In the good books
AUTOMOTIVE HOLDINGS GROUP LIMITED (AHG) Upgrade to Accumulate from Hold by Ord Minnett B/H/S: 3/3/0
After a 17% fall in the share price over 2016, Ord Minnett suggests there is value now on offer. The rating is raised to Accumulate from Hold.
The broker expects shareholders will put increasing pressure on the board to justify the current asset portfolio. Ord Minnett considers there are no meaningful synergies between the automotive retailing segment and logistics and the poor return profile of the latter has affected sentiment.
The broker considers an in specie distribution to divest the logistics business as the best transaction. Target is raised to $4.34 from $4.12.
EVOLUTION MINING LIMITED (EVN) Upgrade to Neutral from Underperform by Credit Suisse B/H/S: 3/3/0
Higher gold price forecasts have driven an upgrade to the broker’s target to $2.20 from $1.87. Rating is also upgraded to Neutral from Underperform.
The broker flags a strongly disciplined business development with a doubling of the dividend pay out and robust 3-year production outlook.
See also EVN downgrade.
INDEPENDENCE GROUP NL (IGO) Upgrade to Outperform from Neutral by Credit Suisse B/H/S: 3/3/0
Given the share price correction, Credit Suisse upgrades to Outperform from Neutral. The broker retains nickel as its top pick in base metals, despite the oversupply.
The broker suspects depressed prices in an over supplied market means some large losses are being taken and, while producers have been stubborn, some mines will ultimately have to close. Target rises to $3.60 from $3.00.
KATHMANDU HOLDINGS LIMITED (KMD) Upgrade to Buy from Hold by Deutsche Bank and Upgrade to Outperform from Neutral by Macquarie B/H/S: 2/2/0
The company’s market update and guidance were better than Deutsche Bank’s expectations. Even better still, the analysts point at the unusually warm winter, which makes them even more confident in management’s turnaround strategy.
The analysts do note the FY result is still dependent on trading through July, which is the largest trading month, but their confidence has grown and there’s value up for grabs. Upgrade to Buy from Hold. Price target lifts to NZ$2.10. Estimates have improved.
Kathmandu has reported sales year-to-date are up 2.6%. FY17 earnings targets are upgraded, with a range of $49-53m now expected.
Macquarie had expected the late start to winter and warm Easter put the earnings risk to the downside. While the second half performance appears to have validated management’s strategies the broker believes questions may arise about the sustainability of the turnaround.
Still, with the stock trading at a 20% discount to the previous bid price, the broker upgrades to Outperform from Neutral. Target rises to $1.70 from $1.60.
NANOSONICS LIMITED (NAN) Upgrade to Add from Hold by Morgans B/H/S: 1/0/0
Morgans has decided its time to upgrade to Add from Hold. Sales forecasts are upgraded 14% to reflect the strong momentum seen in the third quarter.
The next catalyst is the release of the UK guidelines for ultrasound probe de-contamination, expected soon. Target lifts to $2.46 from $2.15.
OZ MINERALS LIMITED (OZL) Upgrade to Neutral from Underperform by Credit Suisse B/H/S: 1/5/2
Credit Suisse upgrades to Neutral from Underperform and raises the target to $5.70 from $5.30 on the back of upgrades to gold price forecasts. The broker’s copper forecasts are largely unchanged.
The broker’s valuation of the stock is underpinned by robust production and cost forecasts and the company is observed to be managing well the aspects under its control.
WESTERN AREAS NL (WSA) Upgrade to Outperform from Neutral by Credit Suisse B/H/S: 3/0/3
Given the share price correction Credit Suisse upgrades to Outperform from Neutral. The broker retains nickel as its top pick in base metals despite the oversupply.
The broker suspects depressed prices in an over supplied market means some large losses are being taken and, while producers have been stubborn, some mines will ultimately have to close. Price target falls to $2.50 from $2.85.
In the not-so-good books
VOCUS COMMUNICATIONS LIMITED (VOC) Downgrade to Neutral from Buy by UBS B/H/S: 3/2/0
The acquisition of NextGen is of no surprise to UBS as national backhaul was the missing link to a fully vertically integrated network. The acquisition will be funded via a $652m capital raising and debt.
On UBS estimates, FY17 earnings forecasts need to be trimmed around 6%, factoring in dilution and softer core earnings. The broker’s price target of $8.60 is unchanged. Rating is downgraded to Neutral from Buy on the outperformance of the share price.
WHITEHAVEN COAL LIMITED (WHC) Downgrade to Neutral from Outperform by Credit Suisse B/H/S: 4/2/2
Given the rally in the share price, Credit Suisse downgrades to Neutral from Outperform. Looking ahead, China’s metallurgical coal imports have lifted sharply in the last two months and, as supply looks tighter, the broker expects US$100/t is achievable.
Seasonal demand means thermal coal prices are modestly higher but, with China’s imports expected to continue to decline, the broker looks to a US$50/t price tag in 2017. Target is raised to $1.20 from 90c.
Earnings forecast
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