In the good books
APA GROUP (APA) was upgraded to Add from Hold by Morgans
APA Group has announced it will build a new 580km gas pipeline, connecting the Perth Basin into the company’s existing pipeline network servicing the Goldfields (WA). The group will spend up to $460m capex on the new pipeline, aiming for first operations around mid-2022. The group expects a “strong portfolio of long term contracts in place by the time construction is complete”. This project is the first time Morgans is aware the company is proceeding with construction prior to revenue contracts being secured. The project contributes to a mild upgrade in forecast earnings as the broker had already assumed incremental earnings from an
unidentified investment. The rating is increased to Add from Hold, given the around 10% total shareholder returns over the next 12 months. The target price is increased to $11.07 from $10.88.
GALAXY RESOURCES (GXY) was upgraded to Hold from Sell by Ord Minnett
Ord Minnett observes lithium prices have bottomed and parts of the supply chain are tighter – such as high-quality battery grade lithium hydroxide versus low-grade spodumene – although significantly higher prices are required to incentivise new projects to meet even conservative scenarios for demand. Now that the sector is attracting attention and capital, the broker expects a constant evolution of the technology which should have an impact on demand and supply. Galaxy Resources is upgraded to Hold from Sell and the target raised to $1.80 from $0.90.
OROCOBRE (ORE) was upgraded to Hold from Sell by Ord Minnett
While some in the lithium sector have run up strongly since the start of October, ahead of any move in the underlying commodity, and value is elusive Ord Minnett upgrades Orocobre to Hold from Sell. Target is raised to $3.40 from $1.95.
In the not-so-good books
VIRGIN MONEY UK (VUK) was downgraded to Neutral from Outperform by Macquarie
The appeal of investment in Virgin Money UK has diminished with recent re-rating, Macquarie suggests. The broker believes that from here, performance will likely be driven more by UK bank sector trends rather than Virgin-specific factors. While there is scope for a substantial longer term re-rating, the execution of portfolio optimisation and ability to deliver on synergies remain key, the broker warns, and visibility on execution is limited. Downgrade to Neutral from Outperform. Target rises to $2.70 from $2.10 due to improved capital and provision coverage.
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.