Weekly Ratings, Targets, Forecast Changes

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This story features BANK OF QUEENSLAND LIMITED, and other companies.
For more info SHARE ANALYSIS: BOQ
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett 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 March 27 to Friday March 31, 2017
Total Upgrades: 3
Total Downgrades: 5
Net Ratings Breakdown: Buy 43.90%; Hold 42.21%; Sell 13.89%

The week ending Friday, 31st March 2017, generated more stockbroker downgrades than upgrades for individual ASX-listed stocks; five down against three up. All upgrades ended at Neutral, but then three out of five downgrades only went down to Neutral as well. Two of such downgrades were reserved for Tox Free Solutions.

Dulux Group and Metcash were the only ones to receive a downgrade to (an equivalent of) Sell.

It was fairly quiet in terms of changes to stockbroker price targets as well. WiseTech Global stands firm on top of the week's table for positive revisions, but it only took a gain of 2.8%. The other three gainers for the week are hardly worth mentioning.

Even less action was shown on the negative side. GWA was worst off with a price target decline of -2.39%.

Out-of-season financial reporting meant a little more action in terms of adjustments to earnings forecasts. Brickworks crowned itself top achiever for the week, enjoying an average gain of +18.5%, followed by Sigma Pharmaceuticals (+14.15%) and FAR ltd (+6%).

On the other side of the ledger we find Syrah Resources receiving a blow of -29.1%, followed by AusNet Services (-6.7%) and Iluka Resources (-5.5%).

Investors' and stockbroking analysts' attention will now shift to local banks as share prices remain above consensus price targets and Bank of Queensland's result turned out weaker than expected, though management had a positive outlook for the market.

Upgrade

BANK OF QUEENSLAND LIMITED ((BOQ)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 1/6/1

First half earnings underwhelmed Ord Minnett but are believed to be a low point in the earnings trajectory,  with improved prospects for margins, volumes and costs.

The broker expects the bank to look for further cost savings with FY17 result and now believes the risk/reward balance is more appropriate.

Ord Minnett raises its recommendation to Hold from Lighten. Target is $11.00.

SENEX ENERGY LIMITED ((SXY)) Upgrade to Neutral from Sell by Citi .B/H/S: 3/3/0

Last month, Citi downgraded to Sell because the share price was too high. Following a retreat, the analysts have decided it is time to upgrade to Neutral/High Risk.

Senex should be one of main beneficiaries from a tight domestic gas market, over time, through its Western Surat Gas Project, predict the analysts. They also think it is too early to pay up for that prospect just yet. Target unchanged at 35c.

WESTERN AREAS NL ((WSA)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/5/1

UBS updates its valuation to include the Odysseus pre-feasibility study. The broker notes potential for mine life to be extended towards 10 or more years.

The broker believes the market has previously provided no value for this project and, given how short the market is on the stock, there is growing risk to the upside.

UBS upgrades to Neutral from Sell, believing the risk/reward is more balanced. Target is raised to $2.58 from $2.38.

Downgrade

DULUX GROUP LIMITED ((DLX)) Downgrade to Sell from Neutral by UBS .B/H/S: 0/4/4

There's no doubting Dulux' superiority and solid market share in paint, and as such the stock deserves a premium multiple, UBS suggests. But the non-paint business continues to show subdued prospects and a turnaround seems some way off.

A cooling in the housing market also suggests paint earnings may have seen a peak. On 7% outperformance against the index in the past month, UBS downgrades to Sell, retaining a $6.10 target.

METCASH LIMITED ((MTS)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 3/1/2

Ord Minnett reviews its investment thesis and downgrades to Lighten from Hold. The broker does not believe the stock price adequately reflects the risks associated  with the food & grocery division.

The broker acknowledges the benefits from cost savings and the upside from the hardware division as well as a strongly performing liquor business.

Earnings per share forecasts are modestly raised and the target lifted to $2.10 from $2.00. Nevertheless, the broker believes the risk-reward equation is not attractive post the recent share price performance.

SUNCORP GROUP LIMITED ((SUN)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 4/3/1

Macquarie assesses that premium rate increases across the insurance market are being led by claims cost inflation. As insurers get costs under control price rises should again moderate across of market, in the broker's view.

The broker downgrades expectations for Suncorp's gross written premium growth based on its analysis. Rating is downgraded to Neutral from Outperform. Target is reduced to $13.60 from $14.33.

TOX FREE SOLUTIONS LIMITED ((TOX)) Downgrade to Neutral from Outperform by Macquarie and Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 0/4/0

The company's waste services contract with Chevron will cease by the end of FY17. Macquarie notes this was the largest contract during the peak of construction. The company retains its contract with the balance of Chevron operations.

The loss of this particular part of the contract will affect FY18 EBITDA by -$1-2m. The broker downgrades to Neutral from Outperform, requiring earnings estimates to stabilise to put a floor under the share price.Target is raised to $2.45 from $2.42.

The loss of a Chevron contract suggests to Morgan Stanley margin pressure in the resources market continues. The broker envisages the trough in earnings per share will be pushed out to FY18 and, although earnings quality is improving, the valuation now appears full.

That said, the broker notes the company's resources exposure continues to reduce and the initial performance of Daniels appears on track. Morgan Stanley downgrades to Equal-weight from Overweight and reduces the target to $2.25 from $2.75. Industry view: In-line.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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