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 93.07% and Syrah Resources with 52.92%.
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In the good books
MANTRA GROUP LIMITED (MTR) Upgrade to Hold from Sell by Deutsche Bank B/H/S: 5/3/0
Deutsche Bank upgrades to Hold from Sell because the valuation multiples are less onerous, following a -20% de-rating over the past year.
The broker retains concerns about earnings quality and capital allocation but upgrades on valuation grounds and believes there are prospects for improved sentiment in the near term. Target is raised to $3.00 from $2.60.
NINE ENTERTAINMENT CO. HOLDINGS LIMITED (NEC) Upgrade to Equal-weight from Underweight by Morgan Stanley B/H/S: 1/3/1
Fundamentally, Morgan Stanley is a structural bear on traditional media as the rate of change in technology and consumer behaviour accelerates and the global leakage of advertising spending continues.
Nevertheless, after a substantially better start to the 2017 ratings year, Morgan Stanley flips its assessment of the earnings risk for Nine Entertainment to more upside than downside and upgrades to Equal-weight from Underweight.
Target is lifted to $1.20 from $0.90. Operating earnings estimates are lifted by 12-31% for FY17-19.
SYDNEY AIRPORT HOLDINGS LIMITED (SYD) Upgrade to Add from Hold by Morgans B/H/S: 2/4/1
Strong passenger growth continued into June, driven by high load factors in larger aircraft. Morgans observes international growth is running well above long-term trends. The broker makes minor upgrades to earnings forecasts.
Rating is upgraded to Add from Hold. Target is raised to $7.40 from $7.18.
In the not-so-good books
AURIZON HOLDINGS LIMITED (AZJ) Downgrade to Underperform from Neutral by Macquarie B/H/S: 0/3/5
Changes in bond markets will reduce core return over the next four years, unless there is a material change by the regulators, point out Macquarie analysts. With funding savings partially offsetting, they estimate a potential impact of -$9m on net profit.
The company had a tough year in terms of volumes, but Macquarie sees a bounce back on the horizon for FY18. So far, there is little evidence of a catch up, they note.
All in all, minor adjustments have been made, but the analysts find the share price valuation rich for a low growth company providing relatively attractive yield. Hence why the downgrade to Underperform from Neutral. Target remains $4.98.
BABY BUNTING GROUP LIMITED (BBN) Downgrade to Neutral from Buy by Citi B/H/S: 1/3/0
The Baby Bunting share price has bounced hard over the month past. Citi analysts have decided it’s time to pull back to Neutral. Longer term, they see Amazon as a real and genuine threat, but the company should have multiple levers to offset.
CREDIT CORP GROUP LIMITED (CCP) Downgrade to Hold from Add by Morgans B/H/S: 1/1/0
Morgans expects FY17 net profit to be 22% above FY16. FY18 growth is expected to be driven by the lending division as the US division moves into profitability. The broker tempers expectations for domestic PDL acquisitions as strong competition continues.
Rating is downgraded to Hold from Add. While positive on the earnings certainty and medium-term growth profile, Morgans would prefer to see greater upside before returning to a more positive stance. Target is reduced to $19.35 from $19.90.
OIL SEARCH LIMITED (OSH) Downgrade to Sell from Neutral by Citi B/H/S: 5/2/1
Citi’s oil and gas analysts have bitten the bullet and succumbed to the realisation that the past is just that and the future holds more limitations to how high oil prices might realistically be able to rise.
Apart from lowering near term forecasts, by on average US$5/bbl, of more importance is the team has now cut the long-term oil price forecast to US$55/bbl real (from US$65/bbl). This becomes a real problem when many a share price for oil and gas producers is still reflecting a higher price.
On Citi’s calculations, Oil Search’s share price is projecting US$68/bbl, hence there is no other option than to downgrade; to Sell from Neutral. New target price of $5.72 compares with $7.47 prior.
PERPETUAL LIMITED (PPT) Downgrade to Sell from Neutral by Citi B/H/S: 0/5/2
Citi notes the fourth quarter should have been a strong one for super flows, with investors moving ahead of regulatory changes, but this was not in evidence.
The broker reduces estimates for FY17 earnings by -0.2% and FY18-19 by -3%. Citi believes the company may need to accelerate its transition and targeted growth strategies if its recent run of relatively poor investment performances continues.
Rating is downgraded to Sell from Neutral. Target is reduced to $50.25 from $50.80.
RCG CORPORATION LIMITED (RCG) Downgrade to Neutral from Buy by Citi B/H/S: 0/2/0
Now that the share price has bounced, a lot, since Citi decided to upgrade to Buy in late May, the decision has been made to downgrade back to Neutral.
Citi analysts note, with regards to the upcoming reporting season, RCG Corp has disappointed investors at each of its last financial reporting releases.
The analysts also highlight they remain concerned about elevated levels of discounting throughout the industry.
SOUTH32 LIMITED (S32) Downgrade to Neutral from Buy by Citi B/H/S: 5/3/0
Operational challenges that have affected the company in FY17 have rolled into FY18 and Citi also retains a bearish outlook on the coal price.
Citi has downgraded coal-nickel and silver prices but upgraded aluminium prices. The target is reduced to $2.70 from $2.95 and as a result the broker downgrades to Neutral from Buy.
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