Weekly Reports | Sep 25 2023
By Rudi Filapek-Vandyck, Editor FNArena
Guide:
The FNArena database tabulates the views of eight major Australian and international stockbrokers: Citi, Bell Potter, Macquarie, Morgan Stanley, Morgans, Ord Minnett, Shaw and Partners 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 September 18 to Friday September 22, 2023
Total Upgrades: 6
Total Downgrades: 5
Net Ratings Breakdown: Buy 55.22%; Hold 35.97%; Sell 8.81%
By Rudi Filapek-Vandyck
September is when investors and financial analysts take a breather post the busy August reporting season in Australia.
This results in below-average volumes on the ASX and significant shrinkage in the number of research reports released by local stockbrokers.
Overall activity from the local analyst community did pick up slightly during the week ending Friday, 22nd of September, 2023. FNArena registered six upgrades in ratings and five downgrades, a slight increase on the week prior.
Most changes centred around resources companies with all five downgrades affecting ratings for miners, including two downgrades for coal miner New Hope following its release of FY23 financials. Half of the three upgrades did not revolve around metals and mining, with each of Genetic Signatures, Megaport and Mesoblast receiving a fresh upgrade to Buy.
Mining companies are also the main constituent for the week's table of positive revisions to valuations and price targets, with most adjustments only minor. Out-of-season reporter Sigma Healthcare saw its performance rewarded with the week's largest gain, 7.29%. Next followed Megaport (4.23%) and Deterra Royalties (3.87%).
The numbers on top of the table for negative amendments are larger with retailer KMD Brands's price target falling by -11.11% post result release, and with Syrah Resources' target declining by -7.22%. Abacus Group's decline of -6.41% made it third largest loser for the week.
A similar picture dominates the week's changes to earnings forecasts with negative revisions noticeably larger, and with miners and explorers dominating both sides of the ledger.
On the positive side, Alumina Ltd enjoyed a 89% shrinkage in this financial year's forecast loss, handsomely beating KMD Brands and Megaport, followed by Fortescue Metals, 29Metals and Monadelphous.
On the negative side, New Hope's consensus forecast dropped by -49.44%, with significant declines befalling forecasts for each of Sandfire Resources, Sigma Healthcare, Syrah Resources, and Abacus Group.
Upgrade
29METALS LIMITED ((29M)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 1/3/0
Morgan Stanley updates its modelling to allow for higher 2024 copper prices and 2025 gold prices,, as well as a lower Australian dollar over 2023-24.
The broker upgrades 29Metals to Overweight from Equal-weight based on valuation and because balance-sheet concerns are being resolved through the entitlement offer amid potential for a faster-than-expected re-start at Capricorn Copper.
Target is raised to $0.85 from $0.75. Industry view: Attractive.
DETERRA ROYALTIES LIMITED ((DRR)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 2/1/1
Morgan Stanley observes iron ore prices have rallied on hopes of softer implementation of steel production reductions. From a fundamental view, the broker's expectations of a longer tail for prices appears to be materialising, with 2024 forecasts revised up 27% to US$105/t.
Morgan Stanley envisages value upside for Deterra Royalties and upgrades to Overweight from Equal-weight. Target is raised to $5.50 from $4.60. Industry View: Attractive.
GENETIC SIGNATURES LIMITED ((GSS)) Upgrade to Speculative Buy from Hold by Bell Potter .B/H/S: 1/0/0
The US represents around 65% of the global molecular diagnostics market and, Bell Potter highlights, has always been a target for Genetic Signatures.
The launch of core operations were delayed by the pandemic and trial issues, yet the EasyScreen gastrointestinal parasite detection kit validation has now been completed, with the submission to the US FDA this month.
US infrastructure has been established with a distribution/warehouse facility in California and the reimbursement code is in place for US$263 per test. The broker upgrades to Speculative Buy from Hold, reducing the target to $0.90 from $0.95.
MEGAPORT LIMITED ((MP1)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/2/0
Citi upgrades Megaport to Buy from Neutral, anticipating upside risk to FY24 forecasts and retaining an EBITDA forecast that is 10% above consensus.
The business is considered a substantial beneficiary of increased cloud adoption and the increased investment and focus on the customer should result in greater share of wallet.
The company is making progress on hiring staff with management expecting 20 new sales roles by the end of October. Target is raised to $12..50 from $11.00.
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