Weekly Reports | Mar 15 2024
Broker Rating Changes (Post Thursday Last Week)
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FLIGHT CENTRE TRAVEL GROUP LIMITED ((FLT)) Upgrade to Buy from Overweight by Jarden.B/H/S: 0/0/0
First half results missed expectations yet Jarden assesses this was overshadowed by market share gains, with FY24 guidance being reiterated along with a FY25 pre-tax profit aspirational margin of 2%.
The broker updates forecasts to allow for disclosure changes, with the net impact being a 5-6% increase in net profit estimates out to FY27.
The business is larger and leaner, with higher returns on investments compared with pre-pandemic levels and Jarden believes this warrants a premium relative to the 16x FY25 EPS currently implied.
Rating is upgraded to Buy from Overweight and the target lifted to $23.50 from $22.00.
RED 5 LIMITED ((RED)) Upgrade to Buy from Hold by Moelis.B/H/S: 0/0/0
Moelis has taken a closer look at the proposed merger of Red 5 and Silver Lake Resources ((SLR)) following the release of half year results from both companies.
While Red 5 will technically take over Silver Lake Resources, the broker points out key executive roles are being favoured towards Silver Lake.
The broker expects the balance sheet impediments causing capital constraints at Red 5's King of the Hills site will be removed within twelve months, and believes Silver Lake Resources may have beat other peers to the punch given the strategic merits the site offers.
The rating is upgraded to Buy and the target price increases to 40 cents from 35 cents.
SAYONA MINING LIMITED ((SYA)) Upgrade to Speculative Buy from Hold by Canaccord Genuity.B/H/S: 0/0/0
Canaccord Genuity sees opportunities for investors with some currently attractive valuations for lithium companies under research coverage. Incumbent producers and low-capex, near-term-development plays are preferred.
The broker now expects minor surpluses for lithium markets over 2024-25 and sees potential for surpluses to swing to deficits, providing pricing upside risk.
While Canaccord's long-term price forecasts remain at US$22,500/t for chemicals and US$1,500/t for concentrate, prices should rally in the 1H of 2024 to around US$16,000/t and US$1,200/t, respectively.
As these 1H price forecasts are lower than the broker's original forecasts, price targets for developers/explorers and producers under research coverage fall on average by -16% and -11%, respectively.
The 6c target for Sayona Mining is unchanged and the rating is upgraded to Speculative Buy from Hold.
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DGL GROUP LIMITED ((DGL)) Downgrade to Hold from Speculative Buy by Canaccord Genuity.B/H/S: 0/0/0
Canaccord Genuity materially lowers its target for DGL Group to 60c from $1.70 and downgrades its rating to Hold from Speculative Buy after 1H results fell well short of expectations.
Apart from lower earnings forecasts, the analyst's valuation multiple is reduced given volatility for the overall business.
The broker is disappointed by management's FY24 guidance for a year-on-year earnings decline; last year's AGM in November mentioned earnings growth.
Revenue for the half was -25% down on the consensus forecast, while underlying earnings (EBITDA) of $30.3m compared to the forecast for $33m.
All segments, apart from Logistics, missed forecasts, notes the broker. Demand for crop protection products were negatively impacted by forecast drought, which has not materialised.
Management sees a positive demand outlook for chemicals, while warehousing demand is robust and fleet utilisation remains strong.
DUSK GROUP LIMITED ((DSK)) Downgrade to Hold from Buy by Canaccord Genuity.B/H/S: 0/0/0
Solid performance from Dusk Group's first half says Canaccord Genuity, despite the impact of more cautious customer spending on the period.
The broker notes difficult trading conditions have persisted into the second half, but does expect the retailer to benefit from easier comps.
The broker particularly likes that Dusk Group has maintained relatively tight control over gross margins and per store cost of doing business.
The rating is downgraded to Hold from Buy, pending improved sales and earnings execution, and the target price decreases to 90 cents from $1.40.
LIGHT & WONDER INC ((LNW)) Downgrade to Overweight from Buy by Jarden.B/H/S: 0/0/0
Light & Wonder provided a strong quarterly outcome with above-industry earnings growth in 2023 of 22%. Jarden believes revenue growth across all the three businesses should lead to the market upgrading estimates and closing the gap on what is achievable.
The broker considers the company a more focused business that continues to grow share via a diversified and incentivised world-class game design team.
Overweight rating, downgraded from Buy following recent outperformance in the share price. Target is raised to $161 from $147.
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