Weekly Reports | Jan 16 2023
By Rudi Filapek-Vandyck, Editor FNArena
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.
The week ending Friday, January 13th witnessed no less than 10 upgrades in stockbroker ratings and 13 downgrades for individual ASX-listed companies.
However, investors should not draw the conclusion that analysts at Australia's major stockbrokers have returned early from their holiday break this year to make early amends.
Rather the switch at Ord Minnett to whitelabel research from Morningstar instead of that by former partner/owner JP Morgan is responsible for most changes, and the wrong impression.
Overall, research activity at stockbrokers in general has been rather tepid thus far with Macquarie and Citi the most active this early in 2023. The first look-ins for the upcoming February reporting season have already been spotted (on a few individual companies only).
Early indications are this is not about to change. Analysts like their annual break like everybody else.
For the week, all upgrades are either Ord Minnett's or Citi's with the latter upgrading Accent Group, Blackmores, Charter Hall and Transurban.
Two exceptions only can be spotted among the 13 downgrades; Morgans moving AGL Energy to Neutral and Macquarie similarly cooling on Westgold Resources.
The general statistics continue showing a market that is as polarised as ever with nearly 55% of all ratings in the Buy (and equivalent) basket, leaving only 36.72% for Neutral/Hold ratings and 8.34% for Sells.
Traditionally, a more 'normal' market sees the majority of ratings concentrated in Neutral and Hold ratings, but it has truly been a long while since we witnessed anything like it.
In line with early-year market optimism, most amendments to valuations and price targets are being made to the upside with the likes of Tyro Payments, Seven West Media, Aurizon Holdings, AUB Group and Perpetual all enjoying increases of 3.50% and higher.
On the negative side of the ledger BlueScope Steel stands out with a reduction of -5.88% thanks to Ord Minnett adopting a more bearish view on the sustainability of high steel prices and margins.
The overall picture looks a lot busier when one switches focus to earnings estimates with the week's table for positive revisions led by Judo Capital (up 26.49%), NextDC (up 15.55%) and Brickworks (up 14.77%). Even Perpetual and Pendal, respectively numbers 9 and 10 for the week, still enjoy increases of nearly 3%. Both will be merging into one entity soon.
The negative side looks a lot less busy though five companies saw earnings forecasts reduced by between 37%-5%, led by Tyro Payments, followed by Gold Road Resources, Lendlease Group, Fortescue Metals, and Origin Energy.
Once back from the holiday break, analysts will increasingly switch focus to the upcoming reporting season which only breaks open from mid-February onwards.
Insurers, banks, and small-cap lithium producers have been in focus thus far into the fresh calendar year, though one wouldn't notice it from the overview below.
Period: Monday January 9 to Friday January 13, 2023
Total Upgrades: 10
Total Downgrades: 13
Net Ratings Breakdown: Buy 54.94%; Hold 36.72%; Sell 8.34%
ACCENT GROUP LIMITED ((AX1)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/1/0
Citi has upgraded to Buy from Neutral on the view that market consensus is too bearish on growth prospects of Accent Group.
Longer term, the broker does acknowledge it is important Accent successfully proves up and develops some of its newer retail banners.
EPS estimates have been reduced in reflection of higher costs for doing business. The new price target of $1.95 is a result of the broker removing its prior -15% valuation discount and instead applying a 15% premium.
The premium is explained by the broker through Accent Group now expected to outperform its retail peers in Australia with more exposure to housing.
AURIZON HOLDINGS LIMITED ((AZJ)) Upgrade to Accumulate from Lighten by Ord Minnett .B/H/S: 2/4/1
Switching to Morningstar research has led Ord Minnett to upgrade its rating for Aurizon Holdings to Accumulate from Lighten.
Your typical value-oriented Morningstar has had this company on its most preferred ideas list for quite a while.
Target price jumps to $4.70 from $3.40.
BLACKMORES LIMITED ((BKL)) Upgrade to Buy from Sell by Citi .B/H/S: 2/3/0
Citi believes Blackmores will be a beneficiary from China re-opening and industry feedback backs up that thesis. On this realisation, the broker's rating for the shares has been upgraded to Buy from Sell (double upgrade).
Increased forecasts, against the background of a sound looking longer-term growth trajectory (Asia), have lifted Citi's price target to $84 (was $58.85).