For the week ending Friday, 9th March 2018, FNArena registered nine upgrades against four downgrades, as overall stockbroking analysts’ activity slowed down post the busy February reporting season, as expected.

Things look explosive in the table for positive revisions to earnings estimates. Again, Perseus Mining sits on top, enjoying an increase of no less than 72%, then follows Aveo Group (+23%), then Western Areas (+18%). Negative changes for all companies during the week are too small to be mentioned.

The week ahead is likely to be dominated by stocks going ex-dividend and by macro events and developments, which might imply a rather quiet week in terms of any changes made by stockbroking analysts.

In the good books

MINERAL DEPOSITS LIMITED (MDL) was upgraded to Add from Hold by Morgans. B/H/S: 1/0/0.  The good news for Mineral Deposits is the Grande Cote mineral sands operation in Senegal, 90% owned by TiZir, which is 50% owned by Mineral Deposits, ramped up production at a time titanium and zircon prices were firming. The bad news is operational problems at the company’s smelter in Norway halted production. Revised production and cost projections lead the broker to increase its target to $1.51 from $1.18.

REA GROUP LIMITED (REA) was upgraded to Buy from Neutral by Citi. B/H/S: 2/5/1. Citi estimates the depth penetration rate for new listings is 63%, forecast to rise to 69% by FY20 and above 80% in the longer term. Listings growth has been strong to date but likely to be affected by the early timing of Easter in March, the broker suspects. REA Group’s pricing encourages agents to move up the product curve and Citi forecasts a 3-year CAGR of 22% for depth revenue. FY18-20 estimates are upgraded 1-3%. Target is raised to $90.00 from $80.20.

TOWER LIMITED (TWR) was upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 1/0/0.  Suncorp (SUN) has sold its 19.99% stake in Tower to Bain Capital Credit. With this major overhang removed, and post a review of earnings and forecasts, Credit Suisse upgrades and target is raised to $0.90 from $0.65.

VIVA ENERGY REIT (VVR) was upgraded to Buy from Accumulate by Ord Minnett. B/H/S: 3/0/0.  Ord Minnett found the recent A-REIT reporting season slightly disappointing. Headwinds are hurting retail while office growth was weaker than market conditions might suggest.  On a weighted average basis, the broker lowers sector FY18 earnings estimates by -140 basis points. The sector has corrected in the year to date and subsequently the broker envisages value in the sector. Viva Energy’s recommendation is upgraded to Buy from Accumulate. $2.30 target.

In the not-so-good books

BANK OF QUEENSLAND LIMITED (BOQ) was downgraded to Lighten from Hold by Ord Minnett. B/H/S: 0/4/3  Ord Minnett has downgraded to Lighten from Hold following a review of the earnings outlook, and given a lack of valuation support. The broker remains concerned about the margin pressures in mortgages and the digital offering, which is a long way behind peers, will require investment to fix its problems. Despite recent growth in transaction deposits, the broker is yet to be convinced that the funding disadvantage has been reduced. Target is raised to $11.20 from $11.00.

LEND LEASE CORPORATION LIMITED (LLC) was downgraded to Lighten from Hold by Ord Minnett. B/H/S: 3/1/0.  Ord Minnett notes the share price has recovered from the impact of the $200 million impairment charge against the Australian construction business. Hence, the company has outperformed the A-REIT sector by nearly 16 percentage points so far in 2018. When normalising construction earnings, the broker estimates the company’s core earnings comprise around 50% of group profit and the market is valuing these at a multiple of 18x. This valuation differential is material and is expected to constrain Lend Lease’s relative performance. As a result, Ord Minnett downgrades to Lighten from Hold. Target is steady at $17.

Earnings forecast

Listed below are the companies that have had their forecast current year earnings raised or lowered by the brokers last week. The qualification is that the stock must be covered by at least two brokers. The table shows the previous forecast on an earnings per share basis, the new forecast, and the percentage change.

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