Weekly Ratings, Targets, Forecast Changes

This story features ALUMINA LIMITED, and other companies. For more info SHARE ANALYSIS: AWC

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, 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 April 22 to Friday April 26, 2019
Total Upgrades: 0
Total Downgrades: 5
Net Ratings Breakdown: Buy 41.70%; Hold 42.97%; Sell 15.33%

The long Easter weekend and Anzac public holiday made their impact felt in the week ending Friday, 26th may 2019. For the week in total, FNArena registered five downgrades for ASX-listed entities, and not one single upgrade.

With four of the five downgrades affecting mining stocks, it's probably a fair conclusion market scepticism is creeping into this year's star performers. In earlier updates we noticed a number of downgrades for yield providing stocks. And the energy sector has had their share as well, as did the banks.

The good news: most downgrades still transfer to Neutral/Hold.

Not much to report on changes in price targets and valuations; there are but a tiny number. Both Galaxy Resources and Alumina Ltd further reinforce the mining theme, and both endured noticeable reductions of -11.6% and -3.3% respectively.

There was a bit more action in changes to earnings forecasts with resources stocks equally presented on the positive side of the week's ledger. Woodside Petroleum, Alumina Ltd, Oil Search and St Barbara all enjoyed rising forecasts.

The negative side shows much larger numbers though with forecasts for the likes of Galaxy Resources and Graincorp falling like a rock, while Northern Star's quarterly update also disappointed, and with sizeable cuts descending upon South32, Orocobre, and National Australia Bank (yet to report).

This week sees an acceleration in the release of quarterly production reports, interspersed with shareholder gatherings and a number of out-of-season financial results. It's getting busier at the micro level.

Downgrade

ALUMINA LIMITED ((AWC)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/2/1

Production of bauxite and alumina was in line with Macquarie's estimates. Costs were 11% above estimates. This drives earnings downgrades. The resumption of full production at Alunorte presents a key downside risk to alumina prices, in the broker's view.

This is likely to weigh on the share price of Alumina Ltd and Macquarie downgrades to Neutral from Outperform. Target is reduced to $2.35 from $2.80.

BHP GROUP ((BHP)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/5/1

Stronger for longer commodity prices have allowed for steep appreciation in the share price but UBS analysts believe prices for iron ore and metallurgical coal are poised for weakness on a 6-12 months horizon, hence the analysts see further upside as limited.

On this basis they have downgraded to Neutral from Buy. In addition, the outlook for crude oil prices is also seen as "subdued", which is yet another headwind forming. Price target lifts to $36 from $35 on further updates to modeling input and forecasts.

GALAXY RESOURCES LIMITED ((GXY)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 4/0/1

Better grades offset weak recoveries at Mount Cattlin, Macquarie observes. The company has stopped looking for a development partner for Sal de Vida and the broker notes no timeline has been provided, although the company still intends to develop the asset.

As Sal de Vida is increasingly uncertain and Macquarie believes funding could be difficult to source during muted market conditions, the rating is downgraded to Underperform from Neutral. Weak recoveries at Mount Cattlin also remain of concern. Target is reduced to $1.50 from $2.10.

KOGAN.COM LTD ((KGN)) Downgrade to Neutral from Buy by UBS .B/H/S: 0/1/0

The company has announced a strong March quarter of trading and two new vertical markets: Kogan Energy Compare and Kogan Cars with EclipX Group ((ECX)). UBS believes these will be slow profit producers.

The company has also launched a retail subscription service to tie in with its upcoming credit card offer. UBS envisages near-term risk is to the upside for earnings but considers this priced into the stock.

To become more positive, the broker requires a strong ramp up of at least one new vertical and improving cash flow. Rating is downgraded to Neutral from Buy and the target is raised to $5.80 from $5.00.

SOUTH32 LIMITED ((S32)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 4/3/0

March quarter production was weak and guidance has been reduced for the alumina and thermal coal assets. This translates to -14-22% reductions to Macquarie's earnings forecasts for the next four years.

Cost guidance is also expected to come under pressure for a number of assets. Earnings upgrade momentum has vanished and Macquarie downgrades to Neutral from Outperform as a result. Target is reduced to $3.60 from $4.00.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order Company New Rating Old Rating Broker Downgrade 1 ALUMINA LIMITED Neutral Buy Macquarie 2 BHP GROUP Neutral Buy UBS 3 GALAXY RESOURCES LIMITED Sell Neutral Macquarie 4 KOGAN.COM LTD Neutral Buy UBS 5 SOUTH32 LIMITED Neutral Buy Macquarie

Recommendation

Positive Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs

Negative Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs 1 GXY GALAXY RESOURCES LIMITED 60.0% 80.0% -20.0% 5 2 AWC ALUMINA LIMITED 20.0% 40.0% -20.0% 5 3 S32 SOUTH32 LIMITED 57.0% 71.0% -14.0% 7 4 BHP BHP GROUP 13.0% 25.0% -12.0% 8

Target Price

Positive Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 BHP BHP GROUP 37.391 37.249 0.38% 8

Negative Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 GXY GALAXY RESOURCES LIMITED 2.350 2.660 -11.65% 5 2 AWC ALUMINA LIMITED 2.610 2.700 -3.33% 5 3 S32 SOUTH32 LIMITED 3.906 3.984 -1.96% 7

Earning Forecast

Positive Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 WPL WOODSIDE PETROLEUM LIMITED 247.159 228.936 7.96% 8 2 AWC ALUMINA LIMITED 26.771 25.401 5.39% 5 3 OSH OIL SEARCH LIMITED 45.313 43.818 3.41% 8 4 SBM ST BARBARA LIMITED 32.690 31.933 2.37% 5 5 SGM SIMS METAL MANAGEMENT LIMITED 81.633 81.050 0.72% 7 6 MP1 MEGAPORT LIMITED -26.600 -26.650 0.19% 3 7 QBE QBE INSURANCE GROUP LIMITED 87.006 86.850 0.18% 8 8 RIO RIO TINTO LIMITED 938.425 936.746 0.18% 8 9 SDA SPEEDCAST INTERNATIONAL LIMITED 32.430 32.372 0.18% 4 10 NCM NEWCREST MINING LIMITED 100.565 100.412 0.15% 8

Negative Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 GXY GALAXY RESOURCES LIMITED -0.276 1.822 -115.15% 5 2 GNC GRAINCORP LIMITED -0.688 6.285 -110.95% 4 3 NST NORTHERN STAR RESOURCES LTD 34.780 41.828 -16.85% 7 4 S32 SOUTH32 LIMITED 32.072 33.664 -4.73% 7 5 ORE OROCOBRE LIMITED 9.698 10.125 -4.22% 8 6 NAB NATIONAL AUSTRALIA BANK LIMITED 218.500 226.657 -3.60% 8 7 CRN CORONADO GLOBAL RESOURCES 60.774 62.078 -2.10% 3 8 SYR SYRAH RESOURCES LIMITED -3.343 -3.341 -0.06% 5 9 URW UNIBAIL-RODAMCO-WESTFIELD 46.943 46.954 -0.02% 4

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