Weekly Reports | Feb 02 2024
Broker Rating Changes (Post Thursday Last Week)
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A2 MILK COMPANY LIMITED ((A2M)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
2023 China newborns were 9m; better than expected. Prior to this, a leaked pre-release which suggested 7.88m, down -18% year on year, had been more broadly in line with Jarden's expectation.
Looking forward, the broker was already expecting a tick up in 2024 driven by improved marriage data, vaccination fears fading and a stronger zodiac sign with the year of the Dragon.
With comfort birth rates are slightly better as a starting point, a2 Milk Co executing its new China label transition well and its supply chain priority/lower forward incremental returns better understood, Jarden upgrades to Overweight from Neutral.
Target rises to NZ$5.15 from NZ$4.95.
CREDIT CORP GROUP LIMITED ((CCP)) Upgrade to Buy from Hold by Canaccord Genuity.B/H/S: 0/0/0
Canaccord Genuity sees limited scope for a beat to first half market expectations from Credit Corp, but sees potential for improved debt purchasing conditions, a building payers book to debt ledger balance, and improved collection efficiency to "tip the scale" in Credit Corp's favour.
The broker points out the US market supply dynamic appears to be improving at pace, in contrast to the Australian and New Zealand markets. While pricing recovery is underway, it expects there is still material upside potential should market dynamics allow.
The rating is upgraded to Buy from Hold and the target price increases to $20.00 from $13.20.
ILUKA RESOURCES LIMITED ((ILU)) Upgrade to Hold from Sell by Canaccord Genuity.B/H/S: 0/0/0
Iluka Resources' December production update showed disappointment from zircon sales but strong synthetic rutile sales providing the offset.
Total production volume more or less met market consensus, suggests Canaccord Genuity. Pricing for mineral sands remained "robust" during the quarter, though the analyst maintains the demand outlook remains "subdued".
Putting it all together, the broker now believes the risk-reward proposition has improved, and this warrants an upgrade to Hold from Sell. Price target remains $7.
LIGHT & WONDER INC ((LNW)) Upgrade to Buy from Overweight by Jarden.B/H/S: 0/0/0
Given Light & Wonder's underwhelming share price performance in recent months, Jarden has lifted its rating on the stock to reflect better value.
Jarden believes the recommendations from US gaming analysts, alongside increasing concerns about a slowdown in regional casino markets and general exiting of the stock after a share price performance has weighed on the stock price.
It expects Light & Wonder to deliver another high quality result with its fourth quarter and end of calendar year reporting.
The rating is upgraded to Buy from Overweight and the target price increases to $147.00 from $141.00.
POLYNOVO LIMITED ((PNV)) Upgrade to Market Weight from Underweight by Wilsons.B/H/S: 0/0/0
Wilsons upgrades PolyNovo to Market Weight from Underweight after the pre-release of a first half report which the broker saw as solid.
The broker's negative view on PolyNovo in the last 12-18 months was premised on the fact that valuation was steep, particularly in comparison to peers, coupled with the lack of certainty in revenue timing and stickiness.
The latter seems to have abated for PolyNovo - having clearly demonstrated a leading share within the US burns market -- whilst the former remains a contentious issue, Wilsons warns.
Target rises to $1.79 from $1.08.
QANTAS AIRWAYS LIMITED ((QAN)) Upgrade to Buy from Overweight by Jarden.B/H/S: 0/0/0
With the transport and waste reporting season due to begin in mid-February, Jarden has reviewed its coverage and previewed first half results.
It is Jarden's view that companies with the highest earnings per share dispersion and with expanded implied price-earnings ratios since the end of financial year may be most at risk of volatile movement in their share price, namely Aurizon Holdings ((AZJ)) and Qube Holdings ((QUB)).
Jarden notes Qantas Airways investors are alert to potential reductions in demand over the financial year. Coupled with concerns about rising fuel costs, the share price has suffered, but the broker expects Qantas Airways could benefit from positive earnings per share revisions.
The rating is upgraded to Buy from Overweight and the target price of $6.90 is retained.
WESFARMERS LIMITED ((WES)) Upgrade to Buy from Neutral by Goldman Sachs.B/H/S: 0/0/0
Prior to the February reporting season, Goldman Sachs adjusts earnings forecasts for Australian Consumer/Retail stocks under coverage in the household goods and staples space.
The analysts take into account three main themes: retail sales data suggests strength for household goods; supermarket volumes will likely remain strong; and potential for some turnaround stories.
The broker plays the household goods related-theme by upgrading the rating for Wesfarmers to Buy from Neutral, in the expectation a buoyant Australian housing market will support resilient sales and margins for Bunnings.
The target rises by 26.3% to $62.90.
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