article 3 months old

Weekly Ratings, Targets, Forecast Changes – 10-09-21

Weekly Reports | Sep 13 2021

This story features APA GROUP, and other companies. For more info SHARE ANALYSIS: APA

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 September 6 to Friday September 10, 2021
Total Upgrades: 8
Total Downgrades: 8
Net Ratings Breakdown: Buy 52.93%; Hold 39.31%; Sell 7.77%

For the week ending Friday 10 September, there were eight upgrades and eight downgrades to ASX-listed companies covered by brokers in the FNArena database.

In the only material adjustment to target prices by brokers for the week, City Chic Collective had the largest percentage rise in the database, after a positive market update by US peer Torrid. Citi feels this bodes well, given City Chic derives some 39% of its sales from the US. It also reconfirmed to Macquarie that the female plus-size market is underpenetrated.

Orocobre had the largest percentage rise in forecast earnings in the FNArena database last week as brokers react to a beat for FY21 results. After combining the Orocobre and Galaxy Resources accounts, Citi generates a lift in forecast earnings for Orocobre in FY22 and FY23 of 139% and 55%, respectively.

The next largest rises in forecast earnings went to Coronado Global Resources and Whitehaven Coal. This comes as Macquarie strategists consider the outlook for coal continues to be positive, even after thermal and met-coal prices have more than doubled in 2021. The broker notes equities have lagged the increase in coal prices and predicts material upside, with greater leverage to metallurgical coal prices favoured via Coronado.

Despite Qantas having the largest percentage decrease in earnings forecasts by brokers in the FNArena database last week, UBS believes the company will return as a stronger airline post pandemic. Nevertheless, the recovery is sensitive to higher vaccination rates, cooperation on borders and increased traffic from pent-up demand.

Coming next was Mayne Pharma, following a miss in broker expectations for FY21 earnings. Macquarie highlights falling gross margins from increased competition. However, Citi believes the company is transitioning to branded products from generic drugs as the largest segment. The analyst lifted the rating to Buy from Neutral soon after the initial downward share price reaction to the FY21 result.

Finally, Northern Star Resources also appears on the list for the largest percentage fall in forecast earnings last week. Despite this, Citi retains its Buy rating and expects Kalgoorlie District Milling synergies.

Total Buy recommendations take up 52.93% of the total, versus 39.31% on Neutral/Hold, while Sell ratings account for the remaining 7.77%.

Upgrade

APA GROUP ((APA)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 3/2/0

Following results season, Ord Minnett prefers APA Group within the Utilities sector due to its strong free cash flow generation, and opportunities for organic and inorganic growth.

The broker increases its rating to Buy from Accumulate on valuation. The price target of $10.75 is unchanged.

DEXUS ((DXS)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/2/1

Macquarie assesses Dexus has been able to improve cash flow by recycling capital, and earnings have grown despite a challenged environment. Office markets form the base and asset valuations are resilient. The broker expects earnings growth in excess of 6% in both FY23 and FY24.

There is also upside from funds management. The business has $23bn in funds under management making it the fourth largest under the broker's coverage with unlisted and listed funds in the platform.

While Macquarie does not assume it is all blue sky, generating a track record of growth in this area could mean the multiple expands. Rating is upgraded to Outperform from Neutral and the target is raised to $11.67 from $11.11.

FLIGHT CENTRE TRAVEL GROUP LIMITED ((FLT)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/4/1

The large exposure to Australasian sales, particularly the international outbound component, has made Flight Centre the least preferred in Credit Suisse's coverage.

Yet, with progress on vaccinations and a better break-even opportunity, the rating is upgraded to Outperform from Neutral and the broker's new stock travel pick.

The broker assesses the corporate division has been steadily gaining market share and remains a high-quality business. Target is raised to $19 from $18.

FORTESCUE METALS GROUP LIMITED ((FMG)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/2/2

Citi upgrades Fortescue Metals to Buy from Neutral and reduces the target to $18.50 from $19.50. The broker suspects iron ore could hold at levels over US$100/t for longer than the market is currently factoring.

Longer-dated market concerns regarding large-scale iron ore exports from Guinea now look much less certain. Moreover, China's leading indicators are stabilising and have headed higher from recent lows.

G.U.D. HOLDINGS LIMITED ((GUD)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/1/0

Citi is increasingly concerned about the sustainability of the current new car sales momentum given industry articles indicate new car orders are down significantly in lockdown areas. Also, auto manufacturers continue to be impacted by semi-conductor supply issues.

The broker upgrades to Buy from Neutral, as this should be a tailwind once lockdown restrictions are lifted. The target price remains at $12.30. Following a recent share price decline it's thought the significant discount to peer Bapcor ((BAP)) is excessive.

HANSEN TECHNOLOGIES LIMITED ((HSN)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 1/0/0

While no specific reason was given, BGH Capital has withdrawn its proposed takeover of Hansen Technologies, with all formal
proceedings relating to the takeover now terminated.

The broker notes Hansen's recent cash flow track record has been excellent and estimates the company now has a debt capacity of around $350m.

Ord Minnett expects the company to focus on M&A, where it has an excellent track execution and integration record, especially once global travel opens up in 2022.

The company reiterated its FY25 targets of $500m revenue at an earnings margin of 32-35%, and the broker's earnings forecasts are unchanged.

Ord Minnett upgrades Hansen Technologies to Buy from Hold and the target of $6.50 is unchanged.

IMDEX LIMITED ((IMD)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/0/0

Macquarie considers the earnings outlook is positive given the latest data that show a continuation of favourable industry inputs. Rating is upgraded to Outperform from Neutral.

The main risks to the rating include a material downturn in gold and copper prices or disruptions caused by the pandemic to operations in Australia and North America. Target is raised to $2.65 from $2.56.

MINERAL RESOURCES LIMITED ((MIN)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/0/1

Citi suspects decisions around the Ashburton development and re-start of Wodgina will be outlined on or before the AGM that is scheduled for November 18.

The share price is down -15% from the recent high in July as benchmark iron ore prices have dropped. The broker believes an upward trend in the lithium market will largely offset weakness in iron ore and the growth outlook is unaffected.

Rating is upgraded to Buy from Neutral and the target is steady at $65. The company has completed the acquisition of 40% of the Red Hill joint venture which further supports Ashburton.

Downgrade

CORPORATE TRAVEL MANAGEMENT LIMITED ((CTD)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 5/2/0

Credit Suisse assesses the market is increasingly close to reflect Corporate Travel's synergy and efficiencies target. Yet, delays to office timelines limit the full sales potential for the business.

Additionally, the share price has continued to rise and while still envisaging upside, the broker suspects this is likely to take longer than previously anticipated. Hence, the rating is downgraded to Neutral from Outperform. Target is $23.

JUPITER MINES LIMITED ((JMS)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/0/1

Jupiter Mine's 49.9%-owned Tshipi manganese mine in South Africa has announced a dividend well below Macquarie's expectation.

The lower distribution is due to Tshipi being cautious on depressed lower-grade manganese prices and higher shipping and transport costs, while also maintaining cash to fund FY22 capital expenditure, the broker notes.

While this leads to only a -2% downgrade to the broker's FY22 earnings forecast, increased risk has the broker increasing its weighted cost of capital assumption and lowering its forecast enterprise multiple. Target falls to 22c from 30c,

Downgrade to Underperform from Neutral.

LENDLEASE GROUP ((LLC)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 3/2/1

Over the next 6-12 months the business may lack upside, Morgan Stanley asserts, as the company takes its development work-in-hand towards a target of around $20bn, so that its target for $8bn per year in completions from FY24 can be realised.

Beyond FY24 the broker finds it unclear if production targets are sustainable or adequately funded.

Rating is downgraded to Underweight from Equal-weight as FY22 and FY23 estimates are revised down -20% and -12%, respectively, to reflect reduced cost reductions at the group level. Target is reduced to $11.40 from $13.00. Industry view is In-Line.

MACQUARIE GROUP LIMITED ((MQG)) Downgrade to Hold from Add by Morgans .B/H/S: 2/2/1

Morgans upgrades FY22 and FY23 estimates for earnings per share by 8% and 3%, respectively, to reflect Macquarie Group's more positive outlook. Macquarie Group expects first half net profit to be only slightly lower compared with the prior half's strong performance.

The business is exposed to structural growth areas and capitalising well on the current environment, with the broker noting some value accretive acquisitions.

Yet, with the stock running hard and now trading on 20x FY22 PE it is close to fair value and the broker downgrades to Hold from Add. Target is raised to $181.10 from $172.30.

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

It is Morgans' view that while the company looks promising, much of its future success is already reflected in the share price and the rating is therefore downgraded until further detail on the Samsung quality audit and gross margin expectations are confirmed. 

The rating is downgraded to Hold from Speculative Buy and the target price increases to $5.68 from $4.49.

QUBE HOLDINGS LIMITED ((QUB)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/3/0

Qube Holdings has announced the acquisition of the Newcastle Agri Terminal for -$90m. Credit Suisse notes that although this is a small deal for the company, it allows Qube to provide grain export services through the Port of Newcastle.

The broker also notes that Qube is set to receive $1.3bn in initial proceeds from the Moorebank sale, which is likely to generate $200-300m in tax payments and $600m in capital management.

Accounting for the acquisition, Credit Suisse upgrades earnings per share forecasts by 0.5% and 2.0% for FY22 and FY23, respectively. 

The rating is downgraded to Neutral from Outperform and the target price increases to $3.55 from $3.30.

TECHNOLOGY ONE LIMITED ((TNE)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/3/0

UBS resumes coverage with a downgrade to Neutral from Buy and $11.70 price target, transfering coverage to another analyst.

The broker forecasts 14% growth in pre-tax profit in FY21-26 and half of this growth is likely to be driven by the migration of the majority of existing customers to the SaaS platform.

The broker is more cautious on the remaining uplift, which is likely to be driven by product/mix and UK expansion.  While the recent acquisition of Scientia should assist the UK expansion, UBS does not believe it will provide substantial upside.

WEBJET LIMITED ((WEB)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/4/0

Credit Suisse envisages material upside to consensus estimates if Webjet can achieve its -20% cost reduction target. Nevertheless, the broker is cautious about fully modelling the upside.

Improvement is expected in the primarily domestic Australian B2C division into 2022. There was limited opportunity, given the resurgence in the pandemic, to fully capture the northern hemisphere summer in the bed bank division.

Credit Suisse now has a preference for Flight Centre ((FLT)), likely to be a key beneficiary for Australia's re-opening. Credit Suisse downgrades to Neutral from Outperform and raises the target to $5.70 from $5.20.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 APA GROUP Buy Buy Ord Minnett
2 DEXUS Buy Neutral Macquarie
3 FLIGHT CENTRE TRAVEL GROUP LIMITED Buy Neutral Credit Suisse
4 FORTESCUE METALS GROUP LIMITED Buy Neutral Citi
5 G.U.D. HOLDINGS LIMITED Buy Neutral Citi
6 HANSEN TECHNOLOGIES LIMITED Buy Neutral Ord Minnett
7 IMDEX LIMITED Buy Neutral Macquarie
8 MINERAL RESOURCES LIMITED Buy Neutral Citi
Downgrade
9 CORPORATE TRAVEL MANAGEMENT LIMITED Neutral Buy Credit Suisse
10 JUPITER MINES LIMITED Sell Neutral Macquarie
11 LENDLEASE GROUP Sell Neutral Morgan Stanley
12 MACQUARIE GROUP LIMITED Neutral Buy Morgans
13 NOVONIX LIMITED Neutral Buy Morgans
14 QUBE HOLDINGS LIMITED Neutral Buy Credit Suisse
15 TECHNOLOGY ONE LIMITED Neutral N/A UBS
16 WEBJET LIMITED Neutral Buy Credit Suisse

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 GUD G.U.D. HOLDINGS LIMITED 75.0% 40.0% 35.0% 4
2 UMG UNITED MALT GROUP LIMITED 75.0% 50.0% 25.0% 4
3 CCX CITY CHIC COLLECTIVE LIMITED 88.0% 63.0% 25.0% 4
4 SCP SHOPPING CENTRES AUSTRALASIA PROPERTY GROUP RE LIMITED 40.0% 17.0% 23.0% 5
5 REG REGIS HEALTHCARE LIMITED 67.0% 50.0% 17.0% 3
6 DXS DEXUS 33.0% 17.0% 16.0% 6
7 FLT FLIGHT CENTRE TRAVEL GROUP LIMITED -7.0% -21.0% 14.0% 7
8 NST NORTHERN STAR RESOURCES LIMITED 80.0% 67.0% 13.0% 5
9 EVN EVOLUTION MINING LIMITED -17.0% -29.0% 12.0% 6
10 APX APPEN LIMITED 50.0% 40.0% 10.0% 4

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 IGO IGO LIMITED -38.0% -10.0% -28.0% 4
2 MQG MACQUARIE GROUP LIMITED 10.0% 30.0% -20.0% 5
3 EBO EBOS GROUP LIMITED 40.0% 60.0% -20.0% 5
4 VRT VIRTUS HEALTH LIMITED 33.0% 50.0% -17.0% 3
5 LLC LENDLEASE GROUP 33.0% 50.0% -17.0% 6
6 CTD CORPORATE TRAVEL MANAGEMENT LIMITED 71.0% 86.0% -15.0% 7
7 WEB WEBJET LIMITED 43.0% 57.0% -14.0% 7
8 AWC ALUMINA LIMITED 20.0% 33.0% -13.0% 5
9 AZJ AURIZON HOLDINGS LIMITED 20.0% 33.0% -13.0% 5
10 CSL CSL LIMITED 17.0% 29.0% -12.0% 6

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 CCX CITY CHIC COLLECTIVE LIMITED 6.663 5.938 12.21% 4
2 MQG MACQUARIE GROUP LIMITED 174.820 161.860 8.01% 5
3 MIN MINERAL RESOURCES LIMITED 64.025 59.520 7.57% 4
4 SCP SHOPPING CENTRES AUSTRALASIA PROPERTY GROUP RE LIMITED 2.676 2.528 5.85% 5
5 TNE TECHNOLOGY ONE LIMITED 10.100 9.567 5.57% 4
6 ORE OROCOBRE LIMITED 8.884 8.520 4.27% 5
7 REG REGIS HEALTHCARE LIMITED 2.360 2.270 3.96% 3
8 SFR SANDFIRE RESOURCES LIMITED 7.952 7.673 3.64% 6
9 ING INGHAMS GROUP LIMITED 4.350 4.200 3.57% 4
10 SHL SONIC HEALTHCARE LIMITED 43.830 42.397 3.38% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 APX APPEN LIMITED 13.775 14.920 -7.67% 4
2 RRL REGIS RESOURCES LIMITED 3.230 3.383 -4.52% 6
3 CGC COSTA GROUP HOLDINGS LIMITED 3.750 3.920 -4.34% 4
4 A2M A2 MILK COMPANY LIMITED 6.290 6.525 -3.60% 6
5 AZJ AURIZON HOLDINGS LIMITED 4.360 4.508 -3.28% 5
6 NST NORTHERN STAR RESOURCES LIMITED 11.790 12.108 -2.63% 5
7 LLC LENDLEASE GROUP 12.692 12.958 -2.05% 6
8 CSL CSL LIMITED 305.317 308.843 -1.14% 6
9 MYX MAYNE PHARMA GROUP LIMITED 0.307 0.310 -0.97% 3
10 DRR DETERRA ROYALTIES LIMITED 4.950 4.970 -0.40% 4

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 ORE OROCOBRE LIMITED 10.500 8.717 20.45% 5
2 CRN CORONADO GLOBAL RESOURCES INC 3.707 3.081 20.32% 3
3 WHC WHITEHAVEN COAL LIMITED 45.262 39.224 15.39% 6
4 HLS HEALIUS LIMITED 31.332 27.383 14.42% 6
5 DRR DETERRA ROYALTIES LIMITED 28.658 25.726 11.40% 4
6 MQG MACQUARIE GROUP LIMITED 911.260 833.680 9.31% 5
7 EHE ESTIA HEALTH LIMITED 8.533 7.900 8.01% 3
8 OZL OZ MINERALS LIMITED 167.317 156.414 6.97% 6
9 MIN MINERAL RESOURCES LIMITED 675.775 638.760 5.79% 4
10 SFR SANDFIRE RESOURCES LIMITED 115.083 108.929 5.65% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 QAN QANTAS AIRWAYS LIMITED -36.077 -24.243 -48.81% 6
2 MYX MAYNE PHARMA GROUP LIMITED -1.043 -0.783 -33.21% 3
3 NST NORTHERN STAR RESOURCES LIMITED 25.780 33.950 -24.06% 5
4 WSA WESTERN AREAS LIMITED 2.725 3.336 -18.32% 5
5 UMG UNITED MALT GROUP LIMITED 12.393 15.143 -18.16% 4
6 EVN EVOLUTION MINING LIMITED 15.228 16.767 -9.18% 6
7 RRL REGIS RESOURCES LIMITED 24.943 27.237 -8.42% 6
8 APX APPEN LIMITED 34.885 37.868 -7.88% 4
9 WEB WEBJET LIMITED -6.514 -6.060 -7.49% 7
10 NCM NEWCREST MINING LIMITED 131.125 141.146 -7.10% 6

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

APA BAP CTD DXS FLT FMG GUD HSN IMD JMS LLC MIN MQG NVX QUB TNE WEB

For more info SHARE ANALYSIS: APA - APA GROUP

For more info SHARE ANALYSIS: BAP - BAPCOR LIMITED

For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED

For more info SHARE ANALYSIS: DXS - DEXUS

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

For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED

For more info SHARE ANALYSIS: GUD - G.U.D. HOLDINGS LIMITED

For more info SHARE ANALYSIS: HSN - HANSEN TECHNOLOGIES LIMITED

For more info SHARE ANALYSIS: IMD - IMDEX LIMITED

For more info SHARE ANALYSIS: JMS - JUPITER MINES LIMITED

For more info SHARE ANALYSIS: LLC - LENDLEASE GROUP

For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED

For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED

For more info SHARE ANALYSIS: NVX - NOVONIX LIMITED

For more info SHARE ANALYSIS: QUB - QUBE HOLDINGS LIMITED

For more info SHARE ANALYSIS: TNE - TECHNOLOGY ONE LIMITED

For more info SHARE ANALYSIS: WEB - WEBJET LIMITED