In the good books
Alumina Limited (AWC) was upgraded to Accumulate from Hold by Ord Minnett
Ord Minnett upgrades its rating for Alumina to Accumulate from Hold after a recent share price fall due to weakening alumina prices. The broker feels the recent increase in cash costs may have ended and a fall in the Australian dollar offers some relief.
The analyst also feels it would be a timely entry point for Alumina shares as the spot alumina price has some near term support. Moreover, there’s considered longer term structural drivers for the alumina and aluminium industries. The $2.10 target price is unchanged.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Costa Group Holdings Limited (CGC) was upgraded to Buy from Neutral by Citi
With both an improved improved outlook for Produce earnings for Costa Group in FY22 and a recently-declining share price, Citi upgrades its rating to Buy from Neutral. The target price falls to $3.45 from $3.64 on a potential loss of quality for the late-season citrus crop.
CSL Limited (CSL) was upgraded to Buy from Neutral by Citi
CSL will purchase Vifor Pharma at a 65% premium to the company’s trading price and Citi estimates the purchase will be roughly 9% accretive to CSL’s net profit after tax prior to amortisation given CSL’s higher trading multiple.
Vifor’s products focus on iron deficiency, renal and cardio-renal therapies.
Citi upgrades to Buy from Neutral and increases the target price to $340 from $325.
Santos Limited (STO) was upgraded to Outperform from Neutral by Macquarie
After a period of research restriction on Santos, Macquarie upgrades its rating to Outperform from Neutral after the completion of the acquisition of Oil Search. The target price is set at $8.
The company is now the broker’s preferred ASX energy exposure into 2022, exhibiting superior free cash flow and growth. The analyst expects sell-downs at PNG LNG, Dorado oil, Alaska oil and Narrabri CSG to monetise and manage risk.
In the not-so-good books
Insurance Australia Group (IAG) was downgraded to Sell from Neutral by UBS
A change in covering analyst has led UBS to downgrade Insurance Australia Group to Sell from Neutral to reflect the company’s numerous challenges.
NRMA is being sued by the regulator for overcharging. The commercial business is undergoing remediation work. Most of IAG’s growth options have been divested in recent years. Positive covid impacts have reversed due to supply-chain issues driving a spike in claims.
Management is confident of achieving its $250m insurance profit target by FY24. In FY22 to date, price increases of 9% are apparently holding without major volume loss, the broker notes, but doubts this level of repricing is sufficient to restore double-digit margins.
Regis Healthcare Limited (REG) was downgraded to Hold from Add by Morgans
A new accounting treatment sees Regis Healthcare adjusting the carrying value of its bed licences, explains Morgans. The company will now write down their value over the next 2.5 years, which has no impact on the broker’s valuation.
In a separate exercise, the analyst lowers the multiple used previously to reflect the take-over activity in the sector. As a result, the rating falls to Hold from Add and the target price is decreased to $1.89 from $2.33. Morgans believes industry conditions will remain challenging.
Stockland (SGP) was downgraded to Underperform from Neutral by Macquarie
Macquarie believes downside risks are forming for residential developers as house price growth will continue to moderate. The broker downgrades its rating for Stockland to Underperform from Neutral and reduces its target price to $4.21 from $4.84.
This view stems from an increased likelihood of a cash rate hike in calendar year 2022, APRA increasing serviceability buffers and an overall decline in housing affordability, explains the analyst.
Also, Macquarie downgrades FY23 settlement volumes for Stockland and notes uncertainty related to overall strategy changes.
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.