In the good books
ASX LIMITED (ASX) Upgrade to Overweight from Equal-weight by Morgan Stanley B/H/S: 1/5/1
Morgan Stanley upgrades to Overweight from Equal-weight, noting the ASX is a first mover in pioneering the blockchain proof of concept, with a decision to be made on whether to go with the technology to be made by mid 2017.
If successful, the broker believes innovation in the US$77bn post-trade market would increase, with the technology simplifying and potentially disrupting the value chain. For ASX it would reduce market costs, defend the clearing monopoly and grow new revenue streams.
The broker raises the target to $50 form $43. In-Line industry view is maintained.
In the not-so-good books
3P LEARNING LIMITED (3PL) Downgrade to Sell from Hold by Ord Minnett B/H/S: 1/1/1
The trading update signalled underlying earnings for the full FY16 year should be in the range of $11.5-12.5m. This compares with Ord Minnett’s prior estimate of $17.8m. The downgrade is largely from weaker-than-expected sales growth.
The broker notes revenue growth has been disappointing in Europe & the Middle East as well as the Americas but in Australasia it is now going backwards. Ord Minnett estimates, on the numbers provided, that revenue in the second half for Australasia is likely to be down 10%.
The broker downgrades to Sell from Hold, believing competitive challenges are having an impact sooner than expected. Target reduces to 55c from $1.45.
OROCOBRE LIMITED (ORE) Downgrade to Reduce from Add by Morgans B/H/S: 2/0/2
Morgans believes the recent spike in the share price is an opportunity to take profits and downgrades to Reduce from Add.
The achieving of break even, product meeting specification and more market friendly policies of the Argentine government have meant the broker reduces its discount rate to 9.8%.
Applying a reduced discount rate as the Olaroz operation moves through ramp up to full production, and factoring in stronger prices, keeps the valuation and price target at $3.48.
TREASURY WINE ESTATES LIMITED (TWE) Downgrade to Equal-weight from Overweight by Morgan Stanley B/H/S: 0/5/1
Morgan Stanley is attracted to the long-term outlook with increasing penetration in China and a tightening wine cycle. Still, following the recent outperformance the broker believes this outlook is reflected in the share price.
Morgan Stanley reduces earnings estimates by 5-6% and downgrades to Equal-weight from Overweight. Target is steady at $10 and In-Line industry view maintained.
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