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Weekly Ratings, Targets, Forecast Changes – 19-03-21

Weekly Reports | Mar 22 2021

This story features BWP TRUST, and other companies. For more info SHARE ANALYSIS: BWP

Weekly update on stockbroker recommendation, target price, and earnings forecast changes.

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 March 15 to Friday March 19, 2021
Total Upgrades: 7
Total Downgrades: 4
Net Ratings Breakdown: Buy 53.30%; Hold 38.88%; Sell 7.82%

For the week ending Friday 19 March there were seven upgrades and four downgrades to ASX-listed companies by brokers in the FNArena database.

In a relatively quiet week there were no material adjustments by brokers to company price targets.

Dalrymple Bay Infrastructure was atop the table for the largest percentage increase in earnings forecasts by brokers for the week after Citi noted two potential near-term catalysts. The first is inclusion in the ASX300 today (March 22) and also the Queensland Competition Authority is due to decide around a light-touch regulatory structure. This would allow the company to negotiate the price with miners for use of its terminal instead of having the regulator set maximum prices.

Next in terms of percentage increase to forecasts earnings was Oil Search after both Citi and UBS revised up forecast oil prices for the sector. Although UBS notes the company has the highest sensitivity to changes in the oil price, it is the broker's least preferred of the energy stocks due to few near-term catalysts.

Japara Healthcare was the only company in the FNArena database to experience a material percentage fall in forecast earnings for the week. After reviewing the final report from the Royal Commission, UBS was underwhelmed by potential delays to much needed regulatory clarity until the FY22 Budget (to be delivered in May this year).

Total Buy recommendations take up 53.3% of the total, versus 38.88% on Neutral/Hold, while Sell ratings account for the remaining 7.82%.

Upgrade

BWP TRUST ((BWP)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/2/2

UBS upgrades to Neutral from Sell given the recent underperformance in the stock, while downgrading FY21 earnings estimates by -2% and FY22-25 by -4-5%.

The downgrade to estimates stems from the fact around two thirds of the leases are expiring in 2021-25 and this presents an elevated level of risk. Target is steady at $3.86.

CLOVER CORPORATION ((CLV)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/0/0

UBS upgrades Clover Corp to Buy from Neutral rating with the target price dropping to $2 from $2.10. 

The broker views the stock as a recovery play offering a best-of-breed product and a unique growth story despite a covid-hit weak result with revenues down -22% versus last year.

The company's FY21 revenue guidance also implies a -16-37% downgrade to UBS's second-half expectations. Even so, the broker expects a gradual recovery with FY20 revenues and net profit expected to return by FY23. 

GOODMAN GROUP ((GMG)) Upgrade to Buy from Neutral by UBS .B/H/S: 6/0/0

Demand for space from tenants has accelerated amid a ramping up of development work in progress. Still, UBS notes the size of the development pipeline is still up 40% in terms of square metres.

The flexibility on the balance sheet, meanwhile, allows the business to capitalise on structural tailwinds and establish a longer-dated development strategy.

The stock is now trading at a significant discount to the broker's $18.70 target and, given the acceleration, the risk/reward is now skewed to the upside. Hence UBS upgrades to Buy from Neutral.

QANTAS AIRWAYS LIMITED ((QAN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 5/0/1

Macquarie expects vaccine rollouts in Qantas’ key international destinations to be largely completed by the end of 2021. Supported by border policies, government stimulus and the vaccine, the broker expects domestic capacity to overshoot pre-covid levels in the near term.

In the broker's view, Qantas has structurally improved the business through covid and has a higher skew towards the more attractive domestic and loyalty businesses and the cost-out which reduces downside risks within international.

The broker upgrades to Outperform from Neutral with the target rising to $6.35 from $5.05.

RIDLEY CORPORATION LIMITED ((RIC)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/0/0

Credit Suisse assesses Ridley is generating a reliable record of delivery on its strategy. Optimisation has started to yield benefits and the broker is also comfortable with the organic growth story. First half operating earnings were ahead of estimates, up 16.5%.

As the valuation is undemanding and there is increasing conviction in the medium-term growth profile, Credit Suisse upgrades to Outperform from Neutral and raises the target to $1.15 from 85c.

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

With the national broadband network rollout affecting fixed margins, Ord Minnett notes the mobile retail sector is the most important earnings driver for Telstra Corp.

According to the broker's assessment of the market, Telstra will lose share of the prepaid market to mobile virtual network operators (MVNO). The postpaid market remains lucrative for Telstra with the company better placed given its head start in the rollout of 5G infrastructure.

Noting the company offers good subscriber growth, quality cellular service and an attractive valuation, Ord Minnett upgrades its rating to Buy from Accumulate with the target price rising to $4.05 from $3.75.

WOODSIDE PETROLEUM LIMITED ((WPL)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/2/0

UBS lifts Brent oil price forecast for 2021 to US$65.50/bbl, from US$57/bbl, and 2022 to US$62/bbl from US$60/bbl.

This reflects the market's desire to price in a faster recovery in demand, along with the outcome of recent OPEC meetings where producers agreed to defer raising production.

In turn, earnings estimates raised for Woodside Petroleum and the rating is upgraded to Buy from Neutral as the risk/reward is now considered appealing, given the stock has underperformed Brent over the year to date. Target is raised to $26.70 from $26.05.

Downgrade

BORAL LIMITED ((BLD)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 3/1/0

Ord Minnett lowers the rating to Lighten from Hold as the valuation appears stretched and the company's new $300m earnings (EBIT) benefit target, tied to a transformation program, seems ambitious.

In addition, the broker highlights a risk to the US business are rising US mortgage rates, which may temper demand for housing as the year progresses.

The analyst acknowledges upside risk should the US Building Products business be sold for $1.5bn. It's considered the majority of this could be returned to shareholders. The target is increased to $5 from $4.90.

FLIGHT CENTRE LIMITED ((FLT)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 1/3/3

Morgan Stanley notes significant momentum in recent weeks amid the announcement from the federal government of a stimulus package for the broader tourism sector.

Nevertheless, the Flight Centre stock price is now 5% ahead of pre-pandemic levels, adjusting for the capital raising.

Morgan Stanley assesses fundamental upside from this point requires the view that earnings will materially improve post the pandemic.

The broker downgrades to Underweight from Equal-weight, partially stemming from a preference for Qantas ((QAN)) within the travel coverage. Target is $17.50. Industry view: Attractive.

STOCKLAND ((SGP)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/4/0

UBS assesses Stockland has benefited significantly from government policy aimed at strengthening the new residential sector as well as a structural shift from urban centres caused by the pandemic.

Nevertheless, the strength in residential markets means risks around macro prudential policy are heightened and the broker downgrades to Neutral from Buy. Target is steady at $4.50.

UBS also notes, with gearing of around 24% and momentum in residential generating strong cash flow, the balance sheet is sound.
Developments are likely to have capital partners and be long dated.

VICINITY CENTRES ((VCX)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/4/2

Ord Minnett downgrades Vicinity Centres to Hold from Buy with a target price of $1.80.

Vicinity Centres' share price has risen about 40% since October's low of $1.21 as the stock recovered from the impact of covid. Ord Minnett believes there may be a further -10% softening in Vicinity Centres' stock price.

While retail conditions are improving, Ord Minnett expects net property income to rebase -13% below pre-covid levels in 2021 due to lower footfall, particularly in the CBD assets. 

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 BWP TRUST Neutral Sell UBS
2 CLOVER CORPORATION Buy Neutral UBS
3 GOODMAN GROUP Buy Neutral UBS
4 QANTAS AIRWAYS LIMITED Buy Neutral Macquarie
5 RIDLEY CORPORATION LIMITED Buy Neutral Credit Suisse
6 TELSTRA CORPORATION LIMITED Buy Buy Ord Minnett
7 WOODSIDE PETROLEUM LIMITED Buy Neutral UBS
Downgrade
8 BORAL LIMITED Sell Neutral Ord Minnett
9 FLIGHT CENTRE LIMITED Sell Neutral Morgan Stanley
10 STOCKLAND Neutral Buy UBS
11 VICINITY CENTRES Neutral Buy Ord Minnett

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 QAN QANTAS AIRWAYS LIMITED 67.0% 33.0% 34.0% 6
2 BWP BWP TRUST -50.0% -75.0% 25.0% 4
3 GMG GOODMAN GROUP 100.0% 83.0% 17.0% 6
4 WPL WOODSIDE PETROLEUM LIMITED 71.0% 57.0% 14.0% 7
5 TLS TELSTRA CORPORATION LIMITED 40.0% 30.0% 10.0% 5
6 BKL BLACKMORES LIMITED -17.0% -20.0% 3.0% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 SGP STOCKLAND 8.0% 25.0% -17.0% 6
2 VCX VICINITY CENTRES -33.0% -17.0% -16.0% 6
3 FLT FLIGHT CENTRE LIMITED -29.0% -14.0% -15.0% 7
4 BLD BORAL LIMITED 50.0% 60.0% -10.0% 5
5 APA APA GROUP 71.0% 80.0% -9.0% 7
6 GXY GALAXY RESOURCES LIMITED -33.0% -25.0% -8.0% 6
7 SUN SUNCORP GROUP LIMITED 43.0% 50.0% -7.0% 7
8 JHC JAPARA HEALTHCARE LIMITED 13.0% 17.0% -4.0% 4

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 QAN QANTAS AIRWAYS LIMITED 5.790 5.462 6.01% 6
2 TLS TELSTRA CORPORATION LIMITED 3.586 3.526 1.70% 5
3 APA APA GROUP 10.829 10.654 1.64% 7
4 VCX VICINITY CENTRES 1.637 1.627 0.61% 6
5 WPL WOODSIDE PETROLEUM LIMITED 27.574 27.440 0.49% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 GXY GALAXY RESOURCES LIMITED 2.417 2.550 -5.22% 6
2 SUN SUNCORP GROUP LIMITED 11.619 11.897 -2.34% 7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 DBI DALRYMPLE BAY INFRASTRUCTURE LTD 8.117 6.360 27.63% 3
2 OSH OIL SEARCH LIMITED 17.630 16.005 10.15% 7
3 WPL WOODSIDE PETROLEUM LIMITED 167.204 157.759 5.99% 7
4 STO SANTOS LIMITED 45.779 43.689 4.78% 7
5 SXY SENEX ENERGY LIMITED 0.812 0.778 4.37% 6
6 KAR KAROON ENERGY LTD 3.367 3.233 4.14% 3
7 QAN QANTAS AIRWAYS LIMITED -68.533 -70.650 3.00% 6
8 TPG TPG TELECOM LIMITED 17.448 17.048 2.35% 6
9 VCX VICINITY CENTRES 11.370 11.167 1.82% 6
10 BLD BORAL LIMITED 22.048 21.715 1.53% 5

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 JHC JAPARA HEALTHCARE LIMITED -4.100 -3.800 -7.89% 4
2 APA APA GROUP 25.160 26.220 -4.04% 7
3 GPT GPT GROUP 30.413 30.967 -1.79% 6
4 EVN EVOLUTION MINING LIMITED 24.871 25.300 -1.70% 7
5 NHF NIB HOLDINGS LIMITED 29.843 30.171 -1.09% 7
6 CSL CSL LIMITED 709.436 714.386 -0.69% 7
7 RIO RIO TINTO LIMITED 1488.171 1496.453 -0.55% 7
8 PPH PUSHPAY HOLDINGS LIMITED 3.591 3.609 -0.50% 3
9 S32 SOUTH32 LIMITED 13.512 13.579 -0.49% 7
10 NIC NICKEL MINES LIMITED 11.717 11.775 -0.49% 3

Technical limitations

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CHARTS

BLD BWP CLV FLT GMG QAN RIC SGP TLS VCX WPL

For more info SHARE ANALYSIS: BLD - BORAL LIMITED

For more info SHARE ANALYSIS: BWP - BWP TRUST

For more info SHARE ANALYSIS: CLV - CLOVER CORPORATION LIMITED

For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED

For more info SHARE ANALYSIS: GMG - GOODMAN GROUP

For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED

For more info SHARE ANALYSIS: RIC - RIDLEY CORPORATION LIMITED

For more info SHARE ANALYSIS: SGP - STOCKLAND

For more info SHARE ANALYSIS: TLS - TELSTRA CORPORATION LIMITED

For more info SHARE ANALYSIS: VCX - VICINITY CENTRES

For more info SHARE ANALYSIS: WPL - WOODSIDE PETROLEUM LIMITED