Weekly Reports | Oct 18 2021
Weekly update on stockbroker recommendation, target price, and earnings forecast changes.
By Mark Woodruff
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 October 11 to Friday October 15, 2021
Total Upgrades: 9
Total Downgrades: 5
Net Ratings Breakdown: Buy 55.27%; Hold 37.59%; Sell 7.14%
For the week ending Friday October 15, there were nine upgrades and five downgrades to ASX-listed companies covered by brokers in the FNArena database.
There were no material changes to forecast target prices last week.
Whitehaven Coal had the only material percentage increase in earnings forecast by brokers over the week, after September quarter production revealed significantly better than expected production at both the Maules Creek and Narrabri projects, according to Morgan Stanley.
Realised thermal coal prices rose 51% quarter-on-quarter and Macquarie sees further upside ahead. If current spot prices were entered into the analyst’s financial model, the company would be offering a free cash flow yield in excess of 50%. While Credit Suisse feels December quarter production may moderate, inventory drawdowns are expected to sustain sales.
Meanwhile, Zip Co sat atop the table for the largest percentage decrease in forecast earnings last week. This occurred as Citi downgraded its rating to Neutral from Buy and lowered its target price to $7.40 from $7.95 to reflect lower customer growth forecasts and higher operating expenditure forecasts. The latter is thought to reflect increasing promotional activity and global expansion.
Moreover, app downloads for the company’s BNPL offering fell for the sixth consecutive month in September, notes the broker. There’s also considered potential for an equity raise should Zip Co accelerate its global expansion plans.
Total Buy recommendations take up 55.27 % of the total, versus 37.59% on Neutral/Hold, while Sell ratings account for the remaining 7.14%.
ARB CORPORATION LIMITED ((ARB)) Upgrade to Buy from Neutral by Citi .B/H/S: 2/2/1
Citi upgrades its rating for ARB Corp to Buy from Neutral, following both a first quarter update and an -11% share price decline since the August peak. The update revealed better-than-expected profit momentum, despite lockdowns in NSW and Victoria.
The target rises to $55.45 from $48.80. The broker sees both a big US opportunity from more (significant proportion driving) vacations, and the potential for Australian sales to accelerate over the second quarter after lockdowns.
Citi lifts long-term export and US earnings forecasts to allow for gains in the US, benefits from the Ford partnership and an expansion of Thai manufacturing facilities.
BANK OF QUEENSLAND LIMITED ((BOQ)) Upgrade to Buy from Neutral by Citi .B/H/S: 6/0/0
Bank of Queensland's FY21 results met Citi's estimates and the outlook for FY22 is better than expected.
Yet the broker suspects the negative stock reaction stems from a fixation on costs that deceivingly appear to be accelerating.
After adjusting for an accounting reclassification and slightly higher volume growth, the broker suggests management is on track to deliver broadly flat expenses. Rating is upgraded to Buy from Neutral and the target lifted to $10.50 from $9.90.
BUBS AUSTRALIA LIMITED ((BUB)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/0/0
Bubs Australia's trading update suggests improved momentum in the daigou channel, and that continued focus on innovation should allow further expansion into new markets and categories. Gross sales were up 97%.
Citi believes the improvement in daigou, despite international borders being closed, is a reflection on how corporate daigou has evolved.
The broker upgrades to Buy/High Risk from Neutral/High Risk and raises its target to $0.63 from $0.41.
CAPRICORN METALS LIMITED ((CMM)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 0/1/0
September quarter production was -8% below Macquarie's estimates. The company has guided to FY22 production of 110-120,000 ounces.
The expectation for long-term production rates has been reiterated at 110-125,000 ounces per annum, largely in line with expectations.
Key to Macquarie's near term outlook is the increase in throughput to 4.5mtpa run rate. Following recent share price weakness, the broker upgrades to Neutral from Underperform. Target is steady at $2.40.
CHORUS LIMITED ((CNU)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/2/0
UBS upgrades the rating for Chorus to Neutral from Sell after recent share price underperformance and a low probability the Commerce Commission will lower its regulated asset base (RAB) estimate in December.
Moreover, higher dividends are estimated for the long term. The target price moves up to NZ$6.35 from NZ$6.30.
DATA#3 LIMITED. ((DTL)) Upgrade to Add from Hold by Morgans .B/H/S: 1/0/0
After a recent share price fall, and with the current share price -20% adrift of Credit Suisse's $5.92 target price, the broker upgrades its rating to Add from Hold.
The analyst points out the AGM is set for Thursday 28th October.