In the good books

ESTIA HEALTH LIMITED (EHE) Upgraded to Equal-weight from Underweight by Morgan Stanley B/H/S: 1/2/0

The operating performance has improved, the balance sheet strengthened and there is a focus on growth. Along with this, Morgan Stanley notes a more favourable regulatory environment. Whilst more positive, valuation and low growth holds the broker back.  Rating is upgraded to Equal-weight from Underweight. Target is raised to $3.45 from $2.30.

UPGRADES

LINK ADMINISTRATION HOLDINGS LIMITED (LNK) Upgraded to Neutral from Underperform by Credit Suisse B/H/S: 5/1/0

The company remains confident of cost synergies from the Capita Asset Services acquisition and Credit Suisse envisages potential upgrades to synergy targets over the coming year. Maiden guidance for fund administration revenues to be flat in FY18 is ahead of the broker’s expectations for a -3% decline. Rating is upgraded to Neutral from Underperform. Target is raised to $8.50 from $7.90.

OZ MINERALS LIMITED (OZL) Upgraded to Neutral from Underperform by Credit Suisse .B/H/S: 4/3/1

A general sector update has triggered an upgrade to Neutral from Underperform while the price target lifts to $7.90 from $7.30. Earnings estimates have received a boost.

SANDFIRE RESOURCES NL (SFR) Upgraded to Neutral from Underperform by Credit Suisse .B/H/S: 1/7/0

A general sector review and update has led to the upgrade to Neutral from Underperform, while the price target lifts to $5.60 from $4.90. A lift in copper price forecasts translates into significantly higher forecasts for Sandfire Resources.

VICINITY CENTRES (VCX) Upgraded to Neutral from Underperform by Credit Suisse .B/H/S: 4/1/1

Credit Suisse analysis shows that, on average, net tangible asset backing per security is up by 28% over the past three years across the large-cap A-REITs. Some 68% of this upside has been driven by cap rate compression. At some point the cycle will turn and reversion to June 2014 cap rates wold mean an average NTA decline of -15%. Credit Suisse suggests there is limited downside from the cyclical cap rate reversion for Vicinity Centres. Rating is upgraded to Neutral from Underperform. Target is $2.65.

In the not-so-good books

BLUE SKY ALTERNATIVE INVESTMENTS LIMITED (BLA) Downgraded to Hold from Add by Morgans B/H/S: 1/1/0

Blue Sky has guided to 37% FY18 profit growth and has noted a quarterly gain in assets under management, supporting the fund’s FY18 and FY19 AUM targets. Confidence is underpinned by several institutional mandates won in the quarter. Morgans believes Blue Sky is well positioned for AUM growth supported by its deal pipeline, institutional interest and a strong macro backdrop. Target rises to $14.34 from $11.18, but with the share price already close to this level, Morgans pulls back to Hold.

DOWNGRADES

INVESTA OFFICE FUND (IOF) Downgraded to Neutral from Outperform by Credit Suisse .B/H/S: 3/1/2

Credit Suisse analysis shows that, on average, net tangible asset backing per security is up by 28% over the past three years across the large-cap A-REITs. Some 68% of this upside has been driven by cap rate compression. At some point the cycle will turn and reversion to June 2014 cap rates wold mean an average NTA decline of -15%. Investa Office is considered the most exposed to this reversion. Rating is downgraded to Neutral from Outperform. Target is reduced to $4.58 from $4.67.

ISENTIA GROUP LIMITED (ISD) Downgraded to Underperform from Neutral by Macquarie .B/H/S: 0/2/1

In its fourth successive guidance downgrade, iSentia has reset earnings expectations to $32-36m when Macquarie had $46m. The competitive pressures and structural headwinds facing the company are becoming increasingly apparent, the broker suggests. At 12.8x forward earnings, iSentia has to provide evidence of a turnaround before Macquarie can justifying buying the stock. Recent price weakness may nevertheless inspire corporate activity. Downgrade to Underperform. Target falls to 91c from $1.66.

PILBARA MINERALS LIMITED (PLS) Downgraded to Neutral from Buy by Citi B/H/S: 1/1/0

Citi analysts have increased the probability on Pilgangoora expansion to 5mtpa, and this pushes up the price target to 95c from 68c. The rating is downgraded to Neutral/High Risk from Buy/High Risk. Investors looking for lithium exposure are directed towards Buy rated Orocobre (ORE). Citi analysts are “fundamentally bullish” on lithium, but also believe increased supply has the potential to push the market back into surplus in 2018.

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.

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