There have been 3 upgrades and 1 downgrade from the 7 stockbrokers monitored by FNArena so far this week.
In the good books
Red 5 Limited (RED) was upgraded to Add from Hold by Morgans
Morgans believes the pathway to gold production in the next quarter at Red 5’s King of the Hills project has been de-risked and raises its rating to Add from Hold. The target also rises to $0.48 from $0.34.
Energisation and commissioning of the SAG mill remains the final major activity to be completed, explains the analyst. It’s felt the share price will continue to re-rate in the coming months as investors also adjust their risk discounts.
Sonic Healthcare Limited (SHL) was upgraded to Outperform from Neutral by Credit Suisse
With Sonic Healthcare’s shares underperforming the ASX200 by -22% year-to-date, Credit Suisse believes the market is underestimating the opportunity that remains for the company in covid testing.
With the shift to rapid antigen tests, the broker believes PCR testing levels have stabilised at 80,000 per day and expects this will normalise to 50,000 tests per day, forecasting an $890m second-half revenue benefit compared to the $1.3bn achieved in the first half.
Combined with pent-up demand driving strong base business performance, Credit Suisse increases earnings per share estimates by 6% and 3% in FY22 and FY23 respectively.
The rating is upgraded to Outperform from Neutral and the target price of $40.00 is retained.
Vita Group Limited (VTG) was upgraded to Speculative Buy from Hold by Ord Minnett
Ord Minnett had previously taken a bearish view on Vita Group post the sale of its ICT business to Telstra (TLS), but today’s update marks a reversal of that view.
With the company now wholly focused on the Artisan skincare and wellness business, Ord Minnett anticipates conditions to improve, which means the long-term outlook is considered “positive” with organic, greenfield and acquisitions all seen as future contributions.
Shareholders already received 39c in the form of a special dividend from the ICT sale back in November and the broker anticipates a further 3c-6c (fully franked) is still forthcoming before June 30.
The rating has been upgraded to Speculative Buy from Hold, with a revised price target of 36c (down from 93c decided upon last year).
Updated forecasts now imply the company will remain loss-making for years to come (one assumes that is now the new ‘organic’ profile).
In the not-so-good books
Mydeal.com.au Limited (MYD) was downgraded to Hold from Add by Morgans
Following a review of late February’s 1H results for MyDeal.com.au, Morgans increases its earnings (EBITDA) loss forecasts. As a result, the target price falls to $0.60 from $0.90 and the rating is lowered to Hold from Add.
The broker feels there may be a lack of catalysts from future sales updates, given management has set a gross sales target of $500m by FY25. This is the same year management expects earnings profitability, a year later than the analyst had predicted.
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.