By Peter Switzer relying on the work of FNArena!
These are the calls by brokers as at July 12, 2024. Before looking at the individual changes in the assessments of the brokers, have a look at this chart below to see the state of buys, sells and holds.
This suggests brokers are in a positive state of mind, which is pretty good considering eventual interest rate cuts should increase the overall market positivity. That’s the big picture, but now let’s zoom into the changes for the upgrades:
IGO LIMITED ((IGO)) Upgrade to Neutral from Sell by UBS. The buy/hold/sell call comes in at 1/3/2 for this stock. UBS upgrades its rating for IGO to Neutral from Sell and increases its target to $6.10 from $5.95. As the June TLEA dividend was well ahead of expectations and the share price has fallen by -37% so far in 2024, the broker believes the market has discounted challenges at TLEA and the nickel business sufficiently.
NORTHERN STAR RESOURCES LIMITED ((NST)) Upgrade to Buy from Neutral by Citi. B/H/S: 3/2/0
Citi previews the Australian gold sector’s upcoming results, stating equities “look attractive” relative to the physical metal. The global Citi team is bullish on gold prices with the Fed expected to lower rates at the September meeting.
Northern Star Resources has underperformed both Evolution Mining ((EVN)) and the AUD gold price by -7% and -13%, respectively for the quarter to date., the analyst states.
The broker applies a US$2500/oz gold price to the earnings forecasts, lower than the Citi global team’s US$3000 forecast,
The Northern Star Resources price target is raised to $15.90 from $15.20 and the stock upgraded to Buy from Neutral.
REA GROUP LIMITED ((REA)) Upgrade to Outperform from Neutral by Macquarie. B/H/S: 4/3/0
After assuming a higher valuation multiple and raising earnings forecasts, Macquarie raises its target for REA Group to $212 from $196 and upgrades to Outperform from Neutral.
The broker is anticipating solid FY24 result due to the benefit of Premiere-plus (the top-tier depth product for property listings on realestate.com.au) penetration and geographic mix.
The analyst forecasts a buy yield of 21% compared to management’s guidance of between 18-19%. The pathway to breakeven for REA India may also come earlier than expected by the market, suggests Macquarie.
REGIS RESOURCES LIMITED ((RRL)) Upgrade to Neutral from Sell by Citi. B/H/S: 3/3/0
Citi raises its target for Regis Resources to $1.90 from $1.70 on higher gold price forecasts and upgrades to Neutral from Sell after recent share price underperformance.
Management’s pre-release of FY24 production was in line with forecasts by the broker and consensus. FY24 Duketon production of 290koz proved within 280-305koz guidance, but Tropicana disappointed with volume of 128koz missing guidance, explains the broker.
The latest reserve statement was underwhelming, according to the analysts, with group resources flat year-on-year at circa 7Moz, inclusive of new areas at Garden Well Main and Rosemont Stage 3.
TELSTRA GROUP LIMITED ((TLS)) Upgrade to Outperform from Neutral by Macquarie. B/H/S: 5/0/1
Macquarie does a mea culpa and confesses a misinterpretation of the “step-away of inflation-lined pricing” for Telstra Group as a negative.
The broker believes the price increases across the three major retail brands (Telstra, Belong and JB Hi-Fi) confirms the telco will remain a price leader.
Equally, the outlook for Telstra Group’s dividend improves, states the analyst, with a better-than-expected mobile pricing decision.
Macquarie now forecasts a 1H25 dividend per share of 9.5c and higher tax paid should assist with franking credit issues.
The target price is raised to $4.40 from $3.70 and the rating upgraded to Outperform.
Now for the Downgrades…
AMPOL LIMITED ((ALD)) Downgrade to Hold from Buy by Ord Minnett. B/H/S: 1/3/0
A general sector update on energy companies shows Ampol is currently rated Hold versus Buy on July 3.
APA GROUP ((APA)) Downgrade to Hold from Buy by Ord Minnett. B/H/S: 1/4/0
A general sector update on energy companies shows APA Group is currently rated Hold versus Buy on July 3.
CLINUVEL PHARMACEUTICALS LIMITED ((CUV)) Downgrade to Hold from Add by Morgans. B/H/S: 2/1/0
Awaiting FY24 results and more information regarding US clinic growth and demand, Morgans decides to downgrade its rating for Clinuvel Pharmaceuticals to Hold from Add in the expectation of short-term stock price volatility.
Recent share price strength was also factored into the broker’s decision to downgrade. The $16.00 target is unchanged.
The analysts caution investors Clinuvel Pharmaceuticals is not a “set-and-forget” stock given the risk around alternative therapies and potential generic competition in time.
GENERATION DEVELOPMENT GROUP LIMITED ((GDG)) Downgrade to Hold from Add by Morgans. B/H/S: 1/1/0
Morgans lowers its FY25 and FY26 EPS forecasts by -6% and -1%, respectively, after allowing for the acquisition of the remaining 61.9% of Lonsec for around -$197m. Strategically the acquisition makes sense, but the broker is wary of the full price paid.
The broker’s near-term earnings changes are offset by increased long-term valuation growth assumptions, and the target edges up to $2.57 from $2.56.
As upside to the analyst’s target is now more limited after a share price rise, the rating is downgraded to Hold from Add.
GQG PARTNERS INC ((GQG)) Downgrade to Accumulate from Buy by Ord Minnett. B/H/S: 4/0/0
Ord Minnett believes GQG Partners delivered an “excellent” June quarter with FUM up 3.7% over the month and up 8.5% on the previous quarter.
The 2Q2024 inflows of $6.5bn are the largest reported since listing and the broker adjusts EPS forecasts by 5% to 9% over the next two years due to better-than-expected FUM and flows.
The rating is downgraded to Accumulate from Buy due to the strong share price performance over the last 12-months.
Target price is lifted to $3.20 from $2.85 on the earnings forecast upgrades.
HUB24 LIMITED ((HUB)) Downgrade to Neutral from Buy by Citi. B/H/S: 3/4/0
Citi highlights the “material” slowdown in hiring activity for Hub24, whereas Netwealth Group’s ((NWL)) hiring has picked up in June.
The broker flags the stock is likely to outperform into the FY24 results, due to higher margins, even though it sees consensus revenues as too high.
A 15% lift in ASX trading volumes year-on-year and up 8% in the 2H24 should boost revenue margins, Citi calculates, but this is likely to be offset by lower cash allocations.
The analyst believes Netwealth Group will overtake Hub24 in terms of underlying flows.
The target price is raised to $46.42 from $42.80.
The rating downgraded to Neutral from Buy on valuation grounds.
IGO LIMITED ((IGO)) Downgrade to Sell from Hold by Bell Potter. B/H/S: 1/3/2
Bell Potter believes the current IGO share price implies long-term lithium prices of US$1,450/t SC6 and US$20,000/t lithium hydroxide, which are significantly higher than spot prices of US$1,000/t and US$12,000/t, respectively.
In the broker’s view, considerable further short-term downside risk remains for the IGO share price. The target is lowered to $5.15 from $7.60 and the rating is downgraded to Sell from Hold.
Separately, management announced the receipt of a $159m dividend from Tianqi Lithium Energy Australia (TLEA).
This payment provides confidence in TLEA’s ability to generate returns to shareholders against the current lithium price backdrop, suggests the broker, while executing committed expansion programs at Greenbushes.
ORIGIN ENERGY LIMITED ((ORG)) Downgrade to Hold from Accumulate by Ord Minnett. B/H/S: 3/2/0
A general sector update on energy companies shows Ampol is currently rated Hold versus Accumulate on July 3.
REGIS RESOURCES LIMITED ((RRL)) Downgrade to Neutral from Buy by UBS. B/H/S: 3/3/0
UBS downgrades its rating for Regis Resources to Neutral from Buy and lowers the target to $1.85 from $2.10 after raising opex assumptions.
The broker highlights short-to medium-term production profile risks at Duketon, as well as timing and execution risks at the McPhillamys project.
REX MINERALS LIMITED ((RXM)) Downgrade to Hold from Buy by Shaw and Partners. B/H/S: 1/1/0
Rex Minerals has entered into a scheme implementation deed for its major shareholder MACH Metals to acquire all of its shares not already owned at 47c.
Shaw and Partners lowers the target price to 47c reflecting the deal and changes the rating to Hold from Buy. High Risk.
SUNCORP GROUP LIMITED ((SUN)) Downgrade to Neutral from Outperform by Macquarie. B/H/S: 3/3/0
Following Insurance Australia Group’s new reinsurance arrangements, Macquarie argues the group should trade on a material
premium to Suncorp Group after boxing in catastrophes and long tail reserves.
Insurance Australia Group is now the broker’s preferred exposure in the sector, trading at a more attractive multiple, with capital management likely in August, and margin stability due to the new reinsurance.
Macquarie’s rating for Suncorp Group is downgraded to Neutral from Outperform given a lack of reinsurance cover versus peers and the prospect of La Nina this year. The target is reduced to $15.80 from $17.
Note both IGO and Regis Resources appeared in the upgrade and downgrade assessments from the brokers.
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.
