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Weekly Ratings, Targets, Forecast Changes – 27-03-20

Weekly Reports | Mar 30 2020

This story features ANZ GROUP HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: ANZ

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 23 to Friday March 27, 2020
Total Upgrades: 42
Total Downgrades: 15
Net Ratings Breakdown: Buy 47.19%; Hold 42.22%; Sell 10.59%

The script from the weeks prior continued in the week ending Friday, 27th March 2020. While equities continued to be exposed to wild gyrations, with a bias to the downside, securities analysts kept on frantically updating and responding to profit warnings and removals of guidance by individual companies. And the scrapping of dividends, which no doubt will be hitting hard on large cohorts of the Australian investor community.

Total Buy (and equivalent) ratings for the seven stockbrokerages monitored daily by FNArena is now well and truly the largest group of recommendations, but still only two out of these seven are carrying more Buy ratings than Neutral/Holds; Citi and Macquarie.

Total Buy recommendations for individual stocks have now risen above 47% with 42.2% on Neutral/Hold and the remaining 10.5% on Sell.

As far as upgrades and downgrades are concerned, the week saw 42 upgrades and 15 downgrades, and the overwhelming majority of upgrades moved to Buy (32 new Buys out of 42). Stocks that received multiple upgrades (not necessarily all to Buy) include Bendalaide Bank, Magellan Financial, REA Group, Star Entertainment, and Westpac.

As expected, probably, only two of the 15 downgrades shifted to a fresh Sell recommendation with Air New Zealand and G8 Education the receivers.

Equally unsurprising, within the 2020 context, the week's table for positive revisions to price targets and valuations looks rather empty with Sigma Healthcare and Medibank Private the only ones in it.

Plenty of large reductions are on display on the opposite side of the ledger, with the week's "leading" roles reserved for Boral, FlexiGroup, Premier Investments, National Australia Bank, Virtus Health, EclipX Group, and others. For the first time for as long as my memory serves me, every stock mentioned in the table is suffering double-digit percentage falls.

There are still companies receiving upgrades to forecasts, and they include Virgin Money UK, Sigma Healthcare, Fortescue Metals, Medibank Private and numerous others. But, no surprise here, for the real fireworks we need to cast our eye over the table showing negative adjustments.

Downward adjustments to earnings forecasts are simply enormous, led by cyclical, highly leveraged companies such as Sims Metal Management, Karoon Energy, Air New Zealand, Nufarm, Qantas, and Oil Search.

It is most likely the above trends will continue in the week(s) ahead.

Upgrade

AUSTRALIA & NEW ZEALAND BANKING GROUP ((ANZ)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/2/1

Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC, says the broker.

Citi lowers ANZ cash earnings forecast by -6-7% for FY20 and FY21. Stronger net interest income assumptions and markets income are offset by higher bad debts.

The broker cuts the second half dividend forecast by -18%. Rating is upgraded to Buy from Neutral and the target is lowered to $24.75 from $28.00.

ALLIANCE AVIATION SERVICES LIMITED ((AQZ)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 2/0/0

Ord Minnett believes there are some important offsetting factors that will assist Alliance Aviation in the current crisis. Firstly, fly-in, fly-out and contract hours are growing as mining companies take additional measures to prevent outbreaks of the virus on site.

Charter revenue remains strong and the fleet is deployed. As the stock is trading at a -20% discount to net tangible assets Ord Minnett upgrades to Buy from Hold. Target is reduced to $1.80 from $2.60.

ALUMINA LIMITED ((AWC)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/2/1

Macquarie remains positive on bulk miners. Alumina Ltd shares have declined -35% in the year to date while alumina spot prices are currently tracking above the broker's forecasts.

Positive cash flow should mean the company returns to a net cash position in FY21/22, on the broker's estimates. Rating is upgraded to Outperform from Neutral. Target is raised to $1.60 from $1.50.

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

In theory, UBS assesses Aurizon carries a low risk to volumes even in the event of coal mine closures.

The network generates a return on its asset base irrespective of volume and the above-rail business is also partially protected from capacity changes representing more than 50% of revenue.

In this way, the broker considers Aurizon one of the more defensive companies in the Australian market. Only one coal mine accounts for more than 5% of coal volumes.

UBS upgrades to Buy from Neutral, believing downside risks for the balance sheet liquidity and earnings are not as great as the share price suggests. Target is $5.55.

BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Upgrade to Neutral from Underperform by Macquarie and Upgrade to Buy from Sell by Citi .B/H/S: 1/3/2

Macquarie has downgraded forecast earnings across the major banks by -2-10% to account for the RBA cut, repricing initiatives, virus support packages and rising impairments due to economic weakness.

The impact on regionals is less severe as they benefit from the majors' repricing initiatives. Exposure to SME impairments lead to material downgrades for Virgin Money UK.

Bendigo & Adelaide Bank target falls to $6.00 from $7.50, upgrade to Neutral from Underperform.

Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC, says the broker.

The broker lowers cash earnings forecasts by -6% for FY20 but upgrades FY21 by 5% and FY22 by 16%.

The broker expects, while bad debts weigh, the bank will benefit from industry-wide mortgage repricing and a predominantly housing-related book.

The dividend is expected to be cut to $0.24 in the second half. Rating is upgraded to Buy from Sell and the target reduced to $7.25 from $9.25.

BANK OF QUEENSLAND LIMITED ((BOQ)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/6/0

Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC, says the broker.

Citi lowers cash earnings forecasts for Bank of Queensland by -10% for FY20 but upgrades FY21 and FY22 by 9-11%.

The broker believes the bank should benefit from industry-wide mortgage repricing amid less sensitivity to cash-linked small and medium enterprises. Bad debts may weigh, nevertheless.

Rating is upgraded to Buy from Neutral and the target reduced to $6.50 from $7.75.

BEACH ENERGY LIMITED ((BPT)) Upgrade to Buy from Neutral by Citi .B/H/S: 5/1/0

Citi has revised down Brent oil forecasts significantly. The broker now expects US$30/bbl across 2020 and a trough of US$17/bbl in the second quarter.

The bearish view is based on forecasts for supply and demand amid an unprecedented build up in global inventory.

Citi upgrades to Buy/High Risk from Neutral as Beach Energy is largely self-funded, assuming it defers some non-core expenditure. Target is reduced to $1.73 from $2.44.

BREVILLE GROUP LIMITED ((BRG)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/1/0

Credit Suisse observes previous concerns around possible shortages of inventory have been largely forgotten and investors are now turning to the potential loss of revenue and the stability of the balance sheet.

Government-mandated temporary store closures have been an increasing feature in European markets while the situation in Australia is extremely uncertain.

The broker expects the company will have some ability to manage the inventory position and cost base over the coming months, estimating a -50% reduction in marketing and R&D expenditure in the second half could offset a -15% gross margin impact.

Medium-term opportunities remain intact and Credit Suisse considers the recent decline in the share price a buying opportunity. Rating is upgraded to Outperform from Neutral. Target is reduced to $16.16 from $23.05.

CARSALES.COM LIMITED ((CAR)) Upgrade to Add from Reduce by Morgans .B/H/S: 2/4/0

Carsales has withdrawn previously "solid" guidance. Momentum in Brazil and Korea is to some extent offsetting weakness in Australia, Morgans notes, and the company has an "extremely robust" balance sheet.

Target falls to $15.67 from $16.22 but given the share price has fallen much further, to the greatest discount to valuation since the GFC, the broker (double) upgrades to Add from Reduce.

COMMONWEALTH BANK OF AUSTRALIA ((CBA)) Upgrade to Buy from Sell by Citi .B/H/S: 1/4/2

Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC, says the broker.

Citi maintains Commonwealth Bank's near-term earnings estimates in FY20 and FY21. Stronger net interest income assumptions and markets income are offsetting higher bad debts, in the broker's assessment.

The dividend forecast for the second half is reduced to $1.90. Rating is upgraded to Buy from Sell and the target reduced to $68.75 from $72.50.

CROWN RESORTS LIMITED ((CWN)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/3/0

Citi envisages earnings risks for the near term and downgrades estimates by -48%. However, the broker remains confident in the FY22 earnings outlook and considers the stock undervalued.

Rating is upgraded to Buy from Neutral and the target reduced to $8.20 from $12.10.

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

UBS upgrades to Neutral from Sell, noting the balance sheet is solid and the company will benefit in the longer term from an accelerating shift to deliveries.

The broker believes earnings risk from the coronavirus crisis is manageable and transitory. The stock appears to be trading broadly in line with peers and is seen as representing fair value. Target is reduced to $51.00 from $52.50.

EVENT HOSPITALITY AND ENTERTAINMENT LTD ((EVT)) Upgrade to Buy from Neutral by Citi .B/H/S: 2/0/0

While the operating business has challenges, Citi believes there are multiple levers to cushion the impact on profitability in the current downturn.

Following the drop of -52% in the share price since the first half result, the broker assesses shareholders are now getting the operating businesses for free, given a $2bn property portfolio.

The broker factors in the closure of cinemas over the entire fourth quarter and hotel closures during April and May as well as lower occupancy in March and June.

There is also a risk that the sale of the German cinemas is delayed into the second half of FY21. Rating is upgraded to Buy from Neutral and the target is lowered to $7.45 from $12.65.

GPT GROUP ((GPT)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/4/1

Macquarie considers the balance sheet in a strong position. The industrial and office assets, around 57% of the portfolio, are likely to be less affected by the current crisis compared with retail.

The broker believes the business can perform well in the current environment and upgrades to Outperform from Neutral. Target is reduced to $5.40 from $6.26.

HEALIUS LIMITED ((HLS)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/1/0

Healius has withdrawn FY20 guidance. The company has indicated that trading in the year to date is in line with guidance but current conditions are now unpredictable.

Citi assumes revenue declines by -10% in the fourth quarter and that costs decline by -5%.

While demand for coronavirus testing is increasing, relative to the normal volume of tests, this is small. As the community isolates, Citi suggests the decline in the underlying business will be greater than any positive impact from virus testing.

The broker reduces the target to $2.80 from $3.40, given the private equity bid was rejected last week. As the share price has declined materially, the rating is upgraded to Buy from Neutral.

IGO LIMITED ((IGO)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/2/1

Citi upgrades to Buy from Neutral. At current levels the broker assesses the valuation is attractive.

Across base metals coverage, the stock carries the lowest operating risk profile given the locations of its mines and the revenue mix. The broker reduces the target to $5.90 from $6.30.

JB HI-FI LIMITED ((JBH)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 3/4/0

Credit Suisse upgrades to Neutral from Underperform. The broker considers the business a relative safe haven in discretionary retail.

There is also a sound funding position which would only be tested if there was an extended closure of retail stores and an inability to extend credit payments.

While expecting cash flow will crimp expenditure, the broker notes the performance in the March quarter provides a cash buffer heading into the uncertain June quarter. Target is reduced to $26.98 from $31.97.

JAPARA HEALTHCARE LIMITED ((JHC)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/4/0

Ord Minnett is now a little more confident that residential aged care facilities have the procedures to manage infection control throughout the current coronavirus outbreak without undue risk.

The broker has also become more constructive on the outlook for occupancy, as the sector should benefit from efforts to clear hospitals ahead of the influx of coronavirus patients.

Despite the company's decision to step away from guidance, the broker lifts forecast slightly and upgrades to Hold from Lighten. Target is reduced to $0.65 from $0.80.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Buy from Sell by Citi and Upgrade to Buy from Sell by Ord Minnett .B/H/S: 2/2/3

Following the share price decline, Citi upgrades to Buy from Sell. The risk to earnings is likely to be skewed to the downside for the sector, given elevated market volatility.

However, there is minimal balance sheet risk, given zero debt. Global asset managers are considered better placed than domestic peers, in part because of natural offsets from a lower Australian dollar. Target is reduced to $40 from $55.

Ord Minnett observes the sell-off in 2020 has been broad-based and indiscriminate. The broker believes Magellan Financial has de-rated beyond a reasonable point and upgrades to Buy from Sell.

The stock is now trading on 16x headline FY21 price/earnings and 14x excluding cash and investments. Target is reduced to $44.25 from $60.18.

MACQUARIE GROUP LIMITED ((MQG)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/2/1

Credit Suisse envisages further risk to FY21, given annuity businesses are likely to start from a lower base and performance fees are likely to fall, given asset price deflation. Increased impairments could be recognised in FY20 and FY21.

The broker reduces FY20 forecasts by -12% and FY21 forecasts by -20%. Given the volatile market, the broker suspects Macquarie Group may not provide any guidance statement for FY21 at the FY20 result.

The share price has fallen -40% since mid February and the broker upgrades to Outperform from Neutral. Target is reduced to $110 for $135.

NEWCREST MINING LIMITED ((NCM)) Upgrade to Buy from Neutral by Citi .B/H/S: 2/4/1

Citi observes Newcrest Mining is one of the few companies that can deliver organic growth and this should help the stock return to its valuation premium. The newest projects highlight the opportunity for asset diversification and value.

If the company can successfully deliver growth by the development of Wafi Golpu or Red Chris this should dilute concentration risk, in the broker's view. There is also exposure to the longer-dated Cascabel.

While not calling the bottom and acknowledging the risk to operating expenditure from the disruptions stemming from coronavirus, the broker believes there is value emerging. Rating is upgraded to Buy from Neutral. Target is steady at $30.40.

NAVIGATOR GLOBAL INVESTMENTS LIMITED ((NGI)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/0/0

Macquarie observes the company's US-dollar denominated assets provide protection for Australian investors. Using the GFC experience to account for the risks to 2020 drives a material downgrade to the broker's forecasts for FY21.

However, FY20 guidance is yet to be withdrawn or revised. Rating is upgraded to Outperform from Neutral and the target is steady at $3.36.

OZ MINERALS LIMITED ((OZL)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/2/1

Citi upgrades to Buy/High Risk from Neutral. The stock has de-rated substantially and, while the broker is cautious on the ramp up of Carrapateena, the risk is considered priced in. Target is reduced to $10.70 from $11.00.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Upgrade to Hold from Sell by Ord Minnett .B/H/S: 0/1/4

Ord Minnett observes the sell-off in 2020 has been broad-based and indiscriminate. The broker takes the opportunity to neutralise its view on Platinum Asset, upgrading to Hold from Sell. Target is reduced to $2.74 from $3.83.

REA GROUP LIMITED ((REA)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Accumulate from Lighten by Ord Minnett .B/H/S: 5/1/0

Macquarie revises estimates as new property listings are expected to decline by -50-60% in April-July. Against the difficult backdrop, the broker believes the business is well-positioned and can recover profitability as activity returns.

Rating is upgraded to Outperform from Neutral. Target price reduced to $90 from $110.

Ord Minnett upgrades to Accumulate from Lighten, assessing the current valuation is attractive as an entry point.

The broker points to the strong network and unique real estate advertising structure in Australia underpinning the stock. The stock is now down -33% in 2020 to date.

The broker reduces the target to $88 from $99. Revised estimates take into account a -50% decline year-on-year in new listings over the next six months.

STEADFAST GROUP LIMITED ((SDF)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 4/0/0

Credit Suisse decreases FY20 net profit estimates by -4%. A very severe economic downturn with a large number of small businesses collapsing could put additional pressure on income.

While not ruling out the downside risk in such a scenario, the broker suspects this would be less severe compared with the broader sector. Therefore, the rating is upgraded to Outperform from Neutral. Target is lowered to $3.50 from $4.00.

SEEK LIMITED ((SEK)) Upgrade to Add from Reduce by Morgans .B/H/S: 4/2/0

Morgans has downgraded its Seek forecasts for a second time due to the virus. Remodelling to assess the company's banking covenants suggests, in a worse case scenario of economic downturn worse than the GFC, Seek would need to raise $300m in capital to remain comfortably within its debt/equity benchmark.

Target falls to $20.55 from $21.72 but given the share price has fallen much further, Morgans (double) upgrades to Add from Reduce.

SANDFIRE RESOURCES NL ((SFR)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/3/0

Citi upgrades to Buy/High Risk from Neutral/High Risk. Target is reduced to $5.00 from $6.20.

The sole producing asset, Monty, is generating cash and the main overhang continues to be the timing of new projects to ensure production continuity when DeGrussa reserves deplete during FY22.

STOCKLAND ((SGP)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 1/3/1

Macquarie notes headwinds include rental abatements in retail, lower residential sales and settlements amid downside risk to retirement earnings.

Still, the balance sheet is healthy, with enough liquidity envisaged through to FY22. Rating is upgraded to Neutral from Underperform. Target is reduced to $3.36 from $4.71.

THE STAR ENTERTAINMENT GROUP LIMITED ((SGR)) Upgrade to Buy from Sell by Citi and Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/2/0

Citi envisages earnings risks for the near term and downgrades estimates by -48%. However, the broker remains confident in the FY22 earnings outlook and considers the stock undervalued.

The broker upgrades to Buy from Sell and reduces the target to $2.40 from $4.10.

Credit Suisse downgrades FY20 estimates for earnings per share by -38% and FY21 estimates by -20%. FY22 estimates are downgraded by -8% as the broker considers it plausible that economic recovery could take a couple of years.

The company has ample liquidity even in the case of more extensive shutdowns to casinos. Finance industry indications are that Australian banks are likely to resist calling in debt.

The stock is presenting deep value and the broker upgrades to Outperform from Neutral, although the growth profile is partially compromised by the opening of Crown ((CWN)) Sydney. Target is reduced to $3.90 from $4.20.

SIGMA HEALTHCARE LIMITED ((SIG)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 0/2/2

FY20 underlying operating earnings were ahead of Credit Suisse estimates. No final dividend was announced.

While the balance sheet appears stretched, Credit Suisse notes the company is pursuing a sale & lease-back of its distribution centres.

The broker believes FY20 was a trough in earnings and in the short term the company can benefit from the increased demand for pharmaceuticals.

Rating is upgraded to Neutral from Underperform. Target is raised to $0.64 from $0.53.

SUNCORP GROUP LIMITED ((SUN)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 1/5/1

Credit Suisse makes changes to key assumptions, lowering FY20 net profit forecasts by -25%. FY21 estimates are lowered by -8-10% on a lower underlying investment yield on insurance and higher bad debts and the bank.

The share price is tracking around -20% below that of Insurance Australia Group ((IAG)), which the broker assumes is because of the banking exposure.

Credit Suisse is becoming more comfortable with the reinsurance renewal risk and upgrades to Neutral from Underperform. Target is reduced to $9.15 from $12.00.

TRANSURBAN GROUP ((TCL)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 2/4/1

Traffic levels are likely to be severely impacted by travel bans, lock-downs and other measures to slow the spread of coronavirus. Credit Suisse expects a reduction in the dividend of -23% in FY21 because of lower free cash flow.

A $0.62 dividend is forecast for FY20, in line with guidance, although the broker acknowledges there is downside risk depending on how the crisis develops in the next few weeks.

Rating is upgraded to Neutral from Underperform as the valuation appears more reasonable. Target is lowered to $10.65 from $13.00.

VIVA ENERGY REIT ((VVR)) Upgrade to Add from Hold by Morgans .B/H/S: 1/1/1

Viva Energy REIT is well placed in the current environment, Morgans suggests, with balance sheet, leases structures and long lease expiries all in its favour. Importantly, petrol stations are an essential service.

The broker upgrades to Add from Hold. Target falls to $2.71 from $2.77.

WESTPAC BANKING CORPORATION ((WBC)) Upgrade to Accumulate from Hold by Ord Minnett and Upgrade to Buy from Neutral by Citi .B/H/S: 4/2/1

Given the emergence of significant valuation support, Ord Minnett upgrades Westpac to Accumulate from Hold. Target is reduced to $18.40 from $23.40.

Valuation satisfactorily compensates investors for concerns regarding fines from AUSTRAC and other regulators as well as a possible restructuring charge from the new CEO to address IT complexities, in the broker's view.

Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC, says the broker.

Citi lowers cash earnings forecasts for Westpac by -4-7% for FY20 and FY21. FY22 estimates are upgraded by 6% on the back of higher net interest income from the re-pricing of risks as bad debts recede.

The second half dividend forecast is cut to $0.65. Rating is upgraded to Buy from Neutral. Target is lowered to $26.00 from $27.25.

WESFARMERS LIMITED ((WES)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 1/4/1

Credit Suisse upgrades to Neutral from Underperform. Wesfarmers has one of the strongest funding positions in the broker's coverage which should enable it to withstand a prolonged enforced closure of its retail stores.

Moreover, most of the businesses have fundamentally sound positions. While the business has been challenged by lower earnings growth from several of its segments, the broker notes the current crisis offers potential for M&A. Target is reduced to $30.07 from $34.43.

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

Citi has revised down Brent oil forecasts significantly. The broker now expects US$30/bbl across 2020 and a trough of US$17/bbl in the second quarter.

The bearish view is based on forecast for supply and demand amid an unprecedented build up in global inventory.

The broker's top pick in the sector is Woodside Petroleum, upgraded to Buy/High Risk from Neutral, given its balance sheet and low break-even oil price. Target is reduced to $23.88 from $33.64.

Downgrade

ADAIRS LIMITED ((ADH)) Downgrade to Hold from Add by Morgans .B/H/S: 1/1/0

Managing liquidity is now primary focus for the company as, while the first 11 weeks of the second half produced buoyant trading, subsequently there has been a marked slowdown. Guidance is now withdrawn.

The board will no longer pay the interim dividend. The main risk is that non-essential retail stores may close and, in the above scenario, the balance sheet could come under pressure, Morgans points out.

Rating is downgraded to Hold from Add and the target lowered to $1.60 from $2.26.

AIR NEW ZEALAND LIMITED ((AIZ)) Downgrade to Sell from Neutral by UBS .B/H/S: 0/1/2

UBS is surprised the bail-out package did not reflect any form of subsidy to cover the large cash burn as New Zealand closes its border.

The extent of the negative impact to equity value depends on the duration of the closure and the subsequent pace of recovery in travel.

Cash burn is -NZ$1.9bn under the broker's base case scenario which assumes the border is closed for nine months.

The NZ government has the option to convert its bridging loan into equity after six months. UBS downgrades to Sell from Neutral and reduces the target to NZ$0.45 from NZ$1.86.

AFTERPAY LIMITED ((APT)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 4/2/0

Morgan Stanley believes this recession is unique and will test Afterpay's business model. The broker suspects the company faces a trade-off between maintaining revenue growth and containing credit risk.

Retailers, faced with the lock-down of physical stores, will seek to accelerate the shift to online. Afterpay is well-placed to capitalise on this for the short term. Yet, Morgan Stanley suspects this will be a temporary tailwind.

Rating is downgraded to Equal-weight from Overweight. Target is reduced to$19.00 from $46.50. Industry view is In-Line.

AVENTUS GROUP ((AVN)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/2/0

Guidance has been withdrawn. The company has indicated trading was solid up until the outbreak of the coronavirus. The distribution is being reduced to protect the balance sheet, although Macquarie notes absolute gearing levels are high versus peers.

Exposure to discretionary retail tenants is the main risk, in the broker's opinion. Rating is downgraded to Neutral from Outperform and the target lowered to $2.43 from $3.45.

CIMIC GROUP LIMITED ((CIM)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/2/0

Hochtief has been coming to support Cimic Group, increasing its stake by 2.2% to 74.9% in the last two weeks, Macquarie notes. Under law, Hochtief can buy 3% every six months. The announced buyback will also go ahead, in contrast to just about everyone else.

All well and good but the sector is clearly now challenged, which is not in contrast to everyone else. The broker downgrades to Neutral from Outperform as the share price is approaching an unchanged $25.73 target.

ECLIPX GROUP LIMITED ((ECX)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/2/0

Increased asset, credit risk and strain on working capital has caused Macquarie to apply a -75% discount to the fundamental valuation. Rating is downgraded to Neutral from Outperform and the target reduced to $0.49 from $1.93.

The company has recently reiterated the sale of Right2Drive and CarLoans is still expected in FY20. Macquarie also notes that all asset exposures are secured and are income-generating business assets. Still, working capital in the current environment is highly uncertain.

FIRSTWAVE CLOUD TECHNOLOGY LIMITED ((FCT)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0

Firstwave Cloud Technology continues to make all the right moves, Morgans suggests, is leveraged to a large and growing market and has created an innovative cyber-security solution for SMEs. However the business is not yet self-funding and relies on ongoing access to equity markets.

Clearly that is a challenge right now. The broker has changed neither earnings forecasts nor valuation but has applied a valuation discount under the current circumstances. Target falls to 11c from 24c, downgrade to Hold from Speculative Buy.

FLEXIGROUP LIMITED ((FXL)) Downgrade to Hold from Add by Morgans .B/H/S: 3/1/0

Guidance has been withdrawn. Morgans observes the company faces several challenges, particularly given its exposure to travel, point-of-sale retail and solar.

There is also a risk to the balance sheet if a steep increase in impairments is experienced. Morgans notes the company has not disclosed covenants, which makes understanding the risk difficult.

The broker regards the stock has high risk until more certainty is achieved and downgrades to Hold from Add. Target is reduced to $0.62 from $2.25.

G8 EDUCATION LIMITED ((GEM)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/4/1

The implications of the lock-downs and a recession from rising unemployment magnifies the risks to the balance sheet and equity, Macquarie asserts.

With a recession as a base case, the broker believes child-care demand after the coronavirus crisis could be in difficulty amid high unemployment.

Rating is downgraded to Underperform from Neutral. Target is reduced to $0.50 from $1.77.

LENDLEASE GROUP ((LLC)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/2/0

Macquarie believes the balance sheet and short-term earnings profile will be negatively affected by a reduction in transaction activity.

The broker downgrades to Neutral from Outperform and reduces the target to $14.22 from $16.86.

MONASH IVF GROUP LIMITED ((MVF)) Downgrade to Hold from Add by Morgans .B/H/S: 1/1/0

FY20 guidance has been withdrawn. Morgans believes it appropriate to revise forecasts and adjust dividend expectations, as cash conservation is paramount.

While the balance sheet is in a reasonable position, the broker reduces the valuation and applies a further -20% discount, setting the target at $0.66 from $1.15. Rating is downgraded to Hold from Add for the short term.

NORTHERN STAR RESOURCES LTD ((NST)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 1/3/2

Northern Star has downgraded March quarter production guidance by -10-15% and withdrawn FY20 guidance, deferring the interim dividend. Ord Minnett reduces estimates by -23% in FY20 and -11% in FY21.

Disruptions are largely because of restrictions being imposed on the movement of workers and suppliers in Western Australia and Alaska. The broker lowers the target to $12.00 from $13.50 and downgrades to Hold from Buy.

PREMIER INVESTMENTS LIMITED ((PMV)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/3/0

The company has temporarily closed most of its stores to protect cash flow. Employees are being stood down and the company does not intend to pay rent during the period of closure.

Credit Suisse reduces earnings estimates for FY20 to reflect two months of full closure and trading at around 70% of the normal level of June and July. No adjustments are yet made to FY21.

Given the uncertainty in the low likelihood of outperformance in recession, Credit Suisse reduces the rating to Neutral from Outperform. Target is raised to $10.17 from $9.94.

RESMED INC ((RMD)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 1/5/1

The pandemic has created strong demand for ventilators globally and the company has committed to increasing its manufacturing capacity although it will take time to source parts. These are typically higher margin items.

Still, with sleep laboratories closing as part of government mandated lock-downs, Credit Suisse expects a sharp decline in new sleep apnoea treatment. The broker estimates 90% of sleep apnoea device sales are new patient set-ups.

Rating is downgraded to Neutral from Outperform and the target lowered to $25.10 from $27.00.

SOMNOMED LIMITED ((SOM)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0

The effects of the crisis on the company's operations are considered significant for the short term as dental and medical societies are recommended to refrain from the company's treatments until coronavirus rates are under control.

Morgans assumes the next two quarters of revenue are negligible amid a gradual return to previous expectations by FY22.

The company has announced an accelerated entitlement offer to raise $15.5m to fund the business through the period of uncertainty. Rating is downgraded to Hold from Add and the target lowered to $1.33 from $3.75.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 ALLIANCE AVIATION SERVICES LIMITED Buy Neutral Ord Minnett
2 ALUMINA LIMITED Buy Sell Macquarie
3 AURIZON HOLDINGS LIMITED Buy Neutral UBS
4 AUSTRALIA & NEW ZEALAND BANKING GROUP Buy Neutral Citi
5 BANK OF QUEENSLAND LIMITED Buy Neutral Citi
6 BEACH ENERGY LIMITED Buy Neutral Citi
7 BENDIGO AND ADELAIDE BANK LIMITED Neutral Sell Macquarie
8 BENDIGO AND ADELAIDE BANK LIMITED Buy Sell Citi
9 BREVILLE GROUP LIMITED Buy Neutral Credit Suisse
10 CARSALES.COM LIMITED Buy Sell Morgans
11 COMMONWEALTH BANK OF AUSTRALIA Buy Sell Citi
12 CROWN RESORTS LIMITED Buy Neutral Citi
13 DOMINO'S PIZZA ENTERPRISES LIMITED Neutral Neutral UBS
14 EVENT HOSPITALITY AND ENTERTAINMENT LTD Buy Neutral Citi
15 GPT GROUP Buy Neutral Macquarie
16 HEALIUS LIMITED Buy Neutral Citi
17 IGO LIMITED Buy Neutral Citi
18 JAPARA HEALTHCARE LIMITED Neutral Sell Ord Minnett
19 JB HI-FI LIMITED Neutral Sell Credit Suisse
20 MACQUARIE GROUP LIMITED Buy Neutral Credit Suisse
21 MAGELLAN FINANCIAL GROUP LIMITED Buy Sell Citi
22 MAGELLAN FINANCIAL GROUP LIMITED Buy Sell Ord Minnett
23 NAVIGATOR GLOBAL INVESTMENTS LIMITED Buy Neutral Macquarie
24 NEWCREST MINING LIMITED Buy Neutral Citi
25 OZ MINERALS LIMITED Buy Neutral Citi
26 PLATINUM ASSET MANAGEMENT LIMITED Neutral Sell Ord Minnett
27 REA GROUP LIMITED Buy Neutral Macquarie
28 REA GROUP LIMITED Buy Sell Ord Minnett
29 SANDFIRE RESOURCES NL Buy Neutral Citi
30 SEEK LIMITED Buy Sell Morgans
31 SIGMA HEALTHCARE LIMITED Neutral Sell Credit Suisse
32 STEADFAST GROUP LIMITED Buy Neutral Credit Suisse
33 STOCKLAND Neutral Sell Macquarie
34 SUNCORP GROUP LIMITED Neutral Sell Credit Suisse
35 THE STAR ENTERTAINMENT GROUP LIMITED Buy Sell Citi
36 THE STAR ENTERTAINMENT GROUP LIMITED Buy Neutral Credit Suisse
37 TRANSURBAN GROUP Neutral Sell Credit Suisse
38 VIVA ENERGY REIT Buy Neutral Morgans
39 WESFARMERS LIMITED Neutral Sell Credit Suisse
40 WESTPAC BANKING CORPORATION Buy Neutral Citi
41 WESTPAC BANKING CORPORATION Buy Neutral Ord Minnett
42 WOODSIDE PETROLEUM LIMITED Buy Neutral Citi
Downgrade
43 ADAIRS LIMITED Neutral Buy Morgans
44 AFTERPAY LIMITED Neutral Buy Morgan Stanley
45 AIR NEW ZEALAND LIMITED Sell Neutral UBS
46 AVENTUS GROUP Neutral Buy Macquarie
47 CIMIC GROUP LIMITED Neutral Buy Macquarie
48 ECLIPX GROUP LIMITED Neutral Buy Macquarie
49 FIRSTWAVE CLOUD TECHNOLOGY LIMITED Neutral Buy Morgans
50 FLEXIGROUP LIMITED Neutral Buy Morgans
51 G8 EDUCATION LIMITED Sell Neutral Macquarie
52 LENDLEASE GROUP Neutral Buy Macquarie
53 MONASH IVF GROUP LIMITED Neutral Buy Morgans
54 NORTHERN STAR RESOURCES LTD Neutral Buy Ord Minnett
55 PREMIER INVESTMENTS LIMITED Neutral Buy Credit Suisse
56 RESMED INC Neutral Buy Credit Suisse
57 SOMNOMED LIMITED Neutral Buy Morgans

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 MFG MAGELLAN FINANCIAL GROUP LIMITED -14.0% -71.0% 57.0% 7
2 CBA COMMONWEALTH BANK OF AUSTRALIA -14.0% -64.0% 50.0% 7
3 BEN BENDIGO AND ADELAIDE BANK LIMITED -17.0% -67.0% 50.0% 6
4 AZJ AURIZON HOLDINGS LIMITED 67.0% 17.0% 50.0% 6
5 MPL MEDIBANK PRIVATE LIMITED 7.0% -36.0% 43.0% 7
6 NAB NATIONAL AUSTRALIA BANK LIMITED 64.0% 21.0% 43.0% 7
7 SGR THE STAR ENTERTAINMENT GROUP LIMITED 71.0% 29.0% 42.0% 7
8 REA REA GROUP LIMITED 75.0% 42.0% 33.0% 6
9 SEK SEEK LIMITED 58.0% 25.0% 33.0% 6
10 ANZ AUSTRALIA & NEW ZEALAND BANKING GROUP 43.0% 14.0% 29.0% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 AIZ AIR NEW ZEALAND LIMITED -67.0% -33.0% -34.0% 3
2 AVN AVENTUS GROUP 33.0% 67.0% -34.0% 3
3 FXL FLEXIGROUP LIMITED 75.0% 100.0% -25.0% 4
4 CIM CIMIC GROUP LIMITED 50.0% 75.0% -25.0% 4
5 ECX ECLIPX GROUP LIMITED 60.0% 80.0% -20.0% 5
6 PMV PREMIER INVESTMENTS LIMITED 40.0% 60.0% -20.0% 5
7 LLC LENDLEASE GROUP 60.0% 80.0% -20.0% 5
8 VRT VIRTUS HEALTH LIMITED 33.0% 50.0% -17.0% 3
9 WTC WISETECH GLOBAL LIMITED 67.0% 75.0% -8.0% 3

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 SIG SIGMA HEALTHCARE LIMITED 0.590 0.543 8.66% 4
2 MPL MEDIBANK PRIVATE LIMITED 2.894 2.873 0.73% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 BLD BORAL LIMITED 3.700 4.900 -24.49% 5
2 FXL FLEXIGROUP LIMITED 1.455 1.863 -21.90% 4
3 PMV PREMIER INVESTMENTS LIMITED 14.018 17.524 -20.01% 5
4 NAB NATIONAL AUSTRALIA BANK LIMITED 19.900 24.200 -17.77% 7
5 VRT VIRTUS HEALTH LIMITED 4.020 4.830 -16.77% 3
6 ECX ECLIPX GROUP LIMITED 1.500 1.788 -16.11% 5
7 WBC WESTPAC BANKING CORPORATION 19.757 23.450 -15.75% 7
8 ANZ AUSTRALIA & NEW ZEALAND BANKING GROUP 20.236 23.821 -15.05% 7
9 SGR THE STAR ENTERTAINMENT GROUP LIMITED 3.576 4.161 -14.06% 7
10 CWN CROWN RESORTS LIMITED 9.625 11.142 -13.62% 6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 VUK VIRGIN MONEY UK PLC 41.649 14.838 180.69% 3
2 SIG SIGMA HEALTHCARE LIMITED 2.828 1.425 98.46% 4
3 FMG FORTESCUE METALS GROUP LTD 215.979 201.128 7.38% 7
4 MPL MEDIBANK PRIVATE LIMITED 14.429 13.657 5.65% 7
5 COE COOPER ENERGY LIMITED 1.308 1.258 3.97% 4
6 HUB HUB24 LIMITED 20.520 19.740 3.95% 5
7 DXS DEXUS PROPERTY GROUP 68.500 66.467 3.06% 6
8 SGP STOCKLAND 36.733 36.167 1.56% 6
9 RIO RIO TINTO LIMITED 864.940 852.938 1.41% 7
10 SAR SARACEN MINERAL HOLDINGS LIMITED 23.775 23.450 1.39% 4

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 SGM SIMS METAL MANAGEMENT LIMITED -5.410 3.130 -272.84% 6
2 KAR KAROON ENERGY LTD -9.303 -3.370 -176.05% 3
3 AIZ AIR NEW ZEALAND LIMITED -1.012 20.374 -104.97% 3
4 NUF NUFARM LIMITED 0.263 12.770 -97.94% 6
5 QAN QANTAS AIRWAYS LIMITED 7.824 25.914 -69.81% 5
6 OSH OIL SEARCH LIMITED 14.938 26.662 -43.97% 7
7 SXY SENEX ENERGY LIMITED 0.388 0.672 -42.26% 6
8 FLT FLIGHT CENTRE LIMITED 59.133 100.300 -41.04% 7
9 APT AFTERPAY LIMITED -19.183 -13.767 -39.34% 6
10 STO SANTOS LIMITED 36.276 57.026 -36.39% 6

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CHARTS

ADH AIZ ANZ AQZ AWC AZJ BEN BOQ BPT BRG CAR CBA DMP EVT FCT GEM GPT HLS IAG IGO JBH LLC MFG MQG MVF NCM NGI NST OZL PMV PTM REA RMD SDF SEK SFR SGP SGR SIG SOM SUN TCL WBC WES

For more info SHARE ANALYSIS: ADH - ADAIRS LIMITED

For more info SHARE ANALYSIS: AIZ - AIR NEW ZEALAND LIMITED

For more info SHARE ANALYSIS: ANZ - ANZ GROUP HOLDINGS LIMITED

For more info SHARE ANALYSIS: AQZ - ALLIANCE AVIATION SERVICES LIMITED

For more info SHARE ANALYSIS: AWC - ALUMINA LIMITED

For more info SHARE ANALYSIS: AZJ - AURIZON HOLDINGS LIMITED

For more info SHARE ANALYSIS: BEN - BENDIGO & ADELAIDE BANK LIMITED

For more info SHARE ANALYSIS: BOQ - BANK OF QUEENSLAND LIMITED

For more info SHARE ANALYSIS: BPT - BEACH ENERGY LIMITED

For more info SHARE ANALYSIS: BRG - BREVILLE GROUP LIMITED

For more info SHARE ANALYSIS: CAR - CAR GROUP LIMITED

For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA

For more info SHARE ANALYSIS: DMP - DOMINO'S PIZZA ENTERPRISES LIMITED

For more info SHARE ANALYSIS: EVT - EVT LIMITED

For more info SHARE ANALYSIS: FCT - FIRSTWAVE CLOUD TECHNOLOGY LIMITED

For more info SHARE ANALYSIS: GEM - G8 EDUCATION LIMITED

For more info SHARE ANALYSIS: GPT - GPT GROUP

For more info SHARE ANALYSIS: HLS - HEALIUS LIMITED

For more info SHARE ANALYSIS: IAG - INSURANCE AUSTRALIA GROUP LIMITED

For more info SHARE ANALYSIS: IGO - IGO LIMITED

For more info SHARE ANALYSIS: JBH - JB HI-FI LIMITED

For more info SHARE ANALYSIS: LLC - LENDLEASE GROUP

For more info SHARE ANALYSIS: MFG - MAGELLAN FINANCIAL GROUP LIMITED

For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED

For more info SHARE ANALYSIS: MVF - MONASH IVF GROUP LIMITED

For more info SHARE ANALYSIS: NCM - NEWCREST MINING LIMITED

For more info SHARE ANALYSIS: NGI - NAVIGATOR GLOBAL INVESTMENTS LIMITED

For more info SHARE ANALYSIS: NST - NORTHERN STAR RESOURCES LIMITED

For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED

For more info SHARE ANALYSIS: PMV - PREMIER INVESTMENTS LIMITED

For more info SHARE ANALYSIS: PTM - PLATINUM ASSET MANAGEMENT LIMITED

For more info SHARE ANALYSIS: REA - REA GROUP LIMITED

For more info SHARE ANALYSIS: RMD - RESMED INC

For more info SHARE ANALYSIS: SDF - STEADFAST GROUP LIMITED

For more info SHARE ANALYSIS: SEK - SEEK LIMITED

For more info SHARE ANALYSIS: SFR - SANDFIRE RESOURCES LIMITED

For more info SHARE ANALYSIS: SGP - STOCKLAND

For more info SHARE ANALYSIS: SGR - STAR ENTERTAINMENT GROUP LIMITED

For more info SHARE ANALYSIS: SIG - SIGMA HEALTHCARE LIMITED

For more info SHARE ANALYSIS: SOM - SOMNOMED LIMITED

For more info SHARE ANALYSIS: SUN - SUNCORP GROUP LIMITED

For more info SHARE ANALYSIS: TCL - TRANSURBAN GROUP LIMITED

For more info SHARE ANALYSIS: WBC - WESTPAC BANKING CORPORATION

For more info SHARE ANALYSIS: WES - WESFARMERS LIMITED