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Weekly Ratings, Targets, Forecast Changes – 17-07-20

Weekly Reports | Jul 20 2020

This story features ALUMINA LIMITED, and other companies. For more info SHARE ANALYSIS: AWC

By Mark Woodruff

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 July 13 to Friday July 17, 2020
Total Upgrades: 10
Total Downgrades: 6
Net Ratings Breakdown: Buy 49.25%; Hold 40.39%; Sell 10.36%

Stockbroking analysts' company ratings on individual ASX-listed stocks are revealing a clear bias toward upgrades. This is also reflected in a positive target price trend.

For the week ending Friday, 17 July, 2020, FNArena registered ten upgrades and six downgrades for individual stocks. Nine of the ten upgrades moved to a Buy rating and only one of the six downgrades moved to a Sell.

While only one broker was responsible for three ratings changes in the REIT sector (two positive, one negative), it may be indicative of a wider uncertainty regarding unknown pandemic effects for the sector.

Alumina Ltd was the standout, receiving two upgrades to a Buy, after JV partner Alcoa reported above-forecast production results in the June quarter.

Only Zip Co was downgraded to a Sell, based partly on conservatism about the recent share price rally and partly on a rise in bad debts.

Alumina Ltd topped the table for a positive percentage rise in target price, followed by TPG Telecom, now deemed to be a robust competitor to Telstra and Optus. Leading the negative target price changes was Woodside Petroleum following ongoing weakness in LNG prices and impairment disclosures.

The weak metallurgical coal outlook impacted negatively on earnings forecasts for Coronado Global Resources.

All three brokers commenting on Senex Energy were very positive on future prospects and upgraded earnings forecasts markedly. Coming in second for earnings upgrades was QBE Insurance Group, with raised expectations for premium rates.

Total Buy ratings for the seven brokers monitored daily remains high at 49.25% of total ratings, versus 40.39% on Neutral/Hold, and 10.36% in Sell ratings.

ALUMINA LIMITED ((AWC)) Upgrade to Outperform from Neutral by Credit Suisse and Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/1/1

Credit Suisse upgrades to Outperform from Neutral believing the positive indicators are exceeding the negatives. Assets are performing and unit costs are down in the June quarter.

Commentary signalling the aluminium sector is turning the corner in Europe and North America suggests the rise in inventory outside of China may start to slow.

That said, the broker acknowledges the global outlook is uncertain and volatility is still expected. Target is raised to $2.00 from $1.65.

AWAC JV partner Alcoa has reported better-than-expected production results from the June quarter. Ord Minnett lifts the valuation for Alumina Ltd as a result.

Better operating results in the next 1-2 years should support a higher dividend as well, in the broker's view.

The stock presents value now and the rating is upgraded to Accumulate from Hold. Target is raised to $2.10 from $1.80.

BEACH ENERGY LIMITED ((BPT)) Upgrade to Add from Hold by Morgans .B/H/S: 4/2/0

Morgans believes the Beach Energy share price represents significant value at the current level. The recent sideways drift in oil prices has contributed to demand uncertainty.

Additionally, there has been speculation that future spot price falls could influence negotiations for price resets on Beach Energy legacy contracts. However, the broker expects a clear difference in price between long-term contracts and the spot market.

Morgans expects the next major catalyst will be the upcoming full year result, which will incorporate an updated five year outlook for asset development and revised reserve estimates.

The rating is increased to Add from Hold. The target price is $1.66.

NATIONAL STORAGE REIT ((NSR)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/2/1

Ord Minnett assesses the short-term impact on operations from the pandemic has been relatively contained with only a -3-4% decline in occupancy.

The broker believes National Storage could unlock value in the medium term by stabilising its occupancy at 85%.

Furthermore, self-storage should remain a preferred property sector and, given the fragmented nature of the asset class, it remains possible bids could re-emerge from those looking to establish scale in Australia.

Rating is upgraded to Accumulate from Hold and the target lifted to $2.05 from $1.60.

OCEANAGOLD CORPORATION ((OGC)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/2/0

Ord Minnett has remodelled the economic and production assessment of Waihi.

A higher peak production rate, longer mine life and increased resources from Martha and Gladstone open pits are envisaged.

This leads to an upgrade to Accumulate from Hold and the target raised to $4.20 from $3.60.

PERPETUAL LIMITED ((PPT)) Upgrade to Neutral from Sell by Citi .B/H/S: 1/6/0

Perpetual has released a business update for Q420, which has led Citi to upgrade to Neutral from Sell.

The broker believes there are increasing signs of a turnaround, with 4Q net outflows moderating and investment performance for most key strategies improving.

Strong growth in FuA in Corporate Trust is encouraging, but much of this is likely to be a one-off event.

Cost growth for FY20 and potentially 1H21 will likely be suppressed. This may be temporary as reduced discretionary spend and salary cuts for executives may reverse over time, according to the broker.

Rating is increased to Neutral from Sell.  The price target increased to $32.00 from $26.10.

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

The company has exchanged contracts for the sale of the Minto properties to entities associated with Charter Hall ((CHC)) for $207m.

Ord Minnett assesses the sale is neutral to valuation. However, the addition to the balance sheet is advantageous, given the uncertainty over logistics volumes for FY21.

Recycling capital from a mature property is a positive signal from a company that has deployed substantial expenditure on new projects.

Ord Minnett upgrades to Accumulate from Hold and raises the target to $3.09 from $2.95.

TPG TELECOM LIMITED ((TPG)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 3/2/0

Morgan Stanley notes the newly merged TPG Telecom has the potential and capital to play disrupter and believes the company can compete against the larger telcos like Telstra and Optus.

The broker points towards a stronger product suite, higher growth options and a stronger balance sheet but also highlights risks like the National Broadband Network (NBN) pricing that is impacting TPG Telecom’s fixed-line profit.

Investors willing to wait 2-3 years for the synergies to play out fully can expect target price upside, comments the broker.

Morgan Stanley upgrades its rating to Overweight from Equal-weight with the target price increasing to $10 from $6.85. Industry view: In-line.

TREASURY WINE ESTATES LIMITED ((TWE)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 1/5/0

Treasury Wine Estates’ had inventory worth $2bn on its books at the end of the first half and Morgan Stanley estimates its realisable value at circa $4bn, most of it from the luxury category. The broker expects the group to return to FY19 earnings in FY22.

Since the de-rating was triggered by headwinds within the US business, the broker believes a sustained re-rating will require more confidence in management’s ability to stabilise the US business.

The short-term outlook remains disrupted but downside risk is limited owing to the group’s asset backing.

Morgan Stanley upgrades its rating to Overweight from Equal-weight with the target price increasing to $13.50 from $12.50. Industry view: Cautious.

WAYPOINT REIT ((WPR)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 2/0/1

Ord Minnett believes long WALE A-REITs are a way to play the current environment, given stable earnings and distribution spreads. Waypoint is the preferred stock as it offers an attractive distribution yield with limited earnings risk.

With the dividend earnings uncertainty surrounding traditional shopping centre landlords, service stations have become a preferred retail asset class.

Rating is upgraded to Buy from Hold and the target is raised to $2.95 from $2.80.

Downgrade

CHARTER HALL LONG WALE REIT ((CLW)) Downgrade to Accumulate from Buy by Ord Minnett .B/H/S: 3/1/0

Ord Minnett believes long WALE A-REITs are a way to play the current environment, given stable earnings and distribution spreads.

Yet, Charter Hall Long WALE displays some earnings risk and has less valuation upside compared to others in the segment, according to the broker.

Hence, rating is downgraded to Accumulate from Buy. Target is reduced to $4.48 from $5.80.

ORIGIN ENERGY LIMITED ((ORG)) Downgrade to Hold from Add by Morgans .B/H/S: 4/3/0

Morgans believes Origin Energy has medium-term potential but a recovery will be some time away.

The downside risks in the meantime outweigh the longer-term potential. Rating is therefore downgraded to Hold from Add.

The company has announced a -$1.2bn post-tax write-down of its LNG business.

Guidance for energy markets operating earnings has been reiterated at $1.4-1.5bn. Target is reduced to $5.95 from $6.43.

SOUTHERN CROSS MEDIA GROUP ((SXL)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/1/0

Macquarie downgrades to Neutral from Outperform. The revenue environment is uncertain and the stock is trading near the target price.

While the business has controlled costs and will benefit from JobKeeper payments, further weakness in advertising markets is expected to prevail for the near term. Target is unchanged at $0.18.

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

Citi has downgraded Woodside Petroleum to Neutral from Buy.

Impairment disclosures have led the broker to downgrade and the analysts fail to see a near-term catalyst, other than a possible reduction in bottlenecks at Scarborough.

Citi believes the market does not fully appreciate that Pluto LNG no longer enjoys its S-Shape inflection point at $60 oil. As a result, third quarter results may disappoint.

The rating is decreased to Neutral from Buy. Target is reduced to $22.33 from $26.08.

WHISPIR LIMITED ((WSP)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/1/0

Ord Minnett downgrades to Hold from Buy as the share price has rallied almost 30% over a week with no obvious news or developments.

A strong result is expected in August and the broker is positive about the longer term but the current valuation offers little upside. Target is steady at $2.80.

ZIP CO LIMITED ((Z1P)) Downgrade to Sell from Neutral by UBS .B/H/S: 2/0/1

The trading update looked strong, with total transaction volumes increasing by 62%. Second half revenue grew 88%. However, highlight the analysts, net bad debts increased to 2.24% at the end of the June quarter.

UBS now believes the risk/reward is unfavourable following the recent rally in the share price and downgrades to Sell from Neutral.

Target is raised to $5.70 from $5.60. The broker notes several short-term risks including uncertainty over the duration of the pandemic, growth in credit risk and the integration risk for Quadpay.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 ALUMINA LIMITED Buy Neutral Credit Suisse
2 ALUMINA LIMITED Buy Neutral Ord Minnett
3 BEACH ENERGY LIMITED Buy Neutral Morgans
4 NATIONAL STORAGE REIT Buy Neutral Ord Minnett
5 OCEANAGOLD CORPORATION Buy Neutral Ord Minnett
6 PERPETUAL LIMITED Neutral Sell Citi
7 QUBE HOLDINGS LIMITED Buy Neutral Ord Minnett
8 TPG TELECOM LIMITED Buy Neutral Morgan Stanley
9 TREASURY WINE ESTATES LIMITED Buy Neutral Morgan Stanley
10 WAYPOINT REIT Buy Neutral Ord Minnett
Downgrade
11 CHARTER HALL LONG WALE REIT Buy Buy Ord Minnett
12 ORIGIN ENERGY LIMITED Neutral Buy Morgans
13 SOUTHERN CROSS MEDIA GROUP Neutral Neutral Macquarie
14 WHISPIR LIMITED Neutral Buy Ord Minnett
15 WOODSIDE PETROLEUM LIMITED Neutral Buy Citi
16 ZIP CO LIMITED Sell Neutral UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 AWC ALUMINA LIMITED 42.0% 17.0% 25.0% 6
2 TPG TPG TELECOM LIMITED 50.0% 30.0% 20.0% 5
3 VOC VOCUS GROUP LIMITED 50.0% 33.0% 17.0% 6
4 BPT BEACH ENERGY LIMITED 58.0% 42.0% 16.0% 6
5 OGC OCEANAGOLD CORPORATION 38.0% 25.0% 13.0% 4
6 NSR NATIONAL STORAGE REIT -13.0% -25.0% 12.0% 4
7 BRG BREVILLE GROUP LIMITED 67.0% 60.0% 7.0% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 Z1P ZIP CO LIMITED 17.0% 50.0% -33.0% 3
2 GMG GOODMAN GROUP 33.0% 50.0% -17.0% 6
3 EVN EVOLUTION MINING LIMITED -29.0% -14.0% -15.0% 7
4 NCM NEWCREST MINING LIMITED 14.0% 29.0% -15.0% 7
5 WPL WOODSIDE PETROLEUM LIMITED 57.0% 71.0% -14.0% 7
6 ORG ORIGIN ENERGY LIMITED 50.0% 64.0% -14.0% 7
7 CLW CHARTER HALL LONG WALE REIT 63.0% 75.0% -12.0% 4

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 AWC ALUMINA LIMITED 1.867 1.708 9.31% 6
2 TPG TPG TELECOM LIMITED 8.714 8.088 7.74% 5
3 NSR NATIONAL STORAGE REIT 1.703 1.590 7.11% 4
4 OGC OCEANAGOLD CORPORATION 3.625 3.450 5.07% 4
5 BRG BREVILLE GROUP LIMITED 22.878 21.854 4.69% 6
6 Z1P ZIP CO LIMITED 6.550 6.450 1.55% 3
7 EVN EVOLUTION MINING LIMITED 4.919 4.861 1.19% 7
8 BPT BEACH ENERGY LIMITED 1.767 1.747 1.14% 6
9 NCM NEWCREST MINING LIMITED 32.659 32.373 0.88% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 WPL WOODSIDE PETROLEUM LIMITED 23.760 25.447 -6.63% 7
2 CLW CHARTER HALL LONG WALE REIT 4.970 5.300 -6.23% 4
3 VOC VOCUS GROUP LIMITED 3.532 3.573 -1.15% 6
4 GMG GOODMAN GROUP 15.663 15.830 -1.05% 6
5 ORG ORIGIN ENERGY LIMITED 6.764 6.829 -0.95% 7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 SXY SENEX ENERGY LIMITED 0.667 0.233 186.27% 6
2 QBE QBE INSURANCE GROUP LIMITED -11.894 -17.299 31.24% 7
3 OSH OIL SEARCH LIMITED 4.291 3.398 26.28% 7
4 AWC ALUMINA LIMITED 7.363 5.974 23.25% 6
5 WPL WOODSIDE PETROLEUM LIMITED 74.105 66.684 11.13% 7
6 GUD G.U.D. HOLDINGS LIMITED 57.726 54.506 5.91% 5
7 PMV PREMIER INVESTMENTS LIMITED 70.452 66.750 5.55% 5
8 JHG JANUS HENDERSON GROUP PLC. 315.741 302.337 4.43% 4
9 TCL TRANSURBAN GROUP 11.276 10.896 3.49% 7
10 ORA ORORA LIMITED 12.936 12.593 2.72% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 CRN CORONADO GLOBAL RESOURCES -13.976 2.973 -570.10% 3
2 OGC OCEANAGOLD CORPORATION 2.167 5.862 -63.03% 4
3 AD8 AUDINATE GROUP LIMITED -2.053 -1.427 -43.87% 3
4 WHC WHITEHAVEN COAL LIMITED 3.756 6.103 -38.46% 7
5 MHJ MICHAEL HILL INTERNATIONAL LIMITED 5.850 6.975 -16.13% 4
6 NEC NINE ENTERTAINMENT CO. HOLDINGS LIMITED 8.406 9.366 -10.25% 5
7 TPG TPG TELECOM LIMITED 26.903 29.403 -8.50% 5
8 NUF NUFARM LIMITED -2.424 -2.281 -6.27% 7
9 NSR NATIONAL STORAGE REIT 7.925 8.425 -5.93% 4
10 ABP ABACUS PROPERTY GROUP 18.525 19.525 -5.12% 4

Technical limitations

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CHARTS

AWC BPT CHC CLW NSR OGC ORG PPT QUB SXL TPG TWE WPL WPR WSP Z1P

For more info SHARE ANALYSIS: AWC - ALUMINA LIMITED

For more info SHARE ANALYSIS: BPT - BEACH ENERGY LIMITED

For more info SHARE ANALYSIS: CHC - CHARTER HALL GROUP

For more info SHARE ANALYSIS: CLW - CHARTER HALL LONG WALE REIT

For more info SHARE ANALYSIS: NSR - NATIONAL STORAGE REIT

For more info SHARE ANALYSIS: OGC - OCEANAGOLD CORP

For more info SHARE ANALYSIS: ORG - ORIGIN ENERGY LIMITED

For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED

For more info SHARE ANALYSIS: QUB - QUBE HOLDINGS LIMITED

For more info SHARE ANALYSIS: SXL - SOUTHERN CROSS MEDIA GROUP LIMITED

For more info SHARE ANALYSIS: TPG - TPG TELECOM LIMITED

For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED

For more info SHARE ANALYSIS: WPL - WOODSIDE PETROLEUM LIMITED

For more info SHARE ANALYSIS: WPR - WAYPOINT REIT LIMITED

For more info SHARE ANALYSIS: WSP - WHISPIR LIMITED

For more info SHARE ANALYSIS: Z1P - ZIP CO LIMITED