In the good books
DACIAN GOLD (DCN) was upgraded to Neutral from Underperform by Macquarie
Dacian Gold’s updated mineral resource for the Greater Westralia Mining Area (GWMA) at Mt Morgans now totals 6.8mt at 4.3g/t for 935koz of gold. Macquarie notes the deposits most recently mined from underground form the bulk of the new resource. Macquarie’s outlook on gold is lukewarm and hence the broker remains cautious on Dacian Gold. Even so, looking at the recent positive run in gold prices, the broker notes a considerable improvement in the stock’s spot price valuation. Rating on Dacian Gold is upgraded to Neutral from Underperform with the target rising to $0.35 from $0.33.
VIRGIN MONEY UK (VUK) was upgraded to Hold from Reduce by Morgans
Last week Virgin Money UK reported a first half underlying profit better than Morgans expected, due largely to a lower-than-expected credit impairment charge and a lower effective tax rate. As a result, the target price is increased to $3.45 from $2.36 though the analyst warns the probability of further waves of covid-19 in the UK is greater than that for Australia. The rating moves to Hold from Reduce, as the uncertainty associated with the UK macroeconomic outlook has reduced. However, company returns will wane should negative interest rates eventuate, cautions the broker.
In the not-so-good books
A2 MILK (A2M) was downgraded to Underperform from Neutral by Macquarie
a2 Milk has reduced its FY21 guidance for the fourth time and expects revenue of $1.20-1.25bn for the financial year versus $1.40bn previously, -28-31% lower than last year. Macquarie expects the fourth quarter will be hit by insufficient improvement in pricing, sales and inventory. Further, Macquarie notes excess inventory levels continue across daigou and cross-border e-commerce (CBEC) with a2 Milk now seeing issues with the China label. Also, a shift towards Chinese products continues with competition also increasing. The broker believes the outlook remains uncertain and downgrades to Underperform from Neutral with the target falling to $5.60 from $9.75.
IRONGATE GROUP (IAP) was downgraded to Neutral from Outperform by Macquarie
Irongate Group’s FY21 results showed funds from operations of 9.26c, about -2% below Macquarie’s expectations of 9.48c. FY22’s dividend growth guidance has increased by 2-3% over last year. In the absence of any covid rental relief, the broker believes underlying growth prospects will be relatively limited at 0.8%. After recently completing the internalisation of management, Macquarie notes the group can now deploy excess capital to grow earnings and expects Irongate has about $120m in deployment capacity. While the stock presents M&A appeal and can grow earnings via deploying its balance sheet, Macquarie feels earnings growth prospects in FY22 are limited and downgrades to Neutral from Outperform. The target price is $1.37.
SUNCORP GROUP (SUN) was downgraded to Neutral from Buy by Citi and to Hold from Add by Morgans
Suncorp has provided more details and insights to the local investment community and Citi reports it was all largely in-line with expectations. The broker has downgraded its rating to Neutral from Buy but has bumped up the price target to $11.80 (from $11.40). The analysts see a positive in the bankinsurer further confirming confidence in the medium-term growth profile, but the share price has moved higher too.
After holding a general insurance forum, Suncorp Group arrived at unchanged overall key group targets for FY23. While the margin targets appear sound to Morgans, earnings upside seems limited in FY22. Also, the group noted the bulk of any planned underlying insurance trading ratio (UITR) uplift will occur in FY23. The broker lowers the rating to Hold from Add after recent share price strength and the target falls to $11.39 from $11.80. Management confirmed that business momentum has broadly continued as expected in the third quarter.
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.