##{"id":92262,"date":"2021-03-15T10:00:19","date_gmt":"2021-03-14T23:00:19","guid":{"rendered":"https:\/\/www.fnarena.com\/?p=92262"},"modified":"2021-03-15T10:00:21","modified_gmt":"2021-03-14T23:00:21","slug":"weekly-ratings-targets-forecast-changes-12-03-21","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2021\/03\/15\/weekly-ratings-targets-forecast-changes-12-03-21\/","title":{"rendered":"Weekly Ratings, Targets, Forecast Changes – 12-03-21"},"content":{"rendered":"Weekly update on stockbroker recommendation, target price, and earnings forecast changes.<\/p>\n
By Mark Woodruff<\/span><\/span><\/span><\/p>\nGuide:<\/strong><\/em><\/p>\nThe FNArena database tabulates the views of seven major Australian and international stock brokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.<\/em><\/p>\nFor 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.<\/em><\/p>\nRatings, consensus target price and forecast earnings tables are published at the bottom of this report.<\/em><\/p>\nSummary<\/strong><\/em><\/p>\nPeriod: Monday March 8 to Friday March 12, 2021
Total Upgrades: 12
Total Downgrades: 5
Net Ratings Breakdown: Buy 52.92%; Hold 39.36%; Sell 7.72%<\/em><\/p>\nFor the week ending Friday 12 March, there were twelve upgrades and five downgrades to ASX-listed companies covered by brokers in the FNArena database.<\/span><\/span><\/span><\/p>\nCSL and Qantas received two upgrades apiece to ratings by separate brokers, while Treasury Wine Estates had two downgrades. <\/span><\/span><\/span><\/p>\nBoth Morgans and Citi homed in on the extended share price underperformance for CSL and identified the decline in plasma collections as the central concern to date. Citi believes this will normalise after the vaccine rollout while Morgans s<\/span><\/span><\/span>ees upside for Seqirus from the potential for a bad northern hemisphere flu season.<\/span><\/span><\/span><\/p>\nWhile both brokers agree that one billion of cost-out for Qantas is a distinct positive, Ord Minnett upgrades on the basis of a global recovery and Citi due to <\/span><\/span><\/span>the increased border certainty from the Australian government’s targeted stimulus package<\/span><\/span><\/span>.<\/p>\nRecent share price outperformance was integral to broker downgrades for Treasury Wine Estates. In addition, Credit Suisse cautions competition will intensify in Australia and Europe as grape supply previously destined for China competes in these markets.<\/span><\/span><\/span><\/p>\nFor reasons explained above, Qantas<\/span><\/span><\/span> and CSL had the two largest percentage rises in forecast target price for the week, by brokers in the FNArena database.<\/span><\/span><\/span><\/p>\nIress also had a material increase in target price after Credit Suisse found both the share price and dividend yield so compelling it lifted the rating to Outperform from Neutral. The opportunity becomes even more attractive when the broker contemplates the benefits from the OneVue integration over time.<\/span><\/span><\/span><\/p>\nGalaxy Resources was atop the table for the largest percentage increase in earnings forecasts by brokers for the week, after an update on the J<\/span><\/span><\/span>ames Bay lithium mine project in northern Quebec. The mine is expected to have a life of 18 years based on an average production rate of 330,000tpa.<\/span><\/span><\/span> <\/p>\nOceanagold was next after one broker, Macquarie, updated <\/span><\/span><\/span>copper price forecasts in the short-term by 20% and 30% in the medium-term to incorporate energy transition-related demand.<\/span><\/span><\/span> This improved outlook triggered 9-10% upgrades to earnings forecasts for the company over FY21-FY25.<\/p>\nAs mentioned last week, earnings upgrades for Karoon Energy flowed from solid production and cash metrics which are expected to continue in FY21.<\/span><\/span><\/span><\/p>\nIn a business update last week, Eclipx Group <\/span><\/span><\/span>signaled a surge in end-of-lease income. Macquarie notes used car market conditions remain strong and higher prices have driven forecast earnings upgrades by more than 20% for FY21.<\/span><\/span><\/span> However, three other brokers temper Macquarie’s enthusiasm by noting prevailing conditions are unsustainable and a reversion to mean is nigh.<\/p>\nJapara Healthcare suffered the largest percentage fall in forecast earnings for the week. In a review of the final report from the Royal Commission, UBS was underwhelmed by potential <\/span><\/span><\/span>delays to much needed regulatory clarity until the FY22 Budget.<\/span><\/span><\/span><\/p>\nZip Co was next on the table for forecast earnings downgrades after UBS reduced the rating to Sell from Neutral. While the broker <\/span><\/span><\/span>remains positive about the short-term growth profile there are significant execution risks and capital requirements will continue to increase.<\/span><\/span><\/span> In addition, higher bond rates may affect the cost of funding and valuation.<\/p>\nAfter six brokers assessed Western Areas in the wake of a <\/span><\/span><\/span>$100m capital raise at $2.15 per share<\/span><\/span><\/span>, the net result was a fall in forecast earnings. Morgans downgraded its rating to Hold from Add and now predicts more risk attached to production volumes at Forrestania than previously forecast. On the other hand, Credit Suisse considered the raise was prudent and upgraded the rating to Outperform from Neutral.<\/p>\nTotal Buy recommendations take up 52.92% of the total, versus 39.36% on Neutral\/Hold, while Sell ratings account for the remaining 7.72%.<\/span><\/span><\/span><\/p>\n<\/p>\n
Upgrade<\/u><\/strong><\/p>\nALS LTD ((ALQ)) Upgrade to Hold from Lighten by Ord Minnett<\/strong> .B\/H\/S: 4\/3\/0<\/p>\nOrd Minnett notes the highlights of ALS Ltd's latest update were a recovery in geochemistry sample flows and the acquisition of Investiga, a Brazilian pharmaceutical testing business.<\/p>\n
An improvement in the geochemistry outlook and the ongoing global vaccination rollout has led to the broker upgrading the rating to Hold from Lighten. The target lifts to $9.80 from $8.60.<\/p>\n
CSL LIMITED ((CSL)) Upgrade to Add from Hold by Morgans and Upgrade to Buy from Neutral by Citi<\/strong> .B\/H\/S: 3\/4\/0<\/p>\nWith underperformance in the shares, no structural concerns and technicals being supportive, Morgans believes the risk\/reward is more attractive for CSL and upgrades the rating to Add from Hold.<\/p>\n
While identifying plasma collection as the main concern, the broker sees upside in Seqirus, on the potential for a bad northern hemisphere flu season. The recent flu respite may leave the population more vulnerable to more severe flu outbreaks over the medium\/long term.<\/p>\n
Morgans makes no changes to forecasts or the price target of $301.10.<\/p>\n
Citi upgrades CSL to Buy from Neutral after a long period of share price underperformance and expects the decline in plasma collections will likely normalise after the covid vaccine rollout in the US. <\/p>\n
The broker leaves earnings forecasts unchanged and retains the $310 target price after assuming plasma donations are back to normal by July 2020 and that mid-term plasma product demand remains unchanged.<\/p>\n
IRESS LIMITED ((IRE)) Upgrade to Outperform from Neutral by Credit Suisse<\/strong> .B\/H\/S: 2\/2\/0<\/p>\nThe share price has dropped to a level Credit Suisse considers compelling, upgrading to Outperform from Neutral. The broker concludes Iress has a defensible and recurring revenue base and there are several opportunities to drive modest earnings growth over time.<\/p>\n
The share price now offers a 2021 dividend yield of 5%, the broker notes, attractive in the current environment amid limited downside. Target is steady at $11. As the OneVue integration progresses, Credit Suisse believes the opportunity becomes even more attractive to investors.<\/p>\n
LINK ADMINISTRATION HOLDINGS LIMITED ((LNK)) Upgrade to Buy by Citi<\/strong> .B\/H\/S: 1\/2\/0<\/p>\nLink Administration has been "re-initiated" at Citi, hidden in a post-February sector report, and involving an upgrade to Buy from No Rating with a $5.70 price target.<\/p>\n
On their own admission, Citi's Buy rating is a non-consensus call and a lot seems to revolve around realised value from the equity stake in PEXA.<\/p>\n
NEWCREST MINING LIMITED ((NCM)) Upgrade to Outperform from Neutral by Macquarie<\/strong> .B\/H\/S: 7\/0\/0<\/p>\nMacquarie upgrades its copper price forecasts in the short-term by 20% and 30% in the medium-term to incorporate energy transition-related demand. The improved outlook drives an 8%-36% increase in the earnings forecasts for FY21-FY25 for Newcrest Mining. <\/p>\n
Macquarie upgrades to Outperform rating from Neutral with the target rising to $30 from $28.<\/p>\n
PANORAMIC RESOURCES LIMITED ((PAN)) Upgrade to Outperform from Neutral by Macquarie<\/strong> .B\/H\/S: 2\/0\/0<\/p>\nMacquarie upgrades its copper price forecasts in the short-term by 20% and 30% in the medium-term to incorporate energy transition-related demand. The improved outlook leads to a threefold rise in the earnings forecasts for Panoramic Resources over FY21-FY25.<\/p>\n
The rating is upgraded to Outperform from Neutral with the target of 19c from 17c.<\/p>\n
QANTAS AIRWAYS LIMITED ((QAN)) Upgrade to Buy from Hold by Ord Minnett and Upgrade to Buy from Neutral by Citi<\/strong> .B\/H\/S: 4\/1\/1<\/p>\nThe global recovery is taking shape and Ord Minnett (courtesy of JPMorgan) believes Qantas is well-positioned to come out on the other end in a better shape, with both its balance sheet and competitive position underpinning that view.<\/p>\n
Qantas has drastically reduced costs and the broker predicts -$1bn per annum less in costs will be carried forward (as permanent operational savings) from FY23 and onwards.<\/p>\n
Price target has lifted to $6 from $5.50 while the rating is upgraded to Buy from Hold. Qantas should be making $1.6bn in profits before tax again in FY24 predicts the broker, as a base-case proposition.<\/p>\n
On current projections, shareholders have to wait until FY23 to see the return of dividends.<\/p>\n
With the increased border certainty from the government stimulus package, Citi upgrades to Buy from Neutral and increases the target to $6.14 from $5.47. However, a leisure led recovery is considered negative for mix, with only negligible impacts on profitability.<\/p>\n
Separately, the broker feels a -$1bn dollar cost out should be a key upside catalyst though previous transformation programs show the company struggled to hold onto past benefits.<\/p>\n
SEALINK TRAVEL GROUP LIMITED ((SLK)) Upgrade to Outperform from Neutral by Macquarie<\/strong> .B\/H\/S: 2\/0\/0<\/p>\nMacquarie upgrades its rating to Outperform from Neutral with the target rising to $9.50 from $8.70.<\/p>\n
The broker upgrades its FY22-23 earnings forecasts for SeaLink Travel Group by 7-10% to reflect permanent operational changes in the marine & tourism segment, along with the realisation of synergies.<\/p>\n
The on-time running of transit systems across both regions 3 and 6 have been sustained, highlights Macquarie, with tender opportunities available in Sydney and Melbourne.<\/p>\n
WOODSIDE PETROLEUM LIMITED ((WPL)) Upgrade to Buy from Hold by Ord Minnett<\/strong> .B\/H\/S: 4\/3\/0<\/p>\nFollowing OPEC’s decision to keep oil production steady, and in line with its global research partner, Ord Minnett increase its price forecasts for Brent crude oil to be in line with the forward curve, and on valuation grounds has raised its recommendation on Woodside Petroleum to Buy from Hold, and its price target is raised to $29.05 from $26.80.<\/p>\n
The broker’s 2021 Brent price forecast increases to US$60 a barrel (bbl) from US$53\/bbl, and its 2022–23 forecasts also increase to US$60\/bbl, while the long-run price from 2026 is unchanged at US$60\/bbl.<\/p>\n
Despite some challenges ahead for Woodside in progressing growth projects through to first production, the broker believe the higher oil price environment has come at an opportune time ahead of commercial discussions for offtake and potential asset sales.<\/p>\n
WESTERN AREAS NL ((WSA)) Upgrade to Outperform from Neutral by Credit Suisse<\/strong> .B\/H\/S: 4\/3\/0<\/p>\nWestern Areas will raise $85-100m in new equity to support Odysseus. This consists of a fully underwritten placement and up to $15m in a share purchase plan.<\/p>\n
The capital raising has been motivated by balance sheet considerations, Credit Suisse notes, in order to have Odysseus fully funded from cash and debt and eliminating any future funding requirement from "at risk" cash flow from Forrestania.<\/p>\n
The broker considers the capital raising prudent and upgrades to Outperform from Neutral. Target is reduced to $2.45 from $2.60.<\/p>\n
See also WSA downgrade.<\/p>\n
Downgrade<\/u><\/strong><\/p>\nMAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Downgrade to Neutral from Outperform by Macquarie<\/strong> .B\/H\/S: 2\/4\/1<\/p>\nMagellan Financial Group's February update shows net inflows were almost $0.7bn in December but were aided by the $726m partnership offer.<\/p>\n
While expecting retail flows to hold up given the group's track record and distribution capabilities, Macquarie notes the flows decreased more than anticipated and expects more outflows for most of 2021. <\/p>\n
The broker has also reduced its performance fee expectations for the half.<\/p>\n
Macquarie downgrades to Neutral from Outperform with the target slipping to $44.50 from $52.<\/p>\n
TREASURY WINE ESTATES LIMITED ((TWE)) Downgrade to Hold from Accumulate by Ord Minnett and Downgrade to Neutral from Outperform by Credit Suisse<\/strong> .B\/H\/S: 0\/6\/1<\/p>\nOrd Minnett downgrades Treasury Wine Estates to Hold from Accumulate following strong share price outperformance since the first-half result, with the target price rising to $11.50 from $11.<\/p>\n
Treasury Wine Estates has entered into a long-term deal with The Wine Group to license some of Treasury’s commercial US wine brands, namely Beringer Main & Vine, Beringer Founders’ Estate, Coastal and Meridian for $100 million.<\/p>\n
Ord Minnett notes these form part of the more than -$300m identified by Treasury Wine in 2020 to be sold as the company refocuses on premium US wine brands from its cheaper offerings.<\/p>\n
Treasury Wine has divested around -4.5m cases of commercial wine for around $100m, in line with its strategy of concentrating on premium wine. Credit Suisse points out the earnings changes are not material across the forecast horizon.<\/p>\n
The broker notes the share price has largely closed the valuation gap to peers and downgrades to Neutral from Outperform. Target is $11.30.<\/p>\n
Credit Suisse also assumes competition will intensify in Australia and Europe as grape supply previously destined for China competes in these markets.<\/p>\n
WESTERN AREAS NL ((WSA)) Downgrade to Hold from Add by Morgans<\/strong> .B\/H\/S: 4\/3\/0<\/p>\nThe company announced a $100m capital raising ($85m placement\/$15m SPP) at a minimum price of $2.15. This implies to Morgans more risk remaining to production volumes at Forrestania than forecast and the analyst reduces expected production and revenue. <\/p>\n
This raising exceeds Morgans expectation of $50m and at a weaker price than forecast. The funds will be used in construction at Cosmos\/Odysseus ($70m) and $30m to exploration and organic growth.<\/p>\n
The broker lowers the rating to Hold from Add and decreases the target to $2.57 from $2.91.<\/p>\n
See also WSA upgrade.<\/p>\n
ZIP CO LIMITED ((Z1P)) Downgrade to Sell from Neutral by UBS<\/strong> .B\/H\/S: 2\/1\/2<\/p>\nAustralasian customer growth surpassed rival Afterpay ((APT)) in the first half and UBS expects cash operating earnings to be at breakeven in FY21.<\/p>\n
The broker remains positive about the short-term growth profile but envisages significant execution risks while capital requirements will continue to increase.<\/p>\n
Higher bond rates may also affect the cost of funding and valuation. UBS downgrades to Sell from Neutral on valuation grounds and raises the target to $6.40 from $5.70. <\/p>\n<\/p>\n