In the good books
Xero (XRO) was upgraded to Neutral from Sell by UBS. B/H/S: 1/2/2. UBS has transferred coverage to a new analyst, resulting in an upgrade to Neutral for Xero and a target increase (and currency switch) to A$42.50 from NZ$26.50. Xero is towards the end of its transition from loss-making start-up to self-funding business, the new analyst notes, and offers a proven business model and significant structural growth opportunities. FY19 has the potential to be an industry-changing year in the UK due to new regulatory requirements.
In the not-so-good books
Graincorp (GNC) was downgraded to Neutral from Outperform by Credit Suisse. B/H/S: 2/3/0. The outlook for rainfall is signalling low soil moisture entering the 2018 season and any further reduction in rainfall from this point would result in downside to the crop. Outside of crop conditions, Credit Suisse notes upside rests on the company pursuing a more aggressive restructuring of its storage and logistics business. Target is steady at $9.06.
Sandfire Resources (SFR) was downgraded to Hold from Buy by Deutsche Bank and Reduce from Hold by Morgans. B/H/S: 0/3/4. Sandfire’s -5% lower copper production in the quarter beat Deutsche Bank’s estimate by 2%. Plant maintenance was impacted and the miner was cycling a strong Dec Q but grades improved, the broker notes, and FY guidance is maintained. Target rises to $8.40 from $8.10 but rating downgraded to Hold on valuation. Gold output was better than Morgans expected in the March quarter, slightly offset by marginally weaker copper production versus forecasts. While the current cash accumulation is impressive, the broker points out the outlook is increasingly reliant on exploration success and development at Black Butte. Target is raised to $7.02 from $6.80.
The above was compiled from reports on FN Arena. The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
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