In the good books
The a2Milk Company (A2M) has been rated as Add by Morgans as it initiates coverage of the stock. B/H/S – 5/1/0. Morgans initiates coverage with an Add rating and $14.40 target. The broker expects strong growth over the coming years as the company wins market share across its product range in larger markets such as China. The broker believes the premium products the company has developed, and which generate high margins, mean the stock deserves a premium rating.
Aurizon Holdings (AZJ) was Upgraded to Outperform from Neutral by Credit Suisse. B/H/S – 2/3/2. Credit Suisse upgrades FY18 estimates for earnings by 3% because of cost reductions in the network. The broker suspects the network is likely to surprise to the upside in 2018. Given recent weakness, the rating is upgraded to Outperform from Neutral. Target is raised to $4.85 from $4.75.
Bank of Queensland (BOQ) was Upgraded to Add from Hold by Morgans. B/H/S – 1/3/4. Morgans expects the strong capital position and surplus franking credits will result in special dividends. The broker also believes the bank’s interim CET1 ratio target of 9.25% will prove too conservative. This creates potential for capital management initiatives in addition to the forecast for special dividends. Rating is upgraded to Add from Hold. Target is $12.00.
James Hardie Industries (JHX) was Upgraded to Outperform from Neutral by Credit Suisse. B/H/S – 4/1/1. Credit Suisse is more confident in the outlook after reports from the company’s customers confirm that US housing and renovation activity is robust. US homebuilders have reported revenues that are slightly above consensus forecasts amid growing order books. In the retail channel both Home Depot and Lowes have beat sales estimates. Credit Suisse forecasts FY18 net profit of US$280 million. Target is $24.75.
Monadelphous Group (MND) was Upgraded to Neutral from Underperform by Credit Suisse. B/H/S – 1/2/2. Management remains cautious on the FY19 outlook, although Credit Suisse expects a win of at least one of the three large iron ore contracts up for grabs in Western Australia in the first half of that year. A revenue benefit is unlikely until the second half. Because of the weakness in the shares the broker upgrades to Neutral from Underperform. Target is steady at $15.10.
Regis Resources (RRL) was Upgraded to Outperform from Neutral by Macquarie. B/H/S – 1/2/3. The company has delivered a maiden inferred underground resource estimate for Rosemont of 1.4mt at 5.1g/t for 230,000 ozs, using a 2.0g/t cut-off grade. This may be only an inferred resource but Macquarie suggests it highlights the options the company has in the Duketon portfolio to extend mine life. Grades at Rosemont Main are particularly encouraging. Macquarie raises the target to $5.00 from $4.60. Rating is upgraded to Outperform from Neutral.
Sydney Airport Holdings (SYD) was upgraded to Outperform from Neutral by Macquarie. B/H/S – 6/1/0. Macquarie has reconsidered the outlook for Sydney Airport, expecting management will maintain growth, at least until the Western Sydney Airport opens. The broker upgrades to Outperform from Neutral and raises the target to $6.85 from $6.40. Macquarie considers the stock undervalued versus Auckland International Airport (AIA) despite a stronger 2018 international passenger growth outlook.
Southern Cross Media (SXL) was Upgraded to Outperform from Neutral by Macquarie. B/H/S – 3/1/2. The stock has sold off since the February result and improved operating momentum in metro radio and regional TV does not appear to be priced in at current levels. Macquarie suggests, while one rating survey does not guarantee a successful year, if sustained it represents upside risk to forecasts. Target is $1.18.
In the not-so-good books
Newcrest Mining (NCM) was Downgraded to Underperform from Neutral by Macquarie. B/H/S – 2/3/3. The wall of the tailings dam at Cadia failed last Friday in the wake of minor earthquakes recorded in the area. Newcrest has suspended production at the mine, which accounts for around 60% of group earnings. Macquarie is factoring in a six-week shutdown. The failure is a major concern to Macquarie. Given the production issues arising from an earthquake in April last year, the market will likely discount valuation until some certainty in the outlook can be established. Target falls to $19 from $23.
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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