In the good books
Capitol Health Limited (CAJ) was Upgraded to Buy from Accumulate by Ord Minnett
A trading update at Capitol Health’s AGM suggested a solid result amidst lockdowns. Underlying growth exceeded Ord Minnett’s forecast by 4%, with Victoria’s 75% of the company’s total sites performing better than expected.
Capitol Health’s organic growth profile from clinic maturation, greenfield opportunities and demographic tailwinds should underpin earnings growth over the medium-term, the broker suggests. With $110m in unused debt facilities & negligible gearing, M&A continues to provide optionality.
Target unchanged at 43c, rating upgraded to Buy from Accumulate.
Lovisa Holdings Limited (LOV) was Upgraded to Outperform from Neutral by Macquarie
Macquarie notes Lovisa has a new CEO with experience in growing brands and stores in China and India, which will now be the focus. Together those markets exceed that of the US by 15%.
While a long term target of 1200 stores globally is already priced in, the broker suggests, upside risk is for another 1400-plus stores in China and India alone.
Greater confidence in store rollout in current markets drive earnings forecast upgrades, and a re-rating is warranted on store upside potential, leading the broker to upgrade to Outperform from Neutral. Target rises to $25 from $17.
In the not-so-good books
Aurizon Holdings Limited (AZJ) was downgraded to Neutral from Buy by UBS
Despite benefiting from current coal activity, Aurizon Holdings is repositioning group mix and supplementing coal income by increasing non-coal related assets in anticipation of coal decline, likely to occur from FY31 according to UBS.
The broker noted the acquisition of One Rail Bulk supports increased non-coal income, but expects the company will need to commit further capital investment of -$550-650m to achieve supplemented income targets.
The broker looks to the potential East Coast Rail sale or demerger for more certainty on the company’s outlook. Coverage is reinstated with a Neutral rating and a target price of $3.50.
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.