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Weekly Ratings, Targets, Forecast Changes

Weekly Reports | Jun 11 2019

This story features AURIZON HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: AZJ

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 June 3 to Friday June 7, 2019
Total Upgrades: 9
Total Downgrades: 11
Net Ratings Breakdown: Buy 40.29%; Hold 43.30%; Sell 16.41%

The local share market continues to defy the headwind from stockbroking analysts issuing more downgrades than upgrades for recommendations on individual ASX-listed entities.

Admittedly, the tally for the week ending Friday, 7th June 2019, carried nine upgrades versus 11 downgrades; so while the balance leans towards more downgrades, it's not a big gap between negative and positive revisions.

Six out of the nine upgrades switched to Buy, while only two downgrades moved to Sell. The week's two unlucky ones are Boral and City Chic.

Resurrecting EclipX Group took the week's honours in terms of target price increases, followed by Village Roadshow and Metcash. Negative adjustments proved bigger, but all in all both sides are only showing limited numbers affected.

Dacian Gold's price target suffered most, not surprising given the company's severe profit warning, affecting the outlook for many years into the future. Then follows Link Administration, also impacted by a profit warning. Then follows gold producer St Barbara who equally issued a negative news update.

Positive revisions to earnings estimates remain few and far between, with GBST, Village Roadshow and News Corp all enjoying increases during the week, but with considerably more happening on the negative side of the week's ledger.

Dacian Gold's target suffered most (see above), followed by another perennial disappointer of late, Costa Group, followed by EclipX Group, Link Administration, St Barbara and Freedom Foods Group, who also issued a profit warning.

The number of profit warnings being issued against a background of an outperforming local share market reminds investors about the two-speed dynamics at play, irrespective of RBA rate cuts and short covering keeping general sentiment bullish.

Upgrade

AURIZON HOLDINGS LIMITED ((AZJ)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 2/5/1

Management is carrying out a structural review, including an assessment of the legal and capital structure. An update is expected at the FY19 results.

Deutsche Bank believes there is limited opportunity to gear up, given the cyclical nature of the resources sector, and there is greater upside from selling an equity stake in the network. The broker upgrades to Buy from Hold and raises the target to $5.40 from $4.80.

ECLIPX GROUP LIMITED ((ECX)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 4/1/0

Credit Suisse believes a strong positive reaction in the share price to the first half result stems mainly from evidence that the underlying fleet and novated lease business is holding a relatively flat trajectory.

There is increased comfort that the company should be able to repair its balance sheet. Disposal of the non-core businesses, Right2Drive, Grays and commercial equipment finance, should enable a reduction in debt.

Credit Suisse upgrades to Outperform from Neutral and raises the target to $1.40 from $0.88.

GENEX POWER LIMITED ((GNX)) Upgrade to Add from Speculative Buy by Morgans .B/H/S: 1/0/0

JPower, one of Japan's largest hydropower operators and developers, will acquire up to 20% of Genex Power and up to $25m following financial close of K2-H. The company has conditional approval on the bulk of its required funding and the main outstanding issue is a final investment decision from Energy Australia.

Morgans is now a lot more confident that project will proceed and, having upgraded to Speculative Buy from Hold in late May, now upgrades to Add. The broker raises the target to $0.35 from $0.29.

MICHAEL HILL INTERNATIONAL LIMITED ((MHJ)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/0/0

Citi upgrades to Buy from Neutral based on the valuation appeal and strategic initiatives being undertaken, including the new promotional strategy and increased focus on Canadian store productivity.

The share price has fallen -25% from its recent peak, the broker observes. Target is steady at $0.63.

METCASH LIMITED ((MTS)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 3/2/2

The re-signing of Drakes in Queensland for another five years signals to Deutsche Bank that an economically viable alternative for supply could not be found at this stage.

Moreover, the extension of the Drakes contract in South Australia by four months highlights the complexity of establishing a new distribution centre.

While top-line growth looks challenging, the broker notes more cost reductions have been confirmed and food inflation is becoming real.

Deutsche Bank upgrades to Hold from Sell. Target is $2.80.

NRW HOLDINGS LIMITED ((NWH)) Upgrade to Buy from Neutral by UBS .B/H/S: 1/1/1

NRW client Gascoyne Resources has gone into administration. Work will continue and NRW will continue to be paid while the administrator explores all options, but UBS suspects NRW will write off the $35m at risk despite this being the worst case scenario.

The broker cuts FY19 forecast earnings but leaves FY20-21 largely unchanged, noting a forecast win-rate for new iron ore contracts offers material upside. UBS believes selling has been overdone and upgrades to Buy. Target falls to $3.05 from $3.10.

ST BARBARA LIMITED ((SBM)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 2/2/1

The company downgrades FY19 production guidance to around 355,000 ounces, back to where it started at the beginning of the year prior to guidance revisions in January and March. The reason is a slippage of around a month in accessing the high-grade stopes at Gwalia.

No explicit revisions to costs have been provided other than acknowledging lower production will affect unit costs. Credit Suisse upgrades to Neutral from Underperform, on share price weakness. Target is steady at $2.72. The broker notes a strong performance has continued at Simberi.

SANTOS LIMITED ((STO)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 3/5/0

Credit Suisse believes Santos is less exposed than Oil Search ((OSH)) to risk around LNG price reviews. Santos has the strength in its balance sheet to mitigate the risk.

The broker models a -0.5% slope drop at PNG LNG in its base case or a -5c/share impact. The Darwin LNG price review presents a negligible impact, given limited remaining life but could set a precedent, the broker suggests.

Rating is upgraded to Neutral from Underperform. Target is reduced to $6.35 from $6.40.

WORLEYPARSONS LIMITED ((WOR)) Upgrade to Buy from Neutral by UBS .B/H/S: 6/1/0

UBS upgrades to Buy from Neutral as the stock appears more attractive on a valuation basis after a -15% reduction in the share price in the last quarter. The broker expects earnings (EBIT) growth of 96% in FY20 and 13% in FY21, supported by the acquisition of Jacobs ECR.

UBS notes an upbeat assessment of end-market capital expenditure from the investor briefing, with potential revenue synergies emerging from the cross-selling of the Worley/Jacobs ECR service platforms. Target is reduced to $16.00 from $17.10.

Downgrade

ACCENT GROUP LIMITED ((AX1)) Downgrade to Neutral from Buy by Citi .B/H/S: 0/2/0

Citi remains a supporter of the company's growth strategies, including the increase in vertical brand/accessory penetration and the acquisition of The Athlete's Foot franchises.

However, the broker downgrades to Neutral from Buy as the share price has increased 24% in the year to date.

Moreover, future growth could be more challenging as the company has largely cycled the benefit of reduced discounting. Citi reduces the target to $1.61 from $1.75.

BORAL LIMITED ((BLD)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 5/1/1

The company has not explicitly confirmed guidance and, given weak residential activity in both Australia & the US and poor weather in the US, Credit Suisse suspects a result in line with guidance would be good.

Management has conceded the growth in infrastructure and non-residential activity would not be offsetting the decline in residential activity in FY20. Weakness is expected to be particularly acute in NSW, the company's largest revenue region.

Credit Suisse reduces FY20 estimates for earnings (EBIT) by -17% and downgrades to Underperform from Neutral. Target is reduced to $4.40 from $4.80.

CARSALES.COM LIMITED ((CAR)) Downgrade to Neutral from Buy by UBS .B/H/S: 6/1/0

UBS believes the opportunity for Carsales.com lies with lifting depth contributions, repairing display and growing internationally. In South Korea there are many drivers for longer-term growth, the broker observes, including greater penetration of the dealer base.

Forecasts are raised to factor in improved execution, although UBS suspects the market is already pricing in success. Hence, rating is downgraded to Neutral from Buy. Target is raised to $14.00 from $12.50.

CITY CHIC COLLECTIVE LTD ((CCX)) Downgrade to Sell from Neutral by Citi .B/H/S: 0/0/1

While the growth prospects are good, Citi finds there is insufficient margin of safety at current prices. Moreover, the company has an element of fashion risk and the broker believes the share price needs to be lower to provide a satisfactory reward.

Rating is downgraded to Sell from Neutral. The broker increases estimates for earnings per share by 3% for FY19 and 9% for FY20. Target is raised to $1.60 from $1.45.

CENTURIA METROPOLITAN REIT ((CMA)) Downgrade to Hold from Add by Morgans .B/H/S: 1/1/0

Following strong appreciation in the security, Morgans downgrades to Hold from Add. The broker assesses the stock continues to offer an attractive yield which will appeal to income investors.

FY19 guidance is unchanged, comprising a distribution of 17.6c per security. On this basis a fourth quarter distribution of around 4.36c is expected. Target is raised to $2.64 from $2.51.

DACIAN GOLD LIMITED ((DCN)) Downgrade to Neutral from Buy by Citi .B/H/S: 2/1/0

Citi only initiated coverage with a Buy/High Risk rating and a $3 target in May, about three weeks ago, so there will be a number of unhappy faces at the office. Company management has downgraded production guidance in significant manner.

Citi analysts today respond by saying they are "disappointed"; what else are they supposed to say? The recommendation has been pulled back to Neutral/High Risk. Target price falls to (wait for it) $0.60 as the analysts express their concern about the "low Reserve-to-mill reconciliation for gold ounces across the whole operation".

Estimates have been reset, with the analysts explaining what essentially has occurred is that projected output in ounces went down -30% on +41% in costs, while valuation multiples were reduced on top.

IRESS MARKET TECHNOLOGY LIMITED ((IRE)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 1/4/0

The company will acquire QuantHouse, which provides low-latency market data feeds, hosting infrastructure and algorithms services. While the business is currently generating a slight loss, Ord Minnett suggests this is likely a reflection of being sub-scale.

As cost synergies and scale benefits should drive improvement, the broker believes the risk is low for IRESS achieving an acceptable return from the purchase.

Rating is downgraded to Hold from Accumulate, given the performance of the stock of late. Target is reduced to $12.92 from $13.09.

JB HI-FI LIMITED ((JBH)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 1/5/2

The stock has risen materially since the federal election and over the past 6-12 months. This leads Ord Minnett to downgrade its rating to Hold from Accumulate and raise the target to $29 from $27.

JB Hi-Fi has reiterated FY19 guidance at a recent investor conference and the broker notes June 2018 will be a tough comparable period to cycle because of the FIFA World Cup, while category trends are more benign and competition is mixed.

LINK ADMINISTRATION HOLDINGS LIMITED ((LNK)) Downgrade to Neutral from Buy by Citi .B/H/S: 6/1/1

Citi lowers estimates for earnings per share by -12% for FY19 and by -16% for FY20. The company has downgraded forecasts, predominantly because of factors outside its control, such as Brexit and the earlier-than-anticipated implementation of superannuation legislation.

Citi believes the issue for the company is the decreased perception of earnings predictability. Rating is downgraded to Neutral from Buy and the target lowered to $6.00 from $8.20.

SUPER RETAIL GROUP LIMITED ((SUL)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/6/0

The share price has risen materially over the past 6-12 months and since the federal election and Ord Minnett downgrades to Hold from Accumulate, raising the target to $9.50 from $9.00.

The broker considers Super Retail is anchored by a strong and resilient automotive business while the consumer environment appears to be having less of an impact than previously feared.

Macpac is proving to be a strong performer although the turnaround in BCF is less certain.

VIVA ENERGY REIT ((VVR)) Downgrade to Hold from Add by Morgans .B/H/S: 1/2/0

Following appreciation in the stock, over the past year it has risen 35.7%, Morgans downgrades to Hold from Add. The base earnings year is moved to FY20 and, as a result, the target increases to $2.61 from $2.52.

The broker asserts there is a sustainable distribution yield and the stock is attractive for income investors. One third of the portfolio is independently revalued every three years.

Total Recommendations
Recommendation Changes

Broker Recommendation Breakup

Broker Rating

 

Order Company New Rating Old Rating Broker
Upgrade
1 AURIZON HOLDINGS LIMITED Buy Neutral Deutsche Bank
2 ECLIPX GROUP LIMITED Buy Neutral Credit Suisse
3 GENEX POWER LIMITED Buy Buy Morgans
4 METCASH LIMITED Neutral Sell Deutsche Bank
5 MICHAEL HILL INTERNATIONAL LIMITED Buy Neutral Citi
6 NRW HOLDINGS LIMITED Buy Neutral UBS
7 SANTOS LIMITED Neutral Sell Credit Suisse
8 ST BARBARA LIMITED Neutral Sell Credit Suisse
9 WORLEYPARSONS LIMITED Buy Neutral UBS
Downgrade
10 ACCENT GROUP LIMITED Neutral Buy Citi
11 BORAL LIMITED Sell Neutral Credit Suisse
12 CARSALES.COM LIMITED Neutral Buy UBS
13 CENTURIA METROPOLITAN REIT Neutral Buy Morgans
14 CITY CHIC COLLECTIVE LTD Sell Neutral Citi
15 DACIAN GOLD LIMITED Neutral Buy Citi
16 IRESS MARKET TECHNOLOGY LIMITED Neutral Buy Ord Minnett
17 JB HI-FI LIMITED Neutral Buy Ord Minnett
18 LINK ADMINISTRATION HOLDINGS LIMITED Neutral Buy Citi
19 SUPER RETAIL GROUP LIMITED Neutral Buy Ord Minnett
20 VIVA ENERGY REIT Neutral Buy Morgans

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 MHJ MICHAEL HILL INTERNATIONAL LIMITED 100.0% 75.0% 25.0% 4
2 VRL VILLAGE ROADSHOW LIMITED 50.0% 25.0% 25.0% 4
3 ECX ECLIPX GROUP LIMITED 80.0% 60.0% 20.0% 5
4 SBM ST BARBARA LIMITED 10.0% -10.0% 20.0% 5
5 WOR WORLEYPARSONS LIMITED 86.0% 71.0% 15.0% 7
6 MTS METCASH LIMITED 7.0% -7.0% 14.0% 7
7 STO SANTOS LIMITED 38.0% 25.0% 13.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Company New Rating Previous Rating Change Recs
1 VVR VIVA ENERGY REIT 33.0% 67.0% -34.0% 3
2 DCN DACIAN GOLD LIMITED 67.0% 100.0% -33.0% 3
3 CAR CARSALES.COM LIMITED 86.0% 100.0% -14.0% 7
4 BLD BORAL LIMITED 50.0% 64.0% -14.0% 7
5 LNK LINK ADMINISTRATION HOLDINGS LIMITED 56.0% 69.0% -13.0% 8
6 ANN ANSELL LIMITED 38.0% 50.0% -12.0% 8
7 IRE IRESS MARKET TECHNOLOGY LIMITED 20.0% 30.0% -10.0% 5
8 JBH JB HI-FI LIMITED -13.0% -6.0% -7.0% 8
9 SUL SUPER RETAIL GROUP LIMITED 25.0% 31.0% -6.0% 8
10 VCX VICINITY CENTRES 10.0% 13.0% -3.0% 5

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 ECX ECLIPX GROUP LIMITED 1.440 1.046 37.67% 5
2 VRL VILLAGE ROADSHOW LIMITED 3.605 3.230 11.61% 4
3 MTS METCASH LIMITED 2.843 2.786 2.05% 7
4 CAR CARSALES.COM LIMITED 14.041 13.827 1.55% 7
5 VVR VIVA ENERGY REIT 2.550 2.520 1.19% 3
6 JBH JB HI-FI LIMITED 24.615 24.365 1.03% 8
7 IRE IRESS MARKET TECHNOLOGY LIMITED 13.446 13.378 0.51% 5
8 SUL SUPER RETAIL GROUP LIMITED 9.141 9.110 0.34% 8

Negative Change Covered by > 2 Brokers

Order Symbol Company New Target Previous Target Change Recs
1 DCN DACIAN GOLD LIMITED 1.483 3.050 -51.38% 3
2 LNK LINK ADMINISTRATION HOLDINGS LIMITED 7.181 8.059 -10.89% 8
3 SBM ST BARBARA LIMITED 3.144 3.262 -3.62% 5
4 BLD BORAL LIMITED 5.771 5.829 -1.00% 7
5 WOR WORLEYPARSONS LIMITED 18.411 18.569 -0.85% 7
6 ANN ANSELL LIMITED 26.491 26.654 -0.61% 8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 GBT GBST HOLDINGS LIMITED 17.650 13.300 32.71% 3
2 VRL VILLAGE ROADSHOW LIMITED 11.733 10.267 14.28% 4
3 NWS NEWS CORPORATION 57.295 53.068 7.97% 5
4 AMC AMCOR LIMITED 82.469 81.093 1.70% 7
5 WOR WORLEYPARSONS LIMITED 59.503 58.777 1.24% 7
6 BLD BORAL LIMITED 40.620 40.128 1.23% 7
7 CSL CSL LIMITED 581.652 579.401 0.39% 8
8 STO SANTOS LIMITED 57.427 57.224 0.35% 8
9 CBA COMMONWEALTH BANK OF AUSTRALIA 487.486 486.057 0.29% 8
10 QBE QBE INSURANCE GROUP LIMITED 87.778 87.595 0.21% 8

Negative Change Covered by > 2 Brokers

Order Symbol Company New EF Previous EF Change Recs
1 DCN DACIAN GOLD LIMITED -5.000 4.250 -217.65% 3
2 CGC COSTA GROUP HOLDINGS LIMITED 19.228 23.775 -19.13% 6
3 ECX ECLIPX GROUP LIMITED 12.460 14.540 -14.31% 5
4 LNK LINK ADMINISTRATION HOLDINGS LIMITED 37.143 43.339 -14.30% 8
5 SBM ST BARBARA LIMITED 28.138 30.745 -8.48% 5
6 FNP FREEDOM FOODS GROUP LIMITED 7.933 8.267 -4.04% 4
7 IRE IRESS MARKET TECHNOLOGY LIMITED 45.495 46.220 -1.57% 5
8 MHJ MICHAEL HILL INTERNATIONAL LIMITED 5.925 6.000 -1.25% 4
9 SGR THE STAR ENTERTAINMENT GROUP LIMITED 28.335 28.668 -1.16% 7
10 REG REGIS HEALTHCARE LIMITED 15.975 16.125 -0.93% 4

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CHARTS

AX1 AZJ BLD CAR CCX DCN GNX IRE JBH LNK MHJ MTS NWH SBM STO SUL WOR

For more info SHARE ANALYSIS: AX1 - ACCENT GROUP LIMITED

For more info SHARE ANALYSIS: AZJ - AURIZON HOLDINGS LIMITED

For more info SHARE ANALYSIS: BLD - BORAL LIMITED

For more info SHARE ANALYSIS: CAR - CAR GROUP LIMITED

For more info SHARE ANALYSIS: CCX - CITY CHIC COLLECTIVE LIMITED

For more info SHARE ANALYSIS: DCN - DACIAN GOLD LIMITED

For more info SHARE ANALYSIS: GNX - GENEX POWER LIMITED

For more info SHARE ANALYSIS: IRE - IRESS LIMITED

For more info SHARE ANALYSIS: JBH - JB HI-FI LIMITED

For more info SHARE ANALYSIS: LNK - LINK ADMINISTRATION HOLDINGS LIMITED

For more info SHARE ANALYSIS: MHJ - MICHAEL HILL INTERNATIONAL LIMITED

For more info SHARE ANALYSIS: MTS - METCASH LIMITED

For more info SHARE ANALYSIS: NWH - NRW HOLDINGS LIMITED

For more info SHARE ANALYSIS: SBM - ST. BARBARA LIMITED

For more info SHARE ANALYSIS: STO - SANTOS LIMITED

For more info SHARE ANALYSIS: SUL - SUPER RETAIL GROUP LIMITED

For more info SHARE ANALYSIS: WOR - WORLEY LIMITED