In the good books
ANZ BANKING GROUP (ANZ) was upgraded to Outperform from Neutral by Macquarie
While Macquarie continues to envisage underlying trends are challenging, ANZ Bank’s institutional book skew should result in better impairment experience in the short term. Hence, the broker considers the risks are more balanced and upgrades to Outperform from Neutral. Target rises to $18.50 from $18.00. Nevertheless, the broker believes consensus continues to underestimate the margin pressures that are resulting from competition and lower interest rates as well as a lack of credit growth.
COLES GROUP (COL) was upgraded to Outperform from Neutral by Credit Suisse
Credit Suisse upgrades earnings estimates, expecting food retailing will grow at a rate at least equivalent to the increase in the resident population, with holiday events likely to provide an additional boost. Cost control and an improvement in gross margins are also likely to provide a basis for strong profit leverage. Meanwhile, a recent pull back provides an attractive entry point and the broker upgrades to Outperform from Neutral. Target is raised to $20.16 from $19.97.
NOVONIX (NVX) was upgraded to Add from Hold by Morgans
As the share price has softened, Morgans upgrades to Speculative Buy from Hold, retaining a $1.33 target. The company is expecting first delivery of mass-produced anode material in April 2021 under its contract with Samsung. By the end of FY21 Novonix is aiming for production capacity of 1000tpa and intends to double that by the end of 2021. Morgans estimates the company will need to spend -$24m to complete its phase 1 expansion and fund the dry particle micro granulation (DPMG) technology and pilot plant. Still, Novonix appears well funded to complete its first growth target.
PLATINUM ASSET MANAGEMENT (PTM) was upgraded to Neutral from Underperform by Credit Suisse
Sizeable outflows have already been factored into forecasts, Credit Suisse asserts, and the stock is trading at trough multiples. Amid more limited downside, the broker upgrades to Neutral from Underperform. Moreover, there is upside in Credit Suisse’s view if the Asia Fund performance improvement attracts funds from offshore markets. Target is steady at $3.30.
WESTPAC BANKING CORPORATION (WBC) was upgraded to Outperform from Neutral by Macquarie
Macquarie remains cautious about the short-term outlook but believes issues are relatively well understood and appear to be captured in current discounted valuations. Moreover, over the longer term, Westpac’s business mix appears to be undervalued although Macquarie recognises the bank needs to address complexity to achieve a much-needed efficiency benefit. The broker upgrades to Outperform from Neutral. Target rises to $18.00 from $17.50.
WHITEHAVEN COAL (WHC) was upgraded to Lighten from Sell by Ord Minnett
Ord Minnett upgrades Whitehaven Coal to Lighten from Sell with the target price rising to $1 from $0.70. A 20% rally in coal prices has seen Whitehaven Coal materially outperform, observes the broker, swinging back to roughly operating income break even. Even with short term prices stabilising, the broker is doubtful the cycle has bottomed just yet due to high inventory levels and supply cuts being temporary. Ord Minnett notes the company remains cash loss-making and expensive.
In the not-so-good books
HUB24 (HUB) was downgraded to Underperform from Neutral by Credit Suisse
Following the outperformance over the past quarter, Credit Suisse downgrades to Underperform from Neutral. HUB24 may be executing on its strategy, and industry dynamics are in its favour, but this is considered more than factored into the current valuation. There is now also downside risk to earnings if the Reserve Bank of Australia cuts official rates, Credit Suisse suggests. Target is steady at $16.30.
RELIANCE WORLDWIDE CORPORATION (RWC) was downgraded to Underweight from Equal-weight by Morgan Stanley
While the trading update has signalled a strong start to the financial year, Morgan Stanley believes this should not be extrapolated and growth into FY22 is likely to be limited. As a result, the rating is downgraded to Underweight from Equal-weight. Morgan Stanley envisages a more benign growth environment with a real risk that revenues could decline in FY22. Target is raised to $4.00 from $3.50. Industry view is Cautious.
The above was compiled from reports on FNArena. The FNArena database tabulates the views of seven major Australian and international stockbrokers: 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.
