitable future for the Tomago smelter.
PENDAL GROUP LIMITED ((PDL)) Upgrade to Add from Hold by Morgans .B/H/S: 3/3/1
FY19 net profit was down -19% and in line with expectations. The weaker result was primarily driven by a step-down in performance fees.
There remains a risk of meaningful outflows in EU funds but on a 12-month view Morgans envisages upside from improved sentiment towards the UK.
The broker upgrades to Add from Hold on valuation. Target is raised to $8.85 from $7.96.
See also PDL downgrade.
ZIP CO LIMITED ((Z1P)) Upgrade to Buy from Sell by UBS .B/H/S: 3/0/0
The company has announced a strategic agreement with Amazon, whereby it will be offered as a payment option for customers shopping on Amazon.com.au.
With the share price falling significantly over recent weeks, UBS upgrades to Buy from Sell. The target of $4.80 is unchanged.
The broker prefers Zip Co to its main peer Afterpay Touch ((APT)) as it has less exposure to the associated risks with 'buy now pay later' and a revenue model that relies on both consumers and merchants.
BORAL LIMITED ((BLD)) Downgrade to Neutral from Buy by UBS and Downgrade to Neutral from Buy by Citi .B/H/S: 0/5/0
UBS lowers its rating to Neutral from Buy as the stock is approaching the target. House prices are lifting and housing approvals appear to be bottoming but the next 12 months are still likely to experience a contraction ahead of a trough, in the broker's view.
US activity needs to pick up faster and Australian housing approvals lift further to regain confidence. Target is reduced to $4.90 from $5.20. Boral has reiterated FY20 net profit guidance to be -5-15% below FY19.
While the company maintained FY20 guidance, Citi notes a weak first half is placing increasing reliance on a strong second half.
While lead indicators have turned positive, underlying activity remains weak and management has had to deepen its cost reductions.
The broker downgrades to Neutral from Buy, envisaging few catalysts for the upside in the near term. Target is steady at $5.