The local share market continues to battle downward pressure with Australia’s major equities indices still in negative territory for the calendar year to date (excluding dividends).
In the good books
APN OUTDOOR GROUP LIMITED (APO) Upgrade to Add from Hold by Morgans B/H/S: 2/1/0. Morgans has upgraded its forecasts for the second time in a week, to reflect the new guidance for 2015 and also the structural trends that are favouring the outdoor advertising industry. These trends are showing no signs of abating and, after upgrades to forecasts and valuation, Morgans reverts back to an Add rating from Hold. Target is raised to $5.41 from $4.46.
ALUMINA LIMITED (AWC) Upgrade to Neutral from Sell by Citi B/H/S: 4/3/0. Citi has upgraded Alumina Ltd 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.
CREDIT CORP GROUP LIMITED (CCP) Upgrade to Overweight from Neutral by JP Morgan B/H/S: 1/0/0. The company has upgraded FY16 guidance by 5.0% at the AGM. JP Morgan recognises that the company faces a number of potential earnings headwinds in coming years, primarily its exit from short-term consumer lending and heightened competition. The broker, nonetheless, notes the significant recent decline in the company’s share price, and believes the risk/reward is now skewed to the upside. Rating is upgraded to Overweight from Neutral rating and the $11.27 target is retained.
In the not so good books
OOH!MEDIA LIMITED (OML) Downgrade to Neutral from Outperform by Macquarie B/H/S: 1/1/0. oOh!media has acquired inLink, which boasts 2500 digital screens across key capital cities. Upside for oOh will need to be driven by earnings upgrades and further bolt-ons over time, Macquarie suggests. In the meantime, growth requires capital investment and margins will eventually contract as contracts renew. The broker sees Out of Home as a compelling advertising story, but feels oOh is well-priced at this stage. Downgrade to Neutral. Target rises to $3.80 from $2.95.
XERO LIMITED (XRO) Downgrade to Underperform from Neutral by Macquarie B/H/S: 0/2/1. Xero’s first half result was in line with Macquarie’s forecast. Customer numbers were higher than expected and revenues were aided by a weaker NZ$. But reluctantly, the broker must downgrade to Underperform. Macquarie is a big fan of Xero’s growth prospects and quality management, but the share price has just run too far, too fast and needs to “take a breather”. NZ$16.50 target retained.
Earnings Forecasts
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 regards to your circumstances.
