Weekly Ratings, Targets, Forecast Changes – 13-03-20

This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL

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 March 9 to Friday March 13, 2020
Total Upgrades: 45
Total Downgrades: 6
Net Ratings Breakdown: Buy 42.96%; Hold 43.75%; Sell 13.30%

Stockbroking analysts have been frantically upgrading their recommendations for individual ASX-listed stocks in Australia as the share market underwent unprecedented volatility last week. The interesting part of that sentence is that while it looks like I am exaggerating just a little bit in my choice of words, the fact is there is not even a hint of hyperbole in it.

As every battle-hardened industry veteran will tell us, a 13% turnaround in Australian indices within a matter of hours has simply never, ever, happened. Never. Ever.

For investors, it's good to keep in mind we are living through truly historic moments and those analysts do not have the superpower of foresight. They are trying to assess what share prices should/could be worth under less extreme circumstances, and with less uncertainty about the ultimate economic fall-out from this year's pandemic, but that's about it.

There is no such thing as "certainty" under global conditions as they are. What we do know is that we will get through this, exact timing and circumstances unknown, and we don't know exactly how the present struggle is going to develop further either. Falling share prices are scary on the best of days. They are extremely scary during weeks of extreme volatility, mostly to the downside.

This is as good a time as ever for every investor to weigh up further actions and decisions against their level of anxiety and risk appetite.

For the week ending Friday, 13th March 2020, FNArena counted no less than 45 upgrades for ASX-listed entities and six downgrades (of which two shifted to Sell).

As should be expected, given the world is preparing for a global recession, amendments to valuations/price targets and earnings estimates have a significant skew to the downside. Investors should expect more of the same in the weeks ahead.

Upgrade

AGL ENERGY LIMITED ((AGL)) Upgrade to Add from Hold by Morgans .B/H/S: 1/2/4

Morgans expects electricity demand will remain resilient in the second half despite interruptions to economic activity. Moreover, AGL Energy carries minimal exposure to the spot price as customer demand is well matched by generation output.

The stock has fallen -19% from its post reporting high in the midst of a broader market sell-off and the broker upgrades to Add from Hold. Target is reduced to $18.35 from $18.38.

ALTIUM LIMITED ((ALU)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/1/0

Macquarie has used a sector update post the February reporting season to sneak in an upgrade for Altium, to Outperform from Neutral, due to excessive share price weakness.

The analysts see a solid medium-term earnings growth path on top of strategic opportunities, while also acknowledging any market shocks have the potential to highlight Altium's near-term reliance on perpetual licence sales and the fact that China is now important for growth.

Target price remains unchanged at $37.50.

ATLAS ARTERIA ((ALX)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/4/0

Atlas Arteria will feel the impact of the virus, Macquarie notes, but offsetting currency movements are material and medium-term government responses are likely to be positive to valuations. The stock offers material value for investors and while the virus initially hurts, valuation should recover quickly.

The dividend is already below cash flow providing scope to maintain current growth, and if the currency remains low, there is minor upside, Macquarie suggests. Upgrade to Outperform, target falls to $8.14 from $8.42 on short-term impact.

AUSTRALIA & NEW ZEALAND BANKING GROUP ((ANZ)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/5/0

Following the rapid correction in Australian bank share prices, UBS believes value is emerging for the first time in several years. The broker is now incorporating an Australian recession in its economic outlook along with quantitative easing.

While acknowledging a low level of confidence in forecasts, the broker believes consensus is now materially overstating the case and this is reflected in current share prices.

As a result, ANZ Bank is upgraded to Buy from Neutral. This is the first time UBS has had a Buy rating on an Australian bank in three years. Target is $21.

APA GROUP ((APA)) Upgrade to Add from Hold by Morgans .B/H/S: 1/6/0

Morgans upgrades to Add from Hold, given recent share price weakness. The broker considers APA Group the best-of-breed in the energy infrastructure segment.

Furthermore, the broker suggests the nature of the revenue makes it an ideal place to deploy capital to avoid exposure to coronavirus, while delivering a 5.3% cash yield. Target is $10.90.

ASX LIMITED ((ASX)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/4/3

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists.

ASX trading revenue is likely to benefit from increased volatility, offsetting the potential for lower near-term corporate action revenue.

Rating is upgraded to Neutral from Sell and the target reduced to $68.50 from $72.25.

BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Upgrade to Neutral from Sell by UBS and Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/2/4

Following the rapid correction in Australian bank share prices, UBS believes value is emerging for the first time in several years. The broker is now incorporating an Australian recession in its economic outlook along with quantitative easing.

While acknowledging a low level of confidence in forecasts, the broker believes consensus is now materially overstating the case and this is reflected in current share prices.

Bendigo and Adelaide Bank is upgraded to Neutral from Sell. Target is $6.50.

Ord Minnett updates forecasts to allow for the recent passing through of the latest cut to the cash rate and prospects for a further cut in April.

While concerns over the transformation agenda remain, and the bank is the broker's least preferred, the risks appear fairly compensated for in valuation.

Hence, Ord Minnett upgrades to Hold from Lighten. Target is reduced to $8.30 from $9.25.

BEACH ENERGY LIMITED ((BPT)) Upgrade to Outperform from Underperform by Macquarie .B/H/S: 3/2/1

Volume growth is being driven by extensive development in the Western Flank and Cooper Basin. Exploration success and a final investment decision on stage 2 at Waitsia are the main catalysts that should boost certainty, Macquarie suggests.

Given the recent slump in the share price, the broker upgrades to Outperform from Underperform.

Oil & gas price forecasts have been lowered for the near and medium term, with FY20 estimates decreasing by -2% and FY20 by -6%. The broker's target decreases by -9% to $2.10.

CARSALES.COM LIMITED ((CAR)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/4/1

While there are short-term risks stemming from the impact of coronavirus, UBS makes only minor changes to online media forecasts, assessing valuations are long-dated.

The broker suspects the greatest impact from the current epidemic is likely to be on new listing volumes.

Rating is upgraded to Neutral from Sell. Target is reduced to $15.65 from $17.50.

COMMONWEALTH BANK OF AUSTRALIA ((CBA)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/2/4

Following the rapid correction in Australian bank share prices, UBS believes value is emerging for the first time in several years. The broker is now incorporating an Australian recession in its economic outlook along with quantitative easing.

While acknowledging a low level of confidence in forecasts, the broker believes consensus is now materially overstating the case and this is reflected in current share prices.

UBS upgrades Commonwealth Bank to Neutral from Sell. The main concern previously was a stretched valuation but the share price has now fallen such that it represents reasonable value. Target is $65.

COCA-COLA AMATIL LIMITED ((CCL)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 2/3/2

With respect to the virus, Macquarie sees limited risk to Consumer Staples particularly supermarkets, Coca-Cola Amatil and Domino's Pizza.

The broker has left its forecasts and $13.60 target for Coca-Cola unchanged but has upgraded to Outperform.

Reflecting on the GFC, Credit Suisse believes Coca-Cola Amatil is underpinned by solid revenue, albeit growth is more modest than that achieved a decade ago.

The branded non-alcoholic beverage category has also been growing in the last six months despite the higher prices caused by container deposit schemes.

Credit Suisse upgrades to Neutral from Underperform now the share price has fallen below the target. Target is $11.40.

COMPUTERSHARE LIMITED ((CPU)) Upgrade to Add from Hold by Morgans and Upgrade to Buy from Neutral by UBS .B/H/S: 2/2/2

The company has downgraded guidance for FY20, expecting a contraction in earnings per share of -15%. This stems from the impact of recent cuts to global interest rates.

Morgans considers this reasonably conservative and downgrades FY20-21 forecasts by -9-15%.

While the current operating environment is difficult, Morgans assesses the stock offers long-term value and upgrades to Add from Hold. Target drops to $14.34 from $17.51.

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists.

Among diversified financials Computershare is considered the most affected.

With margin income guidance re-based for lower yield curves and a 12-month PE at the lower end of historical ranges, UBS considers the stock now offers compelling value.

Rating is upgraded to Buy from Neutral and the target is lowered to $12.70 from $17.50.

CSL LIMITED ((CSL)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/4/0

A brave team of healthcare analysts at Citi has upgraded CSL to Buy from Neutral if only because the share price continues to weaken. Citi has kept the $332 price target intact, while forecasting double-digit percentages growth in EPS for each of the following three years.

Moreover, Citi analysts believe risk to earnings in the medium-term remains to the upside because CSL continues to increase market share due to its superior plasma collection position.

DOMAIN HOLDINGS AUSTRALIA LIMITED ((DHG)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/0/2

While there are short-term risks stemming from the impact of coronavirus, UBS makes only minor changes to online media forecasts, assessing valuations are long-dated.

The broker suspects the greatest impact from the current epidemic is likely to be on new listing volumes.

Rating is upgraded to Buy from Neutral. Target is steady at $3.60.

DOMINO'S PIZZA ENTERPRISES LIMITED ((DMP)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/2/2

With respect to the virus, Macquarie sees limited risk to Consumer Staples particularly supermarkets, Coca-Cola Amatil and Domino's Pizza.

The broker has left its forecasts and $66.10 target for Domino's Pizza unchanged but upgraded to Outperform.

DEXUS PROPERTY GROUP ((DXS)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 6/0/0

Morgan Stanley believes Dexus is "ideal" for taking shelter during market volatility. The leases are underpinned by fixed 3.5-4%/year increases, while a tight Sydney office market should cushion the impact of uncertainties.

Rating is upgraded to Overweight from Equal-weight. In-Line sector view. Price target is raised to $13.00 from $12.45.

FORTESCUE METALS GROUP LTD ((FMG)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/2/2

Ord Minnett suggests the crisis centred on coronavirus is likely to play out for several months but the shares of Fortescue Metals have reached a point where they cannot be ignored from a valuation perspective.

While finding it impossible to pick the absolute low, the broker expects the situation will continue for months, not years. Hence, investors with a medium-term horizon should be rewarded for owning the stock.

Rating is upgraded to Accumulate from Hold and the target is steady at $11.

IOOF HOLDINGS LIMITED ((IFL)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/4/0

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists. Among the platforms, IOOF carries greater exposure to lower equity markets than Netwealth Group ((NWL)).

Despite the PE looking particularly compelling, UBS upgrades to Neutral from Sell, rather than Buy, to reflect re-pricing risks. Target is reduced to $4.80 from $6.40.

IGO LIMITED ((IGO)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/3/1

Ord Minnett upgrades to Accumulate from Hold, given the slump in the share price. Target is reduced to $5.40 from $5.70.

After updating commodity price forecasts Ord Minnett retains a relative preference for diversified miners and gold stocks.

The broker finds selective value in base metals while considers it too early for lithium names.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/2/5

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists.

With Magellan Financial's share price sliding -20% in the year to date, despite more resilient funds under management, downside risks have abated, in the broker's view.

Rating is upgraded to Neutral from Sell and the target is lowered to $46.00 from $54.30.

MIRVAC GROUP ((MGR)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/3/0

UBS reassesses FY22-24 earnings estimates, given recent project acquisitions. The broker envisages growth of 7% from FY21-24 as the business maintains a quality bias and defensive characteristics.

Mirvac is the broker's preferred residential exposure and the rating is upgraded to Buy from Neutral. Target is raised to $3.49 from $3.30.

MINERAL RESOURCES LIMITED ((MIN)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/0/0

After the slump in the share price, Ord Minnett upgrades to Accumulate from Hold. Target is lowered to $16.00 from $16.20.

After updating commodity price forecasts Ord Minnett retains a relative preference for diversified miners and gold stocks.

The broker finds selective value in base metals while considers it too early for lithium names.

MEDIBANK PRIVATE LIMITED ((MPL)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/4/2

The impact of coronavirus on health insurers is likely to mean lower travel insurance revenue while lower bond yields will also have an impact.

There remains little empirical evidence domestically as to how private health insurance volumes may be impacted by the epidemic, although elective surgery in Asia has declined.

With hospital utilisation set to slow if the outbreak continues to spread, UBS believes Medibank Private could experience greater earnings support.

Rating is upgraded to Neutral from Sell and the target is reduced to $2.70 from $2.80.

NATIONAL AUSTRALIA BANK LIMITED ((NAB)) Upgrade to Neutral from Sell by UBS .B/H/S: 2/4/1

Following the rapid correction in Australian bank share prices, UBS believes value is emerging for the first time in several years. The broker is now incorporating an Australian recession in its economic outlook along with quantitative easing.

While acknowledging a low level of confidence in forecasts, the broker believes consensus is now materially overstating the case and this is reflected in current share prices.

UBS upgrades National Australia Bank to Neutral from Sell. The bank is currently facing a number of challenges and the broker awaits the strategic review. Target is $19.

NIB HOLDINGS LIMITED ((NHF)) Upgrade to Accumulate from Hold by Ord Minnett and Upgrade to Buy from Neutral by UBS .B/H/S: 3/3/1

Ord Minnett upgrades to Accumulate from Hold, noting Medibank Private ((MPL)) is trading at an undeserved premium to nib Holdings, even though both are subject to the same pressures.

The broker does not expect material headwinds for the health insurers from the coronavirus issue, although there may be some delay in elective healthcare costs. Target is reduced to $4.64 from $5.22.

The impact of coronavirus on health insurers is likely to mean lower travel insurance revenue while lower bond yields will also have an impact.

There remains little empirical evidence domestically as to how private health insurance volumes may be impacted by the epidemic, although elective surgery in Asia has declined.

UBS upgrades nib Holdings to Buy from Neutral, as the stock is down -40% in the year to date and there is attractive medium-term upside. Target is reduced to $4.75 from $5.34.

NETWEALTH GROUP LIMITED ((NWL)) Upgrade to Neutral from Sell by UBS .B/H/S: 2/3/1

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists.

Lower cost-to-income, divisional diversification and fee thresholds are expected to temper the impact of the market rout.

Although Netwealth Group's platform revenue margins are likely to compress significantly in FY21, UBS considers the value risks are low.

The broker upgrades to Neutral from Sell. Target is reduced to $6.50 from $7.40.

ORORA LIMITED ((ORA)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 2/4/0

After the sale of Australasian Fibre Orora intends to return $1.2bn of capital to shareholders. At the first half result management outlined a more aggressive timeframe than Morgan Stanley had expected.

The broker believes the capital management will include a special dividend, a capital return and an on-market buyback.

Incorporating this, the stock appears undervalued and the broker upgrades to Overweight from Equal-weight. Target is raised to $3.50 from $3.30. Sector view is Cautious.

OROCOBRE LIMITED ((ORE)) Upgrade to Hold from Sell by Ord Minnett .B/H/S: 3/3/1

After the slump in the share price, Ord Minnett upgrades to Hold from Sell. Target is raised to $2.60 from $2.55.

After updating commodity price forecasts Ord Minnett retains a relative preference for diversified miners and gold stocks.

The broker finds selective value in base metals while considers it too early for lithium names.

PENDAL GROUP LIMITED ((PDL)) Upgrade to Buy from Sell by UBS .B/H/S: 3/3/1

Weaker equity markets are likely to affect wealth managers, although UBS suggests value still exists.

While JO Hambro remains a headwind for performance fees and flows, Pendal Group shares now provide significantly greater appeal for the broker.

Rating is upgraded to Buy from Sell and the target reduced to $6.15 from $7.75.

REA GROUP LIMITED ((REA)) Upgrade to Buy from Sell by UBS and Upgrade to Neutral from Underperform by Macquarie .B/H/S: 2/1/2

While there are short-term risks stemming from the impact of coronavirus, UBS makes only minor changes to online media forecasts, assessing valuations are long-dated.

The broker suspects the greatest impact from the current epidemic is likely to be on new listing volumes.

However, UBS points out investors have shown a willingness to look through short-term volume outcomes for REA Group in the past. Rating is upgraded to Buy from Sell. Target is steady at $110.

Macquarie has used a sector update post the February reporting season to sneak in an upgrade for REA Group to Neutral from Outperform.

The decision seems to be inspired by the weaker share price and the anticipation that listings volumes will rebound. Target price remains unchanged at $110.

REGIS RESOURCES LIMITED ((RRL)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/2/1

After the slump in the share price, Ord Minnett upgrades to Accumulate from Hold. Target is raised to $4.40 from $3.90.

After updating commodity price forecasts Ord Minnett retains a relative preference for diversified miners and gold stocks.

The broker finds selective value in base metals while considers it too early for lithium names.

STOCKLAND ((SGP)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/2/2

UBS upgrades to Neutral from Sell on the basis of an improving residential market. The company recently increased FY20 residential volume guidance by 4%.

A strengthening macro backdrop supports longer-term margins and volumes. While retaining a preference for Mirvac Group ((MGR)) the broker acknowledges Stockland has a higher financial and operating leverage to improving residential markets. UBS maintains a $4.80 target.

SPARK NEW ZEALAND LIMITED ((SPK)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 0/3/0

The sell-off in the stock after the results provides an opportunity, Credit Suisse suggests. The broker remains sufficiently attracted to the company's execution on its strategy and competitive position.

A focus on mobile and cloud services, along with cost reductions, should support modest earnings growth as some of the additional media expenditure rolls off in FY21.

The stock is down sufficiently, in the broker's view, to support an upgrade in the rating to Neutral from Underperform. Target is NZ$4.05.

SANTOS LIMITED ((STO)) Upgrade to Add from Hold by Morgans .B/H/S: 4/2/0

Morgans upgrades to Add from Hold, given the decline in the share price. Target is reduced to $7.97 from $8.49.

While volatiility appears likely to continue in the short term the stock is now in value territory, implying an oil price of US$45/bbl which the broker considers is unsustainable in the long term.

The company has reached an agreement to sell down a 25% interest in Darwin LNG and Bayu Undan for US$390m. Discussions on a sell-down of Barossa to around 40% ownership are also well advanced.

SENEX ENERGY LIMITED ((SXY)) Upgrade to Buy from Neutral by Citi and Upgrade to Buy from Hold by Ord Minnett .B/H/S: 6/0/0

Citi analysts are of the view that management at Senex Energy has materially de-risked the company over the year past, including the balance sheet and performance of the coal seams. As such an upgrade to Buy from Neutral seems appropriate.

The company's guidance for FY22 is seen as in-line with Citi's projections. Following a savage sell-off across the energy sector, the analysts report the share price, post sell-off, implies unrealistic modeling inputs such as a long term oil price of US$15/bbl.

Citi has set a target price of 39c (down from 46c) which implies oil priced at US$55/bbl explain the analysts.

Ord Minnett believes the stock is looking increasingly attractive and upgrades to Buy from Hold.

Well performance has been better than expected, with positive implications for capital expenditure and operating expenses.

Moreover, the company has limited exposure to benchmark commodity prices. Target is raised to 38c from 37c.

SYDNEY AIRPORT HOLDINGS LIMITED ((SYD)) Upgrade to Accumulate from Lighten by Ord Minnett and Upgrade to Buy from Neutral by UBS .B/H/S: 4/1/2

The company has provided traffic numbers for February and March to date following the release of Qantas Airways' ((QAN)) reduced capacity numbers.

Ord Minnett has doubled its estimates of passenger number reductions for 2020 and now assumes a -20% fall in international and -6% in domestic for the first half.

The broker also allows for a -10% reduction in rent over a six-month period for the retail portfolio. While the duration and extent of the impact of coronavirus is unknown, Ord Minnett believes Sydney Airport's earnings are defensive and a rebound is likely in 2021.

Rating is upgraded to Accumulate from Lighten, as the stock is considered more than appropriately priced for the uncertainty. Target is reduced to $7.50 from $8.00.

The early disclosure of traffic numbers has revealed a much lower run rate, with international traffic down -25% and domestic down -6% in February.

With evidence of a more protracted and deeper impact on traffic, UBS factors in a -25% decline in international traffic and -5% decline in domestic traffic until September, followed by a gradual recovery and rebound in 2021.

Cash flow estimates are downgraded by -10% for 2020 as a result. The broker upgrades to Buy from Neutral.

Bond rates have further compressed and the government stimulus measures are likely to keep rates lower for longer, which in the broker's view should enhance valuation appeal. Target is reduced to $7.70 from $8.50.

TABCORP HOLDINGS LIMITED ((TAH)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/2/0

Wagering and lottery proved defensive in FY08, Credit Suisse observes, and lottery has a history of outperforming when times are tough.

Despite the defensive nature of the business, the broker takes a more conservative view on growth and downgrades estimates for earnings per share by -5-6% for FY21 and FY22.

Following the recent share price performance, the rating is upgraded to Outperform from Neutral. Target is unchanged at $4.50.

TECHNOLOGYONE LIMITED ((TNE)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/2/1

The market sell-off means TechnologyOne is trading well below Macquarie's target price, which the broker has upgraded to $9.75 from $9.60.

TechnologyOne is a high quality software business with a long track record of growth within its core market verticals, the broker notes. Revenue has seen compound annual growth of 12% from FY04 to FY19, emphasizing the strength of the business and quality customer base.

Macquarie highlights some 85% revenue stems from government, education and health verticals that are highly defensive and where the company has more than 99% retention. Upgrade to Outperform from Neutral.

Downgrade

FLIGHT CENTRE LIMITED ((FLT)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 3/2/1

Macquarie sees earnings risk for JB Hi-Fi, Harvey Norman, Treasury Wine Estates and Flight Centre from lower consumer discretionary spending in the face of increasing virus risk.

In the wake of the US travel ban on Europe, the broker cuts its FY20 earnings forecast cut by -34% for Flight Centre. Target falls to $17.95 from $35.40.

"We believe consensus is yet to adjust to this new reality," says Macquarie. Downgrade to Underperform. No earnings forecast numbers have been provided.

MACQUARIE GROUP LIMITED ((MQG)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/3/1

Ord Minnett still expects Macquarie Group will beat its guidance for cash net profit to be "slightly down" in FY20, and estimates 1.6% growth.

However, there is a risk that FY21 guidance is disappointing versus consensus expectations.

The broker downgrades to Hold from Accumulate and lowers the target to $132 from $149.

 Unusually for a market correction, the stock has performed in line with the market over the past two weeks and outperformed its peers and comparable companies, the broker notes.

PROSPA GROUP LTD ((PGL)) Downgrade to Underperform from Outperform by Macquarie .B/H/S: 1/0/1

Prospa Group faces a number of risks in the current environment that could threaten its earnings and funding model, Macquarie warns. While Prospa may see additional demand for its products, the broker believes the company will have to lift its underwriting standards. Given 100% exposure to SMEs, the low level of impairments the company has enjoyed to date is unlikely to continue.

Prospa has benefited from lower funding costs that have acted as an offset to lower asset yields, the broker notes. The risk is that the benefit reverses in the current environment. Macquarie downgrades its valuation to book value. Target falls to 94c from $2.88. Downgrade to Underperform from Outperform.

QANTAS AIRWAYS LIMITED ((QAN)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/3/0

Virus uncertainty has led Qantas to further cut its capacity, withdraw earnings guidance and cancel its buyback. Macquarie now forecasts a -41% fall in FY20 profit from FY19. Target falls to $4.80 from $7.90.

The broker remains comfortable with Qantas' balance sheet — the cancelled buyback helping — and potentially sees an improved market structure in the medium term supporting longer term share price upside. But for now, the timing of stabilisation or recovery remains unclear so given a high level of operating leverage, Macquarie pulls back to Neutral from Outperform.

RESAPP HEALTH LIMITED ((RAP)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0

The US FDA has not approved the de novo application for the ResApp-DX diagnostic, which Morgans suggests highlights the difficulties in obtaining clearance through this pathway.

Moreover, Sanofi has allowed its option for exclusive negotiations to expire. Morgans withdraws its US commercialisation assumptions from forecasts until more clarity is provided.

Rating is downgraded to Hold from Speculative Buy (Add). Target is lowered to 8.6c from 40c.

SEVEN WEST MEDIA LIMITED ((SWM)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/3/1

Despite the difficulties in assessing the quantum and duration of the coronavirus epidemic, UBS believes there is enough evidence to reduce media forecasts based on the negative impact on consumer & business confidence, and industry risk stemming from cancelled advertising.

The broker now assumes a -10% decline in the second half in both the metro free-to-air TV and radio markets.

Seven West is downgraded to Neutral from Buy, given heightened refinancing risk, while there is limited visibility on asset sales. Target is reduced to $0.12 from $0.30.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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