Weekly Reports | Dec 23 2019
By Greg Peel, Acting 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 December 16 to Friday December 20, 2019
Total Upgrades: 8
Total Downgrades: 11
Net Ratings Breakdown: Buy 38.07%; Hold 45.51%; Sell 16.42%
For the week ending December 20 the FNArena broker database delivered eight ratings upgrades and eleven downgrades. Four of the eight upgrades went to Buy (or equivalent) and four to Hold, while only two downgrades went to Sell and the rest to Hold.
Of the nineteen up/downgrades in total, eleven involved resource companies following quarterly commodity price forecast updates from brokers, and nine of those were specifically delivered by Macquarie.
Two brokers upgraded BlueScope Steel to Buy.
Outside of resources, a profit warning from Smartgroup Corp drew downgrades from three brokers, but given the share price trouncing on the day, all went to Hold.
No surprise that Smartgroup also topped consensus target downgrades with -17.8%.
An update across the Charter Hall suite of listings saw Charter Hall Group enjoy the biggest consensus earnings forecast increase, with 11.5%., with all below quite negligible.
There was more action in earnings downgrades, with Afterpay Touch Group losing -24.7%, Nearmap -21.2% and Sigma Healthcare -20.6%, atop a long list of decent sized cuts.
AINSWORTH GAME TECHNOLOGY LIMITED ((AGI)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 0/1/1
Macquarie believes challenges in game performance will continue to affect the growth trajectory. Increased investment in game development is a positive but a recovery in earnings remains a challenge.
FY20 guidance implies Ainsworth Game could report the worst financial result in the last 10 years, with Macquarie forecasting $2m adjusted pre-tax profit.
The broker upgrades to Neutral from Underperform as valuation support has emerged. Target is raised to $0.80 from $0.55.
BLUESCOPE STEEL LIMITED ((BSL)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/1/1
Macquarie believes risks are receding and, from a steel perspective, envisages renewed momentum in US prices after the winter.
A partial or full resolution of the US/China trade conflict would also be a bullish development and the news of a deal is therefore an important development.
Rating is upgraded to Outperform from Neutral and the target raised to $16.50 from $14.00.
Ord Minnett upgrades to Accumulate from Hold and raises the target to $17 from $15. The broker's new model incorporates raw material prices aligning with mining coverage and near-term steel and scrap prices based on the forward curve.
The broker remains attracted to the company's dominant Australian market position, production growth at North Star and a strong balance sheet.
NEW HOPE CORPORATION LIMITED ((NHC)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 2/2/0
Macquarie considers coal a tough investment call, with downside pressure on coking coal prices partially offset by improving thermal coal prices and a soft Australian dollar.
Rating on New Hope Corp is upgraded to Neutral from Underperform. Target is reduced to $1.90 from $2.00. The reduction in the target also reflects risks around New Acland approvals.
NORTHERN STAR RESOURCES LTD ((NST)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 4/1/1
Credit Suisse believes the company has paid a fair price for 50% of the Super Pit based on the current reserves and the assumption that the current constrained production and elevated costs will improve.
The broker suspects management's reluctance to provide more than just 2020 guidance reflects uncertainties identified during due diligence, or perhaps the lack of visibility around future production.
Rating is upgraded to Neutral from Underperform and the target is steady at $9.60.
PUSHPAY HOLDINGS LIMITED ((PPH)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/0/0
The company has acquired Church Community Builder for US$87.5m. Macquarie expects the acquisition will provide an uplift across revenue from FY21 and beyond.
The broker finds the strategic rationale for the acquisition sound, and assesses the medium-term outlook has been de-risked.
Macquarie envisages additional value emerging in the stock and upgrades to Outperform from Neutral. Target increases 28% to NZ$4.61.