In the good books
Citi has upgraded Alumina (AWC) to Neutral from Sell while reducing the price target to $1.15 from $1.20 as the analysts incorporate the decision made by JV partner Alcoa to curtail alumina capacity further at Point Comfort.
The analysts hold a positive view on alumina prices post 2018, so this decision is poised to be reversed in the years ahead, if Citi forecasts prove correct. The decision to upgrade was made on the basis of “valuation” as the share price has been weak recently.
Macquarie has upgraded Panoramic Resources (PAN) to Outperform from Neutral. The September quarter was a tough one for Panoramic, Macquarie notes, given redundancy costs, provisional pricing adjustments and unfavourable shipment timing. But with the high-cost Lanfranchi mine now closed, the company should run close to cash flow break-even. The longer-term outlook is nevertheless excellent, Macquarie believes, as production increases from the Savannah North and Lower Schmitz projects.
In the not-so-good books
Macquarie has downgraded Amaysim (AYS) to Neutral from Outperform. On the back of its renewed wholesale contract with Optus, Amaysim has offered new phone plans which improve the company’s competitive offering, Macquarie notes, but will place some pressure on revenues per user.
Leveraging off Optus is a key strategic plank for amaysim, the broker suggests, but the environment is becoming more competitive. Given recent stock price strength Macquarie pulls back to Neutral. Target unchanged at $2.45.
Macquarie has downgraded Buru Energy (BRU) to Neutral from Outperform. Macquarie observes many mid-cap energy companies have enjoyed a share price rebound from August lows and do not offer compelling valuation. The broker downgrades its recommendation to Neutral from Outperform and the target to 40c.
Deutsche Bank has downgraded Graincorp (GNC) to Hold from Buy. The pre-release of the FY15 result is considered a negative by Deutsche Bank, as it is at the lower end of guidance and misses the broker’s forecasts. The weak result is primarily driven by an earnings loss in marketing. Deutsche Bank’s FY16 forecasts are reduced by 18%. Rating is downgraded to Hold from Buy.
Macquarie has downgraded GWA (GWA) to Underperform from Neutral. GWA saw 3% sales growth in the September quarter but the company has warned the lower currency will drag on earnings in FY16. While the outlook for housing completions remains strong, the risk is whether GWA can pass on the currency impact to customers through higher prices, Macquarie notes.
Asset sales mean a second capital return is possible and GWA will recommence dividends in FY16, but on earnings risk the broker downgrades to Underperform.
Citi has downgraded Oceanagold (OGC) to Neutral from Buy. Citi analysts point at the strong share price appreciation to justify the downgrade in rating to Neutral from Buy. The analysts note there is upside in the company’s exploration and resource drilling programs at its new projects.
Credit Suisse has downgraded Tatts Group to Underperform from Neutral. Credit Suisse downgrades to Underperform from Neutral, given the share price appreciation recently. The broker suspects turnover may be growing faster than revenue, largely because Tatts is increasingly promoting with free bets. The broker believes it is too early to judge whether UBET has traction with customers.
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