Upgrades
Collins Food Limited (CKF) was upgraded to Outperform from Neutral by Citi
From industry feedback Macquarie deduces the recovery in the quick service restaurant market is improving and, moreover, Collins Foods is gaining share. Growth in earnings will be supported by a consistent rolling out of stores. Meanwhile, online traffic was up 3.4% on the prior year to date. Macquarie highlights category data that suggests chicken and Mexican-style fast food is growing faster than pizza, which augurs well for the company’s KFC and Taco Bell brands. Rating is upgraded to Outperform from Neutral and the target raised to $12.50 from $11.15.
Evolution Mining (EVN) was upgraded to Equal-weight from Underweight by Morgan Stanley–
Morgan Stanley increases gold price forecasts (slightly) and thus FY22-24 estimates for earnings per share. Evolution Mining has some shorter life mines but the broker finds there is exploration and expansion upside potential at multiple sites. The broker changes analysts and, with the stock trading around its new price target, upgrades to Equal-weight from Underweight. Target is reduced to $3.70 from $3.90. Industry view: In-Line.
Insurance Australia Group (IAG) was upgraded to Outperform from Neutral by Macquarie
Macquarie believes the reaction to the Victorian earthquake has been overdone and, after allowing for quota shares, the company’s maximum event retention of $169m is not expected to be breached. The broker forecasts Insurance Australia Group is over provisioned by $400m for business interruption claims. Macquarie assesses the stock is at an attractive discount of around -10-17%, depending on the valuation metrics, and upgrades to Outperform from Neutral. Target is raised to $5.70 from $5.40.
Downgrades
AUB Group Limited (AUB) was downgraded to Accumulate from Buy by Ord Minnett
Ord Minnett downgrades its rating to Accumulate from Buy after a recent share price rally. The target price is increased to $25.78 from $21.98 after raising the earnings forecast for FY22 to the midpoint of the group’s underlying net profit guidance range of $70-73m. Over the last few months, the analyst highlights the group has seen strong underlying EPS growth and consistent dividend growth, with the operating environment expected to remain favourable.
Vita Group Ltd (VTG) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett lowers its rating to Hold from Speculative Buy. The broker’s bear case scenario was realised after the sale of the ICT business at a favourable price to Telstra ((TLS)) of $110m or $0.66 cents per Vita Group share. The price target falls to $0.93 from $1.11. Management intends to pay a special dividend of $0.39-$0.45cps out of the proceeds, with attached franking credits of $0.17-$0.19cps. The group will retain around $35m to support the growth of the Artisan skin health and wellness business and pay transaction costs.
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