Weekly Ratings, Targets, Forecast Changes

This story features AURIZON HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: AZJ

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 February 11 to Friday February 15, 2019
Total Upgrades: 10
Total Downgrades: 36
Net Ratings Breakdown: Buy 44.60%; Hold 41.17%; Sell 14.23%

Macro and global sentiment continue to support equities, but the local reporting season keeps injecting lots of volatility into the Australian share market as the calendar morphs into the final two weeks of what will yet become a deluge in corporate report releases.

Stockbroking analysts continue to issue more downgrades than upgrades in ratings for individual, ASX-listed entities. The week ending Friday, 15th February 2019 was certainly no exception.

For the eight stockbrokers monitored daily, FNArena counted 36 downgrades for the week, only offset by ten upgrades.

Among those ten, only six moved up to a Buy, including results reporters Aurizon Holdings (2x), Bapcor, Breville, Goodman Group, and Treasury Wine Estates.

There is a lot more to observe in terms of individual stocks and changes in ratings on the flipside of the week's ledger; AMP received two more downgrades, Bendigo and Adelaide Bank accumulated three downgrades, Breville Group combined the one upgrade with two downgrades, Cleanaway Waste Management also received three downgrades, as did Magellan Financial Group, while beaten down Pact Group's sixth profit warning since 2017 was good for yet another two downgrades. Treasury Wine Estates received two downgrades post financial report.

Downgrades reflected a mix of poor results and solid results prompting over-excited share price responses.

All in all, 13 of the 36 downgrades (50%) moved to Sell, including all three downgrades for Bendalaide Bank as well as both downgrades for Pact Group, with Class, Challenger, Newcrest Mining, Stockland and Virgin Australia among those to receive fresh Sell ratings.

In terms of all eight stockbrokers combined, Sell ratings still only represent a little more than 14% of all ratings, while total Buy ratings (44.60%) continue to outnumber total Neutral/Hold ratings (41.17%). Traditionally, when Buy ratings are this far ahead of Neutral/Holds it signals a rather rough time for the share market.

This time around, the signal (if there is one) is more difficult to read as five months of relentless selling in late 2018 have been swiftly followed up by two months of swift recovery. Many a shorter-term focused expert is now calling for a "cooling off" period, at the least, but it remains to be seen whether equity markets are paying attention.

One observation stands, however, and that is this reporting season already is proving incredibly tough to read in terms of share price movements post results releases. More about this in this week's Weekly Insights.

This week's table for positive amendments to valuations and price targets reads like an assembly of companies whose corporate results surprised to the upside, with IDP Education wearing the week's crown (up 35%), followed by Goodman Group (up 15.4%) and Magellan Financial Group (up 15%), followed by Cleanaway Waste Management, Telstra, Tassal Group, and Northern Star.

Challenger tops the week's table for negative adjustments to consensus price target, followed by Unibail-Rodamco-Westfield, Virgin Australia, Bendalaide Bank, Pact Group, and Bapcor.

The table for positive revisions to earnings estimates equally reveals large adjustments, with AGL Energy on top for the week, followed by GBST Holdings, Beach Energy, Goodman Group, South32, and others.

On the flipside, we find Virgin Australia, Aveo Group, Coronado Global Resources, Superloop, Carsales, and others.

Local reporting season genuinely moves into a (much) higher gear this week. If the first two weeks are anything to go by, investors should expect more fireworks, and other types of explosions.

Upgrade

AURIZON HOLDINGS LIMITED ((AZJ)) Upgrade to Equal-weight from Underweight by Morgan Stanley and Upgrade to Neutral from Sell by Citi .B/H/S: 1/6/1

As regulatory uncertainty recedes Morgan Stanley suspects the focus will now shift to the company's legal and capital structure. The broker envisages a modest upside risk from re-basing earnings.

The company appears to have accepted the UT5 final decision and the broker expects FY19 consensus earnings estimates will be downgraded and, instead, FY20 and FY21 will be upgraded.

Morgan Stanley upgrades to Equal-weight from Underweight and raises the target to $4.50 from $4.35. Industry view: Cautious.

First half results revealed a decline in earnings from continuing operations of -16%. Citi forecasts underlying EBIT for the non-network business towards the mid point of management's guidance range of $390-430m.

Citi revises FY19 estimates to reflect the fact Aurizon has chosen to account for the implementation of the UT5 decision in FY19, rather than extend the regulatory uncertainty further. The broker expects an 18% lift in underlying EBIT in FY20.

As a result of the clearer outlook for the network earnings, the broker lifts its rating to Neutral from Sell and raises the target to $4.40 from $3.80.

See also AZJ downgrade.

BAPCOR LIMITED ((BAP)) Upgrade to Add from Hold by Morgans .B/H/S: 4/0/0

Bapcorp's first-half result met the broker. A slowing in trading momentum in the second quarter was cushioned by divisional margin expansion.

Management has revised down guidance to the low end of previous guidance and the broker believes the stock can meet that comfortably, noting fundamentals are firm and expects trading challenges will be temporary.

Broker upgrades to Add from Hold but reduces the target price to $6.54 from $6.90.

BREVILLE GROUP LIMITED ((BRG)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/2/1

First half results were ahead of expectations. UBS notes slower growth in North America was far from weak, still delivering 7.1%, and fears around Australian trading were not realised.

While cash flow was soft, the broker notes working capital is being built up in the UK, the US and Europe.

UBS upgrades to Neutral from Sell, believing there are years of growth ahead in Europe. Target is raised to $14.30 from $11.20.

See also BRG downgrade.

CHARTER HALL LONG WALE REIT ((CLW)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/2/1

First half results were ahead of estimates.The company has extended its lease to Inghams for the portfolio of chicken processing facilities to 25 years from 16 years.

Ord Minnett estimates the asset's capitalisation rate should firm to 6.5% from 7.25% on acquisition. This adds $0.07 to the net tangible assets per security and increases the weighted average lease expiry.

As a result, Ord Minnett raises the rating to Hold from Lighten and the target to $4.25 from $4.10.

GOODMAN GROUP ((GMG)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/2/1

First half results were in line with expectations while guidance has beaten Credit Suisse forecasts. The level of demand for industrial assets remains strong, supported by revaluations, investment and development activity.

The company will reduce its pay-out ratio to the low 50% range in order to sustain higher development work-in-progress in the near term.

The broker expects market conditions to remain positive and upgrades to Outperform from Neutral. Target is raised to $13.22 from $10.84.

LENDLEASE GROUP ((LLC)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/0/0

UBS upgrades Lend Lease to Buy from Neutral, believing the stock to be undervalued given risks have fallen on troublesome projects. It also notes the company is not reliant on Australian residential markets given its global profile and institutional capital partners for all asset classes.

UBS expects an announcement regarding the engineering business when the interim results are published on Friday.

Target price rises to $15.70 from $15.20. 

NORTHERN STAR RESOURCES LTD ((NST)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/2/3

Ord Minnett believes the market concern around grades is not a major issue and Kalgoorlie operations should reach FY19 guidance. Moreover, medium-term production opportunities could push Kalgoorlie towards 400,000 ounces of gold per annum.

The broker also notes the recent update on Pogo, with December quarter mining rates up 22%, suggests the upside potential is greater than initially assumed.

The broker upgrades to Accumulate from Hold and raises the target to $10.00 from $8.50.

TREASURY WINE ESTATES LIMITED ((TWE)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 4/3/1

The company missed the broker's expectations and cash flow in the first half, although there was a 25% increase in receivables outstanding, much of which was paid down in January.

The broker finds some signs of falling prices in the Penfolds luxury range, and there is a risk that the market may struggle to absorb the double-digit uplift in supply.

However, the continued expansion of the range in China should allow for very strong growth.

Credit Suisse upgrades to Outperform from Neutral and raises the target to $19.85 from $16.45. The company expects to grow operating earnings by 15-20% in FY20.

See also TWE downgrade.

VOCUS GROUP LIMITED ((VOC)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 1/5/2

Morgan Stanley has become bullish on the potential for market share gains in the Australian enterprise segment of Vocus. The broker considers Vocus a turnaround story, upgrading to Overweight from Equal-weight.

While the broker acknowledges the enterprise segment is smaller, it is less competitive and offers sustainable higher margins than the consumer segment.

Target is raised to $4.00 from $2.90. Industry view is In-Line.

Downgrade

AMCOR LIMITED ((AMC)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 5/2/0

First half results demonstrate to Credit Suisse that operations are on track. The broker maintains FY20 and FY21 estimates unchanged.

FY19 estimates for earnings per share are reduced by -3% because of the delay in the closure of the Bemis transaction, relative to earlier expectations.

The recent rally in the share price has closed out excessive near-term returns, in the broker's view, although fundamentals appears solid.

Credit Suisse downgrades to Neutral from Outperform and raises the target to $14.90 from $14.80.

AMP LIMITED ((AMP)) Downgrade to Neutral from Buy by Citi and Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 0/7/0

In response to AMP's result and guidance Citi has cut forecast earnings by -3% in FY19 and -13% in FY20, cut its target to $2.50 from $2.80, and downgraded to Neutral (High Risk).

AMP does appear to offer some longer term value, the broker suggests, but an internal focus and rebasing of underlying earnings expectations mean investors will likely require significant patience before returns emerge. And the risk of regulatory action remains.

2018 underlying earnings were in line with guidance. Ord Minnett believes 2019 will be a year of re-building and poses significant challenges.

The broker reduces the rating to Hold from Accumulate, noting the uncertainty in wealth management and the absence of immediate catalysts. Target is reduced to $2.35 from $2.60.

ASX LIMITED ((ASX)) Downgrade to Sell from Hold by Deutsche Bank .B/H/S: 0/2/6

Deutsche Bank saw ASX delivering an interim performance in line with expectations. The analysts point out there is impact from the new accounting standard AASB15, but further out this should reduce the volatility of income recognition, on their assessment.

It's the valuation that is a problem, however, and on that basis the stock is receiving a downgrade to Sell from Hold. Target price falls to $57.60 (was $58.50).

AURIZON HOLDINGS LIMITED ((AZJ)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/6/1

First half results were ahead of expectations. The company has resolved the uncertainty around UT5 which Macquarie notes delivers a strong FY20 outlook, while lowering FY19 estimates.

The broker considers the stock is trading at fair value and surprise on the upside is limited and downgrades to Neutral from Outperform. Target is reduced 4.5% to $4.45.

See also AZJ upgrade.

BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Downgrade to Underperform from Neutral by Credit Suisse and Downgrade to Sell from Neutral by Citi and Downgrade to Sell from Neutral by UBS .B/H/S: 0/0/6

Credit Suisse downgrades earnings estimates by up to -10% across the forecast horizon on the back of the first half results.

The broker believes the bank will struggle to achieve earnings growth in the near term, given revenue pressures.

Credit Suisse downgrades to Underperform from Neutral and reduces the target to $10.00 from $11.50.

Citi was disappointed with the first half result, which was weak despite a low bad debt expense. Revenue challenges are starting to mount, in the broker's view.

Meanwhile cost growth is unable to adjust to the slower revenue environment. The broker lowers FY19-21 cash estimates for earnings per share by -5-11%.

Rating is downgraded to Sell from Neutral and the target lowered to $9.50 from $11.25.

Bendigo and Adelaide Bank's first-half result missed the broker by 2% and UBS notes underlying trends deteriorated.

Net interest margins remain under pressure, retail and wholesale deposits fell, gross loans were down, and costs were up.

UBS downgrades earnings per share -4%/-9%/-8% across FY19/20/21. The stock is downgraded to Sell from Neutral.

BREVILLE GROUP LIMITED ((BRG)) Downgrade to Accumulate from Buy by Ord Minnett and Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 1/2/1

First half net profit was ahead of Ord Minnett's forecast. The broker acknowledges Breville is making genuine improvements and its ambitious plans appear to be working.

This is supported by 9% constant currency growth even against tough comparables. Ord Minnett increases the target to $15.08 from $13.69.

While envisaging potential upside for those willing to take a slightly longer view, the broker downgrades the rating to Accumulate from Buy on valuation grounds.

First half results were solid, Credit Suisse notes, and stronger than expected. However, the broker suspects expectations of margin expansion in the medium term are likely to be optimistic.

The broker increases FY19 forecasts by 4%, which implies 12.4% operating earnings (EBIT) growth.

Rating is downgraded to Underperform from Neutral, a valuation-based view given the performance in the share price and considered an opportunity to take profit. Target is raised to $12.59 from $11.69.

See also BRG upgrade.

CITY CHIC COLLECTIVE LTD ((CCX)) Downgrade to Neutral from Buy by Citi .B/H/S: 0/1/0

The company formerly known as Specialty Fashion (now in slimmed down survivor format) reported an interim financial performance some 3% above expectations at Citi. The two key items, according to the analysts, were strong sales growth and steady gross profit margins.

Dividends are back on the agenda, and Citi welcomes the move, adding further capital management may release excess franking credits. Interim dividend of 2.5c was well ahead of Citi's predicted 1.5c, plus shareholders also receive a special 2.5c on top.

Taking it all in, Citi's share price target has risen to $1.45 but the rating is lowered to Neutral from Buy, in reference to the share price rally.

CHALLENGER LIMITED ((CGF)) Downgrade to Sell from Hold by Deutsche Bank .B/H/S: 1/5/1

Slowing sales, falling margins and mounting concerns regarding asset quality have caused Deutsche Bank to sharply revise forecasts lower.

The broker reduces the target to $7.00 and downgrades to Sell from Hold.

CLASS LIMITED ((CL1)) Downgrade to Reduce from Hold by Morgans .B/H/S: 1/1/1

Class's 2019 first-half result met the broker but Morgans downgrades to Reduce from Hold, believing free-cash conversion and rising costs point to challenges ahead.

Previously, the broker set the target price on a discounted valuation basis but has shifted to a blended valuation to reflect political (federal election) and regulatory risk.

Target price falls to $1.34 from $1.48.

COCHLEAR LIMITED ((COH)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 1/4/2

The share price has risen 24% since November and is now trading around 12% above Morgan Stanley's target. As the valuation does not adequately cover the short-term risks Morgan Stanley downgrades to Equal-weight from Overweight and raises the target to $176 from $175.

The broker remains positive on the longer-term outlook, given the eventual evolution of the referral channel to a more retail setting, but notes short-term risks exist, such as a likely weighting to the second half for earnings, which implies a tough hurdle for FY19 guidance. In-Line industry view.

CLEANAWAY WASTE MANAGEMENT LIMITED ((CWY)) Downgrade to Hold from Buy by Deutsche Bank and Downgrade to Neutral from Buy by UBS and Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/4/0

Deutsche Bank analysts describe the interim report as a "good beat across the board". Both revenues and margins surprised to the upside. But it's all in the share price already, which is why the Hold rating is now in place (downgrade from Buy). Target price jumps to $2.33.

First half results beat expectations. The improvement in the business impressed UBS, as both organic growth and underlying operating leverage were stronger than expected.

Momentum should continue into the second half. The broker continues to highlight the defensive characteristics of the business.

Yet, at current levels, this is largely reflected in the share price and the rating is downgraded to Neutral from Buy. Target is raised to $2.30 from $2.15.

First half results were below Credit Suisse estimates. Integration of Toxfree remains on track and the synergy timeline is unchanged.

While the broker likes the business and the opportunities, the shares are considered fully valued for now.

Credit Suisse downgrades to Neutral from Outperform and raises the target to $2.15 from $2.05.

DOWNER EDI LIMITED ((DOW)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 4/1/0

First half net profit was below Credit Suisse forecasts. The broker is perplexed about the change in segment reporting, finding the rationale and lack of advance notice a problem.

Credit Suisse lowers FY19 estimates by -7%, largely because of higher financing and tax expenses. Management also appears cautious on the potential pace of improvement at the Spotless business.

Credit Suisse reduces the target to $7.40 from $8.25 and downgrades to Neutral from Outperform.

FLIGHT CENTRE LIMITED ((FLT)) Downgrade to Hold from Add by Morgans .B/H/S: 3/5/0

Ahead of Flight Centre's result release, Morgans notes recent data points to slowing demand for travel. The travel agent will not be immune to weaker discretionary spending and the broker notes weakness comes at a time cost pressures are mounting.

The broker has decided to "err on the side of conservatism" and shift its forecast to the lower end of guidance, and downgrade to Hold from Add. Target falls to $47.75 from $51.00.

GPT ((GPT)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 0/6/0

Macquarie downgrades to Neutral from Outperform after the 2018 result. The target is raised to $5.99 from $5.95.

While attracted to the earnings growth in 2019 and the strong balance sheet, which is supported by the potential sale of MLC, the broker points to the difficult retail environment and limited shareholder returns.

The broker observes the company is increasing its weighting to logistics but retail will still remain over 40% of capital.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Downgrade to Neutral from Outperform by Macquarie and Downgrade to Hold from Add by Morgans and Downgrade to Neutral from Buy by UBS .B/H/S: 3/4/0

Magellan's result beat Macquarie by 3%, reflecting well managed costs. The fund manager continues to deliver strong results, the broker notes, and recent performance metrics should support ongoing funds flows.

But the stock is trading at a 21% premium to ASX listed fund managers against a five-year average of 14%. Macquarie thus downgrades to Neutral on valuation grounds. Target rises to $31.75 from $29.00.

Magellan Financial Group's 2019 first-half result outpaced the broker by 4%, as management fee revenue rose 27% on the previous half and a strong performance from core funds.

The broker notes growth potential, pointing to the stock's balance sheet and new products.

But the stock is trading within Morgan's valuation so the stock is downgraded to Hold from Add, looking for a better entry point.

Target price rises to $33.40 from $28.76.

The company continues to experience a significantly stronger investment performance and fund flow trends versus its listed asset management peers.

UBS believes this momentum is now adequately priced into the stock and downgrades to Neutral from Buy.

First half net profit was ahead of estimates, driven largely by funds management profits. Target is raised to $32.30 from $28.90.

NEWCREST MINING LIMITED ((NCM)) Downgrade to Sell from Neutral by UBS .B/H/S: 1/4/3

First half results were in line with forecasts. Newcrest now appears expensive to UBS, trading around 10% above valuation.

The broker believes the premium to the rest of the market is not justified, as production is likely to peak in the next two years.

UBS downgrades to Sell from Neutral and reduces the target to $24.00 from $24.50.

PACT GROUP HOLDINGS LTD ((PGH)) Downgrade to Underperform from Neutral by Macquarie and Downgrade to Reduce from Hold by Morgans .B/H/S: 1/2/2

First half operating earnings (EBITDA) are now expected to be $110m and FY19 guidance is now lowered to $230-245m versus 245m previously.

The company has had a challenging start to the year which includes significant cost headwinds and weaker demand conditions in some sectors.

Macquarie notes there appears to have been limited benefit from price reductions that have recently occurred in resin.

The broker downgrades to Underperform from Neutral, highlighting concerns about the base business, and reduces the target to $3.40 from $3.72.

First half operating earnings (EBITDA) were -5% below Morgan's forecasts. Management has downgraded guidance, affected by the uncertainty surrounding the speed with which revenue and efficiency projects can be delivered and the rate that input costs can be recovered.

The aspect of most concern to Morgans is that resin prices have moved in the company's favour over the past four months, which implies the underlying business remains very weak.

The broker suggests investors avoid the stock until the company can demonstrate more stable earnings, and downgrades to Reduce from Hold. Target is lowered to $3.01 from $3.24.

STOCKLAND ((SGP)) Downgrade to Sell from Neutral by UBS .B/H/S: 3/2/1

UBS has downgraded Stockland to Sell from Neutral ahead of its first half result, which the broker expects will reflect the slowdown in the residential, retail and retirement markets.

The broker sees no respite in the market situation and expects deterioration across all core business through FY19.

Target price falls to $3.60 from $3.74.

SPARK INFRASTRUCTURE GROUP ((SKI)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 0/6/1

The Federal Court has found in the Australian Taxation Office's favour regarding the litigation with Victoria Power Networks. Ord Minnett believes the biggest negative is a downgrade to 2019 dividend guidance.

This likely reflects the broader issue, in the broker's view, of distribution network providers funding growth opportunities in unregulated assets while maximising cash returns to investors.

Rating is downgraded to Hold from Accumulate on the target trimmed to $2.50 from $2.55.

SUPER RETAIL GROUP LIMITED ((SUL)) Downgrade to Hold from Add by Morgans .B/H/S: 3/5/0

First half results appear ahead of forecasts but overshadowed by further wage underpayments issues, which Morgans notes are significant. The full result is due on February 14.

The broker lowers estimates by -1-2% in the forecast years and also lowers capital expenditure assumptions. The broker recognises the undemanding valuation but awaits further clarity on the incoming CEO's strategy.

Rating is downgraded to Hold from Add and the target raised to $8.56 from $8.54.

TRANSURBAN GROUP ((TCL)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/4/1

While accounting influenced the first half result, the focus is on cash generation and Macquarie expects the reliance on refinancing as a supplement should diminish in the next two years.

Management has emphasised current project developments and internal opportunities, such as the widening of the M7.

Macquarie makes minor changes to its forecast to reflect weaker traffic at Citylink and marginally lowers the target to $11.89. Rating is downgraded to Neutral from Outperform.

Macro influences are expected to be the major driver of the performance in the near term.

TASSAL GROUP LIMITED ((TGR)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 1/2/0

First half results beat Credit Suisse forecasts, confirming the view that the company will benefit from high harvest volumes and still enjoy strong pricing.

The broker continues to believe the market dynamics for salmon are supportive and believes the targets for prawns, if achieved, will materially boost earnings.

The broker downgrades to Neutral from Outperform as the valuation is back in line with the long-run average. Target is raised to $5.15 from $4.90.

TREASURY WINE ESTATES LIMITED ((TWE)) Downgrade to Equal-weight from Overweight by Morgan Stanley and Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 4/3/1

Morgan Stanley believes the brand is being stretched more and suspects the need to put away large volumes is likely to slow growth. While America represents a good story, the broker believes this is captured in expectations.

Meanwhile, luxury inventory is rising. As the valuation now appears fair, the broker downgrades to Equal-weight from Overweight. Industry view: Cautious. Price target $17.

First half underlying net profit was below Ord Minnett's forecast. Despite strong execution and EBITS growth, the broker observes growth rates are becoming more dependent on vintage, which affects the multiple.

Moreover, incremental EBITS growth generates less cash and this reduces valuation support. Ord Minnett downgrades to Hold from Accumulate and reduces the target to $17.50 from $20.00.

See also TWE upgrade.

UNIBAIL-RODAMCO-WESTFIELD ((URW)) Downgrade to Underperform from Outperform by Macquarie .B/H/S: 1/2/1

Following the release of 2018 financials, Macquarie has double-step downgraded to Underperform from Outperform. In an initial response to the release, the analysts note 2019 guidance is -8% below their own forecast, and -13% below market consensus.

The underlying weakness can become a genuine problem, point out the analysts, given elevated gearing of the balance sheet. New target $10.88 (was $13.59).

VIRGIN AUSTRALIA HOLDINGS LIMITED ((VAH)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 0/1/2

Management has noted pricing for business travellers has been flat in the past month while the leisure market is down slightly. The company is guiding to at least 7% revenue growth in the third quarter, slowing from the 10% reported in the first half.

While underlying pre-tax profit estimates are reduced by -67% for FY19 Credit Suisse improves forecasts for FY20 and FY21 on lower fuel cost assumptions.

The broker downgrades to Underperform from Neutral and reduces the target to $0.18 from $0.20.

WOODSIDE PETROLEUM LIMITED ((WPL)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 4/4/0

2018 results were below expectations because of higher depreciation and finance costs. Yet, the full year dividend surprised Ord Minnett, implying a 94% pay-out ratio.

Management indicated this was due to stronger cash generation over 2018.

With the stock trading in line with valuation and consensus earnings forecasts appearing optimistic, Ord Minnett downgrades to Hold from Accumulate. Target is steady at $34.50.

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