In the good books
Regis Resources (RRL) was upgraded to Neutral from Sell by UBS. B/H/S – 1/4/3. FY18 results were slightly ahead of expectations. UBS attributes share price weakness to the FY19 guidance issued in the quarterly report in July. Higher cost estimates are based on pre-stripping activity at new satellite ore bodies that are to be opened up in FY19, as well as inflation in oil prices. The broker believes the higher costs have now been more than priced into the stock and value is starting to emerge. Target rises to $4.20 from $3.18.
Platinum Asset Management (PTM) was upgraded to Neutral from Underperform by Credit Suisse. B/H/S – 0/3/1. FY18 results were slightly better than Credit Suisse had expected due to some lower quality supporting items. Fund performance has deteriorated in recent months and this will impact Platinum’s ability to earn performance fees in FY19. The broker has cut fee forecasts by 50%. The broker has made minor changes to EPS forecasts with FY19 unchanged and FY20 upgraded by 2%. Credit Suisse upgrades to Neutral from Underperform, believing the stock offers better value than sector peers. Target is raised to $5.25 from $5.15.
Sims Metal Management (SGM) was upgraded to Neutral from Underperform by Credit Suisse and to Neutral from Sell by UBS. B/H/S – 2/4/0.
Sims Metal Management’s FY18 results were broadly in line with Credit Suisse’s estimates. Guidance was limited to “on track to exceed 10% ROIC target” although management remains cautious over global trade war escalation. Credit Suisse makes modest EPS changes to reflect management’s guidance for internal initiatives and macro considerations. Target price steady at $14.80. Sims reported in line with UBS. The stock has been hit hard in the past fortnight due to headwinds in the end markets of China and Turkey. UBS has cut earnings forecasts by 5% and warns earnings visibility is very low. But with market expectations re-based lower, the broker sees the headwinds priced in. Target rises to $13.85 from $13.70.
In the not-so-good books
Blackmores (BKL) was downgraded to Underperform from Neutral by Credit Suisse, to Reduce from Hold by Morgans and to Hold from Accumulate by Ord Minnett. B/H/S – 0/1/2. FY18 results were in line with Credit Suisse estimates. The broker maintains a target of $130 but downgrades to Underperform from Neutral. Credit Suisse also notes sales have not kept pace with rival Swisse in Australia. The company is budgeting for growth in FY19 in Australia and intends to increase marketing. FY18 results were slightly weaker than Morgans expected. Management has highlighted a subdued Australian retail market, which Morgans believes illustrates the lower growth outlook for the domestic vitamin category and also reflects the prevalence of discounting. Target is raised to $130 from $115. FY18 results were in line with Ord Minnett’s forecasts, although the $1.55 dividend, representing a 75% payout of net profit, was below the broker’s estimate. The company has reinstated its DRP. With the stock trading now trading on more than 30 times Ord Minnett’s forecast earnings the rating is downgraded. Target rises to $160 from $145.
Brambles (BXB) was downgraded to Neutral from Outperform by Credit Suisse. B/H/S – 2/5/1. FY18 results were slightly ahead of estimates. Credit Suisse notes a timing delay on price increases and efficiency gains versus cost pressures, and this may provide a more attractive entry point to the stock. Target is raised to $10.90 from $10.40.
Macquarie Group (MQG) was downgraded to Neutral from Buy by UBS. B/H/S – 3/4/0. Over the past five years, Macquarie has successfully diversified away from traditional investment banking towards asset management, lending and leasing. Earnings have tripled. The broker expects momentum to continue under the new CEO. But after a solid rally, UBS now pulls back to Neutral from Buy. Target rises to $122 from $117.
Spark Infrastructure (SKI) was downgraded to Neutral from Buy by Citi. B/H/S – 1/5/1. Apparently, part of the local investment community is worried about higher taxes and the implications for dividends in the years ahead. Citi analysts are less so, but acknowledge uncertainty remains the key word. Recommendation has been pulled back to Neutral from Buy on share price appreciation. Target price remains $2.66.
Speedcast International (SDA) was downgraded to Hold from Add by Morgans. B/H/S – 0/3/0. First half results were below expectations. Morgans has always focused on cash generation and notes operating cash flow was down 26%. Since capital expenditure was higher, free cash flow was non-existent. The broker is disappointed net debt increased. Morgans notes the target for net debt continues to be 2.5 times pro forma EBITDA but this has not eventuated over the last few years as the company continues to make debt-funded acquisitions. The broker downgrades to Hold from Add on quality concerns. Target is reduced to $4.09 from $7.21.
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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