Weekly Ratings, Targets, Forecast Changes – 27-01-23

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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 January 23 to Friday January 27, 2023
Total Upgrades: 9
Total Downgrades: 25
Net Ratings Breakdown: Buy 53.14%; Hold 37.29%; Sell 9.57%

For the week ending Friday January 27 there were nine upgrades and twenty-five downgrades to ASX-listed companies in the FNArena database.

While the overwhelming majority of ratings changes were downgrades, amendments to brokers' price targets and earnings forecasts in the tables below show a greater upside bias, in line with early-year market optimism.

Not only is it the time of year for individuals to implement new year’s resolutions, but also the time for brokers to initiate sector-wide reviews.

Hence, the number of ratings downgrades were increased by a UBS sector report on the Australian Real Estate sector (four downgrades), a Banking sector review by Macquarie (three downgrades) and both Morgan Stanley and Morgans looked at the Retail sector, resulting in a few more downgrades.

For real estate-exposed stocks, UBS expects ongoing volatility for bond yields but feels the range of outcomes for interest rates has diminished, and on average, raises its price targets by 6% across the sector.

The analysts forecast a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation, and expect rate cuts in the second half of 2023 will close valuation discounts in the Real Estate sector, 

The sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels, while structural factors favour Residential.

UBS also moved to underweight from overweight for retail-exposed stocks in the Real Estate sector on a weaker consumer, while caution was retained for office, and it was considered too early to overweight the Funds Management sub-sector due to subdued transaction volumes.

As a result of this changed outlook, the broker downgraded its rating for BWP Trust, Charter Hall Long Wale REIT and Vicinity Centres to Sell from Neutral, and the rating for Mirvac Group to Neutral from Buy. The rating for Goodman Group was raised to Buy from Neutral on the preference for the Logistics sub sector.

After reviewing the Australian banking sector, Macquarie concluded it is peaking, with only one last upgrade left in it (if that), and the broker now has underweight exposure.

The broker considers the sector's longer-term leverage to high interest rates is overstated and doesn’t consider the banks to be a great inflation hedge. Nonetheless, the banks are set for their last hurrah and should deliver their strongest pre-provision profit and growth in more than a decade in FY23, courtesy of strong margins in response to rising interest rates. 

However, the analysts believe stubborn inflation and higher interest rates are eventually likely to impact asset quality and raise impairments.

Macquarie downgraded its rating for Commonwealth Bank, Westpac and Bank of Queensland to Underperform from Neutral, while ANZ Bank was upgraded to Outperform from Neutral given its relative undervaluation.

Morgans take on Discretionary Retail revealed an expectation for generally positive first half results for many retailers, especially as comparisons will be made against a previous corresponding period which included lockdowns.

The analysts also noted retail sales continue to rise faster than market expectations due to low rates of unemployment and elevated household savings ratios. As a result, it’s felt the market has overestimated the impact of interest rate rises on the consumer.

For stocks under the broker's coverage, key picks include Add-rated Beacon Lighting, JB Hi-Fi and Universal Store.

Morgan Stanley prefers retailers with potential for global expansion, levers to adjust margins and a track record of beating market expectations. A high level of insider ownership and a strong balance sheet is also viewed positively.

This broker upgraded its rating for Premier Investments to Overweight from Equal-weight and lowered its ratings for KMD Brands and Accent Group to Equal-weight from Overweight.

As part of its retail review, Morgans also lowered its rating for Accent Group to Hold from Add on a 50% share rally since last October, while Morgan Stanley (Equal-weight from Overweight) cited concerns around an increasing apparel exposure and margin headwinds, along with the tough economic backdrop. 

Following a better-than-expected first half trading update by Accent Group, the average target price in the FNArena database rose to $2.14 from $1.90, the only material positive change in the table below. Broker earnings forecasts also rose, placing the company third on the earnings upgrade table.

Ramelius Resources is first on that table. Despite a second quarter earnings miss, longer term guidance and new hedging combined to drive upward revisions to Ord Minnett’s earnings outlook (FY24 up by 9%, FY25 by 30%). The target and Buy rating were left unchanged.

Serko was next after earnings upgrades by both Citi and Ord Minnett. The latter reiterated how important the Booking.com arrangement is to the broker’s Buy rating thesis and was pleased this was a key driver of upgraded FY23 guidance by management. 

Should this arrangement prove to be successful over time, the broker pointed out Serko’s share price will be worth multiples of where it is currently trading.

While Magellan Financial appeared on the earnings upgrade table and Ord Minnett raised its rating to Accumulate from Lighten, long-suffering shareholders should not become too optimistic. Ord Minnett sees little in the wings for a return to former glories, while Magellan is Morgans (Hold) least preferred among its coverage of ASX-listed fund managers, behind GQG Partners and Pinnacle Investment Management.

Sandfire Resources also received upgraded earnings forecasts from brokers last week following a miss on second quarter production, which was more than compensated for by a beat on costs. According to UBS, the company's outlook has improved materially since the appointment of a new CEO, a completed rights issue and a rally in copper and zinc prices courtesy of the China reopening. A scarcity of copper exposure on the ASX, also prompted Citi to lift its target to $6.40 from $5.60.

Material broker earnings downgrades last week related mainly to the Resources sector, with 29Metals receiving a nearly -300% downgrade (from a small base) while South32, Perseus Mining, Cooper Energy and Alumina copped average broker downgrades in the range of -17% to -10%. Target prices for the latter grouping barely changed.

Following a second quarter production report, Macquarie noted Underperform-rated 29Metals had operational issues at both Golden Grove and Capricorn Copper, while fresh cost guidance was also significantly higher than forecast. Citi (Neutral) was also concerned about the rate of cash burn. The company headed up the table for the largest percentage fall (-18%) in target price last week.

While Ord Minnett lowered its rating to Hold from Accumulate and its target to $1.95 from $2.10, the analyst reminded investors of upside risk from high leverage to the copper price.

In among the Resource sector earnings downgrades, Austal received a 15% downgrade when Citi (one of three brokers covering the stock in the FNArena database) updated research for the shipbuilder and reduced its target by -45%. As a result, the company came a close second on the target price downgrade table for the week, as the average target fell to $2.47 from $2.93 (nearly -16%).

In the prior week, management reduced earnings guidance to $58m from $100m as a result of an increased provision for its towing salvage and rescue (T-ATS) contract, which was secured in 2021 with the US Navy.

According to Citi, “The T-ATS-related downgrade is disappointing, and a reminder of the risks involved when a new vessel build commences. The implications on Austal’s prospects to win the more complicated ocean surveillance ships (T-AGOS) construction contract (which has been delayed to 2023) remain unclear.”

The broker retained its Buy rating on the strength of Austal's balance sheet and the order book, along with the potential to secure new contracts.

Total Buy recommendations comprise 53.11% of the total, versus 37.33% on Neutral/Hold, while Sell ratings account for the remaining 9.56%.

Upgrade

ANZ GROUP HOLDINGS LIMITED ((ANZ)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 5/2/0

Macquarie reviews the Australian banking sector and concludes it is peaking, with only one last upgrade left in it (if that).

The broker considers the sector's longer-term leverage to high interest rates to be overstated; and does not consider the banks to be a great inflation hedge.

But the banks are set for their last hurrah concludes the broker, expecting they will deliver their strongest pre-provision profit and growth in more than a decade in FY23, courtesy strong margins in response to rising interest rates. 

Beyond the March half, however, stubborn inflation and higher interest rates are eventually likely to impact asset quality and raise impairments.

Macquarie is now underweight the banking sector.

ANZ Bank is considered the exception, given its discounted, and in the broker's view, unjustified valuation (the bank is trading at a -45% discount to the All Industrials and about -40% to some peers), the broker spying upside from market income and an uptick in margins from its institutional business.

Rating upgraded to Outperform from Neutral. Target price is steady at $26. 

ALUMINA LIMITED ((AWC)) Upgrade to Lighten from Sell by Ord Minnett .B/H/S: 2/0/2

Alumina Ltd's sole asset Alcoa World Alumina and Chemicals reported higher-than-forecast December-quarter operating costs.

Alumina's EPS forecasts fall -30% for 2022 accordingly, and -50% for 2023, the broker believing costs will remain elevated longer than forecast. DPS forecasts fall -20% and -35%.

But the broker advises that modest changes to costs are having a larger impact on earnings at the moment, given the earnings cycle is at a low ebb, and remains positive for mid-cycle earnings, which it believes will be underpinned by higher energy costs, carbon capture subsidies, light-weighting vehicle trends and a robust battery market.

Ord Minnett upgrades Alumina's rating to Lighten from Sell, after cutting the target price last week to $1.20 from $1.50 (the $1.20 figure still stands).

GOODMAN GROUP ((GMG)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/1/0

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

The rating for Goodman Group rises to Buy from Neutral and the target jumps to $23.00 from $20.60.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Accumulate from Lighten by Ord Minnett .B/H/S: 1/3/2

Ord Minnett raises Magellan Financial's rating to Accumulate from Lighten but cuts its fair value estimate -43% to $11.50 from $20, as covid and management disruptions continue to take their toll.

The broker is bucking the trend with the ratings upgrade, due to a change of coverage to Morningstar away from JP Morgan, but sees little in the wings to return the company to its former glory.

MINERAL RESOURCES LIMITED ((MIN)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/1/0

UBS expects lithium markets will remain in deficit over the near and medium term, before a structural deficit develops in the longer term. Price estimates are upgraded by 50% across the forecast period.

As a result of these new forecasts, the broker raise its rating for Mineral Resources to Buy from Neutral.

No target price update is revealed by UBS. On December 23, a target of $83.30 was set.

MEGAPORT LIMITED ((MP1)) Upgrade to Add from Hold by Morgans .B/H/S: 5/2/0

Megaport reports 2Q results on January 31 followed by 1H results on February 9. Morgans changes its forecasts to US dollars as both results will change from being reported in Australian dollars.

After considering an improving macroeconomic backdrop, more reasonable FY23 earnings expectations and the likelihood of a better 2Q compared to the weak 1Q, the broker upgrades to Add from Hold.

The analyst feels fundamentals will return to the fore after a brutal 2022 for technology and growth stocks on the ASX and notes technology valuations are now back to 20-year long-run averages.

The $9.00 target is unchanged.

PILBARA MINERALS LIMITED ((PLS)) Upgrade to Neutral from Sell by UBS .B/H/S: 3/2/1

UBS expects lithium markets will remain in deficit over the near and medium term, before a structural deficit develops in the longer term. Price estimates are upgraded by 50% across the forecast period.

As a result of these new forecasts, the broker raise its rating for Pilbara Minerals to Neutral from Sell.

No target price update is revealed by UBS. On January 23, a target of $3.40 was set.

PREMIER INVESTMENTS LIMITED ((PMV)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 4/1/1

Morgan Stanley prefers retailers with potential for global expansion, levers to adjust margins and a track record of beating market expectations. A high level of insider ownership and a strong balance sheet are also viewed positively.

Premier Investments fulfills many of the broker's requirements including the expansion opportunity for Smiggle and a strong management track record.

The company is considered best positioned among stocks under Morgan Stanley's coverage to deal with the tough economic backdrop.

The rating is upgraded to Overweight from Equal-weight, while the target rises to $30.50 from $23.25. Industry view: In-Line.

TELSTRA GROUP LIMITED ((TLS)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 5/1/0

Macquarie upgrades Telstra to Outperform from Neutral prior to the December-half result and raises the target price to $4.50 from $4.

The upgrade reflects the broker's expectation of a recovery in roaming revenue and stronger-than-forecast subscriber growth after customers fled Optus after the September/October data breach.

Macquarie also expects a 4.6% uptick in ARPU half on half.

EPS forecasts fall -2% in FY23; -4% in FY24; and -3% in FY25 to reflect the impact of inflation on operational expenditure.

Downgrade

29METALS LIMITED ((29M)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 0/2/3

While 2Q results for 29Metals were a slight beat versus Ord Minnett's forecasts, the broker is concerned by lower potential cash generation in 2023 from operational woes and weak cost control.

Golden Grove's development remains behind schedule, points out the analyst, and Capricorn Copper's upcoming tailings lift will hold back 3Q milling capacity.

Management's 2023 outlook was broadly in line with its December update.

The rating falls to Hold from Accumulate and the target falls to $1.95 from $2.10, yet the analyst reminds investors of upside risk from high leverage to the copper price.

ANSELL LIMITED ((ANN)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/4/0

Macquarie has downgraded its rating on Ansell given a moderation of global manufacturing performance in recent months. December marked the fourth consecutive month that performance of manufacturing index data tracked below 50, suggesting contractionary activity. 

While Ansell's November trading update did indicate positive growth year-to-date for industrial divisions, Macquarie has moderated growth assumptions for these divisions based on what it sees as a reasonable indicator for industrial activity. 

The broker continues to see a favourable outlook for Ansell over the medium to long-term. The rating is downgraded to Neutral from Outperform and the target price increases to $29.20 from $28.85.

ARB CORPORATION LIMITED ((ARB)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 3/2/0

Morgan Stanley identifies some areas of uncertainty for ARB Corp and moves to an Equal-weight stance from Overweight.

The broker sees deceleration risk in recent data and from company peers, as well as risk from elevated industry inventory as supply constraints ease. US distribution uncertainty alluded to at the AGM is considered another reason for caution.

The $31 target is unchanged. Industry view: In-Line. 

ACCENT GROUP LIMITED ((AX1)) Downgrade to Equal-weight from Overweight by Morgan Stanley and Downgrade to Hold from Add by Morgans .B/H/S: 1/3/0

Morgan Stanley prefers retailers with potential for global expansion, levers to adjust margins and a track record of beating market expectations. A high level of insider ownership and a strong balance sheet are also viewed positively.

The broker downgrades its rating for Accent Group to Equal-weight from Overweight on increasing apparel exposure and margin headwinds, along with the tough economic backdrop.

The target rises to $1.95 from $1.85. Industry View: In-Line.

Coming into the February reporting season, Morgans expects generally positive 1H results for many discretionary retailers, especially as comparisons will be made against a previous corresponding period which included lockdowns.

Additionally, the analysts point out retail sales continue to rise faster than market expectations due to low rates of unemployment and elevated household savings ratios. It's felt the market has overestimated the impact of interest rate rises on the consumer.

For stocks under the broker's coverage, key picks include Add-rated Beacon Lighting, JB Hi-Fi and Universal Store.

For Accent Group, which reports on February 23, Morgans lowers its rating to Hold from Add following a 50% share price rally since October last year. 

The broker's FY23 and FY24 earnings (EBIT) forecasts are increased by 7% and 6%, respectively, on an increased assumption for store openings and on the expectation FY23 guidance will be upgraded.

The $2.00 target is unchanged.

BENDIGO & ADELAIDE BANK LIMITED ((BEN)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/4/0

Shares in Bendigo & Adelaide Bank have mostly known but one direction, up, since December last year and UBS finds they are now trading above its own calculation of what seems to be "fair value".

The broker has downgraded to Neutral from Buy. Target price remains unchanged at $10.

UBS remains of the view Australia's regional lenders face more headwinds than the Majors in the years ahead, even though Bendelaide remains the favourite among the regionals.

The valuation, relative to the sector, is "moderate", assesses the broker, plus there's a 6% dividend yield on offer. Both observations prevent the rating from falling below Neutral.

BANK OF QUEENSLAND LIMITED ((BOQ)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/5/1

Macquarie reviews the Australian banking sector and concludes it is peaking, with only one last upgrade left in it (if that).

The broker considers the sector's longer-term leverage to high interest rates to be overstated; and does not consider the banks to be a great inflation hedge.

But the banks are set for their last hurrah concludes the broker, expecting they will deliver their strongest pre-provision profit and growth in more than a decade in the March half, courtesy strong margins in response to rising interest rates. 

Beyond, stubborn inflation and higher interest rates are eventually likely to impact asset quality and raise impairments, says the broker.

Macquarie is now underweight the banking sector.

The broker says Bank of Queensland's relatively weak funding and margin position is likely to cap upside; and adds the bank has a relatively lower exposure to revenue offsets in an inflationary environment.

While appreciating the bank's transformation strategy, the broker's forecasts are -1% to -8% below that of consensus given perceived risk to short-term earnings.

Rating downgraded to Underperform from Neutral. Target price falls to $6.75 from $7.50.

BWP TRUST ((BWP)) Downgrade to Sell from Neutral by UBS .B/H/S: 0/0/3

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

UBS lowers its rating for BWP Trust to Sell from Neutral, while the target rises to $3.70 from $3.59.

COMMONWEALTH BANK OF AUSTRALIA ((CBA)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/3/4

Macquarie reviews the Australian banking sector and concludes it is peaking, with only one last upgrade left in it (if that).

The broker considers the sector's longer-term leverage to high interest rates to be overstated; and does not consider the banks to be a great inflation hedge.

But the banks are set for their last hurrah concludes the broker, expecting they will deliver their strongest pre-provision profit and growth in more than a decade in FY23, courtesy strong margins in response to rising interest rates. 

Beyond the March half, however, stubborn inflation and higher interest rates are eventually likely to impact asset quality and raise impairments.

Macquarie is now underweight the banking sector.

Commonwealth Bank is downgraded to Underperform from Neutral, the broker seeing little chance for earnings increases to match the company's premium valuation. Target price slips to $94 from $95. EPS forecasts rise in FY23 but are fairly steady in FY24.

CHARTER HALL LONG WALE REIT ((CLW)) Downgrade to Sell from Neutral by UBS .B/H/S: 2/2/1

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

UBS lowers its rating for Charter Hall Long WALE REIT to Sell from Neutral, while the target rises to $4.35 from $4.29.

COMPUTERSHARE LIMITED ((CPU)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 6/1/0

Morgan Stanley's bull case for Computershare looks to be playing out, with possibility of further guidance or margin upgrades from the company. Cash rates have continued to increase in key regions since November, and should drive tailwinds for the company. 

Based on these trends, Morgan Stanley lifts its margin income forecast US$821m, above company guidance, but notes expectations of forward rates could see margin yield cool into FY24. According to Morgan Stanley, the market does appear to be pricing in lower cash rates in 2024. 

The rating is downgraded to Equal-weight from Overweight and the target price decreased to $26.50 from $31.60.

EVOLUTION MINING LIMITED ((EVN)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/1/4

Evolution Mining delivered a mixed December quarter, Cowal outperforming Ord Minnett's forecasts and Red Lake underperforming. Costs beat the broker.

Ord Minnett observes that the share price has outpaced peers by 16% since September 30. FY24 EPS forecasts are revised upwards following a review of the broker's copper-price deck.

Rating downgraded to Hold from Accumulate to reflect the recent rally in the share price. Target price rises to $3.20 from $3.

FINEOS CORPORATION HOLDINGS PLC ((FCL)) Downgrade to Accumulate from Buy by Ord Minnett .B/H/S: 2/0/0

Ord Minnett reinitiates on Fineos Corp, noting investors in the company gain exposure to a leading software provider for the life, accident and health insurance industry. 

The broker sees ample growth headroom for the company given many insurers continue to use legacy systems, while the company's migration to the cloud supports more recurring income and operating leverage. 

The broker had previously interrupted coverage and has now returned with an Accumulate rating with a target price of $2.11. This Accumulate rating (from whitelabeling Morningstar research) is a downgrade from a prior more positive rating by Morningstar.

FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED ((FPH)) Downgrade to Neutral from Buy by Citi .B/H/S: 0/4/0

Fisher & Paykel Healthcare has upgraded FY23 revenue guidance to above consensus, Citi notes, having previously suggested the year would be second half-weighted. Covid in China, an early start to the flu season, and a new mask model are contributing.

The broker upgrades its FY23 earnings forecast by 19%.

However the stock has run up 47% since its October low, hence Citi pulls back to Neutral from Buy, citing fair value at this level. Target rises to NZ$28.75 from NZ$27.00.

HARVEY NORMAN HOLDINGS LIMITED ((HVN)) Downgrade to Neutral from Buy by Citi .B/H/S: 1/2/2

Citi has used a general sector update on ASX-listed retailers to downgrade Harvey Norman to Neutral from Buy. Target price has gained 10c to $4.80.

No changes were made to forecasts.

All in all, it is the broker's view that consumer spending most likely will beat benign expectations in FY23, albeit while acknowledging there are risks to this view.

JB HI-FI LIMITED ((JBH)) Downgrade to Sell from Lighten by Ord Minnett .B/H/S: 2/3/2

Ord Minnett downgrades its rating for JB Hi-Fi to Sell from Lighten on concern over structural change to the retail industry as consumers increasingly purchase online. This change in preference is thought to increase risk of exposure to a new range of competitors.

The broker's forecasts and $35.50 target remain the same.

KMD BRANDS LIMITED ((KMD)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 0/2/0

Morgan Stanley prefers retailers with potential for global expansion, levers to adjust margins and a track record of beating market expectations. A high level of insider ownership and a strong balance sheet are also viewed positively.

The broker downgrades its rating for KMD Brands to Equal-weight from Overweight on potential margin headwinds and a tough economic backdrop.

More positively, the analyst likes the global expansion opportunities for Rip Curl, Oboz and Kathmandu and the leverage that arises from reopening/more outdoor activities.

The target falls to $1.05 from $1.25. Industry View: In-line.

MINCOR RESOURCES NL ((MCR)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 0/1/0

Despite base metal pricing having a strong start to the year, Macquarie has downgraded on Mincor Resources following share price strength. The company has reported drilling results that indicate potential upside at both its Durkin North and Golden Mile assets. 

The broker considers the company's second quarter production report, expected in late January, to be an upcoming catalyst. Production ramp-up and costs are the key risks to the broker's forecasts. 

The rating is downgraded to Neutral from Outperform and the target price of $1.80 is retained.

MIRVAC GROUP ((MGR)) Downgrade to Neutral from Buy by UBS .B/H/S: 3/3/0

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

UBS lowers its rating for Mirvac Group to Neutral from Buy to reflect increasing risks to FY23 EPS forecasts (including quality of earnings), while also acknowledging medium term potential for above sector level growth. The target eases to $2.40 from $2.45.

RAMSAY HEALTH CARE LIMITED ((RHC)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/3/1

Ramsay Health Care has risen 17% in three months, outperforming the index. Given only minor earnings upgrades, Macquarie notes the re-rate is all about PE expansion (sentiment over substance).

Ramsay is now trading at a premium to the index well above its longer term averages. While the broker believes the medium to longer-term fundamentals remain attractive, they are captured within current valuations, with further upside contingent on a change of control transaction.

Downgrade to Neutral from Outperform. Target rises to $69.50 from $69.15.

SCENTRE GROUP ((SCG)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/3/1

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

UBS lowers its rating for Scentre Group to Neutral from Buy on a lack of positive upcoming catalysts and forecasts for a weaker consumer spend. The target increases to $3.20 from $3.10.

VICINITY CENTRES ((VCX)) Downgrade to Sell from Neutral by UBS .B/H/S: 0/5/1

In a review of the Australian Real Estate sector, UBS expects ongoing volatility on bond yield moves but feels the range of outcomes for interest rates has diminished. On average price targets are raised by 6% across the sector.

The broker forecasts a peak of 3.35% for the cash rate (market expects 3.8%) on normalising unemployment and inflation.

Rate cuts in the 2H will close valuation discounts in the Real Estate sector, according to the analysts, and the sub-sector of Logistics is preferred given traditionally high rent growth and record low vacancy levels.

While structural factors favour Residential, UBS moves to underweight from overweight for the Retail sector on a weaker consumer. Caution is retained on Office, while it's considered too early to overweight Funds Management due to subdued transaction volumes.

UBS lowers its rating for Vicinity Centres to Sell from Neutral on valuation, a weaker forecast for consumer spending and a slowing development pipeline. The target rises to $1.89 from $1.73.

WESTPAC BANKING CORPORATION ((WBC)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 5/1/1

Macquarie reviews the Australian banking sector and concludes it is peaking, with only one last upgrade left in it (if that).

The broker considers the sector's longer-term leverage to high interest rates to be overstated; and does not consider the banks to be a great inflation hedge.

But the banks are set for their last hurrah concludes the broker, expecting they will deliver their strongest pre-provision profit and growth in more than a decade in the March half, courtesy strong margins in response to rising interest rates. 

Beyond, stubborn inflation and higher interest rates are eventually likely to impact asset quality and raise impairments, says the broker.

Macquarie is now underweight the banking sector.

The broker expects Westpac's discount valuation to tighten but says franchise issues continue to drag and the broker suspects consensus expense forecasts may be overblown and that the bank's sustainable mortgage returns might also be under pressure.

Rating downgraded to Underperform from Neutral. Target price eases to $23.50 from $24.00.

WOODSIDE ENERGY GROUP LIMITED ((WDS)) Downgrade to Neutral from Buy by Citi .B/H/S: 3/4/0

Taking into account Woodside Energy's 70% share price rise since Jan’22, Citi’s flat oil outlook for 2023, optimism on Browse but increased regulatory uncertainty on Scarborough delivery, it’s not clear to the broker how the stock can outperform from here.

To that end Citi downgrades to Neutral from Buy. Target falls to $37.55 from $38.50.

WHITEHAVEN COAL LIMITED ((WHC)) Downgrade to Neutral from Buy by UBS .B/H/S: 6/1/0

UBS downgrades its rating for Whitehaven Coal to Neutral from Buy on valuation, despite a lift in target to $9.80 from $9.20 following a strong 2Q production report.

A strong run of mine (ROM) result beat the broker's expectation with the undergound performance offsetting weather impacts at open cuts, explains the analyst.

Currently strong thermal coal prices have eased for several reasons including a warmer winter in Europe, and a pick up in nuclear/renewables supply, explains the broker.

UBS forecasts prices will trend lower over the next 12-18 months.

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