In the good books
Base Resources (BSE) Upgraded to Speculative Buy from Hold by Ord Minnett B/H/S: 1/0/0
Ahead of the release of the December quarter production report, Ord Minnett analysts have upgraded to a Speculative Buy, while lifting the price target to 34c from 25c. The view is that balance sheet risk is more than accurately reflected in the weaker share price.
Ord Minnett believes the pricing outlook for ilmenite continues to strengthen and this will assist in debt reduction. The analysts are toying with the idea of accelerated de-leveraging if price momentum builds as they expect it will.
Regis Resources (RRL) Upgraded to Equal-weight from Underweight by Morgan Stanley B/H/S: 4/4/0
Regis’ Dec quarter production met the broker’s forecast and costs were 6% lower. Operations are stable and cash is building from earnings margins nearing 50%.
The broker’s Underweight rating had been in place on the basis of the market fully pricing in assumed mine life extensions. The broker concedes mine lives may well be increased and/or gold prices can move higher and as such has upgraded to Equal-weight, while still preferring other junior gold exposures. Target $3.05.
Treasury Wine Estates (TWE) Upgraded to Overweight from Equal-weight by Morgan Stanley B/H/S: 2/4/1
The broker has conducted an extensive review of Treasury Wine and as a result has upgraded to Overweight. Having surveyed Chinese consumers, the broker believes the market continues to under-appreciate the company’s opportunity in China.
Treasury is also well leveraged to wine price increases, which have been underway, and an underperforming Americas business is poised to turn around, the broker believes. Target rises to $13 from $10.
Woodside Petroleum (WPL) Upgraded to Accumulate from Hold by Ord Minnett B/H/S: 2/4/1
Ord Minnett has turned more positive on the resumption of growth at Woodside Petroleum and has upgraded the stock to Accumulate from Hold, while lifting the price target to $36 from $30.
On a risk-weighted basis, the analysts project attributable production could grow 25% over the next decade to 115–120m barrels of oil equivalent (mmboe) in 2025. One note of caution: Royal Dutch/Shell’s 13% equity stake remains an overhang for the stock.
In the not-so-good books
ANZ Group (ANZ) downgraded to Neutral from Outperform by Macquarie B/H/S: 3/5/0
The broker has upgraded bank forecast earnings to reflect the rising yield environment sparked by Trump’s election, but note locally the banks continue to operate in a slow growth environment. The risk of capital raisings has diminished, but the market has pushed bank share prices higher on that basis.
The broker has thus downgraded its sector recommendation to Neutral. Incorporating the recent divestment of Shanghai Rural Commercial Bank, ANZ’s individual rating downgraded to Neutral. Target rises to $31 from $30.
Aurizon Holdings (AZJ) Downgraded to Sell from Neutral by Citi B/H/S: 2/4/2
Aurizon’s trading update revealed a strong December, but Citi analysts are quick to point out other months, October and November in particular, were weak, if not negative.
Citi is of the view the performance does not justify the current share price. Downgrade to Sell from Neutral. Price target moves to $4.75 from $4.60.
Independence Group (IGO) Downgraded to Neutral from Outperform by Macquarie B/H/S: 1/4/1
The lifting of the Indonesian nickel export ban has come as a surprise to the broker, who notes recent government rhetoric has been to the contrary. Given the lift extends only to those producers who can demonstrate plans to develop downstream processing facilities, it is uncertain as to what the impact will be.
The broker has thus left nickel price forecasts unchanged for the time being, while noting substantial downside risk. Independence is downgraded to Neutral. Target falls to $4.40 from $5.00. Earnings forecasts unchanged for the time being.
Western Areas (WSA) Downgraded to Neutral from Outperform by Macquarie B/H/S: 1/2/4
The lifting of the Indonesian nickel export ban has come as a surprise to the broker, who notes recent government rhetoric has been to the contrary. Given the lift extends only to those producers who can demonstrate plans to develop downstream processing facilities, it is uncertain as to what the impact will be.
The broker has thus left nickel price forecasts unchanged for the time being, while noting substantial downside risk. Western Areas is downgraded to Neutral. Target falls to $3.00 from $3.60. Earnings forecasts unchanged for the time being.
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