Weekly Ratings, Targets, Forecast Changes – 21-08-20

This story features A2 MILK COMPANY LIMITED, and other companies. For more info SHARE ANALYSIS: A2M

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 August 17 to Friday August 21, 2020
Total Upgrades: 22
Total Downgrades: 24
Net Ratings Breakdown: Buy 47.92%; Hold 40.68%; Sell 11.40%

During a busy reporting period for ASX-listed stocks, the week ending Friday 21 st of August yielded twenty two upgrades and twenty four downgrades to company ratings by stockbroking analysts. Of the twenty two upgrades seventeen went to a direct Buy, and only two of twenty four downgrades went to a direct Sell.

Receiving two upgrades to ratings by different brokers were The Star Entertainment Group thanks to impressive cost management, Coca-Cola Amatil for improving sales volumes and Monadelphous Group as a result of better-than-expected margins, cashflow, and dividend. Additionally, Monadelphous was assessed as having strong prospects for FY21, despite a pending lawsuit from Rio Tinto.

The only company receiving two downgrades to ratings was Domain Holdings and both were largely due to valuation concerns, after a doubling of the share price since March 2020 lows. Surrounding commentary by both analysts was quite upbeat and was further reflected by another broker upgrading the company’s rating due to its leverage to an improved listing environment.

The table for largest percentage positive change to consensus target prices was dominated by the volatile high PE stocks. IDP Education was a material ‘beat’ to consensus expectations due to a strong student placement pipeline and good cost control. Netwealth Group received general applause for its resilient business model and increasing funds under management, despite some margin pressure. While hope for Carsales and Wisetech Global sprung from buoyant trading up to and beyond the financial year end. Carsales appears to be benefiting from pandemic tailwinds and government stimulus, while Wisetech Global also impressed with operating efficiencies and signs of a step-up in demand for its software by global freight forwarders.

By comparison with positive changes, negative target price changes were much less in percentage terms, with brokers ruminating over the the sustainability of Telstra’s dividend and failing to see much upside for AGL Energy over the next twelve months.

The table for negative updates to earnings estimates reveals significant adjustments for both Qantas Airways and Flight Centre, due to delays in near-term domestic and long-term international travel. Brokers are generally positive on the opportunity for Audinate Group, despite it having the third largest percentage downgrade to earnings. The company is also beholden to a return of normalcy on the international scene, in particular the opening of large venues for its audio visual offerings.

On a more positive note, the largest lift in percentage terms for earnings was Lendlease on strength in the development workbook and hopes for a resolution to the sale of its engineering division. A similar potential divestment story is in play at South32 for its stake in South Africa Energy Coal. This, along with brokers being generally positive on FY21 guidance by management, saw the company third on the table for earnings upgrades, just below Sims Limited, with a better-than-expected FY20 result.

Total Neutral/Hold recommendations take up 47.92% of the total, versus 40.68% on Neutral/Hold, while Sell ratings account for the remaining 11.4%.

Upgrade

THE A2 MILK COMPANY LIMITED ((A2M)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/1/2

Credit Suisse notes a2 Milk's FY20 result was solid and broadly on expected lines. The company expects strong revenue growth to continue in FY21 along with some capex into milk processing and IT.

The company clarified it will continue to prioritise growth over return to shareholders.

Driven by attractive growth prospects and strong valuation support, Credit Suisse upgrades its rating to Outperform from Neutral with the target price increasing to NZ$22.55 from NZ$17.65.

See also A2M downgrade.

ALTIUM LIMITED ((ALU)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 1/4/0

Yesterday, Ord Minnett had placed its Lighten rating under review (see Report yesterday). Today, that review has led to an upgrade to Hold.

The broker explains that while Altium's operational (EBITDA) performance proved slightly better-than-expected, management's projections out to FY25 imply a slower growth rate, and that was exactly why the Lighten rating had been put in place.

Even with the updated FY25 revenue mid-point of $429m circa -14% below the prior $500m target, Ord Minnett observes investors have chosen to look through the downgrade.

Target price lifts to $31.15 from $29.50.

See also ALU downgrade.

BLUESCOPE STEEL LIMITED ((BSL)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 3/3/0

Morgan Stanley found the results commendable, given difficult markets. Earnings (EBIT) were in line with prior guidance and the broker's estimates.

Conditions appear to be gradually improving and Morgan Stanley upgrades to Equal-weight from Underweight. No first half guidance was provided because of the high level of uncertainty.

Target is raised to $11.50 from $10.00. Industry view: Cautious.

COCA-COLA AMATIL LIMITED ((CCL)) Upgrade to Outperform from Neutral by Credit Suisse and Upgrade to Add from Hold by Morgans .B/H/S: 3/4/0

The impact of the pandemic on first half earnings was less than Credit Suisse anticipated. The broker was surprised that Indonesian EBIT broke even despite a -19% drop in volumes and applauds the company's efforts.

The broker no longer projects losses for Indonesia and factors in $70m for the company's new cost savings program. NZ volumes and price assumptions are also upgraded.

Rating is upgraded to Outperform from Neutral and the target is raised to $11.25 from $9.00.

Coca-Cola Amatil’s result was materially stronger than Morgans expected due to a stronger volume recovery in June, quicker than expected realisation of cost savings and cashflow was strong (and the highlight for the broker).

Morgans highlights overall company volumes have improved sequentially since April, while volume trends in developing countries are improving.

The balance sheet remains in a solid position, according to the analyst, and enabled the declaration of an unfranked interim dividend of 9cps.

Following the result and encouraging volume trends Morgans upgrades earnings (EBIT) forecasts by 18.2%, 10.5% and 4% for FY20. FY21 and FY22.

The rating is upgraded to Add from Hold. The target price is increased to $10.39 from $8.93.

DOMAIN HOLDINGS AUSTRALIA LIMITED ((DHG)) Upgrade to Hold from Reduce by Morgans .B/H/S: 3/3/0

Morgans relates Domain Holdings Australia has reported very similar online revenue trends to competitor realestate.com ((REA)), with the core digital business seeing revenue declines of -6.4% in the year. However, print revenues were decimated in the second half, according to the broker.

The company is aiming to move the audience reach conversation from quantity to quality of leads and ability to match buyers and seller, according to the analyst. Additionally, the aim is to move from a classifieds business to an agent and consumer enabler, participating in the lifecycle of the property transaction.

The rating is upgraded to a Hold from Reduce and Morgans is cognisant of the company's leverage to an improved listing environment. The target price is increased to $3.37 from $2.25.

See also DHG downgrade.

DEXUS PROPERTY GROUP ((DXS)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/2/0

Dexus Property Group’s FY20 underlying funds from operations were slightly below Ord Minnett's forecast. A dividend of 23c (20% franked) was declared, taking the full-year payout to 50.3c.

No dividend guidance has been given for FY21 due to uncertainty on rent collections. Even so, the broker expects dividends to stabilise at 50-52c in FY22.

Taking a contrarian view of the group following its FY20 results, Ord Minnett upgrades its rating to Accumulate from Hold with the target price increasing to $9.65 from $9.10.

HT&E LIMITED ((HT1)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/2/1

First half results were ahead of estimates driven by better cost management at Cody Outdoor and very strong growth at Soprano Design.

The broker recognises the Australian Radio Network faces challenges but believes these are well understood.

A re-valuation of Soprano drives an upgrade to the broker's rating, to Outperform from Neutral. Target is raised to $1.60 from $1.25.

HARVEY NORMAN HOLDINGS LIMITED ((HVN)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/2/0

Ord Minnett increases estimates by 2% for FY20 and 8% for FY21. Retailer success is considered a result of lower expenditure in other consumption categories and this should drive solid results when the company reports on August 28.

The broker upgrades to Accumulate from Hold as Harvey Norman is likely to benefit from operating leverage and housing. Target is raised to $4.75 from $3.85.

MCMILLAN SHAKESPEARE LIMITED ((MMS)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/2/0

FY20 results were in line, with the exception of a lack of final dividend, although Credit Suisse is not surprised. The broker considers the decision to withhold a dividend prudent rather than related to any specific cash flow concerns.

While the recovery may be lumpy, July novated lease volumes are considered encouraging and tracking ahead of the prior corresponding period.

Credit Suisse expects growth in FY21 and upgrades to Outperform from Neutral. Target is raised to $10.60 from $10.10.

MONADELPHOUS GROUP LIMITED ((MND)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 2/4/0

Monadelphous Group's FY20 net profit (NPAT) is 34% ahead of Macquarie's estimate. Margins, cash flows and dividend were all ahead of the broker's forecasts.

The company sees potential for operating income margins to return to pre-covid-19 levels although the broker considers this too optimistic.

Macquarie upgrades its rating to Outperform from Neutral with the target price increasing to $11.57 from $11.16. 

Ord Minnett notes Monadelphous Group reported net profit of $36.5m for FY20, below the broker's estimate by -10%. The company also pointed due to covid-19, 10% of FY210 revenue has been deferred into FY21.

The year ahead is expected to be strong but a lawsuit worth circa -$500m from Rio Tinto ((RIO)) precludes the broker from being more positive on the stock.

Ord Minnett upgrades its rating to Hold from Lighten with the target price increasing to $10.80 from $10.

METCASH LIMITED ((MTS)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/1/0

Macro factors are expected to support expenditure on food retail. Metcash is also expected to experience mid-high single digit sales growth.

Credit Suisse expects shopping behaviour will become more localised over the short term, benefiting independent food stores.

Housing-related expenditure is a potential cyclical headwind for hardware, but that risk is expected to become more obvious in 2021-22.

Rating is upgraded to Outperform from Neutral and the target raised to $3.47 from $3.07. A trading update is expected at the AGM on August 26.

NORTHERN STAR RESOURCES LTD ((NST)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/2/2

FY20 results missed forecasts but reserve and mine life growth are positive, Credit Suisse notes.

FY21-22 production forecasts are softer than the broker expected along with modestly higher costs which drives a downgrade to estimates.

That said, while production growth is likely to come at higher average cost it will be accretive and reflects a superior growth profile versus peers, in the broker's view.

Credit Suisse upgrades to Outperform from Neutral. Target is lowered to $15.65 from $16.00.

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

FY20 results were slightly ahead of estimates. Guidance for flows of $8bn in FY21 is significantly higher than Credit Suisse's previous forecasts.

While the company pointed to further revenue margin pressure, the broker considers this manageable given the strong growth in funds under administration.

Forecasts are raised by 17% for FY21 and 27% for FY22. Rating is upgraded to Neutral from Underperform as, while the valuation is optically high, it is considered justified by the three-year compound growth rate of around 20%. Target is raised to $14.00 from $8.45.

PRO MEDICUS LIMITED ((PME)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/0/0

Pro Medicus' FY21 result outpaced UBS forecasts and the broker upgrades to Buy, expecting positive catalysts during FY21 and noting the recent pullback.

A sharper than expected rise in second-half exam volumes triggers a 5% increase in FY21 EPS forecasts. FY22-23 EPS earnings are downgraded -3% to -5% on expectations that expansion will moderate.

The pipeline continued to build through covid and the company has plenty of tendering opportunities. Cash flow was strong, yielding a net cash position of $43m.

Target price is steady at $29.65.

SARACEN MINERAL HOLDINGS LIMITED ((SAR)) Upgrade to Buy from Neutral by UBS .B/H/S: 1/2/1

Saracen Mineral Holdings has unveiled its Superpit mine plan a month early, albeit not a full reveal.

UBS reckons near-term production is lower than markets expected, triggering near-end earnings downgrades, but notes the plan has greater duration. 

Given some details remain hazy, UBS spies potential to increase disappointing FY25-FY27 guidance, and extend the mine life from FY35.

UBS says the miner offers a sector-leading five year production compound average growth rate of 5% out to 2025.

Broker upgrades to Buy from Neutral noting the miner is trading at a 15% discount to valuation. Target price rises to $6.75 from $6.50.

Production forecasts fall -3% for FY21 and -6% for FY22, driving a -17% and -27% fall in net profit after tax estimates.

SG FLEET GROUP LIMITED ((SGF)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/1/0

SG Fleet Group's FY20 net profit beat Macquarie's forecast by circa 11.7% with the fourth quarter performance better than expected. The group did not provide any guidance for FY21.

Trading improved in June continuing into the first half of FY21, notes the broker, along with better than expected novated leads.

Macquarie upgrades its rating to Outperform from Neutral with the target price increasing to $1.92 from $1.85.

SIMS LIMITED ((SGM)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/3/0

Sims reported a better than expected FY20, observes Macquarie, with some improvement in market and profitability. No dividend was declared.

Macquarie is impressed by how the group managed to reduce its costs in the UK and ANZ while winning four important contracts in FY20 and another three for FY21. The company has not provided any guidance although notes intake volumes are recovering.

The market environment has improved post lockdowns in North America and the UK, assesses the broker, and upgrades its rating to Outperform from Neutral. Target is raised to $9.50 from $7.95.

THE STAR ENTERTAINMENT GROUP LIMITED ((SGR)) Upgrade to Outperform from Neutral by Credit Suisse and Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 6/1/0

Credit Suisse notes excellent cost control and good customer management in the current trying times and upgrades FY21 estimates. The broker assesses, by FY22, Star Entertainment is likely to have retired substantial debt.

Management has identified $300m in assets that can be divested to fund FY21 investments.

The broker now models FY23 revenue at 80% of FY19. Rating is upgraded to Outperform from Neutral and the target is raised to $3.60 from $3.40.

Star Entertainment Group's FY20 result outpaced consensus and Ord Minnett forecasts, thanks to impressive cost management, although earnings disappointed.

Star has removed the dividend until leverage normalises. Domestic visits show some signs of improvement but visibility is poor.

Deleveraging plans, the fact that Star is better positioned to deal with domestic capacity and supply than competitors and the loyalty plan are likely to favour margin expansion, says the broker.

The broker expects an earnings fall in FY21 but upgrades the company to  Accumulate from Hold and raises the target price to $3.25 from $2.70.

TABCORP HOLDINGS LIMITED ((TAH)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/4/0

Tabcorp Holdings announced a lower payout to 75% of net profit while also stating dividends will resume "when appropriate". 

Credit Suisse assumes lottery will increase revenue by 1% in FY21 for Tabcorp versus -3% assumed previously. The broker notes the first half will be cycling a period of exceptionally strong jackpots and the business might grow.

Earnings growth forecasts for FY21-22 have been revised upwards.

Credit Suisse upgrades its rating to Outperform from Neutral with the target price increasing to $4.30 from $3.65.

Downgrade

THE A2 MILK COMPANY LIMITED ((A2M)) Downgrade to Sell from Buy by Citi .B/H/S: 3/1/2

Citi believes the best days are behind the company and downgrades to Sell from Buy. A substantial path for growth continues but the outlook is considered increasingly risky amid a resurgence of Chinese brands and increasing geopolitical risks.

The broker acknowledges use of the cash balance for acquisitions and/or capital management remains the biggest risk to the view.

Citi reduces FY21 and FY22 net profit estimates by -3% to reflect the lower sales and earnings outlook for China along with pressure on Australasian earnings from FY22 amid structural decline in the daigou channel. Target is reduced to $17.20 from $21.50.

See also A2M upgrade.

ALTIUM LIMITED ((ALU)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/4/0

Altium's FY20 earnings beat Macquarie's forecasts by a nose, thanks to improved margins on in-line revenue, but forward estimates disappointed.

The broker notes strong subscriber growth in response to heavy discounting in the June quarter.

Revenue and subscriber guidance is maintained out to 2025 but company management has pushed out the timeline by six to 12 months. The goal remains to shift from a licence model toward SaaS, and to graduate from software to a platform.

Earnings per share forecasts rise 1% in FY21; fall -10%, -13% and -8% in FY22, FY23 and FY24; and rise 1% in FY25.

Target price rises 2.9% to $35 after removing the -5% covid-discount. Neutral rating retained, to reflect virus uncertainty. 

See also ALU upgrade.

BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 0/5/2

FY20 net profit was below Ord Minnett's forecasts. Costs rose 10% half-on-half in the second half. The broker upgraded in June, predicated on evidence of an improving funding cost environment and a defensive book mix that should limit the downside on impairment expenses.

Since then, developments have moved against this view and the rating is downgraded to Hold from Accumulate. Ord Minnett reduces net profit estimates by -10% for FY21 and -12% for FY22. Target is reduced to $6.70 from $8.10.

CARSALES.COM LIMITED ((CAR)) Downgrade to Hold from Add by Morgans .B/H/S: 1/5/0

Morgans describes the Carsales.com FY20 result as good in challenging times and FY21 should show continued growth on a normalised basis.

A strong end of year and July trading confirms to the analyst used car conditions are buoyant.

The broker highlights international businesses now represent 24% of 'look through' revenue for the company, with these businesses being the dominant portals in their geographies.

The rating is lowered to Hold from Add. The target price is increased to $19.17 from $14.58.

CHARTER HALL GROUP ((CHC)) Downgrade to Neutral from Buy by UBS .B/H/S: 5/1/0

UBS is of the view Charter Hall Group delivered "extraordinary growth" in a year marked by unprecedented volatility.

The broker considers the guidance, -4% below UBS forecast, to be conservative and expects upgrades in the year ahead.

UBS downgrades its rating to Neutral from Buy on valuation grounds with the target price revised upwards to $12.25 from $9.80.

COCHLEAR LIMITED ((COH)) Downgrade to Sell from Neutral by Citi .B/H/S: 2/2/2

FY20 results were largely in line with expectations. Citi reduces FY21-22 estimates for earnings per share by -24-27%. The broker expects flat sales compared with FY20, with growth returning in FY22.

The broker acknowledges Cochlear could increase its implant market share given continued investment, potentially helped by the recall from Advanced Bionics.

Rating is downgraded to Sell from Neutral on valuation. Target is lowered to $184 from $203.

COLES GROUP LIMITED ((COL)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 3/4/0

Coles Group's FY20 reported a mixed FY20 result: underlying net profit disappointing Ord Minnett; earnings from the core food business in-line on expanded margins; and liquor, convenience and corporate segments underperforming.

Operating cash flow was strong, the company boasting 111% cash conversion.

The broker is adopting a cautious outlook noting flattening food margins in the first quarter, growth challenges and continued weakness in convenience, liquor and corporate segments.

Ord Minnett downgrades to Hold from Accumulate and the target price falls to $19 from $19.50.

CSL LIMITED ((CSL)) Downgrade to Neutral from Buy by Citi .B/H/S: 2/5/0

FY20 net profit was in line with Citi's estimates. The broker considers the FY21 net profit forecasts ($2.1-2.27bn) are achievable only of plasma collections improve over the course of the year.

Still, the broker remains positive about the control of the pandemic globally and sets its net profit estimates near the top of the range. Citi downgrades to Neutral from Buy and reduces the target to $320 from $334.

CORPORATE TRAVEL MANAGEMENT LIMITED ((CTD)) Downgrade to Hold from Add by Morgans .B/H/S: 3/3/0

The FY20 result of Corporate Travel Management beat Morgans forecasts on most key metrics, particularly cashflow and balance sheet strength.

The fourth quarter was materially stronger, according to the broker, with Europe and the US the strongest contributors to group revenue.

The broker expects earnings may not return to FY19 levels until FY23.

The rating is downgraded to Hold from Add, as the stock has rallied 64% since being upgraded to an Add in early August. The target price is increased to $14.20 from $12.85.

DOMAIN HOLDINGS AUSTRALIA LIMITED ((DHG)) Downgrade to Buy from Neutral by UBS and Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 3/3/0

Domain Holdings Australia's FY20 was a "solid beat" versus UBS forecast, somewhat driven by JobKeeper subsidies and a better than expected print result.

UBS has upgraded its FY21 earnings forecast by circa 25% and assumes a quicker return of subscription /agent services revenues back to pre-pandemic levels.

The stock is trading at UBS' target price and the broker downgrades to Neutral from Buy rating with the target price increasing to $3.60 from $3.55.

Domain Holdings revenue was down -9.1% on FY20. Ord Minnett notes Project Nash appears to support the company quite favourably despite the lockdowns and restrictions.

With the company prioritising cost control in FY21, the broker expects better margins and has increased operating earnings forecasts for FY21.

Domain is trading at an elevated premium to its peers, notes the broker, downgrading its recommendation to Hold from Accumulate with a target price of $3.50.

See also DHG upgrade.

GROWTHPOINT PROPERTIES AUSTRALIA ((GOZ)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 1/2/0

Growthpoint Properties' FY20 funds from operation (FFO) was 4% ahead of Ord Minnett’s forecast. Portfolio occupancy decreased to 93% as Botanicca, a newly completed project in Melbourne, was vacant on completion.

No earnings guidance was provided for FY21 but the dividend was guided to 20c, down -8% versus FY20.

Driven by valuation, Ord Minnett downgrades its recommendation to Hold from Accumulate with the target price rising to $3.40 from $3.30.

IDP EDUCATION LIMITED ((IEL)) Downgrade to Hold from Add by Morgans .B/H/S: 4/1/0

IDP Education’s FY20 result was materially ahead of Morgans expectations.

This was largely due to a quicker-than-expected recovery of its IELTS division and signs of strong student demand for its placement operations.

The company ended the period with $205m of net cash (assisted by the $225m capital raising in April) and declared it will pay its deferred 19.5cps interim dividend in September.

Morgans does not expect the recovery to be linear for the company and due to the recent strong share price the rating is reduced to Hold from Add.

The target price is increased to $19.31 from $15.07.

IMDEX LIMITED ((IMD)) Downgrade to Neutral from Buy by UBS .B/H/S: 0/1/0

Imdex's FY20 operating income beat UBS's forecast. The broker highlights a strong start to FY21 with tools to hire exceeding last year. Progressive recovery is expected across FY21 and FY22.

Earnings growth forecasts downgraded by -3-7% for FY21-23 driven by higher D&A charges which offset operational upgrades of 3-11% across FY21-23.

The broker downgrades its rating to Neutral from Buy with the target price increasing to $1.45 from $1.30.

IRESS LIMITED ((IRE)) Downgrade to Hold from Add by Morgans .B/H/S: 1/2/1

Iress reported headline profit (NPAT) of $26.3m, which was broadly in-line with Morgans forecasts. An interim dividend of 16cps was declared.

The company did not reinstate previous guidance, given continued potential disruptions (primarily related to project implementations) from covid-19.

Morgans concludes the company has a strong recurring earnings base and pipeline of opportunities, but investment for growth remains high and the broker is looking for a clearer point at which operating leverage will materialise.

The rating is downgraded to Hold from Add. The target price is decreased to $12.05 from $13.74.

INVOCARE LIMITED ((IVC)) Downgrade to Neutral from Buy by Citi .B/H/S: 1/4/1

Citi reduces 2020-22 operating earnings forecasts to account for the lower volume in case averages that is expected over the foreseeable future.

The broker also assumes gathering restrictions will affect the business and the multiple will re-rate higher as social distancing measures are eased and there is clarity on the new senior management strategy.

First half net profit was -17% below forecasts and there is no 2020 guidance. However, the 5.5c interim dividend was unexpected. Rating is downgraded to Neutral from Buy. Target is lowered to $11.00 from $12.75.

ORIGIN ENERGY LIMITED ((ORG)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 4/3/0

FY20 results were in line with Macquarie's estimates. Weaker pricing has weighed on guidance, with underlying profit forecast to fall to $300m in FY21. Operating earnings guidance (EBITDA) is $1.15-1.3bn.

Macquarie notes the upside relies on a rally in oil and/or gas prices amid the company's ability to shorten its exposure to falling power prices. Rating is downgraded to Neutral from Outperform and the target reduced to $6.01 from $6.62.

QANTAS AIRWAYS LIMITED ((QAN)) Neutral by Citi .B/H/S: 3/2/1

Qantas's FY20 result was a shocker as expected, and the broker downgrades FY22 and FY23 revisions -6% and -10% respectively, finding little joy in the outlook.

Cit expects a domestic recovery in the second half of FY21, led by Jetstar Domestic, but the earliest recovery for the international operations is FY22.

On the upside, Qantas is addressing its cost base and the broker expects FY21 first-half earnings will represent the nadir. Neutral (High Risk) rating retained. Target falls to $4.40 from $4.60.

SONIC HEALTHCARE LIMITED ((SHL)) Downgrade to Neutral from Buy by Citi .B/H/S: 2/4/1

Sonice Healthcare has delivered an FY20 result above June guidance, consensus and Citi forecasts, courtesy an uptick in covid testing. While pathology rose, radiology took a -10% hit as volumes dried up.

Cash generation was strong and the business base largely recovered from its March-May slump by year-end. Revenue growth in July and August was extremely strong, again thanks to covid. No guidance was forthcoming.

FY21 forecasts rise but Citi expects a return to normal in FY22, although FY22 EPS  forecasts fall -7% to reflect currency and interest rate movements.

Broker downgrades to Neutral from Buy. Target is raised to $35.50 from $34.00.

SMARTGROUP CORPORATION LTD ((SIQ)) Downgrade to Hold from Add by Morgans .B/H/S: 2/3/0

First half profit (NPATA) of $32.1m was in-line with recent guidance with the balance sheet net debt figure of around $12m a key positive, notes Morgans.

Novated lease volumes showed further recovery into June/July, but not to the same extent as competitors, according to the broker.

Morgans expects a relatively low organic growth profile and capital will likely need to be deployed (acquisitions) for growth.

The rating is lowered to Hold from Add. The target price is decreased to $6.75 from $7.20.

TELSTRA CORPORATION LIMITED ((TLS)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 3/2/1

FY20 net profit was down -14.4% while underlying operating earnings (EBITDA) increased 11.5%. Ord Minnett makes material reductions to forecasts based on the FY20 financials and FY21 guidance and also transfers coverage to another analyst.

The broker's review highlights significant structural challenges and the dividend yield is not considered overly compelling. Rating is downgraded to Hold from Accumulate and the target lowered to $3.40 from $4.10.

TREASURY WINE ESTATES LIMITED ((TWE)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/5/0

Treasury Wine Estates is caught between rising geopolitical tensions between Australia and China, with the latter investigating the winemaker for anti-dumping practices.

Macquarie sees the company as a pawn in a larger game, noting Treasury Wine's Asian division which forms about 40% of the group's operating income may suffer.

China is the winemaker's key export region, highlights the broker, adding any disruption in this market would be "very destructive" for the company.

The rating is downgraded to Neutral from Outperform. The target price is decreased to $10.60 from $14.90.

VIVA ENERGY GROUP LIMITED ((VEA)) Downgrade to Hold from Add by Morgans .B/H/S: 3/3/0

Viva Energy Group posted a relatively good first half result, according to Morgans. The analyst states retail was close to estimates, commercial impressed and refining again dragged.

The broker highlights the outlook for the refining business remains uncertain.

The company will distribute most of the Viva Energy REIT sale proceeds (around $530m) to shareholders through a capital return of 21.46cps and special dividend of 5.94cps.

Following recent share price strength, the rating is decreased to Hold from Add. The target price is decreased to $1.95 from $2.00.

WISETECH GLOBAL LIMITED ((WTC)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 1/2/1

Wisetech Global's FY20 result was slightly ahead of Credit Suisse's forecast and at the lower end of company management's guidance. The company's FY21 guidance points towards operating income of $155-$180m supported by an increased focus on costs.

The broker believes the foundation is set for attractive long term growth, amplified at profit given the scalability of the software and operating model. Long term investors are expected to be in for surprises to the upside.

Overall, the broker struggles to bridge the strong share price performance with the news in the FY20 result and downgrades its rating to Neutral from Outperform. The target price increases to $28 from $23.6

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Click to view our Glossary of Financial Terms