Weekly Reports | Mar 22 2024
Broker Rating Changes (Post Thursday Last Week)
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LIONTOWN RESOURCES LIMITED ((LTR)) Upgrade to Overweight from Market Weight by Wilsons.B/H/S: 0/0/0
Wilsons raises its target for Liontown Resources by $1.00 to $1.85 and upgrades the rating to Overweight from Market weight as the funding gap to positive cashflow has now been bridged, in the broker's view.
Management has announced execution of a facility agreement for a $550m debt facility with a syndicate of leading international and domestic commercial banks and government credit agencies.
The debt facility is designed, according to the company, to ensure the Kathleen Valley Lithium project is funded through to first production and ramp-up to the 3mtpa base case.
See also LTR downgrade.
SERKO LIMITED ((SKO)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
The year ahead will be an important one for Serko, points out Jarden, as the five-year agreement with Booking.com awaits renewal, but also, potentially, with the positive free cash flow milestone on the agenda.
First up, in order to meet FY25 financial targets, Jarden points out customer acquisitions need to accelerate. Reaching breakeven on the free cash flow measurement could well be achieved in FY25.
The broker has adopted a supportive view, and upgrades to Overweight from Neutral while adding NZ10c to its price target, now at NZ$4.95.
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29METALS LIMITED ((29M)) Downgrade to Neutral from Overweight by Jarden.B/H/S: 0/0/0
As per Jarden, persistent liquidity concerns have seen the broker downgrade its rating on 29Metals. While the stock has rallied more than 50% since reporting on its full year in late February, the broker expects this will provide shareholders little consolation.
The company has announced a new CEO, to commence from the start of May, and while the new hire seems a good fit, with more than 25 years of experience in the Australian mining industry, Jarden warns it could signal a 'clearing of the decks'.
The broker expects restitution of an appropriate capital structure and lower operating costs will be a priority.
The rating is downgraded to Neutral from Overweight and the target price of 38 cents is retained.
CORE LITHIUM LIMITED ((CXO)) Downgrade to Sell from Hold by Canaccord Genuity.B/H/S: 0/0/0
A challenging first half for Core Lithium, says Canaccord Genuity, with spodumene pricing taking a -75% tumble over the period. Negative earnings of -$11.5m were largely in line with the broker's expectations, but net losses of -$167.6 disappointed.
The steep lithium pricing decline saw the company undertake a strategic review, ultimately suspending mining at the Grants open pit. Core Lithium has noted it is unlikley it will be able to meet its offtake agreement obligations to Ganfeng and Yahua.
The rating is downgraded to Sell from Hold and the target price decreases to 14 cents from 19 cents.
LIONTOWN RESOURCES LIMITED ((LTR)) Downgrade to Underweight from Neutral by Jarden.B/H/S: 0/0/0
Liontown Resources has sourced a commitment letter for a reduced debt facility of $550m, after its banking syndicate withdrew its $760m package back in January. Both Westpac Bank ((WBC)) and ANZ Bank ((ANZ)) have withdrawn from the syndicate.
The company is working to complete preconditions ahead of drawdown, with a key precondition being provision of a new base case financial model by end of July, including revised mine plan and production, capital expenditure and operational expenditure estimates.
According to Jarden, the debt facility, alongside cash, will not be sufficient.
While possibly funded to first production in mid-2024, Liontown Resources would need to commission ahead of peers and lithium prices would need to be in excess of US$2,000 per dry metric tonne in order to generate sufficient free cash flow to meet repayments by October 2025.
The rating is downgraded to Underweight from Neutral and the target price of 91 cents is retained.
See also LTR upgrade.
SANDFIRE RESOURCES LIMITED ((SFR)) Downgrade to Neutral from Overweight by Jarden.B/H/S: 0/0/0
Despite its newly lowered rating on the stock, Jarden continues to see Sandfire Resources as a core holding in the resources sector. The broker considers the outlook for copper pricing positive, with material supply disruptions late last year tightening concentrate supply.
Following the Motheo growth project, Jarden expects Sandfire Resources can deliver 28% copper production growth over the next two years to around 108,000 tonnes of copper.
It also anticipates copper pricing lifting as high as US$4.50 per pound in FY26, with a long-term price expectation of US$3.50 per pound.
The rating is downgraded to Neutral from Overweight and the target price of $6.50 is retained.
SOMNOMED LIMITED ((SOM)) Downgrade to Market Weight from Overweight by Wilsons.B/H/S: 0/0/0
Wilsons downgrades its rating for SomnoMed to Market Weight from Overweight and slashes its target to 45c from $1.25 due to a lack of continuity in the RestAssure campaign.
The broker's changes are also in reaction to unexpected changes within senior management ranks.
The long-awaited global regulatory clearances for the new RestAssure platform are expected this year. Wilsons believes management should raise at least $15m to launch RestAssure properly and support the broader business.
The company's 1H results were consistent with prior 1Q and 2Q disclosures, note the analysts, and management reiterated FY24 revenue and EBITDA guidance.
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