Weekly Reports | Jun 29 2020
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 June 22 to Friday June 26, 2020
Total Upgrades: 9
Total Downgrades: 15
Net Ratings Breakdown: Buy 49.50%; Hold 40.94%; Sell 9.57%
When it comes to stockbroking analysts updates on individual ASX-listed stocks, the balance between negative adjustments and positive amendments remains skewed towards the positive, with exception of investment recommendations.
Upgrades to valuations and price targets outweigh the downgrades, and the same observation can be made for changes to earnings forecasts, one month out from the August reporting season.
But the local share market has experienced one hell of a rallyf rom its sell-down low in the third week of March, and this is increasingly being reflected in more rating downgrades than upgrades being issued.
For the week ending Friday, 26th June 2020, FNArena registered nine upgrades in ratings against 15 downgrades.
Logistics services provider Qube Holdings stole the limelight during the week, receiving no less than four downgrades, of which only one moved to a Sell.
Freshly announced new customer Woolworths for the company’s flagship development near the main airport in Sydney is triggering higher capex spending for the years ahead.
Only one upgrade didn’t lift to Buy, with Sigma Healthcare the lonely stand-out amidst fresh Buy ratings for salary packaging firms, miners, an oil producer, and one bank.
The week’s overview of downgrades only contains three new Sell ratings, with Sydney Airport and Altium responsible for the additional two.
Scandal hit Freedom Foods and smaller mining stocks feature prominently.
The week’s table for positive revisions to price targets has three stocks enjoying double digit percentage increases; Seek, EclipX Group, and Premier Investments.
Freedom Foods is the exception in an otherwise more subdued looking table for the week’s negative revisions, with FrexiGroup and Coronado Resources suffering notable reductions too.
There are some genuine fireworks on display in the table showing positive updates for earnings estimates, led by Nufarm, Air New Zealand, Qantas, and Wagners Holding Co.
The first nine of the week’s top are all enjoying double digit percentage increases.
The opposing side of the week’s ledger has notable decreases, but the numbers are significantly lower for companies including Metcash, Whitehaven Coal, Sydney Airport, and OceanaGold.
This week will see Fisher & Paykel Healthcare and Collins Foods (tomorrow) report out-of-regular-season financial results after which analysts and investors will redirect their focus towards the upcoming August reporting season.
AUSTRALIA & NEW ZEALAND BANKING GROUP ((ANZ)) Upgrade to Add from Hold by Morgans .B/H/S: 5/1/1
Morgans has a positive view on the major banks at current share prices, with the exception of Commonwealth Bank ((CBA)).
While system credit growth is subdued, the major banks are expected to regain home lending market share amid funding stress for the non-bank lenders.
Low interest rates are expected to continue being a headwind to net interest margins.
ANZ Bank is upgraded to Add from Hold. A final dividend is expected to be declared in November. Target is steady at $17.
CLASS LIMITED ((CL1)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 2/0/0
The share price has fallen -37% since the peak in February, including -17% in the past week, Ord Minnett notes.
The company has not formally updated guidance since the first half result but the broker retains forecasts broadly in line with previously provided targets and is comfortable these can be achieved.
The stock has now fallen far enough and the broker envisages good value amid several catalysts on the horizon, upgrading to Buy from Hold. Target is reduced to $1.50 from $1.76.
CORONADO GLOBAL RESOURCES ((CRN)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/0/0
While lowering forecasts for coal in line with spot prices, UBS notes prices are now well into the cost curve and further downside is likely to be limited.
Chinese import restrictions are a headwind for thermal coal, but India is emerging from lockdown which should benefit coking coal demand.
Coronado Global is upgraded to Buy from Neutral given its discount to valuation and because of its metallurgical coal exposure. Target is reduced to $1.80 from $2.05.
ECLIPX GROUP LIMITED ((ECX)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 3/1/0
Morgan Stanley looks for names in the sector that exhibit differentiated growth and resilience in their business model along with re-rating catalysts.
The broker's top pick is EclipX Group as it has the strongest growth potential and a unique funding model that peers are replicating.
The valuation remains attractive and the broker upgrades to Overweight from Equal-weight. Target is raised to $1.70 from $1.10. Industry view is In-Line.
MCMILLAN SHAKESPEARE LIMITED ((MMS)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 1/3/0
Morgan Stanley observes McMillan Shakespeare is trading below historical averages and a macro rebound remains the key catalyst.
An alternative revenue stream from PlanPartners helps offset novated headwinds.
Rating is upgraded to Overweight from Equal-weight. Target is lowered to $11.50 from $14.00. In-Line sector view.