In the good books
AGL ENERGY (AGL) was upgraded to Accumulate from Hold by Ord Minnett
Ord Minnett completes a comprehensive review of forecasts and believes the main risk associated with an investment in AGL Energy is the possibility and size of further earnings declines. Earnings are expected to decline to around $660m by FY25. AGL has guided to an FY20 net profit of $780-860m. Beyond the current year, Ord Minnett expects wholesale electricity prices to fall further and revert to a long-run wholesale electricity price forecasts of $75 per megawatt hour beyond FY25. Rating is upgraded to Accumulate from Hold and the target raised to $24.10 from $19.10. This stock is not covered in-house by Ord Minnett. Instead, the broker white labels research by JP Morgan.
BEACH ENERGY (BPT) was upgraded to Accumulate from Hold by Ord Minnett
Ord Minnett observes Beach Energy has significantly underperformed peers in recent weeks and now represents better value, while still offering strong growth in exposure to east coast gas markets. Rating is upgraded to Accumulate from Hold and the target raised to $2.60 from $2.55. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
INSURANCE AUSTRALIA GROUP (IAG) was upgraded to Buy from Neutral by Citi
Citi expects the market will increasingly focus on the growth potential beyond FY20 and, dependent on the commercial insurance cycle, it is plausible Insurance Australia Group could achieve 4-6% growth in earnings per share for FY22 and beyond. This could be supplemented by further capital initiatives. The broker upgrades to Buy from Neutral and raises the target to $8.75 from $8.60.
NORTHERN STAR RESOURCES (NST) was upgraded to Buy from Hold by Ord Minnett
The company has one of the better production growth profiles amongst the gold coverage and Ord Minnett expects growth options will be pursued in 2020. Meanwhile, the focus is on progress at Pogo in Alaska and the broker expects further consolidation around Kalgoorlie. Rating is upgraded to Buy from Hold. Target is trimmed to $11.50 from $11.80.
ORIGIN ENERGY (ORG) was upgraded to Accumulate from Hold by Ord Minnett
Origin Energy has been a strong performer, generating robust cash flow and Ord Minnett expects increased capital returns. The broker upgrades to Accumulate from Hold and raises the target to $9.50 from $8.25. This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
REDBUBBLE (RBL) was upgraded to Add from Hold by Morgans
Morgans upgrades forecasts modestly to reflect recent trends in cost management and after taking a less pessimistic view on customer acquisition costs over time. The broker suspects the quarterly report for the December quarter may act as a catalyst to re-shape the market’s view of how much cash the company can produce as it gains scale. Rating is upgraded to Add from Hold and the target raised to $2.28 from $1.99.
SANTOS (STO) was upgraded to Buy from Neutral by Citi
Following changes to modelling, Citi upgrades to Buy from Neutral and raises the target to $8.90 from $8.47. The broker assesses the implied oil price to justify the current share price is an undemanding US$53/bbl. Looking towards 2025 production is expected to grow more than 50%. Santos is the only large cap stock with the balance sheet to comfortably execute on growth expenditure aspirations while still paying a 5% dividend yield. While the broker acknowledges the view that the stock is already a crowded trade, near-term catalysts are expected to help it outperform.
In the not-so-good books
INFIGEN ENERGY (IFN) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett downgrades to Hold from Buy as the value gap has now closed and the stock price looks full. Target is raised to $0.70 from $0.69.
The above was compiled from reports on FNArena. The FNArena database tabulates the views of seven major Australian and international stock brokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. 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.
