In the good books

Domino’s Pizza (DMP) was upgraded to Neutral from Sell by Citi

Citi has upgraded to Neutral from Sell post significant de-rating of the share price since November last year. The analysts declare they don’t see any near-term upside earnings risks, but they retain the view this company has “significant” earnings growth prospects in Europe.

On Citi’s projections, average EPS growth will be 16% over the next three years. On this basis, the target price is set at $43.40 (down from $45.20).

In terms of the upcoming reporting season, Citi believes top line is likely to be trending near the low end of the range, with Domino’s chances for beating its own guidance not seen as high. The suggestion made is that when the share price were to fall below $39, Citi will be ready to upgrade to Buy (all else remaining equal). 

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

Macquarie has taken a positive view following the announcement made by Pilbara Minerals ((PLS)), indicating strong demand from potential customers for hard rock lithium miners.

Pilbara Minerals remains the broker’s top pick in the sector, with ongoing cautious view for Altura Mining. Galaxy Resources’ rating is hereby upgraded to Outperform from Neutral.

Concerning the latter, Macquarie has pushed back the development assumption for Sal de Vida by circa 6 months with first production now expected in late-2022. Target price declines to $2.70 from $3.

Magellan (MFG) was upgraded to Add from Hold by Morgans

Morgans notes the strong performance by the Magellan funds, including the Infrastructure Fund. This, say the analysts, should bode well for funds flows in the months ahead.

Short term risk stems from volatile equity markets, but Morgans has nevertheless decided it’s time to upgrade to Add from Hold. Target price lifts to $28.76 from $28.54.

NetWealth (NWL) was upgraded to Neutral from Underperform by Credit Suisse

Marking to market, Credit Suisse analysts have reduced estimates for asset managers and operators of financial platforms. More so for the former (-6% on average versus -1% on average).

The analysts highlight while share prices have de-rated noticeably, many asset managers are also experiencing fund outflows, and this can potentially still accelerate on continued risk off sentiment.

As net flows have improved on the back of new partnerships, post the present year earnings estimates have slightly increased. Upgrade to Neutral from Underperform. Target price remains $7.75.

Santos (STO) was upgraded to Hold from Reduce by Morgans

Recent share price weakness has pushed Santos shares into “fair value” territory, on Morgans’ assessment, hence why the rating has been upgraded to Hold from Reduce.

The broker has put through higher oil price forecasts in its model, while noting balance sheet pressure has been alleviated on the combination of significant cost-out initiatives and a recovery in the oil price.

Target price has fallen to $5.53 from $5.59. Upside risk remains with the PNG operations, suggest the analysts.

Woodside (WPL) was upgraded to Neutral from Underperform by Macquarie and to Add from Hold by Morgans

Macquarie sees oil prices strengthening in the first half of calendar 2019. On this basis, the rating for Woodside Petroleum has been lifted to Neutral from Underperform.

Sector preference remains (in order) Oil Search ((OSH)), then Santos ((STO)), with Woodside last among large caps “due to certainty and timing around catalysts for the first two”.

Macquarie believes Woodside is facing a challenging year ahead, though it is seen as a candidate to announce a buyback or special dividend. Target price falls to $33.30 from $34.70.

Stockbroker Morgans has upgraded to Buy from Hold, observing Woodside Petroleum’s ebitdax margin of 72% is nothing but “exceptional”. The quality of earnings is supported by what the analysts deem are “low risk” operations.

Morgans has had difficulties to look beyond the company’s lack of growth, but the analysts see fundamentals for LNG and crude oil operations improving, and this is likely to support the sanctioning of Browse, Scarborough and Kitimat LNG, suggest the analysts.

The updated modelling has also incorporated higher oil price forecasts. Estimates went up. The target price lifts to $37.83 (was $36.74). Noteworthy: DPS forecasts have been reduced.

In the not-so-good books

Autosports Group (ASG) was downgrade to Neutral from Outperform by Macquarie

Ahead of the interim results report release next month, Macquarie is expecting to see ebitda contracting by -11% from a year ago, predominantly because of weak market conditions.

The bad news is: the analysts see these conditions somewhat being entrenched. On this basis, the recommendation has been pulled back to Neutral from Outperform.

Estimates have been reduced by double digit percentages, with pronounced effect on DPS forecasts. Target price drops to $1 from $2.30. Stock is illiquid, which doesn’t help, plus Macquarie sees risk as to the downside, still.

Class (CL1) was downgraded to Hold from Add by Morgans

Morgans has further lowered expectations for Class with the analysts suggesting the overall market dynamics are not easy for the company, as SMSF formation is likely slowing down, in particular if Labor wins the upcoming federal election.

In the short term, the broker believes the overall landscape remains highly competitive. Rating downgraded to Hold from Add. Target price falls to $1.48 from $2.65.

Highlands Pacific (HIG) was downgraded  to Hold from Add by Morgans

Morgans advises shareholders to take no action with Cobalt 27 Corp having agreed to acquire all outstanding shares at 10.5c per unit.

The analysts point out, part of the process will be a shareholders’ meeting to approve the scheme of arrangement, which will require the approval of 75% of non-conflicted shareholders.

Downgrade to Hold from Add. Target price falls to 11c from 33c

Katmandu (KMD) was downgraded to Neutral from Outperform by Macquarie

The company’s trading update didn’t exactly excite, and that is putting it mildly, missing management’s own expectations. Macquarie downgrades to Neutral from Outperform.

The analysts suggest macro uncertainty, NZ weather and retail competition in general are all impacting. Forecasts have been lowered. Target price slumps to $2.28 from $3.13.

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.