In the good books
APA Group (APA) was upgraded to Add from Hold by Morgans
APA Group’s share price has rebounded strongly, Morgans notes, after it was gazumped in its pricey bid for AusNet Services. The broker assumes the gas pipeline utility was looking to diversify away from its fossil fuel dependence.
Morgans believes the organic headwinds the company is facing as higher gas prices impact on demand are more than offset by tailwinds from stronger inflation, given CPI-linked contracts.
Hence despite the rebound, the broker upgrades to Add from Hold. Target rises to $9.98 from $8.71.
Nickel Mines Limited (NIC) was upgraded to Outperform from Neutral by Macquarie
Macquarie estimates Nickel Mines’ share of contained nickel production will rise to circa 87ktpa by 2024. This comes as the company secures the rights to acquire a 70% interest in the Oracle Nickel Project. The broker increases its rating to Outperform from Neutral.
The 70% interest will be acquired for -$US525 million. The analyst upgrades production by 32% for 2024-2026, as full production rates for Oracle are expected from 2024. The broker lifts its price target to $1.45 from $1.10.
In the not-so-good books
Bapcor Limited (BAP) was downgraded to Hold from Buy by Ord Minnett
Bapcor CEO Darryl Abotomey has announced his intention to retire in February 2022, at what Ord Minnett describes as a challenging time for the company.
Despite being well-placed for profit growth the news does spark concern of near-term risk, particularly as the company is part way through a supply chain overhaul that includes the consolidation of 13 distribution centres, a project already carrying execution risk.
The rating is downgraded to Hold from Buy and the target price decreases to $7.20 from $9.00.
Technology One Limited (TNE) was downgraded to Underperform from Neutral by Macquarie and to Sell from Neutral by UBS
Following FY21 results for TechnologyOne, Macquarie raises its FY22-24 EPS forecasts by 10%, 15% and 15%, respectively, due primarily to lower opex. The broker lifts its target to $11 from $9.20 and notes solid momentum in the SaaS transition.
However, Macquarie reduces its rating to Underperform from Neutral after comparing multiples for domestic and overseas peers. Management’s lower revenue growth forecast was also taken into account.
UBS assesses a solid FY21 result for TechnologyOne though downgrades its rating to Sell from Neutral after a 30% share rally in the last three months. The profit result was a 1% beat versus the broker and towards the top end of guidance, primarily due to cost efficiencies.
Management reiterated the FY26 $500 million annual recurring revenue (ARR) target, after progress on SaaS transitions during 2H21, points out the analyst. The broker lifts its target price to $11.90 from $11.70.
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.
