There have been 14 upgrades and 7 downgrades from the 7 stockbrokers monitored by FNArena so far this week.
In the good books
Aussie Broadband Limited (ABB) was upgraded to Outperform from Neutral by Credit Suisse
Aussie Broadband’s December-half trading update missed Credit Suisse’s estimates due to higher than expected marketing activity, which the broker expects will unwind in the second half.
Guidance met Credit Suisse forecasts, thanks to forecast customer growth and the broker believes the company is on track to achieve 6.5% market share by June 30 and 9.3% by June 25.
Credit Suisse spies an opportunity after the recent sell-off and upgrades to Outperform from Neutral. Target price falls to $5 from $5.40 to reflect an increased weighted average cost of capital.
AdBri Limited (ABC) was upgraded to Neutral from Underperform by Credit Suisse
Credit Suisse upgrades Adelaide Brighton to Neutral from Underperform after reviewing the Australian Building Materials Industry.
The broker raises industry revenue forecasts 5% to 10% to reflect a forecast rise in volumes as covid restrictions ease, and in response to positive market data. Credit Suisse suspects this will not be reflected in the second-half results, with rising costs and lockdowns weighing.
Credit Suisse raises earnings forecasts for Adelaide Brighton to reflect concrete and quarry acquisitions (5% accretive), extension of the company’s lime contract with Alcoa and stronger underlying volumes.
Target price rises to $3 from $2.90.
Ansell Limited (ANN) was upgraded to Neutral from Underperform by Macquarie
Ansell provided a preliminary first half result and updated FY22 guidance which were weaker than Macquarie expected, despite the broker foreseeing the covid-based supply and labour issues driving poor earnings numbers on in-line revenues.
Having been “comfortable” with its Underperform rating yesterday, the big share price fall has prompted the broker to upgrade to Neutral. On a -19% cut to FY22 earnings forecasts, target falls to 28.30 from $30.70.
See downgrade below
ARB Corporation Limited (ARB) was upgraded to Buy from Hold by Ord Minnett
ARB provided a positive market update, featuring first half sales up 26.5%, Ord Minnett notes, benefiting from continued strong demand for 4WD accessories domestically and offshore.
Operating margins have been maintained at the record levels achieved in the first half FY21. The broker has increased earnings forecasts across FY22-24.
Rating upgraded to Buy from Hold (bypassing Accumulate), target rises to $52.20 from $48.00.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Alumina Limited (AWC) was upgraded to Buy from Hold by Ord Minnett
Following an -11% share price drop since January 18, Ord Minnett is attracted to the current valuation of Alumina Ltd given expected long-term alumina and aluminium market trends.
The broker considers a 10% dividend remains likely in 2022 given forecast alumina sport pricing, which should be attractive to investors. Low inventories have already driven aluminium pricing to its highest level since 2008, and this trend is likely to persist in the medium term.
The rating is upgraded to Buy from Hold and the target price of $2.20 is retained.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Carsales.com Limited (CAR) was upgraded to Outperform from Neutral by Credit Suisse
Consistent with Credit Suisse’s expectations for 12% revenue growth, 7.5% underlying earnings growth and 27.6% profit after tax growth, Carsales.com is guiding to solid growth for each metric with a more significant second half skew given first half lockdowns.
Given the share price’s comparatively low multiple, and the company’s growth potential, Credit Suisse sees value for investors at current trading levels.
The rating is upgraded to Outperform from Neutral and the target price of $25.80 is retained.
Computershare Limited (CPU) was upgraded to Buy from Neutral by UBS
A more detailed disclosure released late last year by Computershare has provided much needed improved earnings visibility for investors. UBS has upgraded modeling on the company accordingly, and notes an expected earnings recovery is ahead.
The recovery should be supported by the integration of the Computershare Corporate Trust, with the broker expecting the company will benefit from an earnings spike in FY24 as integration costs complete.
The rating is upgraded to Buy from Neutral and the target price increases to $22.50
CSR Limited (CSR) was upgraded to Outperform from Neutral by Credit Suisse
Credit Suisse upgrades CSR to Outperform from Neutral after reviewing the Australian Building Materials Industry.
The broker raises industry revenue forecasts 5% to 10% to reflect a forecast rise in volumes as covid restrictions ease, and in response to positive market data. Credit Suisses suspects this will not be reflected in the industry’s second-half results, with rising costs and lockdowns weighing.
The broker downgrades FY22 estimates for CSR but upgrades for FY23, expecting an improvement in non-residential and multi-residential projects – it also incorporates a loose -4% hit to account for the Yarraville strike (given volumes could be strong before and after).
All eyes are peeled to interest rates but for now the broker notes building approvals are holding up amid zero migration. Target price steady at $6.70.
Integral Diagnostics Limited (IDX) was upgraded to Buy from Accumulate by Ord Minnett
Integral Diagnostics’ trading update outpaced Ord Minnett’s forecasts but the broker spies growing covid pressure, noting several markets have yet to endure the omicron variant.
EPS forecasts fall -2% in FY22, -9% in FY23 and -14% in FY24.
Target price falls to $5 from $5.25. Recent share price weakness has the broker upgrading to Buy from Accumulate.
Livetiles Limited (LVT) was upgraded to Buy from Neutral by Citi
A general update on the local technology sector includes an upgrade for LiveTiles to Buy/High Risk from Neutral. Citi’s price target tumbles to 10c from 18c.
Generally speaking, Citi analysts are anticipating strong results, not too much impacted by omicron, though rising costs can be a problem for the period ahead.
Platinum Asset Management Limited (PTM) was upgraded to Equal-weight from Underweight by Morgan Stanley
Morgan Stanley considers Australian asset managers are no longer expensive versus global peers, though prefers diversity and
structural growth options. Super fund consolidation is thought to remain a challenge for Australian asset managers.
Platinum Asset Management is investing in ESG, one of the best growth option for traditional asset managers, according to the analyst.
The rating is upgraded to Equal-weight from Underweight, after recent share price weakness. Also, the broker explains the company has a relatively defensive channel mix with mostly retail clients, which reduces the risk of large mandate losses.
The target price is reduced to $2.60 from $3.55. Industry view is In-Line
REA Group Limited (REA) was upgraded to Buy from Neutral by Citi
A general update on the local technology sector includes an upgrade for REA Group to Buy from Neutral. Citi’s price target is $172.65.
Generally speaking, Citi analysts are anticipating strong results, not too much impacted by omicron, though rising costs can be a problem for the period ahead.
Resmed Inc (RMD) was upgraded to Buy from Neutral by Citi
Citi expects ResMed will still deliver notable growth in FY22 despite impacts of supply chain disruptions and elevated freight and manufacturing costs on gross margins.
The broker forecasts 14% revenue growth, 12% before tax earnings growth and 13% profit after tax growth, while ResMed Inc continues to guide to a US$300-350 additional device benefit from the Philips recall this financial year.
Given recent share price decline the rating is upgraded to Buy from Neutral and the target price decreases to $38.00 from $38.50.
Swoop Holdings Limited (SWP) was upgraded to Speculative Buy from Hold by Morgans
Morgans awaits more detail on Swoop Holdings’ in-line 2Q report at 1H results due on February 22.
Due to a recent fall in share price during market-wide volatilty, the analyst lifts its rating to Speculative Buy from Hold.
While broker forecasts are unchanged, the valuation reduces around -20% on a peer de-rate. Further, the target price is set at a -10% discount to the valuation, due to lesser estimated M&A activity than previously forecast.
In the not-so-good books
Altium (ALU) was downgraded to Neutral from Buy by Citi
A general update on the local technology sector includes a downgrade for Altium to Neutral from Buy. Citi’s price target falls sligtly to $35.30 (-10c).
Generally speaking, Citi analysts are anticipating strong results, not too much impacted by omicron, though rising costs can be a problem for the period ahead.
Ansell Limited (ANN) was downgraded to Hold from Add by Morgans
Following a 1H trading update by Ansell, Morgans lowers FY22-24 profit forecasts by -28%, -19% and -16%, respectively, mainly on lower estimated margins. As a result the target price falls to $28.95 from $41.87.
The broker assesses the majority of issues that weighed are covid related and deemed temporary in nature. However, the troubles to-date brings caution that more slippage may occur. Thus, the rating is lowered to Hold from Add.
Management downgraded FY22 guidance on various operational challenges including supply chain disruptions, increased labour/freight costs and lower demand for medical gloves.
See upgrade above
Brambles Limited (BXB) was downgraded to Underweight from Equal-weight by Morgan Stanley
Morgan Stanley reduces its rating for Brambles to Underweight from Equal-weight due to the ongoing supply chain environment and increased lumber and transport prices. The target price falls to $9.30 from $11.60. Industry view: Inline.
The broker’s FY22-24 profit forecasts decline on weaker estimated revenue growth and earnings margins, along with updated foreign exchange forecasts.
Estia Health Limited (EHE) was downgraded to Hold from Accumulate by Ord Minnett
Estia Health provided a trading update that confirmed an escalation in the challenge from covid, leading to omicron outbreaks in more than 70% of residential aged-care homes, in turn leading to another drop in occupancy as affected homes cannot accept new residents.
Ord Minnett believes it will take time to recover occupancy and in the interim, the decline will have a significant impact on earnings.
Target falls to $2.15 from $2.70, downgrade to Hold from Accumulate.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Medibank Private Limited (MPL) was downgraded to Lighten from Hold by Ord Minnett
Ord Minnett downgrades Medibank Private ahead of the February 25 result after assessing key industry issues.
While the company should enjoy lower covid claims and has committed to return gains to shareholders, Ord Minnett is cautious on the sector fearing lower rate increases possibly below inflation, federal election uncertainty, rising costs and expenses and sharp rises in capital requirements from APRA, which could dampen dividends.
Rating downgraded to Lighten from Hold. Target price falls to $3 from $3.30.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
NIB Holdings Limited (NHF) was downgraded to Lighten from Hold by Ord Minnett
Ord Minnett downgrades nib Holdings ahead of the February 21 result after assessing key industry issues.
While the company should enjoy from lower covid claims and has committed to return gains to shareholders, Ord Minnett is cautious on the sector fearing lower rate increases possibly below inflation, federal election uncertainty, rising costs and expenses and sharp rises in capital requirements from APRA, which could dampen dividends.
Persisting margin pressure is also a concern.
The broker expects nib’s travel business should pick up over FY22 and break even in FY23.
Rating downgraded to Lighten from Hold. Target price falls to $6.10 from $6.90.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Pointsbet Holdings Limited (PBH) was downgraded to Neutral from Outperform by Credit Suisse
In the wake of PointsBet’s reported 4.2% turnover share of the US market in the December quarter, Credit Suisse is assuming further market share loss and increased marketing spend from the current number 5 in the marketplace.
The broker is concerned a further capital raising will be required before the year’s out, unless management can achieve its 10% market share goal or the company is taken over.
Target falls to $5.50 from $8.00, downgrade to Neutral from Outperform.
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.
