In the good books
ALS (ALQ) was upgraded to Hold from Lighten by Ord Minnett
Ord Minnett notes the highlights of ALS Ltd’s latest update were a recovery in geochemistry sample flows and the acquisition of Investiga, a Brazilian pharmaceutical testing business. An improvement in the geochemistry outlook and the ongoing global vaccination rollout has led to the broker upgrading the rating to Hold from Lighten. The target lifts to $9.80 from $8.60.
CSL (CSL) was upgraded to Buy from Neutral by Citi
Citi upgrades CSL to Buy from Neutral after a long period of share price underperformance and expects the decline in plasma collections will likely normalise after the covid vaccine rollout in the US. The broker leaves earnings forecasts unchanged and retains the $310 target price after assuming plasma donations are back to normal by July 2020 and that mid-term plasma product demand remains unchanged.
NEWCREST MINING (NCM) was upgraded to Outperform from Neutral by Macquarie
Macquarie upgrades its copper price forecasts in the short-term by 20% and 30% in the medium-term to incorporate energy transition-related demand. The improved outlook drives an 8%-36% increase in the earnings forecasts for FY21-FY25 for Newcrest Mining. Macquarie upgrades to Outperform rating from Neutral with the target rising to $30 from $28.
PANORAMIC RESOURCES (PAN) was upgraded to Outperform from Neutral by Macquarie
Macquarie upgrades its copper price forecasts in the short-term by 20% and 30% in the medium-term to incorporate energy transition-related demand. The improved outlook leads to a threefold rise in the earnings forecasts for Panoramic Resources over FY21-FY25. The rating is upgraded to Outperform from Neutral with the target of 19c from 17c.
QANTAS AIRWAYS (QAN) was upgraded to Buy from Hold by Ord Minnett
The global recovery is taking shape and Ord Minnett (courtesy of JPMorgan) believes Qantas is well-positioned to come out on the other end in a better shape, with both its balance sheet and competitive position underpinning that view. Qantas has drastically reduced costs and the broker predicts -$1bn per annum less in costs will be carried forward (as permanent operational savings) from FY23 and onwards. Price target has lifted to $6 from $5.50 while the rating is upgraded to Buy from Hold. Qantas should be making $1.6bn in profits before tax again in FY24 predicts the broker, as a base-case proposition. On current projections, shareholders have to wait until FY23 to see the return of dividends.
SEALINK TRAVEL (SLK) was upgraded to Outperform from Neutral by Macquarie
Macquarie upgrades its rating to Outperform from Neutral with the target rising to $9.50 from $8.70. The broker upgrades its FY22-23 earnings forecasts for SeaLink Travel Group by 7-10% to reflect permanent operational changes in the marine & tourism segment, along with the realisation of synergies. The on-time running of transit systems across both regions 3 and 6 have been sustained, highlights Macquarie, with tender opportunities available in Sydney and Melbourne.
WOODSIDE PETROLEUM (WPL) was upgraded to Buy from Hold by Ord Minnett
Following OPEC’s decision to keep oil production steady, and in line with its global research partner, Ord Minnett increase its price forecasts for Brent crude oil to be in line with the forward curve, and on valuation grounds has raised its recommendation on Woodside Petroleum to Buy from Hold, and its price target is raised to $29.05 from $26.80. The broker’s 2021 Brent price forecast increases to US$60 a barrel (bbl) from US$53/bbl, and its 2022–23 forecasts also increase to US$60/bbl, while the long-run price from 2026 is unchanged at US$60/bbl. Despite some challenges ahead for Woodside in progressing growth projects through to first production, the broker believes the higher oil price environment has come at an opportune time ahead of commercial discussions for offtake and potential asset sales.
In the not-so-good books
MAGELLAN FINANCIAL GROUP (MFG) was downgraded to Neutral from Outperform by Macquarie
Magellan Financial Group’s February update shows net inflows were almost $0.7bn in December but were aided by the $726m partnership offer. While expecting retail flows to hold up given the group’s track record and distribution capabilities, Macquarie notes the flows decreased more than anticipated and expects more outflows for most of 2021. The broker has also reduced its performance fee expectations for the half. Macquarie downgrades to Neutral from Outperform with the target slipping to $44.50 from $52.
WESTERN AREAS (WSA) was downgraded to Hold from Add by Morgans
The company announced a $100m capital raising ($85m placement/$15m SPP) at a minimum price of $2.15. This implies to Morgans more risk remaining to production volumes at Forrestania than forecast and the analyst reduces expected production and revenue. This raising exceeds Morgans expectation of $50m and at a weaker price than forecast. The funds will be used in construction at Cosmos/Odysseus ($70m) and $30m to exploration and organic growth. The broker lowers the rating to Hold from Add and decreases the target to $2.57 from $2.91.
ZIP CO (Z1P) was downgraded to Sell from Neutral by UBS
Australasian customer growth surpassed rival Afterpay (APT) in the first half and UBS expects cash operating earnings to be at breakeven in FY21. The broker remains positive about the short-term growth profile but envisages significant execution risks while capital requirements will continue to increase. Higher bond rates may also affect the cost of funding and valuation. UBS downgrades to Sell from Neutral on valuation grounds and raises the target to $6.40 from $5.70.
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.
