In the good books 

BINGO INDUSTRIES (BIN) was upgraded to Buy from Neutral by Citi 

Citi lowers FY20 forecasts by around -8% to reflect weaker waste collections and post collections volumes. Volumes are expected to return to trend growth from the second half of FY21. The broker still expects Bingo Industries can reach its long-run margin target of around 30%. The broker also suspects consensus estimates and expectations for a market share war are overdone. Rating is upgraded to Buy/High Risk from Neutral/High Risk and the target lowered to $3.10 from $3.30. 

COSTA GROUP HOLDINGS (CGC) was upgraded to Add from Hold by Morgans 

Morgans assesses the outcome of the 2020 citrus crop is the main risk for the remainder of the year and will be the determinate of whether guidance is achieved. The broker also believes Costa Group has done a good job of navigating pandemic-related challenges. Amid signs the headwinds are moderating, Morgans upgrades to Add from Hold. Target is raised to $3.60 from $3.05. 

JB HI-FI (JBH) was upgraded to Outperform from Neutral by Macquarie 

Macquarie envisages potential for JB Hi-Fi to surprise to the upside at the FY20 results. Recent feedback has indicated strong demand for electronics and hardware continued throughout May. The broker also notes discretionary expenditure has been propped up by the increased earnings of the JobSeeker population as well as indications that funds from early superannuation access went towards discretionary expenditure. While the effects will wear off in September as the JobKeeper winds up, the pace at which the Australasian economies are reopening has underpinned a more positive view on the outlook. Rating is upgraded to Outperform from Neutral and the target raised to $41.00 from $35.60. 

NEWCREST MINING (NCM) was upgraded to Buy from Neutral by UBS 

The Australian dollar gold price has increased by 18% over the year to date driving the ASX gold index 24% higher. However, UBS notes relative performance among stocks has diverged with Newcrest Mining underperforming. This has created an opportunity to consider rotating into Newcrest and the broker upgrades to Buy from Neutral. Target is raised to $35 from $33. 

VICINITY CENTRES (VCX) was upgraded to Outperform from Neutral by Credit Suisse 

Vicinity Centres has recently reported that 50% of retailers in its centres were open in the first week of May. The impact of rent relief on earnings remains unclear. While Credit Suisse is unable to quantify the impact of the pandemic with any certainty, FY20-22 estimates are reduced by -8.0-14.5% to reflect the potential impact of rent relief and negative re-leasing spreads. The company appears to be more inclined to take other capital management options, including cutting the dividend, rather than raising equity. Nevertheless, the broker considers the downside is captured in the current price and upgrades to Outperform from Neutral. Target is reduced to $1.93 from $2.38. 

VIVA ENERGY GROUP (VEA) was upgraded to Add from Hold by Morgans 

Morgans suggests the recent sell-off in Viva Energy shares is overdone. Refining market conditions remain depressed but the recent divestment of property has ideally positioned the balance sheet, suggests the broker. There is potential for a relief rally, stemming from initial signs that traffic activity is recovering, the report suggests. The broker upgrades to Add from Hold. Target is raised to $1.90 from $1.47. 

In the not-so-good books 

AFTERPAY (APT) was downgraded to Hold from Add by Morgans 

The stock is trading at its highest multiples compared with historical averages. Morgans upgrades earnings forecasts for the next two years because of improved revenue and bad debt assumptions, based on recent trends. However, the rating is downgraded to Hold from Add on valuation grounds. Target is raised to $46.00 from $33.11. The fact Tencent has taken a 5% stake in the company is an advantage, in the broker’s view, providing substantial options going forward. 

ALACER GOLD (AQG) was downgraded to Neutral from Buy by UBS 

The Australian dollar gold price has increased by 18% over the year to date driving the ASX gold index 24% higher. However, UBS notes relative performance among stocks has diverged. Alacer Gold is downgraded to Neutral from Buy because of the share price outperformance. Target is raised to $10.30 from $9.50. 

ATLAS ARTERIA (ALX) was downgraded to Hold from Add by Morgans 

Atlas Arteria is undertaking a capital raising via a $420m institutional placement and share purchase plan of up to $75m. Proceeds are to be used to repay the debt related to the APRR investment. Morgans recommends clients take up the offer as the price represents at least a 12% potential return compared with the target, which is reduced to $6.98 from $7.21. Given the recent strength of the share price and reduction in the target, the potential return at current prices has compressed to 5%. Hence, Morgans downgrades to Hold from Add. 

EVENT HOSPITALITY AND ENTERTAINMENT (EVT) was downgraded to Neutral from Buy by Citi 

The share price has increased 52% since March 23 and, as a result, Citi downgrades to Neutral from Buy. The downgrade relates to risks to the cinema division outlook and the valuation of property. While the hotel division should benefit from a resurgent domestic tourism sector, the broker still expects challenges from lower corporate travel because of increased use of videoconferencing. Citi also suspects Event Hospitality will try to avoid raising equity and/or selling assets. New debt, however, may have higher borrowing costs or restrictions on dividends and growth capital expenditure. Target is raised to $9.75 from $7.45. 

EVOLUTION MINING (EVN) was downgraded to Neutral from Buy by UBS 

The Australian dollar gold price has increased by 18% over the year to date driving the ASX gold index 24% higher. However, UBS notes relative performance among stocks has diverged. Evolution Mining has improved 63% over the year to date, outperforming peers. From here, UBS believes a higher gold price or material improvement in operations is required and downgrades to Neutral from Buy. Target is $5.50. 

FREEDOM FOODS GROUP (FNP) was downgraded to Hold from Add by Morgans 

The company’s high-margin products have been severely affected by the restrictions relating to the pandemic. Morgans downgrades forecasts materially, expecting it will take time for the out-of-home channel to fully recover. The broker believes Freedom Foods needs to closely manage its balance sheet or an equity raising will be required. As earnings will take time to recover and multiples are stretched, the broker downgrades to Hold from Add. Target is reduced to $4.33 from $5.05. 

IRESS (IRE) was downgraded to Accumulate from Buy by Ord Minnett 

The company has announced a $170m capital raising and will acquire OneVue Holdings ((OVH)) at an implied equity value of $107m. In the near term, the acquisition is dilutive but offers longer-term upside potential. While Iress has withdrawn guidance, trading in the year to April has been in line with expectations and there is no material impact from the pandemic thus far. Ord Minnett updates forecasts and reduces the rating to Accumulate from Buy. Target is lowered to $11.85 from $12.65. 

LOVISA HOLDINGS (LOV) was downgraded to Sell from Buy by Citi 

Citi downgrades to Sell from Buy, following the V-shaped recovery in the share price, up 219% since March 19. The broker does not envisage downside risks are factored into consensus net profit forecasts, which assume FY22 will more than double FY20. The broker envisages risks stemming from costume jewellery underperforming the broader discretionary retail category as well as dependence on shopping centres for foot traffic. There is also the prospect of a slower roll-out of stores and exposure to countries that have experienced a greater impact from the pandemic. Target is reduced to $5.85 from $6.90. 

NORTHERN STAR RESOURCES (NST) was downgraded to Sell from Neutral by UBS 

The Australian dollar gold price has increased by 18% over the year to date driving the ASX gold index 24% higher. However, UBS notes relative performance among stocks has diverged and Northern Star has outperformed, lifting 31%. As a result, the broker downgrades Northern Star to Sell from Neutral, raising the target to $14.50 from $13.70. 

PRO MEDICUS (PME) was downgraded to Neutral from Buy by Citi 

Pro Medicus has been awarded a five-year contract worth $22m by Chicago-based Northwestern Memorial Healthcare, which UBS considers is further validation of the Visage viewing platform. Material upside is envisaged from this contract. The company has not experienced any major delay or deferral from the pandemic. However, the broker reduces FY20 and FY21 revenue estimates by -7% and -5%, respectively, to account for a more conservative recovery in elective examination volumes. Rating is downgraded to Neutral from Buy as, despite the growth outlook, the valuation risks are considered evenly balanced. Target is raised to $29.65 from $29.30. 

THE STAR ENTERTAINMENT GROUP (SGR) was downgraded to Neutral from Buy by Citi 

Star Entertainment has achieved tax certainty regarding the NSW government’s gambling tax regime, moving to fixed tax rates as expected. Citi increases FY20 estimates for operating earnings by 10% following the re-opening of Sydney, although acknowledges the pace of recovery remains uncertain. Rating is downgraded to Neutral from Buy as, once Queens Wharf in Brisbane is operating and earnings normalise, the free cash flow no longer offers a significant margin of safety, given competitive pressures and VIP restrictions. Target is raised $3.10 from $2.95. 

SUPER RETAIL GROUP (SUL) was downgraded to Neutral from Buy by UBS 

UBS downgrades Super Retail to Neutral from Buy and increases earnings (EPS) estimates for FY20-22 by 8-26% to reflect improved trading conditions. Target is raised to $8.70 from $7.50. Over the medium to longer term UBS suggests the company is well-placed to emerge from the pandemic in a stronger position, however given the share price performance and near-term earnings risk the risk/reward is considered balanced. 

VICINITY CENTRES (VCX) was downgraded to Hold from Accumulate by Ord Minnett 

Vicinity Centres has raised $1.2bn equity via an underwritten placement at $1.48 a share along with a share purchase plan. Ord Minnett believes covenant and liquidity pressures were not the trigger but rather the board elected to keep gearing below the upper end of the target range. This is a big dilution for investors to wear, in the broker’s view. In addition, the company will not pay a second half distribution. The stock has bounced since early April and is now trading in line with valuation. Ord Minnett downgrades to Hold from Accumulate and lowers the target to $1.70 from $1.80. 

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.