The chart below shows the buy recommendations of brokers. Companies are only displayed in this table if at least 5 of the above mentioned brokers have a current position on the stock. A broker sentiment value of +1 means all brokers have a buy recommendation. The target price upside/downside is relative to the price at the time the table was updated.
The stocks with the largest target price upside this week are Alacer Gold Corp with 84.4% and Vocus Communications with 52%.
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In the good books
ANSELL LIMITED (ANN) Upgrade to Buy from Hold by Ord Minnett B/H/S: 2/4/1
Ord Minnett observes the company has made a solid start to FY17 and is a potential beneficiary of the economic stimulus that may emerge from the incoming Donald Trump administration in the US.
The strong US dollar provides valuation support although it may be a future headwind. The broker expects a good first half result against a weak comparable period and upgrades to Buy from Hold. Target is raised to $25.00 from $24.70.
GOODMAN GROUP (GMG) Upgrade to Outperform from Neutral by Credit Suisse B/H/S: 3/3/0
Credit Suisse is upgrading to Outperform from Neutral as the stock is trading some 14% below its target price of $7.37. The stock now looks oversold to the broker.
The broker already allows for a decline of around 200 basis points in development margins from FY17-20 in its forecasts.
If cap rates soften, driven by bonds, the broker suspects this could procure downside to development profit assumptions but this should be more than offset by the company ceasing its asset disposal program in such a scenario.
MINERAL RESOURCES LIMITED (MIN) Upgrade to Outperform from Neutral by Macquarie B/H/S: 2/2/0
The company has announced that EBITDA is now expected to be $380-420m, an increase on guidance provided in August. The guidance also assumes the proportional consolidation of the company’s 43.1% stake in the Mt Marion project.
Macquarie upgrades to Outperform from Neutral believing the stock has a large number of opportunities available. Target is raised to $13.37 from $11.70.
PROGRAMMED MAINTENANCE SERVICES LIMITED (PRG) Upgrade to Accumulate from Hold by Ord Minnett B/H/S: 4/0/0
Ord Minnett expects the company to report EBITDA of $36.9m for the first half, up 85% on a year ago, given the full contribution from the Skilled Group acquisition.The broker also expects the company to retain its recently downgraded FY17 guidance for operating earnings of around $100m.
The earnings outlook may be far from certain, but the broker believes management has factored in much of the near-term risk in its guidance, with revenue opportunities in the development pipeline presenting potential upside.
Rating is upgraded to Accumulate from Hold. Target rises to $1.80 from $1.70.
SEALINK TRAVEL GROUP LIMITED (SLK) Upgrade to Buy from Hold by Ord Minnett B/H/S: 1/1/0
Sealink has highlighted its growth options in North Stradbroke, its contract security at Gladstone and the quality of its Bay Islands operation at its investor briefing.
Ord Minnett believes, with the stock 13% off its highs, acquisitions still on the table and a strong outlook, Sealink is deserving of an upgrade to Buy from Hold. Target is raised to $4.59 from $4.47.
In the not-so-good books
AUTOMOTIVE HOLDINGS GROUP LIMITED (AHG) Downgrade to Underweight from Equal-weight by Morgan Stanley B/H/S: 5/1/1
Regulatory settings linked to the automotive market are set to change, Morgan Stanley contends, with ASIC reviewing commissions and financing practices at dealerships.
The broker believes the risks facing automotive dealerships are more likely to affect the near-term earnings for this company. This is because of a less favourable geographic exposure and a logistics business, which has been hard to turn around.
Rating is downgraded to Underweight from Equal-weight. Sector view is In-Line. Target is reduced to $3.15 from $4.50.
GRAINCORP LIMITED (GNC) Downgrade to Hold from Buy by Deutsche Bank B/H/S: 2/4/0
Deutsche Bank considers the FY16 result a positive as it was ahead of expectations. The result highlights the diversification benefits from growth in the malt division and a return to earnings growth in storage and logistics.
Offsetting this was weaker-than-expected margins in oils. The broker downgrades to Hold from Buy as the stock is now trading at a 4% discount to valuation. Target is steady at $8.90.
JAMES HARDIE INDUSTRIES N.V. (JHX) Downgrade to Neutral from Buy by Citi B/H/S: 4/3/0
Having previously nominated James Hardie as one to own post US presidential elections, Citi has now pulled back to Neutral from Buy. The reason lies with an appreciating share price.
James Hardie is struggling to meet demand due to capacity constraints in the US. Management is addressing the matter but it will weigh on margins in the short term. Citi notes management is confident these issues will have been addressed to support growth in FY18.
The analysts suggest investors should view the next 2-3 quarters as “work in progress”. Target drops by 20c to $20.30. Estimates have been reduced.
MCMILLAN SHAKESPEARE LIMITED (MMS) Downgrade to Underweight from Overweight by Morgan Stanley B/H/S: 1/2/1
Regulatory settings linked to the automotive market are set to change, Morgan Stanley contends, with ASIC reviewing commissions and financing practices at dealerships.
The broker does not discount the risk to fringe benefit tax/novated leasing, even if this seems stable for the time being. Moreover, Australia’s housing-linked and debt-intensive growth over the last four years has provided a substantial tailwind, which appears to be subsiding.
The broker downgrades to Underweight from Overweight. Target is reduced to $9.60 from $14.79. Sector view is In-Line.
MACQUARIE ATLAS ROADS GROUP (MQA) Downgrade to Hold from Buy by Deutsche Bank B/H/S: 4/2/0
Deutsche Bank is downgrading its exposure to the Australian infrastructure sector as a whole. The broker concludes that, despite recent falls across the sector, it is only trading at fair value.
Despite growth options and solid operations as well as favourable longer-term trends, the broker believes the macro bond environment has swamped these issues.
Rating is downgraded to Hold from Buy. Target drops to $4.75 from $6.10.
PLATINUM ASSET MANAGEMENT LIMITED (PTM) Downgrade to Underperform from Neutral by Credit Suisse B/H/S: 0/2/2
The growth outlook remains weak, in Credit Suisse’s view, with continued fund outflows. The broker finds little valuation support given the stock is trading at a 6% premium to peers.
Credit Suisse views the recent run in the share price as temporary and downgrades to Underperform from Neutral. Target is lowered to $5.10 from $5.25.
SG FLEET GROUP LIMITED (SGF) Downgrade to Equal-weight from Overweight by Morgan Stanley B/H/S: 2/1/0
The AGM update signalled growth is slower than Morgan Stanley previously thought. Regulatory settings linked to the automotive market are set to change, the broker contends, with ASIC reviewing commissions and financing practices at dealerships.
The broker does not discount the risk to fringe benefit tax/novated leasing, even if this seems stable for the time being. Rating is downgraded to Equal-weight from Overweight. Target is reduced to $3.60 from $4.60. Industry view is In-Line.
SYDNEY AIRPORT HOLDINGS LIMITED (SYD) Downgrade to Hold from Buy by Deutsche Bank and Downgrade to Underperform from Neutral by Credit Suisse B/H/S: 3/3/1
Deutsche Bank is downgrading its exposure to the Australian infrastructure sector as a whole. The broker concludes that, despite recent falls across the sector, it is only trading at fair value.
Despite growth options and solid operations as well as favourable longer-term trends, the broker believes the macro bond environment has swamped these issues.
Rating is downgraded to Hold from Buy. Target drops to $6.05 from $7.60.
Credit Suisse observes Sydney Airport has fixed rates of price escalation in its contracts with international airlines, Qantas domestic many other customers.
There is limited capacity to increase prices above agreed rates to offset higher inflation until contracts expire. The broker calculates 100 basis points of higher inflation over the life of the concession reduces the fair value estimate by 13%.
Credit Suisse reduces its rating to Underperform from Neutral and reduces the target to $6.00 from $6.60
VILLAGE ROADSHOW LIMITED (VRL) Downgrade to Hold from Buy by Ord Minnett B/H/S: 1/3/0
Ord Minnett believes the outlook for Village Roadshow is uncertain across all three of its major divisions. Cinema is leading the pack but cycling strong content in December.
With gearing rising in FY17, and no clarity on asset sales at an offset, the broker finds it hard to envisage a re-rating in the short term, despite the valuation support. Ord Minnett downgrades to Hold from Buy and reduces the target to $5.11 from $5.94.
Earnings forecast
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