In the good books
Alumina (AWC) Upgraded to Neutral from Sell by Citi B/H/S: 2/1/4
Incorporating the latest results from AWAC-partner Alcoa and Citi’s update on commodity prices projections has triggered modest increases to earnings forecasts. It was enough to trigger an upgrade in rating to Neutral from Sell.
Price target moves to $1.80 from $1.70. Citi’s preference remains with the likes of Rio Tinto ((RIO)) and South32 ((S32)) with both also offering investors alumina & aluminium exposure.
Beadell Resources (BDR) Upgraded to Outperform from Neutral by Macquarie B/H/S: 1/1/1
March quarter production was weak and Macquarie believes Access and machine availability negatively affected  the outcome. A key constraint on production at Tucano is the configuration which limits feed to oxide only.
A feasibility study is underway to assess the necessary upgrades to process fresh ore. The broker believes the production profile will strengthen now and mine life extensions are also likely.
Rating is upgraded to Outperform from Neutral. Target is $0.30.
Bendigo and Adelaide Bank (BEN) Upgraded to Equal-weight from Underweight by Morgan Stanley B/H/S: 0/1/6
Morgan Stanley believes regional banks are relatively well placed to navigate the changing mortgage market, given more leverage to re-pricing, falling capital and less impact from lower loan growth.
This is most positive for Bendigo & Adelaide and the broker upgrades to Equal-weight  from Underweight. The stock is now the broker’s preferred regional bank. Target is raised to $11.40 from $10.30. Industry view is In-Line.
The bank still needs to improve its return on equity, improve on costs, and de-risk via a partial sale of Homesafe, Morgan Stanley believes.
BHP Billiton (BHP) Upgrade to Buy from Neutral by Citi B/H/S: 4/4/0
Wet weather in Queensland and Escondida strikes virtually guaranteed the March quarter was going to be weak, and that’s exactly what the company delivered, suggest analysts at Citi.
Citi analysts have updated their commodity prices projections, leading to further upgrades. In combination with a noticeably weaker share price, this has triggered an upgrade to Buy from Neutral. Target price remains unchanged at $28.50.
Noteworthy: EPS estimates have been reduced for FY17 but increased for FY18, though still no growth is anticipated post FY17. DPS estimates have been lifted across the board.
Coca-Cola (CCL) Upgraded to Outperform from Neutral by Credit Suisse B/H/S: 1/5/2
Credit Suisse has upgraded to Outperform from Neutral. The analysts do not believe the latest profit warning is more evidence of structural decline for the company’s key products; we are merely experiencing temporary headwinds, argue the analysts.
Because forecasts beyond the current financial year do not fall, the stockbroker’s DCF valuation is only impact by -10c. Target thus falls to $10.30 from $10.40.
In the absence of volume growth, the analysts believe management will still achieve stable margins and slightly higher prices, helped by a second $100m cost reduction program and the closure of the SA bottling plant.
See downgrade below.
Independence Group (IGO) Upgraded to Buy from Neutral by Citi B/H/S: 5/1/0
Citi has upgraded to Buy from Neutral following share price weakness. Independence Group’s March quarter update proved weaker than expected, but Citi analysts draw confidence from the fact Nova is back on track.
The Nova mine is expected to reach nameplate output in the September quarter, point out the analysts. Price target falls to $4.16.
Oz Minerals (OZL) Upgraded to Hold from Sell by Deutsche Bank B/H/S: 3/3/2
March quarter production was -11% below Deutsche Bank’s forecast because of heavy rainfall. Carrapateena’s feasibility study has been delayed because of issues with mine scheduling. Nevertheless, the project remains on track.
While technical concerns remain, the broker does not risk-weight Carrapateena. The stock is now closing in on fair value and rating is upgraded to Hold from Sell. Target is reduced to $7.00 from $7.10.
In the not-so-good books
AGL (AGL) Downgraded to Hold from Accumulate by Ord Minnett B/H/S: 4/2/1
Time for the AGL Energy share price to take a breather, advocate analysts at Ord Minnett. They have pulled back their recommendation to Hold from Accumulate on valuation grounds, i.e. it’s getting pricey where the share price currently sits.
It is the stockbroker’s view that the strong positive catalysts driven by summer weather conditions are now not likely to be seen for a few months. In the meantime, policymakers across Australia are looking into potential remedies for Australia’s electricity crisis, point out the analysts. Target remains $28.50.
Coca-Cola Amatil (CCL) Downgraded to Sell from Neutral by UBS B/H/S: 1/5/2
Soft grocery sales in Australia drove Coca-Cola’s earnings guidance downgrade, along with a weak macro backdrop in Indonesia. A fall in first half profit is expected while FY profit is expected to be flat, implying improvement in the second half.
UBS believes the decline of fizzy drink sales is structural, and may accelerate. Management has been doing well to cut costs but opportunities will soon fade. Further earnings risk is also provided by a possible container deposit scheme.
UBS cuts its target to $9 from $10 and downgrades to Sell.
See upgrade above.
Evolution Mining (EVN) Downgraded to Hold from Add by Morgans B/H/S: 6/1/0
March quarter production was in line with estimates. Mineral ore reserves have increased to 6.99m ounces, with growth largely driven by the Ernest Henry acquisition.
Morgans raises the target slightly, to $2.33 from $2.32. Rating is downgraded to Hold from Add as the stock is trading above valuation.
The stock remains the broker’s preferred play in the mid-cap gold sector.
Nine Entertainment Co. (NEC) Downgrade to Sell from Neutral by UBS B/H/S: 2/1/2
Nine’s share price has risen 30% since its February result, on a variety of factors, UBS notes including taking ratings from its rivals, the attribution of greater value to Stan, cost-out potential and M&A if media laws change.
Yet ratings have improved against a backdrop of structural FTA TV decline, and the broker questions Stan’s valuation. Stan faces competition from both direct rivals and other media platforms, point out the analysts. UBS has lifted its target to $1.05 from 90c but downgrades to Sell on valuation.
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