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Weekly Ratings, Targets, Forecast Changes – 08-11-19

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

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.

DOWNER EDI LIMITED ((DOW)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/2/0

The shares have recently outperformed and UBS downgrades to Neutral from Buy. The share price has increased around 20% in the year to date. The company has reiterated guidance for FY20 net profit of around $365m.

Downer EDI has indicated that cash conversion in FY20 would not be as strong as previously because of the impact of the Murra Warra wind farm, the run down in NBN/LNG projects and higher cash costs. UBS reduces the target to $8.15 from $8.35.

FLIGHT CENTRE LIMITED ((FLT)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/0

Citi notes Flight Centre has either downgraded or issued guidance below consensus five times in the past 12 months. The consistent underlying driver of weakness has been the Australian leisure channel.

The broker downgrades to Neutral from Buy and reduces the target to $42.90 from $50.50.

Citi forecasts an underlying pre-tax profit decline of -32% in the first half before a 12% recovery in the second half. The pre-tax profit margin is expected to contract to 1.3% in FY20.

ILUKA RESOURCES LIMITED ((ILU)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/5/0

Macquarie observes the near-term outlook for zircon is subdued and achieving the forecast step up in sales in the December quarter without further impacting on realised prices appears unlikely.

Moreover, a more conservative staged development at Sierra Rutile is likely to limit output to 175,000tpa. The main positive is the potential de-merger of the Mining Area C royalty but this is outweighed by the near-term softness in demand, in the broker's view.

Rating is downgraded to Neutral from Outperform and the target is reduced to $9.30 from $10.00.

MACQUARIE GROUP LIMITED ((MQG)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/3/0

First half profit was $1.46bn. Earnings quality was enhanced by the normalisation of asset & equity investment income and affected by a lower tax rate.

Following the first half result Credit Suisse downgrades to Neutral from Outperform. Target is steady at $135.

Results were broadly in line with expectations and the broker continues to believe this is a quality business, although upside appears limited in the near term.

ORIGIN ENERGY LIMITED ((ORG)) Downgrade to Hold from Add by Morgans .B/H/S: 4/3/0

After reviewing Origin Energy's Sep Q report, Morgans has pulled its rating back to Hold from Add. APLNG production was solid, aided by better prices, but Energy Markets was less impressive with electricity volumes down -8% and gas down -7%.

The broker has reduced its forecast for the division to the bottom end of the guidance range.

Meanwhile, Beetaloo drilling results look positive, but the complexity of commercialisation will limit any near term market reaction, the broker suspects. Target falls to $8.19 from $8.24.

PENDAL GROUP LIMITED ((PDL)) Downgrade to Sell from Neutral by UBS and Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/3/1

FY19 results were largely in line with UBS estimates. Hence, the rally in the share price appears overdone, particularly on the back of the outlook for higher FY20 costs.

The broker commends the medium-term focus on strategic growth but notes elevated costs come at a time when JO Hambro's revenue growth prospects are more constrained.

Rating is downgraded to Sell from Neutral and the target is raised to $7.45 from $6.90.

Pendal Group's full-year result was broadly in line with consensus, leading to a sigh of relief from the market. FY20 is expected to be impacted by lower JOHCM performance fees and a higher compensation ratio, offset by lower tax.

The stock has made a comeback of late on signs of funds flow improvement, and at 16.7x is only  -1% below its five-year PE average.

Macquarie thus downgrades to Neutral from Outperform, while still preferring Pendal, along with Janus Henderson ((JHG)), in the space. Earnings forecasts downgraded but target unchanged at $8.25.

See also PDL upgrade.

REA GROUP LIMITED ((REA)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/3/1

Ahead of REA Group's quarterly report tomorrow, and Domain Group's AGM next week, the broker has increased its real estate ad volume decline expectations in the first half to -12% from a prior -7.5% given data confirmation weak conditions have persisted into FY20.

The broker does see volumes ticking up down the track but for now downgrades REA to Neutral from Outperform. A lowering of the broker's risk free rate assumption increases the target to $109 from $107.

REGIS HEALTHCARE LIMITED ((REG)) Downgrade to Neutral from Buy by UBS .B/H/S: 0/3/1

The Royal Commission report was heavy on issues but light on solutions, UBS notes. The broker nevertheless believes the government will move on long term structural reforms, suggesting headwinds will persist until at least FY22.

Regis Healthcare annouced two small acquisitions but no financial details, although UBS has lifted earnings forecasts. Target rises to $3.20 from $3.10 but after a solid recent run, the broker pulls back to Neutral.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating


Order Company New Rating Old Rating Broker
1 COCA-COLA AMATIL LIMITED Buy Neutral Ord Minnett
2 CSR LIMITED Neutral Sell Citi
3 PENDAL GROUP LIMITED Buy Neutral Morgans
5 BORAL LIMITED Neutral Buy Citi
10 MACQUARIE GROUP LIMITED Neutral Buy Credit Suisse
11 ORIGIN ENERGY LIMITED Neutral Buy Morgans
12 PENDAL GROUP LIMITED Neutral Buy Macquarie
14 REA GROUP LIMITED Neutral Buy Macquarie


Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 Z1P ZIP CO LIMITED 83.0% 17.0% 66.0% 3
2 PPH PUSHPAY HOLDINGS LIMITED 50.0% 25.0% 25.0% 3
3 ABC ADELAIDE BRIGHTON LIMITED -50.0% -67.0% 17.0% 6
4 CSR CSR LIMITED -42.0% -58.0% 16.0% 6
5 SCG SCENTRE GROUP -10.0% -20.0% 10.0% 5
6 CCL COCA-COLA AMATIL LIMITED -58.0% -67.0% 9.0% 6
7 RRL REGIS RESOURCES LIMITED 57.0% 50.0% 7.0% 7
8 BAP BAPCOR LIMITED 80.0% 75.0% 5.0% 5

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 REG REGIS HEALTHCARE LIMITED -25.0% 25.0% -50.0% 4
2 DOW DOWNER EDI LIMITED 50.0% 75.0% -25.0% 4
3 VCX VICINITY CENTRES -33.0% -10.0% -23.0% 6
4 CHC CHARTER HALL GROUP 50.0% 67.0% -17.0% 4
5 BKL BLACKMORES LIMITED -50.0% -33.0% -17.0% 6
6 MQG MACQUARIE GROUP LIMITED 42.0% 58.0% -16.0% 6
7 REA REA GROUP LIMITED -8.0% 8.0% -16.0% 6
8 ILU ILUKA RESOURCES LIMITED 17.0% 33.0% -16.0% 6
9 PDL PENDAL GROUP LIMITED 21.0% 36.0% -15.0% 7
10 ORG ORIGIN ENERGY LIMITED 57.0% 71.0% -14.0% 7

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 CSR CSR LIMITED 3.775 3.553 6.25% 6
2 BKL BLACKMORES LIMITED 70.667 66.517 6.24% 6
3 Z1P ZIP CO LIMITED 4.203 4.050 3.78% 3
4 PDL PENDAL GROUP LIMITED 8.229 7.937 3.68% 7
5 BAP BAPCOR LIMITED 7.540 7.283 3.53% 5
6 MQG MACQUARIE GROUP LIMITED 134.650 131.967 2.03% 6
7 REG REGIS HEALTHCARE LIMITED 2.948 2.923 0.86% 4
8 RRL REGIS RESOURCES LIMITED 5.187 5.150 0.72% 7
9 ILU ILUKA RESOURCES LIMITED 9.192 9.158 0.37% 6
10 SCG SCENTRE GROUP 3.922 3.908 0.36% 5

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 FLT FLIGHT CENTRE LIMITED 44.317 48.299 -8.24% 7
2 CHC CHARTER HALL GROUP 12.645 13.200 -4.20% 4
3 PPH PUSHPAY HOLDINGS LIMITED 2.770 2.800 -1.07% 3
4 ABC ADELAIDE BRIGHTON LIMITED 3.100 3.125 -0.80% 6
5 DOW DOWNER EDI LIMITED 8.400 8.445 -0.53% 4
6 VCX VICINITY CENTRES 2.553 2.566 -0.51% 6
7 ORG ORIGIN ENERGY LIMITED 8.464 8.486 -0.26% 7
8 GPT GPT 5.970 5.984 -0.23% 6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 Z1P ZIP CO LIMITED -1.867 -2.850 34.49% 3
2 NAB NATIONAL AUSTRALIA BANK LIMITED 202.317 178.267 13.49% 7
3 XRO XERO LIMITED 11.948 10.589 12.83% 6
4 ORI ORICA LIMITED 104.657 94.767 10.44% 7
5 FMG FORTESCUE METALS GROUP LTD 198.430 186.330 6.49% 7
6 PDL PENDAL GROUP LIMITED 53.257 50.786 4.87% 7
7 PPH PUSHPAY HOLDINGS LIMITED 7.731 7.442 3.88% 3
8 WBC WESTPAC BANKING CORPORATION 204.200 197.386 3.45% 7
9 ILU ILUKA RESOURCES LIMITED 72.645 70.533 2.99% 6
10 JHX JAMES HARDIE INDUSTRIES N.V. 117.749 114.384 2.94% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 OGC OCEANAGOLD CORPORATION 8.275 12.319 -32.83% 5
2 CSR CSR LIMITED 24.895 28.927 -13.94% 6
3 FLT FLIGHT CENTRE LIMITED 234.286 261.700 -10.48% 7
4 BKL BLACKMORES LIMITED 278.767 304.917 -8.58% 6
5 MPL MEDIBANK PRIVATE LIMITED 14.471 15.571 -7.06% 7
6 RRL REGIS RESOURCES LIMITED 43.869 45.680 -3.96% 7
8 ORG ORIGIN ENERGY LIMITED 56.479 57.193 -1.25% 7
9 S32 SOUTH32 LIMITED 17.888 18.079 -1.06% 7
10 REA REA GROUP LIMITED 267.000 269.333 -0.87% 6

Technical limitations

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