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Weekly Ratings, Targets, Forecast Changes – 29-07-22

Weekly Reports | Aug 01 2022

This story features ANSARADA GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: AND

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 July 25 to Friday July 29, 2022
Total Upgrades: 9
Total Downgrades: 11
Net Ratings Breakdown: Buy 59.29%; Hold 33.76%; Sell 6.95%

For the week ending Friday July 29 there were nine upgrades and eleven downgrades to ASX-listed companies covered by brokers in the FNArena database.

Wagners Holdings received the largest percentage decrease in average target price set by brokers last week. Morgans saw potential for underwhelming FY22 results and noted uncertainty around growth prospects for the Composite Fibre Technologies (CFT) division and for the company’s Earth Friendly Concrete (EFC) product.

As a result, the broker lowered its rating to Hold from Add, and reduced its target to $1.45 from $2.20. The opportunity in Europe for the EFC product is well appreciated though hard to quantify.

Last week UBS lowered its target price for EML Payments to $1.05 from $2.10 and reduced its rating to Neutral from Buy. In an ongoing saga, the Central Bank of Ireland (CBI) has sought more remediation/controls and assurances, which is expected to extend the process into 2023.

The delay will have an impact on sales growth for the company and lead to a deferral of the company's switch from cash to bonds to benefit from higher interest rates, explained the analyst.

Wagners also headed the list for the largest percentage fall in forecast earnings last week. Coming second was Sandfire Resources, despite a strong June-quarter performance, in which copper production beat the high end of guidance. 

While UBS retained a positive view on the company and noted shares are trading at too-wide a discount to peers, its target fell to $6.20 from $7.35 after higher costs were taken into account. 

Costs and capex missed at the MATSA copper operations in Spain, when compared to Ord Minnett's forecasts. Costs were also a -12% miss at the DeGrussa copper-gold operations in Western Australia, though the Sell-rated broker left its $3.80 target unchanged.

Integral Diagnostics also had a bad week in terms of earnings forecasts, and three of four brokers that were updated in the FNArena database set reduced 12-month price targets. These changes followed unaudited FY22 results that fell short of expectations.

Citi downgraded its FY22-FY24 EPS forecasts by -28%, -25% and -15%, respectively, as the FY22 margin fell around -20% compared to FY21. Morgan Stanley attributed the lower margin to negative fixed cost leverage, increased employee costs and an elevated consumables cost.

Both Mineral Resources and Nickel Mines also appeared on the list for material falls in broker earnings forecasts after issuing June quarter activities reports.

Iron ore production for Mineral Resources was a miss versus Overweight-rated Morgan Stanley’s forecast, while production at Mt Marion was -10% below expectation as the company battled covid absenteeism and some operational difficulties. 

Outperform-rated Credit Suisse noted Nickel Mines' record earnings were driven by a 57% increase in nickel sales though volume growth was partially offset by a 21% increase in unit cash costs, leading to the overall margin falling -9% short of the broker’s forecast.

On the flipside, Nanosonics led the table for the largest percentage increase in earnings forecasts. 

Ord Minnett raised earnings forecasts and lifted its target to $3.70 from $3.50 after a business update showed the switch to direct distribution boosted sales and average prices. 

The broker retained its Lighten rating given the recent sharp rally in the share price. While Sell-rated Citi raised its target price to $3.85 from $3.65, concerns remain that material profits won’t be generated until FY25.

Brickworks was next on the table after its June-half trading update pleased Ord Minnett. A strong housing pipeline is expected to drive continued earnings growth in Australia, while an uptick in non-residential construction in North America should lend support. 

Management upgraded earnings guidance, thanks to completions of the Oakdale and Rochedale estates.

Total Buy recommendations take up 59.29% of the total, versus 33.76% on Neutral/Hold, while Sell ratings account for the remaining 6.95%.

Upgrade

ANSARADA GROUP LIMITED ((AND)) Upgrade to Add from Hold by Morgans .B/H/S: 1/0/0

At 4Q trading update, Ansarada Group guided to a “positive outlook for FY23, with Q1 underpinned by contracted revenue and solid pipeline”. Morgans assesses a strong end to the year, which was broadly in-line with forecasts.

The broker upgrades its rating for the company to Add from Hold as there is now more than 10% upside to the new $1.85 target price, down from $2.03. The target was lowered on lower peer multiples and lower medium-term free cash flow.

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

Credit Suisse reviews Eagers Automotive in light of some macro-economic changes to the global automotive markets.

The broker believes pent up demand for vehicles in Australia is running at around 350k to 400k post the covid problems in the last two years.

Eagers Automotive is in a good position to benefit from improvements in the global automotive supply chains and notably the company did not "over earn" during covid, but experienced high margins, points out Credit Suisse.

Accordingly, the analyst explains strong demand and the ability to maintain robust margins will assist in revenue and ongoing earnings growth for the company.

Credit Suisse increases earnings forecasts by 7.9% and 8.2% for FY22 and FY23, respectively.

The rating is upgraded to Outperform from Neutral and the price target is raised to $14.50 from $12.30.

See also APE downgrade.

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

Ord Minnett upgrades AUB Group's to Buy from Accumulate heading into the result and cuts the target price to $25 from $26.88 to reflect uncertainty around Tysers' earning potential.

The broker notes general insurance broking is in a strong cycle, enjoying higher pre-tax earnings and the potential for EPS accretive purchases, and says discussions with brokers point to stable or improved margins given rate rises have outpaced general inflation.

Costs are the main wildcard as is the gearing situation. Ord Minnett expects any rise in interest expense is likely to be offset by interest revenues on float cash.

The broker prefers AUB over Steadfast ((SDF)), given it is trading on a discount to peers while enjoying similar business outcomes.

HT&E LIMITED ((HT1)) Upgrade to Neutral from Outperform by Macquarie .B/H/S: 3/0/1

On June 1, Macquarie downgraded its view on the media sector to Underweight from Neutral, with the broker's macro strategy team putting 60% probability of a mild recession and that does not bode well for media companies across the board.

So far, advertising volumes are holding up, but Macquarie thinks it is but a matter of time before the trend turns negative.

HT&E's FY22 result is anticipated to beat market consensus in August. Outperform rating retained. Amidst cuts to forecasts across the sector, estimates for HT&E have been left untouched.

Price target has declined to $1.40 from $1.70.

MEDIBANK PRIVATE LIMITED ((MPL)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/2/0

UBS upgrades its rating for Medibank Private to Buy from Neutral after raising FY23-24 EPS forecasts by 9-12% due to favourable growth and margins persisting in the wake of covid. The target price rises to $3.90 from $3.35.

The broker has identified, from its own survey, improved consumer sentiment towards the private health insurance (PHI) value proposition, which should drive above-average policyholder growth. 

In addition, the analyst considers the balance of regulatory risks is now skewed to the upside, and the customer's claims and overall experience will be improved by digital trends.

PERPETUAL LIMITED ((PPT)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 4/1/0

Following Perpetual's 4Q update, Ord Minnett raises its rating to Buy from Accumulate on valuation, though lowers its target to $33.00 from $36.50 to reflect weaker flows and market conditions.

For the quarter, flows were weaker than the analyst expected for Perpetual Asset Management Australia and Perpetual Asset Management International.

The broker sees ongoing momentum and funds under administration (FUA) growth in the Corporate Trust business, and earnings diversification via further revenue opportunities from Perpetual Digital. 

PERSEUS MINING LIMITED ((PRU)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/0/0

Perseus Mining's June-quarter update has triggered an upgrade to Buy from Neutral at Citi, but it's more related to the share price response than to the report itself.

Citi considers Perseus Mining a "standout" in its ASX-listed gold coverage with free cash flow estimated at 19% next year versus a mere 5% for the sector in general. Estimates have been culled.

The broker does temper investor enthusiasm by pointing at the High Risk that has been attached to the Buy rating. The company is expected to make a call on Block 14 project in Sudan in H2 2023. Target unchanged at $2.10.

REGIS RESOURCES LIMITED ((RRL)) Upgrade to Neutral from Sell by Citi and Upgrade to Add from Hold by Morgans .B/H/S: 3/1/1

Citi analysts observe investors getting more nervous about Aussie gold producers as costs are creeping higher and Citi's in-house forecast has the gold price trending sideways next year.

The good news is Regis Resources' FY23 guidance implies more gold available to be sold, with management also including McPhillamys in its outlook, but not until after FY25.

Citi has pulled back its price target to $1.70 from $1.90 but upgrades to Neutral from Sell following an -18% retreat in the share price. The broker does highlight it does not see "compelling value" on offer.

Regis Resources produced a better than expected 4Q22 result with 123.9koz produced compared to Morgans estimated 114koz.

The broker notes an increase in costs above guidance over the quarter and welcomes the FY23 to FY25 production outlook of 450-500koz.

Now the company will need to deliver on the growth outlook to build investor confidence management, explains the analyst.

Short term higher costs and labour shortages, in line with other WA producers, remain as earnings risks, Morgans points out.

The target is lowered to $2.02 from $2.05 and the rating is upgraded to Buy from Hold due to weakness in the share price.

Downgrade

EAGERS AUTOMOTIVE LIMITED ((APE)) Downgrade to Neutral from Buy by UBS .B/H/S: 5/1/0

UBS has used a general sector update to lower its price target for Eagers Automotive, now at $12.90 versus $17.50 previously.

The broker's rating has been downgraded to Neutral from Buy.

UBS has taken the prognosis on board that new car sales will drop -15% peak-to-trough on the expectation that house prices will drop -10% and the historical correlation between the two remains intact.

See also APE upgrade.

COCHLEAR LIMITED ((COH)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/4/0

Globally, healthcare staff shortages have continued to impact the recovery of surgical volumes following covid disruptions in 2020-21.

The Credit Suisse monthly hospital survey suggests sluggish US surgical volume growth in recent months for both inpatient and outpatient surgeries.

Given hospital staffing constraints are impacting surgeries globally, the broker has lowered its cochlear implant sales forecast by -6% in FY23, not expecting any significant change in the operating environment in 1H23 relative to 2H22.

Credit Suisse downgrades Cochlear to Neutral from Outperform and cuts its target to $232 from $240.

EML PAYMENTS LIMITED ((EML)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/1/0

The Central Bank of Ireland (CBI) has sought more remediation/controls and assurances from EML Payments which pushes out the risk the process is extended in 2023, assesses UBS.

Shortfalls in some aspects of the remediation process were identified by the CBI and the delay will have a forecast impact on the sales growth for the company as well as a deferral of the company's switch from cash to bonds to benefit from higher interest rates, explains the analyst.

The rating is downgraded to Neutral from Buy and the price target is reduced to $1.05 from $2.10 due to ongoing uncertainty around the growth restrictions.

FORTESCUE METALS GROUP LIMITED ((FMG)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/5/2

Macquarie viewed the 4Q22 results update from Fortescue Metals as solid across the board with volumes, costs and prices coming in within expectations. Capital expenditure guidance was noticeably higher than anticipated.

Accounting for the adjustment in capital expenditure guidance of US$2.7bn to US$3.1bn and higher unit costs, Macquarie reduces the estimated free cash flow forecast by -25% in FY23.

Earnings forecasts are adjusted for a -15% decline in free cash flow each year in the medium term and FY23 earnings estimates are reduced by -5%.

Macquarie's earnings forecasts are -3% lower than FY22 Bloomberg consensus and -16% below FY23 and the broker points out the estimates could be too low with higher iron ore spot prices.

Macquarie downgrades the stock to Underperform from Neutral and the price target is lowered by -11% to $16.00.

G.U.D. HOLDINGS LIMITED ((GUD)) Downgrade to Neutral from Buy by UBS .B/H/S: 3/2/0

UBS has used a general sector update to lower its price target for G.U.D. Holdings, now at $9.10 versus $13.30 previously.

The rating for G.U.D. Holdings has been downgraded to Neutral from Buy.

UBS has taken the prognosis on board that new car sales will drop -15% peak-to-trough on the expectation that house prices will drop -10% and the historical correlation between the two remains intact.

JANUS HENDERSON GROUP PLC ((JHG)) Downgrade to Sell from Neutral by Citi .B/H/S: 0/3/1

Underlying, comment Citi analysts, the Q2 flows for Janus Henderson look even worse than expected. The broker concludes any new strategy will require time before generating concrete impact.

Forecasts have been further trimmed. Price target drops to $31.60 from $33.90. Downgrade to Sell from Neutral.

Janus Henderson, exclaims the broker, is strongly leveraged to any potential rebound in financial markets. In the absence of such rebound, it seems shareholders may need to be very patient, suggests Citi.

NITRO SOFTWARE LIMITED ((NTO)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 1/1/0

Following a 2Q update by Nitro Software, Morgan Stanley notes ongoing underperformance versus consensus expectations, and now assumes lower growth into FY23-24. The target falls to $1.30 from $2.00 and the rating falls to Equal-weight from Overweight.

Citing macroeconomic challenges and lower than expected synergies from the Connective acquisition, management lowered FY22 annual recurring revenue (ARR) guidance to US$57-60m from US$64-68m, while revenue guidance was unchanged, with no explanation given.

Management intends to reduce costs to achieve guidance for a reduced earnings (EBITDA) loss of-US$10-13m, down from -US$15-18m. Industry View: In-Line.

NEWS CORPORATION ((NWS)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/1/0

On June 1, Macquarie downgraded its view on the media sector to Underweight from Neutral, with the broker's macro strategy team putting 60% probability of a mild recession and that does not bode well for media companies across the board.

So far, advertising volumes are holding up, but Macquarie thinks it is but a matter of time before the trend turns negative.

News Corp is expected to release a rather weak FY22 report in August. Macquarie downgrades to Neutral from Outperform.

Target price falls to $21.10.

RAMELIUS RESOURCES LIMITED ((RMS)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/1/0

After incorporating Ramelius Resources' 4Q result into forecasts and downgrading the outlook on higher costs, Ord Minnett lowers its target price to $1.10 from $1.35. The rating also falls to Hold from Accumulate.

However, the broker believes downside to the share price is protected by balance sheet strength. Costs are expected to improve in FY24
with a higher contribution from the Penny Project, though production will likely plateau.

SONIC HEALTHCARE LIMITED ((SHL)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 3/2/1

Macquarie assesses the growth drivers for Sonic Healthcare and downgrades the company to Underperform from Neutral.

The broker spies only slight organic growt and notes the company is relying on acquisitions to meet Macquarie's EPS forecasts, which are already below consensus. Consensus forecasts 6.8% EPS growth to FY26, compared with Macquarie's 4.4%.

Macquarie raises its EPS forecasts 3% for FY23 and 4% for FY24 to reflect covid-19 earnings and acquisition earnings.

Target price falls to $32 from $38.45 to reflect higher risk-free rates, and lower long-term growth assumptions.

WAGNERS HOLDING CO. LIMITED ((WGN)) Downgrade to Hold from Add by Morgans .B/H/S: 2/1/0

Morgans sees potential for Wagners Holding Co to produce underwhelming FY22 results and notes uncertainty around growth prospects for the Composite Fibre Technologies (CFT) division and the EFC division's product.

As a result, the rating falls to Hold from Add, and the target to $1.45 from $2.20.

The broker likes the opportunity in Europe for the Earth Friendly Concrete-Low Carbon Technologies (EFC) division, though finds it hard to quantify.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 ANSARADA GROUP LIMITED Buy Neutral Morgans
2 AUB GROUP LIMITED Buy Buy Ord Minnett
3 EAGERS AUTOMOTIVE LIMITED Buy Neutral Credit Suisse
4 HT&E LIMITED Buy Neutral Macquarie
5 MEDIBANK PRIVATE LIMITED Buy Neutral UBS
6 PERPETUAL LIMITED Buy Buy Ord Minnett
7 PERSEUS MINING LIMITED Buy Neutral Citi
8 REGIS RESOURCES LIMITED Buy Neutral Morgans
9 REGIS RESOURCES LIMITED Neutral Sell Citi
Downgrade
10 COCHLEAR LIMITED Neutral Buy Credit Suisse
11 EAGERS AUTOMOTIVE LIMITED Neutral Buy UBS
12 EML PAYMENTS LIMITED Neutral Buy UBS
13 FORTESCUE METALS GROUP LIMITED Sell Neutral Macquarie
14 G.U.D. HOLDINGS LIMITED Neutral Buy UBS
15 JANUS HENDERSON GROUP PLC Sell Neutral Citi
16 NEWS CORPORATION Neutral Buy Macquarie
17 NITRO SOFTWARE LIMITED Neutral Buy Morgan Stanley
18 RAMELIUS RESOURCES LIMITED Neutral Buy Ord Minnett
19 SONIC HEALTHCARE LIMITED Sell Neutral Macquarie
20 WAGNERS HOLDING CO. LIMITED Neutral Buy Morgans

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 MPL MEDIBANK PRIVATE LIMITED 3.583 3.479 2.99% 7

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 WGN WAGNERS HOLDING CO. LIMITED 1.767 2.017 -12.39% 3
2 EML EML PAYMENTS LIMITED 2.483 2.833 -12.35% 3
3 PPT PERPETUAL LIMITED 33.400 37.260 -10.36% 5
4 RMS RAMELIUS RESOURCES LIMITED 1.420 1.570 -9.55% 3
5 FLT FLIGHT CENTRE TRAVEL GROUP LIMITED 16.497 18.096 -8.84% 6
6 CTD CORPORATE TRAVEL MANAGEMENT LIMITED 24.507 26.467 -7.41% 7
7 GUD G.U.D. HOLDINGS LIMITED 11.930 12.770 -6.58% 5
8 NWS NEWS CORPORATION 32.650 34.625 -5.70% 4
9 NCM NEWCREST MINING LIMITED 23.123 24.490 -5.58% 7
10 IEL IDP EDUCATION LIMITED 33.240 35.175 -5.50% 5

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 NAN NANOSONICS LIMITED -0.233 -1.000 76.70% 3
2 BKW BRICKWORKS LIMITED 367.400 313.500 17.19% 4
3 CTD CORPORATE TRAVEL MANAGEMENT LIMITED 13.883 12.233 13.49% 7
4 AWC ALUMINA LIMITED 12.123 11.329 7.01% 5
5 FLT FLIGHT CENTRE TRAVEL GROUP LIMITED -127.300 -135.280 5.90% 6
6 BHP BHP GROUP LIMITED 626.460 591.907 5.84% 7
7 HT1 HT&E LIMITED 16.688 16.338 2.14% 4
8 APE EAGERS AUTOMOTIVE LIMITED 106.698 104.870 1.74% 6
9 HVN HARVEY NORMAN HOLDINGS LIMITED 51.136 50.476 1.31% 5
10 SGM SIMS LIMITED 273.783 271.783 0.74% 6

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 WGN WAGNERS HOLDING CO. LIMITED 4.077 5.477 -25.56% 3
2 SFR SANDFIRE RESOURCES LIMITED 56.451 67.723 -16.64% 7
3 IDX INTEGRAL DIAGNOSTICS LIMITED 10.828 12.622 -14.21% 5
4 MIN MINERAL RESOURCES LIMITED 208.630 239.600 -12.93% 5
5 NIC NICKEL INDUSTRIES LIMITED 13.515 15.381 -12.13% 4
6 CRN CORONADO GLOBAL RESOURCES INC 77.544 88.130 -12.01% 3
7 OZL OZ MINERALS LIMITED 109.286 121.933 -10.37% 7
8 PRU PERSEUS MINING LIMITED 18.433 20.520 -10.17% 3
9 CGF CHALLENGER LIMITED 39.429 42.786 -7.85% 7
10 SQ2 BLOCK INC 149.453 160.330 -6.78% 4

Technical limitations

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CHARTS

AND APE AUB COH EML FMG GUD HT1 JHG MPL NTO NWS PPT PRU RMS RRL SDF SHL WGN

For more info SHARE ANALYSIS: AND - ANSARADA GROUP LIMITED

For more info SHARE ANALYSIS: APE - EAGERS AUTOMOTIVE LIMITED

For more info SHARE ANALYSIS: AUB - AUB GROUP LIMITED

For more info SHARE ANALYSIS: COH - COCHLEAR LIMITED

For more info SHARE ANALYSIS: EML - EML PAYMENTS 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: HT1 - HT&E LIMITED

For more info SHARE ANALYSIS: JHG - JANUS HENDERSON GROUP PLC

For more info SHARE ANALYSIS: MPL - MEDIBANK PRIVATE LIMITED

For more info SHARE ANALYSIS: NTO - NITRO SOFTWARE LIMITED

For more info SHARE ANALYSIS: NWS - NEWS CORPORATION

For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED

For more info SHARE ANALYSIS: PRU - PERSEUS MINING LIMITED

For more info SHARE ANALYSIS: RMS - RAMELIUS RESOURCES LIMITED

For more info SHARE ANALYSIS: RRL - REGIS RESOURCES LIMITED

For more info SHARE ANALYSIS: SDF - STEADFAST GROUP LIMITED

For more info SHARE ANALYSIS: SHL - SONIC HEALTHCARE LIMITED

For more info SHARE ANALYSIS: WGN - WAGNERS HOLDING CO. LIMITED