In the good books
Amcor (AMC) was upgraded to Overweight from Equal-weight by Morgan Stanley. B/H/S – 4/3/0. Morgan Stanley believes Amcor’s growth outlook is returning to more normal levels after a disappointing FY18. The broker expects EBIT growth of 3% as FY18 was negatively affected by rising raw material costs and challenges in the North American beverage market, as well as difficult conditions in Latin America. Most of these issues should moderate over the next 12 months. Target is raised to $15.80 from $14.80. Cautious industry view.
Regis Resources (RRL) was upgraded to Outperform from Neutral by Macquarie. B/H/S – 1/1/4. FY18 production was a record and, in isolation, FY18 could be viewed as a high point for earnings. However, Macquarie considers this overlooks the strong long-term potential. The introduction of higher-grade satellites is expected to push costs higher in FY19 but subsequently the broker expects a rapid reversion to the norm. The target is reduced to $4.90 from $5.10.
Senex Energy (SXY) was upgraded to Buy from Neutral by Citi. B/H/S – 5/1/0. Following a review of the geology surrounding the Atlas project, Citi is comfortable that the company can unlock the reserves growth. The broker does not believe the share price is reflecting the extent to which Atlas reserves can increase. Meanwhile, the infrastructure deal with Jemena, and the new $150m debt facility, act to de-risk Queensland CSG in terms of funding, scale and schedule. Target is raised to $0.57 from $0.45.
In the not-so-good books
Breville (BRG) was downgraded to Neutral from Outperform by Credit Suisse. B/H/S – 1/3/0. Breville is well positioned to benefit from omni-channel retailing and an increased focus on customer experience, Credit Suisse notes, but to achieve sales growth the company will need to increase share in a highly competitive market against a backdrop of weak discretionary spending. There is also a risk of higher costs in Europe as Breville transitions to a direct supplier model, and risks from potential US tariff extensions. Target falls to $11.60 from $13.50.
Hub24 (HUB) was downgraded to Neutral from Outperform by Credit Suisse. B/H/S – 1/1/0. Competition in the advised platform market was always going to emerge, Credit Suisse suggests, but BT Panorama’s (WBC) price cuts came sooner and are larger than expected, followed by AMP (AMP) for MySuper. While the broker still sees significant growth for emerging platforms, price competition will lead to churn and margin compression. The broker has reduced earnings forecasts for Hub24 and cut its target to $13.20 from $14.10.
Netwealth (NWL) was downgrade to Underperform from Neutral by Credit Suisse. B/H/S – 0/1/2. Credit Suisse downgrades Netwealth for the same reasons for its Hub24 downgrade above. As a result of this view, the broker has reduced earnings forecasts for Netwealth and cut its target to $7.35 from $7.90. Downgrade to Underperform from Neutral.
The above was compiled from reports on FN Arena. The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
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