In the good books

For companies in the good books, see Buy, Sell, Hold – what the brokers say from Thursday 21 July.

In the not-so-good books

ACONEX LIMITED (ACX) Downgrade to Neutral from Buy by UBS B/H/S: 4/2/0

Aconex recently signed an enterprise agreement with Exxon, which UBS suggests provides significant validation for its platform, and showcased its new Cost Module, which is already driving wider platform adoption. Good reasons for the share price to have had a good run.

But at 60% year to date, versus 8% for SaaS peers, 13% for the Small Ords and 17% for the Nasdaq, the broker believes it is time to pull back to Neutral. Target rises to $9.00 from $7.20.

COCA-COLA AMATIL LIMITED (CCL) Downgrade to Neutral from Outperform by Credit Suisse B/H/S: 2/4/1

Credit Suisse expects earnings to be flat or lower in the first half. The broker has observed price deflation and deep-value water competition in route and supermarket channels.

Credit Suisse downgrades to Neutral from Outperform given the rise in the share price. Target is $9.80.

CIMIC GROUP LIMITED (CIM) Downgrade to Underperform from Neutral by Macquarie B/H/S: 0/1/4

First half profit was 3% ahead of Macquarie’s estimates amid a continuation of the weak trend for revenue with stronger margins.

The broker likes the margin improvement and positive leverage to infrastructure but an improving cash performance which had featured in recent results is absent from the first half.

In the context of a relatively full valuation the broker downgrades to Underperform from Neutral. Target falls to $30.35 from $35.85.

DORAY MINERALS LIMITED (DRM) Downgrade to Underperform from Neutral by Macquarie B/H/S: 0/0/1

Gold equities have enjoyed a strong run up since the Brexit decision and Macquarie combines this with reductions to its Australian dollar forecasts, which removes much of the potential upside to price targets.

The broker downgrades to Underperform from Neutral. Target is reduced to 80c from $1.00.

EVOLUTION MINING LIMITED (EVN) Downgrade to Neutral from Outperform by Macquarie B/H/S: 2/4/0

Gold equities have enjoyed a strong run up since the Brexit decision and Macquarie combines this with reductions to its Australian dollar forecasts, which removes much of the potential upside to price targets.

The broker downgrades to Neutral from Outperform. Target is lowered to $3.00 from $3.10.

NINE ENTERTAINMENT CO. HOLDINGS LIMITED (NEC) Downgrade to Neutral from Outperform by Macquarie B/H/S: 2/2/2

Near-term cost offsets will be hard to obtain, Macquarie contends, given the competitive landscape. The broker lowers TV ad market estimates for the second half and FY17 which drives a material downgrade for Nine Entertainment.

The broker envisages Nine’s market share falling to 35.8% in the June half, down from 38.6% a year earlier and this is unlikely to improve in the December half, given Seven (SWM) will be broadcasting the Olympics.

Rating is downgraded to Neutral from Outperform. Target is reduced to $1.30 from $1.60.

PALADIN ENERGY LTD (PDN) Downgrade to Neutral from Buy by Citi B/H/S: 0/4/0

Citi’s decision to downgrade Paladin to Neutral from Buy is predominantly inspired by yet another downgrade to future uranium prices. Citi projects the company will only generate modest operational cash flow over the years ahead.

Which is why selling more equity in Langer Heinrich is but a necessity to satisfy the company’s liability towards bond holders to the tune of US$212m in 2017. Target drops to 22c (was 39c). High Risk tag has been maintained.

QUBE HOLDINGS LIMITED (QUB) Downgrade to Hold from Add by Morgans B/H/S: 0/3/0

The ACCC has approved the takeover of Asciano (AIO). Morgans already assumed Qube would complete its acquisition of a 50% interest in Patrick Container Terminals. Qube will sell its 6% stake in Asciano to the consortium and then by the 50% equity in PCT.

Morgans increases earnings forecasts by 2-3%, to reflect greater confidence in the stability of the logistics earnings margin. Target lifts to $2.46 from $2.41 and the rating is downgraded to Hold from Add.

ST BARBARA LIMITED (SBM) Downgrade to Neutral from Outperform by Macquarie B/H/S: 0/2/1

Gold equities have enjoyed a strong run up since the Brexit decision and Macquarie combines this with reductions to its Australian dollar forecasts, which removes much of the potential upside to price targets.

The broker downgrades to Neutral from Outperform. Target is steady at $3.60.

SILVER CHEF LIMITED (SIV) Downgrade to Neutral from Outperform by Macquarie and Downgrade to Hold from Add by Morgans B/H/S: 0/2/0

Silver Chef’s FY17 earnings guidance is below Macquarie’s expectations and earnings estimates are reduced by 12%. FY16 is unchanged.

Macquarie remains positive about the growth outlook for hospitality, and also GoGetta but has concerns around the increased provisioning.

With the stock trading in line with the revised price target the rating is downgraded to Neutral from Outperform. Target falls to $9.53 from $10.49.

The company has re-confirmed FY16 profit guidance of $23-24m and initial FY17 guidance is $23-25m. FY17 guidance is 15% below Morgans forecasts, with the main reason being additional expansion costs in Canada and an increase in the expected bad debt profile for GoGetta.

While underlying growth remains strong the broker prefers to wait and assess the long-term outlook for GoGetta at the results. Rating is downgraded to Hold from Add rating retained. Target is lowered to $10.40 from $11.00.

SEVEN WEST MEDIA LIMITED (SWM) Downgrade to Underperform from Outperform by Macquarie B/H/S: 2/1/3

Near-term cost offsets will be hard to obtain, Macquarie contends, given the competitive landscape. The broker lowers TV ad market estimates for the second half and FY17 which drives a material downgrade for Seven West Media.

Seven also faces challenges from the Olympics, which the broker previously estimated will generate a $20m loss in the first half.

Rating is downgraded to Underperform from Outperform, reflecting a lower target price as well as the recent share price performance. Target is $1.00 versus $1.05.

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