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 27 to Friday January 31, 2025
Total Upgrades: 11
Total Downgrades: 15
Net Ratings Breakdown: Buy 60.17%; Hold 32.40%; Sell 7.43%
For the week ending Friday January 31, 2025, FNArena recorded eleven ratings upgrades and fifteen downgrades for ASX-listed companies by brokers monitored daily.
Ratings adjustments were dominated by an upbeat Property sector report released by Macquarie, resulting in an equal number of upgrades and downgrades (six) for the broker's research coverage of 22 stocks.
Pointing to prospects for interest rate cuts and accelerating GDP growth in 2025, Macquarie analysts believe the residential market will benefit from the broker's forecast for a -75bps reduction in the RBA cash rate during the year, with the first cut anticipated in February.
It's thought downside risks in the office market are already priced into valuations.
Macquarie's preferred exposures are Mirvac Group, Dexus, GPT Group, Centuria Industrial REIT, Dexus Industria REIT, and Qualitas.
Beyond the property sector, Macquarie and Bell Potter downgraded their ratings for Capricorn Metals on valuation grounds, following a 22% share price gain since January 1st, also raising 12-month targets by approximately 4% following a strong second quarter operational update.
Sales for Capricorn came in higher-than-expected by Macquarie, and all-in-sustaining costs were lower than forecast.
Highlighting strong cash generation, Bell Potter now expects a stronger second half will allow management to meet re-affirmed production guidance.
The tables below show negative revisions to average earnings forecasts last week significantly outweighed positive adjustments, while changes by brokers to average target prices were broadly balanced.
HMC Capital received the largest percentage upgrade to average target price after UBS raised its target to $10.85 from $7.95 and upgraded to Buy from Neutral following significant recent initiatives in both the digital infrastructure and energy transition space.
In the last few months of 2024, HMC management announced the establishment and listing of the DigiCo Infrastructure REIT (data centres in Australia and the US), and the acquisition of Neoen's Victorian renewable generation and storage portfolio for -$950m.
UBS also identified other areas of potential upside for HMC Capital within existing verticals (involving consumer-facing assets and alternative real estate) following recent guidance upgrades by similar exposures, Baby Bunting and Ingenia Communities, as well as the growth potential across both HMC's Energy Transition and Private Credit platforms.
The asset manager also appears third on the positive change to earnings forecast table below, behind Synlait Milk and Boss Energy.
Macquarie forecast higher profits for Synlait Milk (July year-end) in FY25, following inaugural first-half earnings (EBITDA) guidance of NZ$58-63m through to the end of January.
This Underperform-rated broker noted an improvement around new business development in Advanced Nutrition products, as well as currency and mix benefits for Ingredients.
Management is also reducing costs through lower consultancy expenses, headcount reductions, and North Island asset optimisation, highlighted Macquarie.
Following Boss Energy's "solid" operational results in quarter two, Bell Potter suggested a re-rate is in the wind given undervaluation versus peers, and the potential for shorters of the stock to reverse positions.
The analysts believe management is well placed to beat FY25 production guidance of 850klbs as both drummed production and production in circuit are now operating at nameplate capacity.
Macquarie was pleasantly surprised by lower-than-expected costs at the Honeymoon mine, while Morgan Stanley highlighted better-than-anticipated sales in the December quarter, exceeding consensus expectations.
Bellevue Gold's average earnings forecast rose around 18% last week. Brokers generally made only minor adjustments to earnings forecasts following the company's quarterly operational result, but Bell Potter raised its target to $2.00 from $1.90 due to higher Australian dollar gold price forecasts.
Turning to negative outcomes last week, Autosports Group and COG Financial Services suffered falls in average targets of -16% and -12%, respectively.
While remaining positive on the long-term growth outlook for COG Financial Services, Bell Potter lowered its earnings estimates to reflect near-term headwinds after a "mixed" trading update.
This broker highlighted a weaker-than-expected outcome for aggregation in the second quarter. The company's aggregation service provides access to a broad panel of lenders and financial products, enabling finance brokers to offer competitive financing solutions to clients without needing direct relationships with multiple lenders.
Regarding Autosports Group, management downgraded first half profit before tax and revenue guidance, having previously downgraded as recently as last November.
UBS explained lower guidance reflected weaker new vehicle volumes over November and December, though noted a marginal share price decline in reaction to the ASX release suggested the market is looking through the cycle to future RBA rate cuts, with margins at or near the bottom of the cycle.
Citi attributed some of the downward revision to industrial action at ports but viewed weaker retail demand as the more probable cause due to "excess" new vehicle inventories.
The group also appears fifth on the table for negative change to earnings forecasts, below three lithium miners and gold producer Perseus Mining.
A summary of brokers' views on quarterly reporting by IGO Ltd, Mineral Resources and Pilbara Minerals may be accessed under Stock Analysis on the FNArena website.
Brokers highlighted a strong second quarter operationally for Perseus Mining, but management announced lower-than-anticipated second half production guidance and weaker costs, highlighted Macquarie.
Total Buy ratings in the database comprise 60.17% of the total, versus 32.40% on Neutral/Hold, while Sell ratings account for the remaining 7.43%.
Upgrade
ABACUS GROUP ((ABG)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/0/0
Macquarie holds a favourable outlook for the ASX Property sector in 2025, supported by prospects for interest rate cuts and accelerating GDP growth.
The residential market will benefit from the broker's forecast of a -75bps reduction in the RBA cash rate during 2025, with the first cut anticipated in February. It's thought downside risks in the office market are already priced into share valuations.
From coverage of 22 stocks in the Property sector, Macquarie prefers Mirvac Group, Dexus, GPT Group, Centuria Industrial REIT, Dexus Industria REIT, and Qualitas.
For Abacus Group, the broker raises its target to $1.26 from $1.15 and upgrades to Outperform from Neutral, noting a deep discount to fundamental value.
AGL ENERGY LIMITED ((AGL)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/1/0
Macquarie upgrades AGL Energy to Outperform from Neutral with a higher target price of $12.08, up from $11.67, due to an improved earnings outlook driven by higher NSW power prices.
The analyst explains 1H25 results should benefit from government rebates, customer relief programs, and stronger prices. FY26 and FY27 pricing outlooks of $120-$125/MWh for SA and NSW are around $10/MWh higher than the broker's previous forecast.
Macquarie envisions battery arbitrage revenue could have a material impact over the next two years as Neoen and Liddell batteries come online.
The broker highlights political uncertainty in the energy sector, noting a potential government change could extend the "need for coal" and possibly lead to AGL developing an open cycle gas turbine.
Macquarie lifts EPS estimates by 2.5% for FY25 and 7.5% for FY26. Outperform rating retained with a $12.08 target price.
CENTURIA INDUSTRIAL REIT ((CIP)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/3/0
Macquarie holds a favourable outlook for the ASX Property sector in 2025, supported by prospects for interest rate cuts and accelerating GDP growth.
The residential market will benefit from the broker's forecast of a -75bps reduction in the RBA cash rate during 2025, with the first cut anticipated in February. It's thought downside risks in the office market are already priced into share valuations.
From coverage of 22 stocks in the Property sector, Macquarie prefers Mirvac Group, Dexus, GPT Group, Centuria Industrial REIT, Dexus Industria REIT, and Qualitas.
For Centuria Industrial REIT, the broker's target rises to $3.32 from $3.20 due to updates to economic forecasts and the rating is upgraded to Outperform from Neutral.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE