In the good books
CORPORATE TRAVEL MANAGEMENT (CTD) was upgraded to Outperform from Neutral by Macquarie
There are signs of a strong FY22 domestic recovery in North America and Australasia and Macquarie notes these regions now comprise more than 70% of group revenue. The broker points to recent updates from Qantas (QAN), Serko (SKO) and corporate activity data. Macquarie upgrades to Outperform from Neutral, noting the main risk is that the pandemic restrictions persist and delay recovery of domestic and international travel. Target is raised to $20.75 from $20.05.
DOMINO’S PIZZA ENTERPRISES (DMP) was upgraded to Neutral from Sell by Citi
Citi upgrades Domino’s Pizza Enterprises to Neutral from Sell with the target rising to $104.2 from $72.40. Citi sees potential for Domino’s Pizza Enterprises to enter a number of new countries in Europe like Italy, Spain and Poland. The broker estimates these markets could represent a network opportunity of 2,506 stores, potentially contributing an operating income of $263m. 81 net new stores were opened in Europe to date, suggesting the company needs to roll out at least 53 stores if it plans to rollout 2,850 stores by 2028-33. Citi highlights rollouts have been skewed towards the second and fourth quarters. Looking at the opportunities to expand into new countries, the scope for store acquisitions in existing markets and the improving rollout pace in Europe, Citi remains optimistic.
RESMED (RMD) was upgraded to Accumulate from Hold by Ord Minnett
Ord Minnett reviews forecasts and takes a more optimistic view of the potential boost from the launch of the AirSense 11 flow generator platform. The new device is also expected to support gross margins as manufacturing volumes ramp up. In the interim, sales are expected to stagnate as customers await the new device, which may exacerbate already tough comparables. Ord Minnett upgrades to Accumulate from Hold, envisaging potential upside to consensus numbers. Target is raised to $28.50 from $26.50.
SYNLAIT MILK (SM1) was upgraded to Hold from Reduce by Morgans
Despite FY21 guidance being lowered to a loss of -NZ$20-30m from March’s breakeven expectation, Morgans believes issues will be largely confined to FY21. The rating rises to Hold from Reduce and the target price falls to $2.55 from $2.58. The broker explains lower guidance was due to ongoing shipping delays and lower-than-expected ingredient sales prices due to sales phasing impacts and volume pressure. Also, there’s a more conservative approach to year-end inventory volumes and valuations. The analyst feels investors could start to look through existing issues if the company can start to rebuild confidence in a FY22 earnings recovery at the FY21 result. The broker continues to believe gearing is too high though management states a raising is not in prospect.
In the not-so-good books
ARISTOCRAT LEISURE (ALL) was downgraded to Equal-weight from Overweight by Morgan Stanley
Aristocrat Leisure added 886 machines to the North American installed base during the first half, ahead of Morgan Stanley’s expected 600. The broker notes the company continues to reinvest ahead of peers, with design and development spend up 2% versus the NYSE listed International Game Technology PLC’s -23%. In the broker’s view, this leaves it well placed to add machines and gain market share. IDFA changes were implemented in late April and the impact on Aristocrat Leisure has been limited so far, highlights the broker while warning it is too early to tell. Morgan Stanley believes the results support the thesis that the company will emerge from covid in a better position with considerable balance sheet optionality. Noting the company outperformed the ASX200 by almost 30% and looks fairly valued, Morgan Stanley downgrades to Equal-Weight from Overweight with the price target lifting to $41 from $38. There is no industry rating.
NEW HOPE CORPORATION (NHC) was downgraded to Neutral from Outperform by Credit Suisse
Total coal sales for the March quarter were softer than Credit Suisse had expected, as were the Bengalla realised prices. The company rating is lowered to Neutral from Outperform after a recent rally in the share price. The price target of $1.30 is unchanged. With earnings continuing to concentrate to Bengalla, the broker believes the company will likely need the successful approval and execution of the Acland extension to trigger a re-rate.
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.