In the good books

Bank of Queensland (BOQ) upgraded to Neutral from Underperform by Macquarie B/H/S: 1/5/2

Underlying 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. Macquarie upgrades to Neutral from Underperform. Target is reduced to $11.00 from $12.50.

Harvey Norman (HVN) upgraded to Hold from Lighten by Ord Minnett B/H/S: 1/4/2

While 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. 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. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan. Target price is $3.65

HUB24 Limited (HUB) upgraded to Buy from Hold by Ord Minnett B/H/S: 2/0/0

The 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. 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.

Ingham’s Group Limited (ING) upgraded to Buy from Neutral by Citi B/H/S: 4/2/0

Citi 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. Earnings estimates have been lifted by 1-3%. There is also potential for additional support from a share buyback, suggests Citi. Target price is $3.90

Mirvac Group (MGR) upgraded to Buy from Hold by Deutsche Bank B/H/S: 4/2/1

Deutsche 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. 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. Current Price is $2.19. Target price not assessed.

Oz Minerals Limited (OZL) upgraded to Neutral from Underperform by Credit Suisse and to Add from Hold by Morgans B/H/S: 3/3/0

OZ 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. 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.

Morgans believes the company is on track to meet 2018 guidance amid stable production. The broker lifts copper price assumptions slightly for 2018-19. 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.

Perpetual Limited (PPT) upgraded to Hold from Lighten by Ord Minnett B/H/S: 0/6/1

Net 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. 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%. 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. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan. Target price is $45.00

The Star Entertainment Group (SGR) upgraded to Outperform from Neutral by Credit Suisse B/H/S 8/0/0

Credit 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. Target falls to $5.60 from $5.90 but, as the share price has fallen further, the broker upgrades to Outperform from Neutral.

Whitehaven Coal Limited (WHC) upgraded to Neutral from Sell by Citi B/H/S: 5/3/0

Whitehaven 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.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.

In the not-so-good-books

Scentre Group (SCG) downgraded to Hold from buy by Deutsche Bank B/H/S: 4/2/1

Deutsche 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. The broker reduces the leasing spread forecast to -1.5% for the next five years. Current Price is $3.90. Target price not assessed.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.