Period: Monday April 16 to Friday April 20, 2018
\nTotal Upgrades: 15
\nTotal Downgrades: 4
\nNet Ratings Breakdown: Buy 45.74%; Hold 39.30%; Sell 14.96%<\/em><\/p>\nPositive news followed through thick and fast last week in the form of stockbroker recommendation upgrades. For the week ending April 20th, 2018 FNArena registered no less than 15 upgrades for ASX listed stocks, against only four downgrades, of which two went to Evolution Mining.<\/p>\n
Further adding to the positive current is the observation that five out of the fifteen recommendation upgrades went to Neutral; meaning two thirds moved up to Buy (or an equivalent).<\/p>\n
Amongst stocks receiving upgrades we find Challenger, Hub23, Ingham's, Netwealth and Origin Energy. OZ Minerals was good for two upgrades during the week, both went to Buy.<\/p>\n
The good news continues with positive adjustments to valuations\/price targets outnumbering reductions, with the added observation that negative amendments, while fewer, have been far greater in isolated cases.<\/p>\n
Thus while Perpetual, Bank of Queensland and Janus Henderson steal the show with price target cuts between 6.9%-10.7%, the positive side has South32, NextDC, Primary Health Care and Rio Tinto all enjoying 3%+ increases to consensus targets.<\/p>\n
The tables ranking changes to earnings estimates further support the positive undercurrent. Oz Minerals suffered -6% to forecasts, followed by Bank of Queensland (-3%) and Mt Gibson (-2%), but Alumina ltd commands top dog status for the week with a gain of no less than 22%, beating Rio Tinto (+8%) and Fletcher Building (+7%).<\/p>\n
Upgrade<\/u><\/strong><\/p>\nBANK OF QUEENSLAND LIMITED ((BOQ)) Upgrade to Neutral from Underperform by Macquarie<\/strong> .B\/H\/S: 1\/4\/2<\/p>\nUnderlying trends remain challenging for the bank as revenue growth is constrained, Macquarie observes. While Bank of Queensland is affected by elevated funding costs in the near term, the broker continues to believe banks will re-price mortgages to offset the impact.<\/p>\n
Macquarie upgrades to Neutral from Underperform. Target is reduced to $11.00 from $12.50.<\/p>\n
CHALLENGER LIMITED ((CGF)) Upgrade to Outperform from Neutral by Macquarie<\/strong> .B\/H\/S: 1\/5\/1<\/p>\nFunds management revealed strong momentum in the March quarter, Macquarie suggests, particularly in the context of a fairly weak quarter for other listed fund managers. FY18 guidance for normalised net profit of $545-565m has been maintained.<\/p>\n
Macquarie upgrades to Outperform from Neutral, expecting net book growth rates to be sustained and with near-term credit quality metrics holding up. Target is raised to $13.00 from $12.95.<\/p>\n
GENERATION DEVELOPMENT GROUP LIMITED ((GDG)) Upgrade to Add from Hold by Morgans<\/strong> .B\/H\/S: 1\/0\/0<\/p>\nGeneration Development Group has announced its funds update for the March quarter. Investment bond sales were up 84%. Morgans likes the long-term story and, subsequent to recent changes to superannuation rules, expects alternative low-tax investment options like investment bonds will experience significant structural growth.<\/p>\n
The business is profitable and the company is at an inflection point where performance can be significantly ramped up. The broker upgrades to Add from Hold and raises the target to $1.33 from $1.28.<\/p>\n
HUB24 LIMITED ((HUB)) Upgrade to Buy from Hold by Ord Minnett<\/strong> .B\/H\/S: 2\/0\/0<\/p>\nThe March quarter was the company's second strongest overall, which impressed Ord Minnett given flows typically start off the year slowly. Existing forecasts are supported by groups already using the platform and new wins are incremental to the broker's base case.<\/p>\n
Ord Minnett calculates a valuation gap has now emerged and its target of $11.85, revised up from $11.00, offers 11% upside. As structural tailwinds are strengthening, the broker upgrades to Buy from Hold.<\/p>\n
HARVEY NORMAN HOLDINGS LIMITED ((HVN)) Upgrade to Hold from Lighten by Ord Minnett<\/strong> .B\/H\/S: 1\/4\/2<\/p>\nWhile Ord Minnett believes there is an absence of positive catalysts and risks are skewed to the downside, valuation support is now emerging at current share prices. Hence, the broker upgrades to Hold from Lighten. The target is lowered to $3.65 from $3.75.<\/p>\n
The broker incorporates lower forecasts for sales and margins in franchising operations in FY18, along with the $28.8m write-off of a loan associated with the Coomboona dairy JV.<\/p>\n
INGHAMS GROUP LIMITED ((ING)) Upgrade to Buy from Neutral by Citi<\/strong> .B\/H\/S: 4\/2\/0<\/p>\nCiti has upgraded to Buy from Neutral with a price target of $3.90, up from $3.60. The analysts have come to the conclusion the domestic market backdrop has become more favourable, with higher prices and limited competition from other proteins.<\/p>\n
Earnings estimates have been lifted by 1-3%. There is also potential for additional support from a share buyback, suggests Citi.<\/p>\n
JANUS HENDERSON GROUP PLC. ((JHG)) Upgrade to Buy from Neutral by Citi<\/strong> .B\/H\/S: 4\/2\/0<\/p>\nCiti adjusts estimates to account for recent flow data, lowering forecasts for earnings per share in FY18 by -2% and FY19 by -1%.<\/p>\n
Although net outflows present a harsh backdrop for the stock, the sell-off has been significant and Citi believes there are positive aspects that signal value and provide support for the equity market.<\/p>\n
Rating is upgraded to Buy from Neutral. Target is lowered to $47.50 from $50.00.<\/p>\n
MIRVAC GROUP ((MGR)) Upgrade to Buy from Hold by Deutsche Bank<\/strong> .B\/H\/S: 4\/2\/1<\/p>\nDeutsche Bank upgrades to Buy from Hold after analysing the retail tenancy mix. The conclusion is that the leases are affected by online, given the over-exposure to food catering and retail services. Mirvac has the lowest exposure to apparel.<\/p>\n
The upgrade is based on upside to the current share price, the high quality retail and office portfolio and the stock trading at a -2% discount to NTA. Target lifts to $2.36 from $2.35.<\/p>\n
NETWEALTH GROUP LIMITED ((NWL)) Upgrade to Buy from Hold by Ord Minnett<\/strong> .B\/H\/S: 1\/1\/1<\/p>\nOrd Minnett believes the pullback in the March quarter funds update is a buying opportunity after the company's share of net flows accelerated to 26% in the preceding quarter.<\/p>\n
The broker notes industry trends driving advisers towards independent platforms underpin the business. Rating is upgraded to Buy from Hold. Target is reduced to $6.40 from $6.48.<\/p>\n
ORIGIN ENERGY LIMITED ((ORG)) Upgrade to Outperform from Neutral by Macquarie<\/strong> .B\/H\/S: 6\/2\/0<\/p>\nOrigin's position as a firm provider of +3GW of electricity is increasingly attractive, Macquarie suggests, as grid-grade wind and solar farms emerge to meet renewables targets. A mild summer, and the increasing growth of household solar, saw a drop in demand, but surplus gas can be redirected to exports, the broker notes.<\/p>\n
Stronger oil prices are supporting APLNG cash flows, while cost initiatives provide for further upside. Put it together and Macquarie has upgraded to Outperform from Neutral. Target rises to $9.89 from $9.21.<\/p>\n
OZ MINERALS LIMITED ((OZL)) Upgrade to Neutral from Underperform by Credit Suisse and Upgrade to Add from Hold by Morgans<\/strong> .B\/H\/S: 3\/3\/0<\/p>\nOZ Minerals' March Q production numbers are in line with 2018 guidance and Credit Suisse forecasts. There has been no change to the Carrapateena development timetable.<\/p>\n
Carra progress leads the broker to de-risk valuation to 85% from 75%, which combined with revised commodity price and FX assumptions leads to a target price increase to $9.05 from $8.55. This in turn leads Credit Suisse to upgrade to Neutral from Underperform.<\/p>\n
Morgans believes the company is on track to meet 2018 guidance amid stable production. The broker lifts copper price assumptions slightly for 2018-19.<\/p>\n
This year is considered the peak for construction and expenditure at Carrapateena and Morgans lowers its risk weighting on Carrapateena to 75%. The broker is backing the company's ability to bring the project on line and upgrades to Add from Hold. Target is raised to $10.05 from $9.80.<\/p>\n
PERPETUAL LIMITED ((PPT)) Upgrade to Hold from Lighten by Ord Minnett<\/strong> .B\/H\/S: 0\/6\/1<\/p>\nNet flows were a negative -$1.3bn in the March quarter, primarily Australian equities in the institutional channel. Ord Minnett observes a number of challenges in the near term, including market volatility, outflows and the replacement of the CEO.<\/p>\n
However, the fall in the share price means the stock is trading on a forward PE multiple of less than 14x and a fully franked dividend yield of more than 6%.<\/p>\n
The broker upgrades to Hold from Lighten, envisaging less downside risk to the current share price relative to other listed fund managers. Target is reduced to $45.00 from $49.50.<\/p>\n
THE STAR ENTERTAINMENT GROUP LIMITED ((SGR)) Upgrade to Outperform from Neutral by Credit Suisse<\/strong> .B\/H\/S: 8\/0\/0<\/p>\nCredit Suisse has reassessed its Star valuation to take into account the capital raising, faster growth in VIP revenue and weakness in Brisbane earnings, which together lead to -6-7% earnings forecasts reductions.<\/p>\n
Target falls to $5.60 from $5.90 but, as the share price has fallen further, the broker upgrades to Outperform from Neutral.<\/p>\n
WHITEHAVEN COAL LIMITED ((WHC)) Upgrade to Neutral from Sell by Citi<\/strong> .B\/H\/S: 5\/3\/0<\/p>\nWhitehaven Coal's March quarter production report has triggered an upgrade to Neutral from Sell, supported by Citi analysts also lifting coal prices input, together with a slightly increased production forecast for FY18.<\/p>\n
Mechanical problems at Narrabri have caused a slight downgrade in the company's guidance for that particular operation. Price target rises to $4.50 from $4.20.<\/p>\n
Note the company is currently working on optimisation around rail infrastructure and expects to lodge the environmental impact statement (EIS) for its Vickery project in the June quarter, after which the search will commence for JV partners.<\/p>\n
Downgrade<\/u><\/strong><\/p>\nCOMPUTERSHARE LIMITED ((CPU)) Downgrade to Lighten from Hold by Ord Minnett<\/strong> .B\/H\/S: 0\/5\/2<\/p>\nOrd Minnett believes the company needs to achieve significant growth in earnings from new sources, such as mortgage servicing and cost savings, and downgrades to Lighten from Hold.<\/p>\n
The broker envisages better relative upside in other segments of the market such as general insurance or wealth management. Target is raised slightly to $16.20 from $16.00.<\/p>\n
EVOLUTION MINING LIMITED ((EVN)) Downgrade to Neutral from Buy by UBS and Downgrade to Underperform from Neutral by Credit Suisse<\/strong> .B\/H\/S: 1\/5\/2<\/p>\nThe stock has re-rated substantially and UBS now believes it is fairly priced versus its peers, downgrading to Neutral from Buy. The re-rating has occurred on the back of operating excellence and a clear strategy, the broker suggests.<\/p>\n
In the final quarter of FY18 the company has lifted guidance by 3%. UBS notes individual guidance for each mine has not changed but the mines are achieving at the top end of expectations. Target is raised to $3.40 from $3.16.<\/p>\n
Credit Suisse downgrades to Underperform from Neutral on the strength in the share price. Target is raised to $2.65 from $2.52.<\/p>\n
Strength in the March quarter has delivered an upgrade to FY18 guidance, to 191,500 ozs. The broker notes Ernest Henry continues to deliver as it capitalises on elevated copper levels.<\/p>\n
SCENTRE GROUP ((SCG)) Downgrade to Hold from Buy by Deutsche Bank<\/strong> .B\/H\/S: 4\/2\/1<\/p>\nDeutsche Bank downgrades to Hold from Buy after analysing the retail tenancy mix. The broke notes the business is heavily exposed to high-risk online categories such as apparel and home wares.<\/p>\n
The broker reduces the leasing spread forecast to -1.5% for the next five years. Target falls to $4.22 from $4.30.<\/p>\n<\/p>\n