Weekly Ratings, Targets, Forecast Changes – 13-12-19

Weekly Reports | Dec 16 2019

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

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.

Summary

Period: Monday December 9 to Friday December 13, 2019
Total Upgrades: 4
Total Downgrades: 7
Net Ratings Breakdown: Buy 37.88%; Hold 45.22%; Sell 16.90%

As corporate activity begins to wind down for 2019, the week ending Friday the Thirteenth of December brought four upgrades and seven downgrades from FNArena database brokers. Of the upgrades, two went to Buy and two to Hold, while three downgrades went to Sell and four to Hold.

Evolution Mining and Magellan Financial were both upgraded to Hold on valuation, while Iluka Resources, Rio Tinto and Sydney Airport were all downgraded to Hold on valuation.

Brokers are squaring up for the holidays.

Target price changes were relatively modest last week. Caltex ((CTX)) topped the list with a 5.0% increase on upgraded guidance and thereafter moves were un-noteworthy.

Downgraded guidance from Whitehaven Coal led to an -11.3% target cut, with Metcash ((MTS)) in second spot on -2.1%.

Yet Metcash managed to top the earnings increase table with 26.5% after delivering an earnings result that was not as bad as feared in the underlying business. OceanaGold ((OGC)) followed with 11.1%.

Whitehaven’s downgraded guidance resulted in a -27.9% forecast cut, while a run of broker resets of commodity price forecasts netted to an -18.3% cut for South32 ((S32)). Same story for Galaxy Resources ((GXY)), down -16.6%, while downgraded guidance hit Viva Energy ((VEA)) forecasts by -13.4%.

Upgrade

CHARTER HALL GROUP ((CHC)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/1/0

UBS is increasingly convinced of Charter Hall's ability to continue raising and deploying third-party equity/debt. The broker upgrades earnings estimates by 7-8% to reflect growth in assets under management and co-investments.

UBS also believes concerns regarding peak performance fees in FY20 and Sydney/Melbourne office fundamentals are unjustified. The broker upgrades to Buy from Neutral and raises the target to $12.50 from $12.10.

EVOLUTION MINING LIMITED ((EVN)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 2/4/1

Evolution Mining has fallen -28% from its August peak and is now near Morgan Stanley's valuation, prompting an upgrade to Equal-weight from Underweight. The broker sees costs and the relatively short lives of some of the company's mines as well priced versus the potential for operational and mine-life improvements.

Target falls to $3.80 from $4.00. Industry view: In-Line.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Hold from Sell by Ord Minnett .B/H/S: 0/3/4

All fund managers being reviewed by Ord Minnett generated solid absolute returns over the first half to the end of November. Flow momentum remains strong for Magellan Financial and the first half is on track to record the biggest retail inflow for a half year ever.

Ord Minnett upgrades to Hold from Sell and raises the target to $50.41 from $49.60.

NOVONIX LIMITED ((NVX)) Upgrade to Speculative Buy from Hold by Morgans .B/H/S: 1/0/0

Morgans upgrades to Speculative Buy from Hold. Target is raised to $0.90 from $0.65. The company has announced an initial deal for 500,000t of synthetic graphite with Samsung, which will take delivery of this order from October 2020 subject to required quality assurance processes and a supplier audit.

 Morgans assesses cash management will be an issue, as first delivery will not take place until the first quarter of FY21 , but the deal makes it easier for the company to raise funds with debt rather than tapping the equity market.


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