In the good books

Alacer Gold (AQG) was upgraded to Outperform from Neutral by Macquarie

Macquarie upgrades to Outperform from Neutral. Target is $2.70. The company’s Copler sulphide project is approaching commercial production and recent additions to oxide resources and heap leaching capacity are expected to extend oxide gold production.

Coca Cola Amatil (CCL) was upgraded to Hold from Sell by Deutsche Bank and to Hold from Lighten by Ord Minnett

Deutsche Bank found several positives in the company’s investor briefing. Investments are being made to reinvigorate the sales force and the group is looking to learn from the highly successful NZ operation.

Nevertheless, category headwinds are not dissipating and Deutsche Bank believes Indonesia will remain tough for the foreseeable future, albeit volumes are stabilising.

After the share price decline the broker believes the multiple is now more appropriate and upgrades to Hold from Sell. Target is $8.

The company has indicated 2019 will be another year of transition, with accelerated investment in Australian beverages. Ord Minnett was impressed by the plans, as the new chief of Australian beverages appears to understand the competitive advantage in the company’s superior network and distribution.

Indonesia remains disappointing, the broker observes, and the company is refining its strategy, deploying a narrower category focus.

Following the decline in the share price, Ord Minnett suggests valuation support is emerging and upgrades to Hold from Lighten. Target is reduced to $8.50 from $8.75.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Graincorp (GNC) was upgraded to Buy from Neutral by UBS

The company has received an indicative all-in cash takeover bid of $10.42 per share. The board has recommended no action be taken and continues to review its asset portfolio.

UBS believes the company’s grain division on Australia’s east coast will be the most valuable aspect for an international grain trader. However, ADM was blocked from taking over the company in 2013 by the Foreign Investment Review Board, which suggests a change in federal government may be needed before a successful bid from offshore.

The broker also notes, as most of the major grain traders are not interested in, or are divesting, malt assets, an Asian food company or the WA co-op, CBH, could be interested in some of the assets.

Rating is upgraded to Buy from Neutral. Target is raised to $10.42 from $8.40

New Hope Corporation (NHC) was upgraded to Outperform from Neutral by Macquarie

Macquarie upgrades coal price forecasts which have driven a 5% increase to the price target for New Hope to $4.00 from $3.80. The broker upgrades to Outperform from Neutral.

Sandfire Resources (SFR) was upgraded to Outperform from Neutral by Macquarie

Macquarie envisages an improved earnings outlook for Sandfire Resources and upgrades the target to $7.70 from $7.40.

The broker upgrades to Outperform from Neutral because of recent weakness in the shares against the copper price.

Scentre Group (SCG) was upgraded to Overweight from Underweight by Morgan Stanley

The stock has underperformed its retail peer Vicinity Centres ((VCX)), Morgan Stanley observes, since the announcement it was fast approaching the debt ratio required by ratings agencies to maintain an A1 credit rating.

The broker’s analysis suggests the company could minimise dilution by redeploying around 25% of sales proceeds into its ongoing buyback and maintain debt/EBITDA below 6.5x.

The broker’s forecast for growth in a tough retail environment is boosted by developments. The broker envisages 10.3% upside to its $4.30 target and upgrades to Overweight from Underweight. Industry view is Cautious.

Whitehaven Coal (WHC) was upgraded to Outperform from Neutral by Macquarie

Macquarie upgrades coal price forecasts which have driven an 8% increase to the price target for Whitehaven Coal to $5.60 from $5.20. The broker upgrades to Outperform from Neutral.

In the not-so-good books

Galaxy Resources (GXY) was downgraded to Neutral from Outperform by Macquarie

Macquarie downgrades to Neutral from Outperform as a rally in the stock price has closed the upside on its target, which remains steady at $3.00.

Funds from the sale of Sal de Vida tenements will be used to advance the project while securing a development partner remains a key catalyst.

Huon Aquaculture (HUO) was downgraded to Neutral from Outperform by Credit Suisse

Credit Suisse still considers the valuation undemanding and believes FY20 should deliver a strong performance as harvest volumes catch up with trend market growth.

Nevertheless, the stock has outperformed the market since August and the broker downgrades to Neutral from Outperform. Target price steady at $4.90.

Metcash (MTS) was downgraded to Underperform from Neutral by Macquarie

In the wake of Metcash’s result, Macquarie downgrades to Underperform. The company has done a good job, the broker suggests, in controlling cost increases via its Working Smarter initiative. But that has largely run its course, as has the synergy benefits from the Hardware acquisition.

The company is still feeling the impact of the lost Drakes contract, and supermarket competition remains fierce. Nor has there been any improvement in conditions in WA or SA, Macquarie notes. More investment is needed to offset these threats. Target falls to $2.41 from $3.17.

Orocobre (ORE) was downgraded to Neutral from Outperform by Macquarie–

Macquarie downgrades to Neutral from Outperform. Target is raised to $4.60 from $4.40.

Redbubble (RBL) was downgraded to Hold from Add by Morgans

Morgans reduces forecasts to reflect near-term challenges being caused by changes to Google search engine algorithms. The broker also includes forecasts for the TeePublic business that was recently acquired.

While this is mildly accretive to earnings the broker now factors in slower top-line growth and a higher proportion of paid traffic.

As the stock is trading in line with the revised target, reduced to $1.19 from $1.91, the rating is downgraded to Hold from Add.

Regis Resources (RRL) was downgraded to Neutral from Outperform by Macquarie

Macquarie downgrades to Neutral from Outperform after a strong gain in the share price. The target is steady at $4.50.

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.
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.