In the good books

BORAL (BLD) was upgraded to Hold from Lighten by Ord Minnett

Boral has received an upgrade to Hold from Lighten as Ord Minnett updates assumptions and forecasts for Australia’s building materials sector. While the broker believes the share price has “overshot” by some margin, it remains concerned about the outlook for the company’s fly ash operations in the US given structural decline of US coal-fired power. Because optimism seems warranted for Boral’s other operations, Ord Minnett believes an upgrade to Hold is now appropriate. Price target has lifted to $4.90 from $4.50.

OIL SEARCH (OSH) was upgraded to Buy from Hold by Ord Minnett

Ord Minnett has used a general sector update on energy, including forecasts for Brent and electricity prices, to upgrade its rating for Oil Search to Buy from Hold. The updated forecasts now work off Brent priced at US$53/bbl in 2021 (up 17%), and US$50/bbl in 2022 and 2023 (up 11%). Most preferred sector exposures are Santos, then Beach Energy, then Oil Search. For Oil Search, the price target has moved to $4.58 from $4, supported by higher forecasts.

PLATINUM ASSET MANAGEMENT (PTM) was upgraded to Neutral from Sell by Citi

The worst is now behind Platinum Asset Management predicts Citi; reason to upgrade to Neutral from Sell. Earnings estimates have moved higher; the new price target of $3.90 compares with $3 previously. The analysts do caution it may still be a while, if not a long while, before Platinum might experience material net inflows. Meanwhile, risk remains as the resignation of a longstanding portfolio manager could lead to net outflows at and staff departures from Platinum’s second largest fund, the Asia Fund, highlight the analysts. They add some 70% of all funds under management at Platinum concerns retail investors who tend to be more loyal.

RELIANCE WORLDWIDE CORPORATION (RWC) was upgraded to Accumulate from Hold by Ord Minnett

Ord Minnett has upgraded Reliance Worldwide to Accumulate from Hold with the stock having underperformed the broader market by some -11% since the release of a market update on October 29 last year. The broker believes a stronger Aussie dollar and the rising copper price, both key input costs for the company, can be held responsible for this. Offsetting the above, the company is expected to release a very strong interim result in February. Target price moves to $4.50 from $4.20. Ord Minnett highlights that, on a constant currency basis, EPS estimates have increased by 8% on average.

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

UBS has upgraded Super Retail Group to Buy from Neutral on the belief investors are underestimating the duration of the spike in demand for the group’s products, with the broker specifically highlighting domestic tourism benefits and car miles driven. There is the risk that (part of) demand has been pulled forward, the analysts concede, but they also believe this is already in the share price. The shares are seen trading at a discount while a gradual recovery in international travel and favourable FX complement a better than expected macro outlook, UBS argues. Higher forecasts have lifted the price target to $12.20 from $11.30.

In the not-so-good books

ACCENT GROUP (AX1) was downgraded to Equal-weight from Overweight by Morgan Stanley

Time to take some profits, in the view of Morgan Stanley. The broker has downgraded to Equal-weight from Overweight with a revised price target of $2.60 (versus $2 in late November). The analysts believe this company has executed well under unusual circumstances. Operational momentum is expected to continue, but conditions are nevertheless expected to normalise, probably by FY22. On this basis, Morgan Stanley sees the risk-reward as balanced with an eye to the stock’s multiple. DPS forecasts have noticeably moved higher.

CREDIT CORP GROUP (CCP) was downgraded to Hold from Accumulate by Ord Minnett

Ord Minnett has increased forecasts with the broker arguing Credit Corp remains in a very favourable position with respect to the Australian purchased debt ledger, or PDL, market. The company is seen enjoying clear positive near-term earnings momentum. The acquisition of a large portion of the purchased debt ledger assets and arrangement book of Collection House (CLH) further fuels the broker’s optimism. However, a strong share price performance has led to a downgrade in rating; to Hold from Accumulate. The price target has jumped to $30 from $20.

COSTA GROUP HOLDINGS (CCP) was downgraded to Neutral from Buy by Citi

Citi has downgraded to Neutral from Hold inspired by the share price appreciation in 2020. Today’s update does lift the price target to $4.30 from $3.75. While the analysts believe Costa Group remains well-positioned amidst rising prices and better growing conditions, elevated supply for blueberries continues to provide offset. The broker points out Costa Group has responded by changing the mix in berries it produces. Earnings estimates have risen (see also higher price target). The analysts are now cautious about further prospects for sustained earnings upgrades.  

NOVONIX (NVX) was downgraded to Hold from Speculative Buy by Morgans

Morgans has pulled back its rating for Novonix to Hold from Speculative Buy. The target price has remained unchanged at $1.33. The downgrade comes in response to a sharp rally in the share price, which the analysts believe is due to optimism towards EVs and new batteries following the election of Joe Biden as president of the US. Earnings estimates have been reduced due to delays to the company’s contract with Samsung. While the company offers high growth potential, stockbroker Morgans points to some uncertainty given it’s still in the early stages of development.  

REECE (REH) was downgraded to Lighten from Hold by Ord Minnett

Ord Minnett has updated input assumptions and forecasts for Australia’s building materials sector. Reece has been the best performing sector exposure but Ord Minnett now sees the share price as having overshot fundamental value. This explains the downgrade to Sell from Hold, while the price target improves by $1.50 to $13.50.

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.