Weekly Reports | Sep 15 2023

Starting today, FNArena is publishing a summary of the highlights from Broker Call Extra updates throughout the week past.

Broker Rating Changes (Post Friday last week)

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BRAMBLES LIMITED ((BXB)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0

FY23 results from Brambles were in line with expectations. Jarden notes the strong positive reaction in the stock, possibly reflecting increased confidence that the company can deliver operating leverage alongside improved cash flow.

Confidence in the margin appears centred on two items, including the normalisation of group costs after a sustained period of acceleration and the ongoing benefits of price increases.

The broker lifts the target to $16.00 from $14.30, underpinned by FX and movements in peer valuation multiples. Brambles has also guided to lower capital intensity and as a result the rating is raised to Overweight from Neutral.

NEXT SCIENCE LIMITED ((NXS)) Upgrade to Overweight from Market Weight by Wilsons.B/H/S: 0/0/0

Wilsons upgrades Next Science to Overweight from Market Weight, with the target edging up to $0.57 from $0.56, surprised by the early performance of the DME business in the first half while noting Xperience took a back seat although still grew well.

The company has announced an institutional placement, an offer to US shareholders and a domestic share purchase plan, raising up to $18.5m.

A convertible note issued in February has also been redeemed and resubscribed on the same terms. This places management in a debt-free position enabling it to execute on a direct sales strategy, the broker adds.

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LEO LITHIUM LIMITED ((LLL)) Downgrade to Neutral from Buy by Jarden.B/H/S: 0/0/0

As Leo Lithium emerges from suspension, correspondence with the Mali government has involved a review of the new Mining Code act, suspension of operations to produce and sell DSO as well as potential changes to taxes and duties.

Jarden considers the most significant news, and the basis of the severity of the reaction in the share price, is the Ganfeng investment and cooperation agreement.

In replacing the $106m equity placement by Ganfeng in May the company has effectively provided an additional 5% of Goulamina to Ganfeng, taking its stake to 55%, allowing it to invest directly into the joint venture and sole fund expenditure on Goulamina.

Without any obvious premium for control, the broker considers this a major negative for Leo Lithium. Rating is downgraded to Neutral from Buy and the target reduced to $0.60 from $1.43.

MAYNE PHARMA GROUP LIMITED ((MYX)) Downgrade to Underweight from Overweight by Wilsons.B/H/S: 0/0/0

FY23 revenue and EBITDA were below forecasts. Wilsons acknowledges this was a messy year for Mayne Pharma, commencing with a management transition and delivering promises//partial withdrawals of capital returns as well as acquisitions and divestments.

In FY24 the broker is cautious about the outlook given the underperformance in key segments pivotal to growth in the US business.

Having upgraded back in May based on a trading update that signalled a more positive outlook the broker now believes the call was wrong and downgrades to Underweight from Overweight. Target is reduced to $2.68 from $4.43.

SANDFIRE RESOURCES LIMITED ((SFR)) Downgrade to Hold from Buy by Canaccord Genuity.B/H/S: 0/0/0

FY23 results beat Canaccord Genuity's estimates at the EBITDA line. Sandfire Resources has provided further guidance on operating costs and expenditure at Matsa and Motheo.

Underlying mine operating costs at Matsa were -12% below the broker's estimates while Motheo operating costs were -26% below. The broker's valuation of Motheo has fallen -4% on higher stripping rates at the start of the mine life which is partially offset by extending the Matsa mine life to 2040.

Canaccord Genuity downgrades to Hold from Buy as the stock is trading at valuation. Target is $7.