In the good books

BLACKMORES LIMITED (BKL) Upgrade to Outperform from Neutral by Credit Suisse B/H/S: 2/1/0

The company has reported 28% growth in its China “direct” channel and is confident about brand health and sales activity emanating from China. Credit Suisse upgrades expectations for growth in direct sales to China to 25% from 10%. The change in view results in an upgrade to earnings for FY19-23 of 8-17%. The broker abandons its DCF valuation, upgrades to Outperform from Neutral and raises the target to $150 from $95.

Upgrades

NUFARM LIMITED (NUF) Upgraded to Add from Hold by Morgans B/H/S: 3/3/1

The company will purchase the European product portfolio called “Century”, to be divested because of competition requirements arising from ChemChina’s acquisition of Syngenta.

Morgans notes, importantly, the acquisition generates materially higher margins and has a stronger cash flow conversion than Nufarm. The acquisition is expected to significantly strengthen the scale and product offering of the company’s European business. Based on an attractive growth profile and undemanding valuation Morgans upgrades to Add from Hold and raises the target to $10.00 from $9.20.

In the not-so-good books

AUSTRALIA & NEW ZEALAND BANKING GROUP (ANZ) Downgraded to Neutral from Buy by Citi B/H/S: 2/6/0

Citi found the FY17 cash earnings results weak. A substantial fall in bad debts in the second half enabled the bank to deliver a result in-line with forecasts. Despite the re-balancing, Citi believes the institutional division remains a structural disadvantage for ANZ. Rating is downgraded to Neutral from Buy as activity is not converting into a commensurate uplift in returns. Target is reduced to $30.00 from $31.50.

Downgrades

INDEPENDENCE GROUP NL (IGO) Downgraded to Underperform from Neutral by Credit Suisse B/H/S: 1/3/2

September quarter revealed a solid start as Nova ramps up to nameplate. Credit Suisse notes material movements were sustained at Tropicana and the underground study is progressing. The broker downgrades to Underperform from Neutral on valuation. Target is raised to $3.70 from $3.35.

ISENTIA GROUP LIMITED (ISD) Downgraded to Hold from Buy by Deutsche Bank B/H/S: 0/3/0

Deutsche Bank believes the trading update highlights serious questions regarding the handling of the business. The company has guided to FY18 operating earnings of $32-36m, representing a miss of -21-30% to prior consensus estimates. The decline has been attributed to churn experienced over the first half but Deutsche Bank believes the shortfall should have been apparent earlier. A blow-out in operating expenditure is even more perplexing for the broker and suggests the business is under competitive and structural pressure. Rating is downgraded to Hold from Buy. Target is reduced to $1.10 from $2.20.

Earnings Forecast

Listed below are the companies that have had their forecast current year earnings raised or lower by the brokers last week. The qualification is that the stock must be covered by at least two brokers. The table shows the previous forecast on an earnings per share basis, the new forecast, and the percentage change.