Weekly Reports | Feb 23 2024
Broker Rating Changes (Post Thursday Last Week)
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CLEANAWAY WASTE MANAGEMENT LIMITED ((CWY)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
Despite the 1H24 earnings miss by Cleanaway Waste Management, Jarden looks beyond these results with a more optimistic take on improving "momentum" for Solid Waste Services and Liquid Waste and Health Services.
The broker adjusts earnings to the higher end of management's EBIT target for FY24 to $354m, but post an increase in net interest estimates, the EPS forecast is lowered by -2.5% for FY24.
Due to the share price weakness and an increase in the valuation for peers, the rating is upgraded to Overweight from Neutral and the target lifted to $2.85 from $2.60.
JAMES HARDIE INDUSTRIES PLC ((JHX)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
Jarden believes there was short term noise around management retaining 4Q24 guidance, rather than the market focusing on better than forecast 3Q24 results which revealed both US volumes and EBIT ahead of expectations.
The strength in US earnings and leverage is highlighted by the analyst as the US market offers scope to recover.
Jarden raises FY24 EPS forecasts by 6.2% and 11.4% for FY25.
The pullback in the share price was seen as a great opportunity to upgrade to Overweight from Neutral and the target lifted to $57 from $48.
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A2 MILK COMPANY LIMITED ((A2M)) Downgrade to Market Weight from Overweight by Wilsons.B/H/S: 0/0/0
Wilsons believes a2 Milk Co's management deserves credit for delivering a robust first half result amid a contracting China infant milk formula market, alongside significant channel mix changes.
First half revenue of $812m represented a 4% year-on-year increase, whlie earnings of $113m represented a 5% year-on-year increase, with the result underpinned by stronger China revenue.
A guidance upgrade has the company expecting low to mid-single digit sales growth over the full year.
The rating is downgraded to Market Weight from Overweight and the target price increases to $5.85 from $5.47.
AFT PHARMACEUTICALS LIMITED ((AFP)) Downgrade to Underweight from Neutral by Jarden.B/H/S: 0/0/0
AFT Pharmaceuticals served up an earnings downgrade according to Jarden, only 3-months after the November 1H24 earnings report.
A combination of product launch delays, a change in strategy and lower A&NZ sales were the only details offered to the market for the -22% downgrade in the FY24 EBIT guidance midpoint to $18m from $22m, notes Jarden.
The broker's EBIT forecasts are lowered by -20% to -27% for FY24 to FY26, respectively.
The rating is downgraded to Underweight from Neutral and the target price drops to NZ$2.80 from NZ$3.55.
ABACUS STORAGE KING ((ASK)) Downgrade to Hold from Buy by Moelis.B/H/S: 0/0/0
ABACUS STORAGE KING's December-half result met Moelis's forecasts and management reaffirmed dividend and payout-ratio guidance (a 5% yield), confirming the resilience of the storage market, says the broker.
While RevPAM posted respectable growth (albeit slower), this was overshadowed by the rolling off of hedges, dampening EPS.
The company invested $77m into acquisitions in the half and the broker observes gearing was comfortable, leaving room for $250m in develpments or acquisitions. Moelis expects the company's development pipeline should propel growth.
While the company is trading at a -19% discount to net tangible assets, the broker also observes it is under-earning given its operating cost base and management fees.
Rating downgraded to Hold from Buy. Target price is $1.34.
CHARTER HALL SOCIAL INFRASTRUCTURE REIT ((CQE)) Underweight by Jarden.B/H/S: 0/0/0
According to Jarden, Charter Hall Social Infrastructure REIT offers exposure to some of the most attractive asset classes such as childcare and healthcare. However, the REIT's balance sheet is holding back structural benefits.
The cost of debt supersedes the upside from asset sales and reducing the payout ratio, highlights the analyst.
With significant underperformance of the REIT relative to the sector, it is becoming more attractive notes Jarden, but the 1H24 results pointed to lower interest rates or inorganic growth needed to improve the outlook.
An Underweight rating and $3.05 target are unchanged.
CHARTER HALL RETAIL REIT ((CQR)) Downgrade to Hold from Buy by Moelis.B/H/S: 0/0/0
Charter Hall Retail REIT reported first half earnings per unit of 13.5 cents and dividends per unit of 12.3 cents, alongside reiterating full tear guidance for earnings per unit of 27.4 cents with a 90-95% payout ratio.
Moelis believes the REIT is continuing to deliver a strong operating performance. While the portfolio continues to benefit from tailwinds driving relatively strong top line growth, but earnings headwinds continue to prevent a positive earnings trajectory.
In the medium-term, the broker expects the earnings line to continue to track sideways.
The rating is downgraded to Hold from Buy and the target price decreases to $3.98 from $4.02.
FLETCHER BUILDING LIMITED ((FBU)) Downgrade to Neutral from Buy by Goldman Sachs.B/H/S: 0/0/0
Goldman Sachs downgrades to Neutral from Buy as the first half EBIT of NZ$264m from Fletcher Building was down -27% and below forecasts. This miss at the EBIT line came despite slightly better-than-expected revenue and amid significant margin contraction.
Guidance for FY24 underlying EBIT of NZ$540-640m is also well below expectations and points to a deeper-than-expected trough, the broker asserts. Target is reduced to $3.70 from $4.65.
HOMECO DAILY NEEDS REIT ((HDN)) Downgrade to Hold from Buy by Moelis.B/H/S: 0/0/0
An in line first half result from HomeCo Daily Needs REIT, according to Moelis, with the company reporting funds from operations per share of 4.3 cents.
The period saw HomeCo Daily Needs REIT divest Midland and Epping for $145m, and contract four more assets at a cost of $157m. The company targets a further $70m in development capital expenditure over the second half, currently retaining its target return on invested capital of 7%.
The rating is downgraded to Hold from Buy and the target price of $1.35 is retained.
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