In Case You Missed It – BC Extra Upgrades & Downgrades – 07-06-24

Weekly Reports | Jun 07 2024

Broker Rating Changes (Post Thursday Last Week)


AFT PHARMACEUTICALS LIMITED ((AFP)) Upgrade to Neutral from Underweight by Jarden.B/H/S: 0/0/0

Both the FY24 earnings (EBIT) result by AFT Pharmaceuticals and FY25 earnings guidance were in line with Jarden's forecasts.

The broker upgrades to Neutral from Underweight on an improved risk/reward balance after expectations were set lower following management's February downgrade. The ratings upgrade is also partly in response to the recent share price decline. 

FY25 earnings growth is underpinned by a margin recovery, and, following management's guidance, Jarden has more confidence the
gross margin can improve from cycling higher impairments and an improving product mix.

Management is also confident the rest-of-the-world (RoW) opportunity is underpinned by US sales and the Hikma Pharmaceuticals relationship.

Hikma and AFT signed an exclusive license and distribution agreement for the commercialisation of Combogesic IV in the US.

The target price rises to NZ$2.90 from NZ$2.80.

ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED ((EOS)) Upgrade to Speculative Buy from Hold by Petra Capital.B/H/S: 0/0/0

Petra Capital views Electro Optic Systems in a more positive light following a $35m capital raise via an institutional placement and an additional $2m from a Share Purchase Plan (SPP).

According to the broker, the capital infusion addresses liquidity concerns and will fund working capital and growth initiatives, including long-lead inventory purchases and bank guarantee collateral.

The analyst lowers EPS estimates by -7 and -7% for FY24 and FY25 due to higher working capital and shares on issue.

Upgrade to Speculative Buy and the target lifts to $1.50 from $1.14

FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED ((FPH)) Upgrade to Overweight from Market Weight by Wilsons.B/H/S: 0/0/0

Wilsons came away from the Fisher & Paykel Healthcare FY24 earnings presentation with an upgrade in the rating and price target.

The FY24 results saw revenue rise 10% to NZ$1,742.8m, driven by a 14% rise in NewApps consumables and 18% growth in Homecare sales, notes the broker.

Hardware sales decreased by -29% as they rebased from covid highs and the gross margin improved to 61.1%, up by 172 bps.

Management guided to FY25 revenue between NZ$1.9-NZ$2.0bn and net profit of NZ$310-NZ360m.

Wilsons adjusts EPS forecasts FY25-FY27 by 2% to 9%, driven by higher sales and margins.

Rating upgraded to Outperform from Market Weight and the target lifted to $30.

NRW HOLDINGS LIMITED ((NWH)) Upgrade to Buy from Overweight by Jarden.B/H/S: 0/0/0

Jarden upgrades NRW Holdings to Buy from Overweight and raises its target price to $3.25 from $2.95.

The broker expects improved labour conditions and earnings mix will outpace weakness in lithium and nickel markets, and likely trigger consensus upgrades.

Jarden observes earnings visibility has improved markedly, de-risking earnings forecasts and appreciates the company's strong work in hand, spying upside risk.

EPS forecasts rise 2% across FY25 to FY26.


PETER WARREN AUTOMOTIVE HOLDINGS LIMITED ((PWR)) Downgrade to Hold from Buy by Moelis.B/H/S: 0/0/0

Peter Warren Automotive has guided to a sharp fall in FY24 underlying profit for FY24, missing consensus forecasts by -20% (a -40% downgrade to second-half estimates) observes Moelis.

Oversupply in new cars, a softening in new car demand (cost-of-living pressures) and higher interest costs due to higher rates and inventory were declared the culprits.

Top-line revenue remained strong due to used car deliveries and a strong performance from the company's service, parts and used-car division.

Management guided to continued weakness in FY25, observing new car margins would remain under pressure, albeit above pre-covid levels.

The broker observes an oversupply in Mazda, VW, Volvo and Chinese OEM brands.

EPS forecasts fall -20% to -30% across FY24 to FY26 to reflect continued gross profit margin pressure. The broker observes there has been no update on a new CEO.

Rating is downgraded to Hold from Buy. Target price falls to $1.98 from $2.60 in March.

SANDFIRE RESOURCES LIMITED ((SFR)) Downgrade to Market Weight from Overweight by Wilsons.B/H/S: 0/0/0

Wilsons attended the recent site tour of the Motheo operation in Botswana and the analyst noted Sandfire Resources' nearly flawless execution in delivery and ramp-up activities.

The broker highlights management is focused on commissioning the filtration plant and stabilising Motheo’s performance as a 5.2Mtpa operation.

On site management indicated the long-term growth potential with plans to establish a buffer of around 15 years of reserves, and a new geological model expected in 2-3 months to enable targeted drilling.

No changes to the analyst's earnings forecasts.

Downgrade to Market Weight from Overweight, due to recent share price strength. Target retained at $9.90.

VITURA HEALTH LIMITED ((VIT)) Downgrade to Hold from Buy by Petra Capital.B/H/S: 0/0/0

Petra Capital has downgraded Vitura Health to Hold from Buy with a reduced target price of 9c from 12c.

The company's latest trading update indicated EBITDA margins year-to-date were around 5%, implying a significant downgrade for 2H24 margins, previously 8.7% in 1H24, according to the broker.

Petra Capital points to increased competition in the core cannabis distribution business for the substantial decline from the FY23 EBITDA margin of 17.7%.

The broker makes material changes to its financial estimates with net profit forecast to decline to $3m in FY24 from $6.3m. The broker is looking for management to stabilise unit volumes and EBITDA margins to regain confidence in the strategy update.

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