Weekly Reports | Nov 25 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 18 to Friday November 22, 2019
Total Upgrades: 9
Total Downgrades: 10
Net Ratings Breakdown: Buy 37.56%; Hold 45.78%; Sell 16.66%
For the week ending Friday, 22nd November 2019 FNArena counted nine upgrades for ASX-listed stocks versus ten downgrades from the seven leading stockbrokerages monitored daily. Coca-Cola Amatil received two upgrades to Neutral during the week while BlueScope Steel was downgraded twice, with only one downgrade moving to Sell.
Four of the nine upgrades stopped at Neutral, while three out of the ten downgrades mark a fresh Sell ratings. The two other receivers are Domino's Pizza and Volpara Health.
Some positive momentum can be distinguished from the tabel of price target revisions with the top three of Qantas, Coca-Cola Amatil and ALS ltd all enjoying double-digit percentage increases. The negative side has only one such revision: AP Eagers (profit warning).
Remarkable, the top three of the week's table for positive earnings revisions is made up of popular high growth companies Aristocrat Leisure, TechnologyOne and Afterpay Touch. The first two released FY19 financials. Alas, as is so often the case, the table for negative revisions continues to display the larger adjustments.
Taking the heaviest blow for the week is mapping company Nearmap, followed by AP Eagers, OceanaGold, Coronado Global Resources, and BlueScope Steel.
The local out-of-season reporting scheduling continues during the week ahead, while macro considerations continue to impact market sentiment and direction.
COCA-COLA AMATIL LIMITED ((CCL)) Upgrade to Neutral from Underperform by Credit Suisse and Upgrade to Neutral from Underperform by Macquarie .B/H/S: 1/3/2
Credit Suisse observes the Australian business has been heading in the right direction over the past six months, highlighting its estimates have been ahead of the market.
While not the preferred valuation measure, Credit Suisse believes, if investors gain confidence in the company's ability to grow sustainably, closing the PE gap to Woolworths ((WOW)) could mean the stock hits $14 a share.
Rating is upgraded to Neutral from Underperform and the target is raised to $11.00 from $9.40.
Management has reiterated expectations for mid single-digit earnings growth in 2020. Macquarie welcomes the company's confidence in the outlook and upgrades to Neutral from Underperform.
Second half profit growth is expected to be higher than the first half. Coca-Cola Amatil has confirmed 2019 will be the end of its transition period and it can now focus on the top line. Target is raised to $11.20 from $8.77.
MONADELPHOUS GROUP LIMITED ((MND)) Upgrade to Neutral from Sell by Citi .B/H/S: 1/3/0
First half revenue guidance was weaker than expected, which Citi suspects may have been the result of delays to projects. The broker upgrades to Neutral from Sell, believing the company is well-placed to capitalise on the demand outlook in its core markets.
Nevertheless, Citi envisages downside risk to near-term earnings, given a lower conversion rate for the pipeline of work as well as lower margins. Target is raised to $15.90 from $15.50.
MONASH IVF GROUP LIMITED ((MVF)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0
The company has outlined a number of initiatives expected to drive modest profit growth of 5% over the medium term. Monash IVF has also clarified the impact from the exit of five referring fertility specialists and the update is in line with expectations.
Morgans assesses the stock is now offering more than 10% total shareholder return over 12 months and upgrades to Add from Hold. Target is raised to $1.15 from $1.09.
ORIGIN ENERGY LIMITED ((ORG)) Upgrade to Add from Hold by Morgans .B/H/S: 5/2/0
APLNG is expected to deliver stronger cash flows for Origin Energy vs what Morgans previously anticipated. This is driven by higher production output and better LNG pricing.
While underlying operating earnings will be higher by $80m in FY20 the broker points out this is driven by accounting standards rather than a change in business conditions.
Rating is upgraded to Add from Hold. Origin Energy expects to pay dividends at the higher end of its policy range of 30-50%. Target is raised to $8.62 from $8.19.
QANTAS AIRWAYS LIMITED ((QAN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/1/0
Macquarie considers the stock cheap vs its global peers, expecting both the domestic airline and the loyalty scheme will generate improved profitability in the medium term. The broker expects the stock to continue re-rating and upgrades to Outperform from Neutral.
Target is raised to $7.90 from $6.15. Forecasts are updated to reflect the first quarter trading update and a review of the Australian domestic market.
An improvement in domestic airline profits is expected as Virgin Australia ((VAH)) revises its pricing, fleet, routes and frequency. This will ultimately lead to capacity reductions.