Weekly Reports | 10:00 AM
Weekly update on stockbroker recommendation, target price, and earnings forecast changes.
By Mark Woodruff
Guide:
The FNArena database tabulates the views of eight major Australian and international stockbrokers: Citi, Bell Potter, Macquarie, Morgan Stanley, Morgans, Ord Minnett, Shaw and Partners and UBS.
For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.
Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.
Summary
Period: Monday January 13 to Friday January 17, 2025
Total Upgrades: 11
Total Downgrades: 6
Net Ratings Breakdown: Buy 60.21%; Hold 32.23%; Sell 7.56%
For the week ending Friday January 17, 2025, FNArena recorded eleven ratings upgrades and six downgrades for ASX-listed companies by brokers monitored daily.
The magnitude of percentage downgrades to average earnings forecasts by analysts significantly outpaced upgrades, driven primarily by stocks in the Resources sector as brokers returned from the Christmas break and marked estimates to market for the December quarter, while also previewing upcoming quarterly production updates.
Rises and falls in average target prices were remarkably even.
Among industrials, Star Entertainment and Premier Investments suffered the largest percentage falls in average earnings forecasts and target prices.
For Star Entertainment, brokers were reacting to a negative update by management the prior week on the company's cash and liquidity position.
Morgans felt the risk/reward payoff for holding Star stock was "unfavourable," citing a lack of short-term funding options, a lack of state government support, risks of more dilutive equity issues, and weakness in the overall market.
This broker lowered its target to 12c from 22c, while Ord Minnett arrived at 17c, down from 30c.
Premier Investment's first half trading update indicated sales missed the consensus forecast by -3%, with higher costs resulting in a more significant impact at the EBIT line, explained Macquarie.
The analyst anticipates ongoing headwinds for Smiggle, with customers still facing higher cost-of-living and interest rate pressures.
UBS retained its Neutral rating for Premier, citing the growth outlook across all divisions, especially Peter Alexander, and the company's previous cost management performance.
The largest falls in average earnings forecasts by analysts befell Coronado Global Resources and Mineral Resources.
While lowering its target for Coronado, partly due to lower hard coking and thermal coal price forecasts, Bell Potter (Buy) noted the company's production profile has de-risked with the commencement of ramp-up of salable production from its lower cost and less weather-affected Mammoth underground mine.
Outperform-rated Macquarie predicted volumes will be "solid" in the December quarter, with both production and sales rising quarter-on-quarter by 4% and 14%, respectively.
Ord Minnett also lowered its 2025 forecasts for hard coking coal and thermal coal by -9% and -8%, respectively, due to weaker commodity demand, higher-for-longer interest rates, and anticipated impacts of Trump tariffs and other trade barriers.
Prior to production results on January 29, Macquarie lowered its FY25 EPS forecast for Mineral Resources by -75% due to higher lithium and iron ore costs. More positively, the broker's FY26 EPS forecast declined by less than -1%.
On the flipside, average target prices rose materially for Insignia Financial, Genesis Minerals, and global mining services provider, Perenti.
Insignia has received a cash bid from CC Capital at $4.30 per share, up from Bain Capital's December bid of $4.00 per share, which was rejected by the board.
UBS kept its $4.05 target and Neutral rating, believing the competing offer is opportunistic and unlikely to change the board's view.
In the prior week, Macquarie raised its target price by 64% to $4.40 on higher earnings and buyer interest and noted longer-term potential in the wealth landscape. This broker's rating was also upgraded to Equal-weight from Underweight.
Genesis Minerals released its December quarter activities report last week to general acclaim by analysts covering the company.
Production of 57koz significantly outperformed the UBS forecast of 46koz due to the Gwalia operations mining a bulk high-grade stope and the Laverton mill restart exceeding expectations. The analyst increased the target to $3.00 from $2.80 and downgraded to Neutral from Buy on valuation.
Accumulate-rated Ord Minnett raised its target to $3.15 from $2.90 and now believes FY25 production could exceed management's guidance.
In research penned on January 6 and summarised last week by FNArena, Citi expected another "solid" upcoming first half result for Perenti, underpinned by contract mining and potential for some improvement in its Drilling Services margin due to improvement in rig utilisation.
The analysts felt an upgrade in earnings guidance is likely in the near-term and raised their target price to $1.60 from $1.15.
Several companies received positive earnings revisions last week, including Capricorn Metals, following a strong operational report the previous week; Ventia Services, after Morgans moderated the expected negative earnings impact from ACCC civil proceedings; and Perseus Mining, which benefited from Macquarie's revised lower Australian dollar forecast.
Earnings forecast for Atlas Arteria also received a boost from Macquarie's new currency forecast and prospects for slightly better French traffic flows based on recent reporting by peers.
Traffic is also running a little better at Dulles Greenway (a 22-km toll road in northern Virginia, USA).
Total Buy ratings in the database comprise 60.21% of the total, versus 32.23% on Neutral/Hold, while Sell ratings account for the remaining 7.56%.
Upgrade
BABY BUNTING GROUP LIMITED ((BBN)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/2/0
Following on from Citi's first impressions of Baby Bunting's 1H update yesterday, the broker raises its target to $2.01 from $1.98 and upgrades to Buy from Neutral.
The analysts anticipate further upside from the company's store refurbishment program and new store formats.
It's also thought margins will continue to surprise on the upside via the delayed impact of supplier renegotiations due to stock turns and annualisation benefits.
Yesterday's summary of Citi research: In an initial view of today's first-half update by Baby Bunting, Citi notes a faster-than-expected acceleration in like-for-like sales in December 2024, which has continued into January.
An expansion in gross margin compared to the previous corresponding period was broadly in line with the consensus forecast, observes the broker.
While material EPS revisions are unlikely, the analysts believe investors should gain confidence a turnaround is gaining momentum. Management reiterated FY25 guidance.
BELLEVUE GOLD LIMITED ((BGL)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 3/1/0
Ord Minnett marks to market commodity prices for the December quarter.
The broker downgrades the 2025 copper price forecast by -14%, hard coking coal by -9%, thermal coal by -8%, and aluminium by -8% due to weaker commodity demand, higher-for-longer interest rates, and the impacts of Trump tariffs and other trade barriers.
Ord Minnett upgrades Bellevue Gold to Hold from Lighten, with a lower target price of $1.15, down from $1.35.
EPS forecasts are reduced by -38.1% in FY25 and -25.7% in FY26.
FORTESCUE LIMITED ((FMG)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 2/2/3
Ord Minnett marks to market commodity prices for the December quarter.
The broker downgrades the 2025 copper price forecast by -14%, hard coking coal by -9%, thermal coal by -8%, and aluminium by -8% due to weaker commodity demand, higher-for-longer interest rates, and the impacts of Trump tariffs and other trade barriers.
Fortescue is upgraded to Buy from Accumulate, with the target price raised to $21.10 from $20.50. The company is seen as attractively valued among iron ore producers during a seasonally stronger production period for Chinese steel production.
Ord Minnett raises EPS forecasts by 9.7% and 17.5% for FY25 and FY26, respectively.
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