In the good books
Regis Resources (RRL) was upgraded to Hold from Reduce by Morgans. B/H/S – 1/2/5.
Gold production for the June quarter was up 7.8%, only marginally below the record in the December quarter. Morgans increases valuation, raising the target to $4.40 from $3.65 on the back of the updated resource and reserve base, approval of the Rosemont development and advances at McPhillamys. Rating is upgraded to Hold from Reduce, using the spot gold price and a zero discount rate.
Seek (SEK) was upgraded to Hold from Reduce by Morgans. B/H/S – 2/3/3. Morgans observes Seek has pushed out a lift off in profit, committing to another increase in operating and capital expenditure to grow market share in China, Southeast Asia and Australia. The company intends to pursue market dominance and more durable long-term growth. This has prompted a downgrade in the broker’s forecasts to reflect both the FY18 result and the guidance for FY19. Target is raised to $20.24 from $19.06.
Vicinity Centres (VCX) was upgraded to Outperform from Neutral by Credit Suisse. B/H/S – 4/1/0. The company has an MoU with Keppel Capital to establish and manage a wholesale property fund via a 50/50 JV. Vicinity proposes to seed the fund with $1 billion in shopping centres from its balance sheet. The fund is expected to contain eight real assets across five Australian states, offering a yield in the mid 6% range. Credit Suisse suggests the next hurdle will be securing additional investor interest in the vehicle. Rating is upgraded to Outperform from Neutral, given more certainty regarding the outlook for asset sales. $2.79 target maintained.
In the not-so-good books
A2Milk (A2M) was downgraded to Sell from Neutral by Citi. B/H/S – 4/1/1. Citi has cut earnings forecasts for A2 ahead of its earnings result, to reflect the increasing likelihood excess inventory is building domestically. Given the FY18 result has largely been pre-released, this is more of a call on FY19. Given the risk the broker sees to the first half FY19 result, the broker downgrades to Sell from Neutral, despite A2’s strong brand. Target falls to $9.50 from $10.90.
Eclipx Group (ECX) was downgraded to Neutral from Buy by Citi and to Neutral from Outperform by Credit Suisse. B/H/S – 4/2/0. The company issued a profit warning and Citi analysts have responded by pulling back their recommendation to Neutral from Buy. Price target tumbles to $3.17 from $4.50 on reduced forecasts. The company’s net profit growth forecasts have been halved, with FY18 guidance reduced to 13-17% growth from 27-30%. Credit Suisse downgrades to Neutral from Outperform but also suggests there is a possibility the market’s reaction to the company’s profit warning might have been overdone. Target price cut to $1.90 from $4.10.
Fletcher Building (FBU) was downgraded to Underperform from Outperform by Credit Suisse. B/H/S – 0/4/1. Following a change in analyst, Credit Suisse reviews forecasts, noting the company is emerging from a major re-setting of the business. The broker remains well disposed towards the new CEO, the strategy and the Australian turnaround but factors in a reversion to mid-cycle activity levels in New Zealand. Target is reduced to NZ$6.08 from NZ$8.40.
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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