In the good books
AURIZON HOLDINGS (AZJ) was upgraded to Add from Hold by Morgans
Morgans upgrades to Add from Hold, assessing returns are improving at current prices. Beyond FY22 the broker expects a slight decline in earnings through FY23-24 because of falling interest rates. This will affect the re-set of the network pricing in FY24 and pressure on coal earnings is anticipated amid a decline in contracted capacity and pricing. The long-dated nature of the assets makes earnings less correlated with the business cycle and this provides a defensive element, the broker suggests. There is also the flexibility to pursue growth investments and/or capital management. Target is raised to $4.14 from $4.06.
OCEANAGOLD CORPORATION (OGC) was upgraded to Outperform from Neutral by Macquarie
OceanaGold Corp’s restart plan for Didipio is expected to see both processing and mining resume in fourth quarter 2021, with the miner’s 2021 guidance in line with Macquarie’s estimates. The company expects the underground operation to be fully ramped up within the next 10 months, six months earlier than the broker expected. As a result of the faster ramp-up at Didipio, Macquarie lifts 2022 and 2023 earnings per share (EPS) estimates by 7% and 4%, with a -2% reduction in 2025 based on adjusted mine inventory assumptions. Target increases to $2.90 from $2.50
In the not-so-good books
HOMECO DAILY NEEDS REIT (HDN) was downgraded to Hold from Accumulate by Ord Minnett
HomeCo Daily Needs has made a $88.3m placement to partially fund the acquisition of six assets for $222m and will establish a distribution reinvestment plan for the remainder of FY22. The acquisitions are expected to be more than 3% accretive to earnings and include a Coles-anchored neighbourhood centre, three large format retail (LFR) centres and two strategic adjoining properties. Ord Minnett downgrades to Hold from Accumulate because of the recent rally and raises the target to $1.58 from $1.54.
MAGELLAN FINANCIAL GROUP (MFG) was downgraded to Sell from Neutral by UBS
Retail funds under management are experiencing outflows and UBS anticipates there would have been around -$255m of retail net outflows during August. Meanwhile pressure on fees is elevated. The higher-than-average fees and below-average performance is likely to put pressure on the company to lower base management fees, in the broker’s opinion, and the rating is downgraded to Sell from Neutral. Earnings estimates are lowered by -3% for FY22 to reflect these assumptions. Target is reduced to $35.00 from $52.70.
MINERAL RESOURCES (MIN) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett now factors in lower iron ore prices and reviews its forecasts for base metals and coal. Earnings forecasts have been lowered by -10-35% given the drop in iron ore prices. As a result, the broker downgrades Mineral Resources to Hold from Buy. Target is reduced to $57 from $68.
NATIONAL AUSTRALIA BANK (NAB) was downgraded to Neutral from Outperform by Credit Suisse
Credit Suisse downgrades to Neutral from Outperform, noting the stock has rallied 5% over the reporting season and is up 64% on a rolling year basis. While the bank has restored operating momentum, the broker believes this is now captured in the share price. National Australia Bank has historically traded at a -5% PE discount to the major banks compared to its current level of parity, the broker adds. Target is steady at $28.50.
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.