Weekly Ratings, Targets, Forecast Changes – 26-07-24

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Weekly update on stockbroker recommendation, target price, and earnings forecast changes.

By Mark Woodruff

Guide:

The FNArena database tabulates the views of eight major Australian and international stockbrokers: Citi, Bell Potter, Macquarie, Morgan Stanley, Morgans, Ord Minnett, Shaw and Partners and UBS.

For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.

Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.

Summary

Period: Monday July 22 to Friday July 26, 2024
Total Upgrades: 13
Total Downgrades: 14
Net Ratings Breakdown: Buy 58.58%; Hold 32.84%; Sell 8.58%

For the week ending Friday July 26, 2024, FNArena recorded thirteen ratings upgrades and fourteen downgrades for ASX-listed companies by brokers monitored daily.

The top six downgrades to average earnings forecasts related to mining companies in a week when overall downgrades were slightly greater than upgrades.

When the size of a company’s yearly earnings forecasts is small, any changes to that forecast can have an exaggerated impact in percentage terms. 

Such was the case last week regarding FY24 forecast downgrades for Sandfire Resources, Cooper Energy and Paladin Energy which filled the top three positions in the earnings downgrade table.

Average forecasts for each company subsequently increased in FY25, which more accurately reflected positive views held by brokers following June quarter operational reports.

Ord Minnett even suggested the fourth quarter results for Sandfire Resources had de-risked the FY25 outlook. Following a -20% share price fall since May, the broker highlighted the current opportunity for investors to gain exposure to a large and liquid copper exposure with strong fundamentals.

This broker upgraded its rating to Accumulate from Hold after noting the Motheo operations in the quarter outperformed expectation and offset a softer-than-expected outcome for the Matsa mine in Spain.

Costs at both mines highlighted ongoing cost control and improved by-product credits, noted UBS (Neutral), while FY25 guidance for copper output was 3% ahead of Neutral-rated Citi’s projection, though guidance for zinc disappointed.

Cooper Energy’s June-quarter production and sales met forecasts by consensus and Morgans. Gains in production in the Otway Basin were slightly offset by pipeline issues at Orbost.

These issues didn’t overly concern the broker given they are now resolved, and the analysts’ main focus now turns to the Orbost Improvement Project, on which management appears to be making good progress.

Morgans believes increasing gas prices in the Australian East Coast Gas market due to a growing supply deficit leaves Cooper Energy well positioned.

Uranium miner Paladin Energy’s fourth quarter production of 0.52mlbs beat the consensus forecast for 0.48mlbs and management maintained FY25 production guidance, noted Morgan Stanley.

Management stated the first shipment of 319,229lb U3O8 had departed the Walvis Bay harbour in Namibia on July 12.

While operating costs were a little higher-than-expected, Macquarie assured investors this outcome was a one-off due to the restart of Langer Heinrich.

For FY25, guidance was maintained for production, costs, and capex.

Earnings forecasts by brokers for Syrah Resources also fell and the average target in the FNArena database fell to 70c from 80c.

While production at the Balma operations was strong, graphite sales were lower-than-expected by Shaw and Partners as demand was crimped by the US Government’s decision to grant US original equipment manufacturers (OEM’s) two additional years to source graphite from China.

Incredibly, the introduction of a discretionary licencing process has actually increased the control China has over the global graphite and battery supply chain, explained the broker, which reduced its target to 80c from $1.10.

Morgan Stanley’s target for Syrah Resources fell to 40c from 50c on lower graphite price forecasts.

Brokers also materially lowered earnings forecasts for Lynas Rare Earths last week. Fourth quarter neodymium praseodymium (NdPr) production fell -16% short of Citi’s forecast due to challenges receiving concentrates and an unplanned maintenance shutdown.

While noting the increased likelihood of lower production in FY25 against the backdrop of a soft rare earths market, Outperform-rated Macquarie is constructive on the long-term attractiveness of the NdPr market.

According to UBS, the focus for Lynas investors will be on the near-term growth trajectory and ensuring the company remains cost competitive with operations expanding from Malaysia to Australia and eventually the US.

On the flipside, Select Harvests, Atlas Arteria and Chrysos Corp all received a FY24 boost to average earnings forecasts in the FNArena Database of between 62% and 36% last week.

For Select Harvests, Bell Potter noted recent press reports have cited an up to 11% jump in almond pricing is possible following a recent crop downgrade from the US Department of Agriculture. 

This broker, however, continues to be wary around the potential development of a La Nina weather pattern in 2024, an event that would typically adversely impact almond yields in Australia.

Next was Atlas Arteria after the June quarter traffic and revenue update showed a better outcome for the APRR road network (in France) than the market had originally feared, according to Morgan Stanley.

Traffic on the Chicago Skyway is also recovering, and the broker was also encouraged by a 5% rise in traffic for Dulles Greenway (in the US) on the previous corresponding period.

While overall traffic growth surprised on the downside, the June quarter update implied revenue-per-trip rose enough to ensure first half revenue growth was in line with Morgans forecast.

Chrysos Corp appears third on the earnings upgrade table below due to a lift in the average FY24 forecast. However, the company also features second on the negative change to average target price list as the outlook dimmed when FY25 guidance came in materially weaker-than-expected by consensus.

Bell Potter lowered its Additional Assay Charge estimates by -42% in FY25 and -20% in FY26 to account for a slower recovery in activity for the exploration market.

This broker’s lower earnings forecasts reflected lower deployment of PhotonAssay units (that analyse mineral samples) and revenue-per-unit, and higher unit costs.

The analyst’s target was reduced to $5.70 from $7.60 and the rating downgraded to Hold from Buy.

Shaw and Partners felt the quarterly setback was temporary and not reflective of the underlying demand for Chrysos’ technology, while Ord Minnett remained positive on the longer-term given the company’s genuinely disruptive product and the large total addressable market opportunity.

The largest positive and negative changes to average target prices in the tables below went respectively to Universal Store and Lifestyle Communities –  in a week when the size of downgrades was larger than upgrades in the FNArena Database.

The Discretionary Retail sector may have passed an inflexion point, suggested Citi, following a better-than-expected June quarter trading update by Universal Store. Like-for-like sales accelerated to a rise of 8.7% in the final 19 weeks from the 1% increase in the first seven weeks of the quarter.

The underlying FY24 EBIT margins expanded by around 77bps to 16.1% (consensus 15.2%) due to gross margin expansion and strong cost management, explained UBS.

In reaction to management at Lifestyle Communities (in the prior week) withdrawing all forward-looking guidance -citing sales uncertainty from the VCAT resident complaints challenging exit fees- Buy-rated Citi lowered its target to $11.70 from $17.20 due to increased uncertainty, lower development margins and slightly higher expenses.

Ord Minnett also lowered its target to $12.60 from $15.80 but retained an Accumulate rating to reflect long-term valuation upside.

Following fourth quarter results last week, and an around 15% share price rally over the last three months, Macquarie, and Citi both downgraded their ratings for Whitehaven Coal to Neutral from Buy (or equivalent).

Citi lowered its FY24 earnings forecast by -15% due to lower-than-expected realised pricing and sales. Also, leading into FY24 results, the broker is cautious on risks of higher FY25 unit cost guidance for the Queensland operations.

Overall, there were beats for run-of-mine (ROM) production and saleable coal of 9% and 12%, respectively, compared to Macquarie’s forecasts.

While FY25 guidance remains a risk, this broker noted a potential deleveraging event this year, as management guided to a sell down of the Blackwater asset of between -20-30%.

DroneShield’s share price received an extra dose of volatility after June quarter sales missed broker forecasts, leading both Shaw and Partners and Bell Potter to downgrade ratings to Hold from Buy.

While first half revenue of $24.1m marked a record for DroneShield, Bell Potter was expecting around $30m. Despite this setback, the broker’s long-term positive view was undiminished, and the target increased to $1.60 from $1.00.

The highlight of DroneShield’s quarter for Shaw and Partners (target to $1.30 from $1.40) was Asia becoming a new growth market for the company to supplement the EU, the US and Australia.

Total Buy ratings in the database comprise 58.58 % of the total, versus 32.84% on Neutral/Hold, while Sell ratings account for the remaining 8.58%. 

Upgrade

AUSTRALIAN FINANCE GROUP LIMITED ((AFG)) Upgrade to Neutral from Sell by Citi .B/H/S: 0/2/0

Citi remains Neutral on ASX listed non-bank lenders under research coverage as a slowing economy leads to elevated risk. The currently inverted yield curve is thought to outweigh some green shoots around mortgage credit and market share.

For Australian Finance Group, the broker upgrades its rating to Neutral from Sell after recent share price weakness and better-than-expected 4Q lodgements.

Buy-rated Liberty Financial is Citi’s preferred exposure in the sector.

FNArena assumes an unchanged $1.50 target from the truncated research report available.

ALS LIMITED ((ALQ)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/0/1

Following two depressed years, UBS now anticipates a recovery in global mineral exploration activity and raises its target for ALS Ltd to $17 from $14.55. The rating is also upgraded to Buy from Neutral.

The broker highlights increasing exploration by major miners and an increase in miner equity raisings over the past quarter.

The analyst reminds investors EPS growth for ALS Ltd is leveraged to global TIC (Testing, Inspection, and Certification) megatrends such as increasing regulation (i.e. environmental, EPA) and outsourcing.

CORONADO GLOBAL RESOURCES INC ((CRN)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 5/0/0

Following 2Q results, Ord Minnett raises its target for Coronado Global Resources to $1.60 from $1.50 and upgrades to Accumulate from Hold following a -25% share price decline this year.

Production for the quarter was in line, but costs were well below the broker’s forecast on larger-than-anticipated recent cost efficiencies at Curragh due to fleet removals and higher dragline usage.

Management’s 2024 guidance for 16.4-17.2mt at a cost of US$95-99/t is unchanged.

INSIGNIA FINANCIAL LIMITED ((IFL)) Upgrade to Neutral from Sell by Citi .B/H/S: 0/2/2

Following a further review of yesterday’s 4Q update by Insignia Financial, Citi raises its target to $2.65 from $2.20 and upgrades to Neutral from Sell on signs near-term news flow may be more positive than originally thought.

Due to the significant pressure of one-off cash costs, the broker would not be surprised by a dividend cut.

Yesterday’s research is summarised below.

Today’s 4Q update by Insignia Financial surprised the market with a cost-driven profit upgrade, suggests Citi. Management expects profit in the range of $212-218m, beating prior forecasts by the broker and consensus for $199.1m and $197.5m, respectively.

In an early assessment of the update, the broker notes net flows ex pension payments returned to positive territory -$162m- yet funds under administration (FuA) fell due to pension payments of -$994m and negative market movements of -$585m.

Despite better above-the-line costs, a further $135m after tax was added to the remediation provision, along with a further $11m associated with an enforceable undertaking with APRA, explains Citi.

MINERAL RESOURCES LIMITED ((MIN)) Upgrade to Add from Hold by Morgans .B/H/S: 5/1/1

Morgans reviews lithium miners, revising down its lithium price forecasts expecting an extended malaise into FY25 as lithium supplies continue to surge out of China, Africa, Argentina and Australia into a stable demand environment.

The broker now expects a recovery will be delayed to FY26 as demand for EVs and batteries accelerates.

On the upside, the broker believes the recent market retreat has exposed value. The broker may be bearish on lithium in the near-term but holds a positive view for the longer term. The broker believes it will be worth the wait, expecting the turnaround will be faster than expected.

Given China’s 10-year technology lead in the battery market, it expects it will retain its dominance over the US and EU.

This is a positive for Mineral Resources, says Morgans, given it sells into China. The broker believes the company’s valuation to be attractive despite high trading multiples, which it attributes to the lithium mining cycle, and expects its production profile to shift to growth sharply in the next three years, a distinguished position it shares only with Pilbara Minerals. 

The broker observes the company is also expected to raise its iron-ore production sharply. Rating is upgraded to Add from Hold. Target price rises to $69 from $66.

PANTORO LIMITED ((PNR)) Upgrade to Buy from Hold by Bell Potter .B/H/S: 2/0/0

Pantoro’s June-quarter gold production record met Bell Potter’s forecast and all-in-sustaining costs outpaced.

Cash and bullion as at June 30 stood at $103.9m and net cash stood at $85m. The company retains its US$12.5m Convertible Loan Facility.

Bell Potter estimates that this is the first positive quarterly cash position (net of the equity raising and debt repayments) since the restart of Norseman Gold and views it as a positive milestone, auguring a big cash boost in FY25.

The broker’s forecast loss for FY24 falls to -$2.4m from -$6.5m. EPS forecasts are steady.

Rating is upgraded to Buy from Hold. Target price is steady at 10c.

PERPETUAL LIMITED ((PPT)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/1/0

Perpetual’s Q4 market update revealed a disappointing performance for Asset Management, comments UBS, with Assets under Admin (AuM) coming in -5% lower than forecast.

Larger than expected outflows were once again responsible. What exactly are the tax implications from selling wealth management to KKR is the next potential catalyst, suggests the broker.

If there’s no capital gains tax to be paid, this should allow a relief rally to take place. All eyes on Aug 29. UBS has upgraded to Buy from Neutral, with an unchanged target price of $25.00.

REGION GROUP ((RGN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 5/0/0

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Region Group, the target rises to $2.42 from $2.30 on a favourable adjusted funds from operations (AFFO) outlook, explains the broker. The rating is upgraded to Outperform from Neutral.

SOUTH32 LIMITED ((S32)) Upgrade to Buy from Neutral by Citi .B/H/S: 5/1/0

In a further reaction to yesterday’s news (see below) on Worsley Alumina, Citi lowers its target for South32 to $3.35 from $4.00 but upgrades to Buy from Neutral.

The broker believes the bad news is already captured after a share price fall and there may be some moderation in environmental conditions imposed by the EPA in Western Australia.

In an initial review yesterday of Q4 operational results, Citi suggested the market’s focus will be on impairment expenses for South32’s flagship asset Worsley Alumina. Saleable production at Worsley decreased by -2% in FY24, only achieving 94% of guidance.

Referring to Worley, management noted conditions imposed by the Western Australian Environmental Protection Authority create “significant operating challenges… and impact its long-term viability”.

The broker believes a miss for copper production won’t surprise the market given KGHM has earlier published monthly data for April and May. Apart from copper, production was broadly in-line with management guidance, notes the analyst.

SANDFIRE RESOURCES LIMITED ((SFR)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/4/0

Fourth quarter results for Sandfire Resources have de-risked the FY25 outlook in Ord Minnett’s view. The broker upgrades its rating to Accumulate from Hold following a -20% share price fall since May.

Copper production in Q4 at Motheo outperformed Ord Minnett’s forecast and offset a softer-than-expected Matsa outcome.

The analysts’ target rises to $9.65 from $9.45 on an improved outlook.

Ord Minnett highlights the opportunity for investors to gain exposure to a large and liquid copper exposure with strong fundamentals.

TECHNOLOGY ONE LIMITED ((TNE)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/3/0

Customer feedback in key demographics has been positive, giving UBS confidence around the sustainability of TechnologyOne’s 115-120% pa net revenue retention target. Even as the benefit from SaaS flips unwinds, the broker identifies important supports for NRR.

The next catalyst is TechnologyOne’s Investor Day on 30 July, at which UBS expects new detail around product/technology capabilities.

TechnologyOne carries a relatively rich multiple, the broker notes, but not inconsistent with ASX tech/software stocks on a growth-adjusted basis.

UBS does not necessarily expect multiple expansion, but sees a company growing profits at near-20% pa to deliver attractive shareholder returns.

Target rises to $21.90 from $17.20, upgrade to Buy from Neutral.

UNIVERSAL STORE HOLDINGS LIMITED ((UNI)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 5/1/0

Universal Store’s FY24 trading update sharply outpace Ord Minnett’s forecasts, earnings (EBIT) outpacing by 18% as the company increased market share and held costs in.

EPS forecasts rise 6% in FY24; 11% in FY25; and 10% in FY26. Rating is upgraded to Buy from Accumulate. Target price rises to $6.60 from $5.90.

WHITEHAVEN COAL LIMITED ((WHC)) Upgrade to Buy from Hold by Bell Potter .B/H/S: 5/2/0

Whitehaven Coal’s June-quarter production sharply outpaced Bell Potter’s forecasts.

While Queensland production was strong, rail issues hurt sales, cost guidance proved a miss due to labour inflation, and realised pricing was struck at a -26% discount to the PLV HCC index, dragging on the FY24 result, but all up it was a solid performance, observes the broker.

The company closed the quarter with net debt of $1.3bn and Bell Potter estimates available cash liquidity to be roughly $490m.

The broker expects the real kick to come in the latter half of the year as rising met coal demand provides a windfall to the company as Daunia’s sales strengthen. A Blackwater sell-down of up to -30% is expected in August.

EPS forecasts fall -13% in FY24; rise 12% in FY25 and are steady for FY26.

Rating is upgraded to Buy from Hold. Target price jumps to $9.90 from $8.90.

See also WHC downgrade.

Downgrade

ABACUS GROUP ((ABG)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/1/0

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Abacus Group, the target falls to $1.16 from $1.21 and the rating is downgraded to Neutral from Outperform largely due to 50bps of cap rate expansion in office, explains the broker.

ANSELL LIMITED ((ANN)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 1/3/0

Ord Minnett is expecting a -16% fall in EPS to US$0.96 (2% above consensus) for Ansell when reporting FY24 results on August 20, but forecasts EPS of US$1.06 for FY25, -6% below consensus.

Negatively for Ansell, the analyst highlights a move by distributors in the glove market towards private-label products (where their margins are higher) and low barriers to entry in the industry.

While the target remains at $24.30 (prior whitelabeled research from Morningstar had a $32 target), the broker downgrades to Lighten from Hold due to its below-the-market FY25 forecast.

ARENA REIT ((ARF)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 0/4/0

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Arena REIT, the target rises to $4.09 from $3.96 but the rating is downgraded to Neutral from Outperform on valuation.

CHRYSOS CORP. LIMITED ((C79)) Downgrade to Hold from Buy by Bell Potter .B/H/S: 2/1/0

Fourth quarter revenue for Chrysos was broadly in line with Bell Potter’s forecast, and FY24 revenue of $45.4m was in line with updated guidance, but FY25 revenue and earnings (EBITDA) guidance materially missed expectations.

The broker lowers its Additional Assay Charge (AAC) estimates by -42% in FY25 and -20% in FY26 to account for a slower recovery in exploration market activity.

Overall, Bell Potter’s lower earnings forecasts reflect lower unit deployments and revenue-per-unit, and higher unit costs.

Additional financial model changes by the analysts result in a target of $5.70, down from $7.60, and the rating is downgraded to Hold from Buy.

CENTURIA INDUSTRIAL REIT ((CIP)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/5/0

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Centuria Industrial REIT, the target falls by -12% to $3.22 and the rating is downgraded to Neutral from Outperform due to a challenging funds from operations (FFO) outlook over the next three years, explains the broker.

DRONESHIELD LIMITED ((DRO)) Downgrade to Hold from Buy by Bell Potter and Downgrade to Hold from Buy by Shaw and Partners .B/H/S: 0/2/0

While 1H revenue of $24.1m was a record for DroneShield, Bell Potter was expecting around $30m, but the broker’s long-term positive view is undiminished, and the target rises to $1.60 from $1.00.

Management expects the 2024 result will be heavily weighted to the 2H, yet the broker points out H1 only accounted for around 25% of Bell Potter’s 2024 revenue forecast.

The current share price valuation may be excessive, suggest the analysts, who anticipate ongoing share price volatility due to short-term performance and future contract announcements. The rating is downgraded to Hold from Buy.

DroneShield’s June-quarter sales missed Shaw and Partners’ forecasts, leading the broker to revise down FY24 sales forecasts and June-half earnings (EBITDA). 

The broker does not consider the result shoddy and retains its December-half forecasts.

June-half revenue rose 110%, and the broker is particularly taken with the company’s growth prospects as it moves into Asia, where China’s neighbours are likely to be receptive given the former’s 70% share of the global drone manufacturing market. The broker expects the region could contribute to a doubling in the sales pipeline to $1.1bn.

Shaw and Partners says management expects contract sizes will become bigger and more frequent and the broker observes room for growth given market penetration remains at less than 1% of a potential $10bn market and geopolitical conflicts continue. The broker also expects the company to solidify its position as leader in the field.

The broker also expects DroneShield could well become an acquisition target given recent strong and continuing activity in the sector.

Rating is downgraded to Hold from Buy. Target price is $1.30 which compares with $1.40 in June.

ENDEAVOUR GROUP LIMITED ((EDV)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/3/0

Macquarie predicts FY24 results for Consumer Staples will reveal a slowing in food inflation, but ongoing pressure for the cost-of-doing-business (CODB). Wages, rents and utilities continue to see higher cost growth than food, explains the broker.

However, the broker believes Australian consumers are at a turning point for a stronger FY25 on the back of slowing inflation, tax cuts and rising wages.

The broker’s target for Endeavour Group rises by 3% to $5.75 and the rating is downgraded to Neutral from Outperform following the recently strong share price.

The analyst points out cost-of-living pressures have resulted in softer demand for restaurants, cafes and pubs & bars.

Endeavour Group reports on August 26.

GENESIS MINERALS LIMITED ((GMD)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/2/0

Ord Minnett raises its target for Genesis Minerals to $2.00 from $1.90 on incremental forecast earnings/cash flow improvements for FY25/26 following Q4 results. 

Updated FY25 guidance at FY24 results will likely reflect an acceleration at the Laverton/Ulysses projects, suggests the analyst.

While production was broadly in line with the broker’s forecast in the 4Q, costs rose as some mining costs and growth spend were brought forward.

Ord Minnett downgrades its rating for Genesis Minerals to Hold from Accumulate after a 25% share price rally since management’s Aspire 400 outlook was released in early-May.

GOODMAN GROUP ((GMG)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/2/1

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Goodman Group, the target rises to $36.51 and the rating is downgraded to Neutral from Outperform on valuation.

GROWTHPOINT PROPERTIES AUSTRALIA ((GOZ)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/1/0

During the upcoming reporting season, Macquarie suggests FY25 guidance will be key for most ASX-listed stocks in the Property sector. Near-term outperformance is expected from groups with a more favourable growth outlook.

Initially, the broker anticipates the REIT sector will be supported over the remainder of 2024 by a US rate cut in September and a US market cycle shift to a slowdown.

Later on, the analysts forecast accelerating Australian GDP growth and RBA rate cuts will help offset the risk of a US market cycle downturn.

Macquarie likes the Residential sector the most and Office the least. Mirvac Group, Scentre Group and Charter Hall are preferred among large caps and Qualitas, Region Group and HMC Capital among the small/mid caps.

For Growthpoint Properties Australia, the broker’s target falls to $2.24 from $2.50 mainly due to 50bps of cap rate expansion in the Office portfolio.

The rating is downgraded to Neutral from Outperform as outlook remains challenging as cost of debt rises and the outlook for Office remains under pressure, explain the analysts.

WHITEHAVEN COAL LIMITED ((WHC)) Downgrade to Neutral from Outperform by Macquarie and Downgrade to Neutral from Buy by Citi .B/H/S: 5/2/0

The 4Q realised price of $236/t for Whitehaven Coal matched Macquarie’s forecast but missed the consensus estimate by -9% due
to product mix differences.

Overall, there were beats for run-of-mine production and saleable coal of 9% and 12%, respectively, compared to the broker’s forecasts.

Providing a potential deleveraging event this year, notes the analyst, management guided to a sell down of the Blackwater assets of between -20-30%. However, it’s felt FY25 guidance remains a risk.

As Whitehaven’s share price has rallied by 10% since April, Macquarie downgrades its rating to Neutral from Outperform. The broker’s target falls to $8.75 from $9.00.

Following 4Q results by Whitehaven Coal, Citi lowers its FY24 earnings (EBITDA) forecast by -15% due to lower-than-expected realised pricing and sales.

Leading into FY24 results, the broker is cautious on risks of higher FY25 unit cost guidance for the Queensland operations.

The target falls to $8.90 from $9.20 and the rating is downgraded to Neutral from Buy following an around 15% share price rally over the last three months.

See also WHC upgrade.

WOOLWORTHS GROUP LIMITED ((WOW)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/3/0

Macquarie predicts FY24 results for Consumer Staples will reveal a slowing in food inflation, but ongoing pressure for the cost-of-doing-business (CODB). Wages, rents and utilities continue to see higher cost growth than food, explains the broker.

The political environment also remains hostile to excess profits for supermarkets, points out the analyst. However, it’s believed Australian consumers are at a turning point for a stronger FY25 on the back of slowing inflation, tax cuts and rising wages.

The broker’s target for Woolworths Group rises by 7.1% to $37.50 and the rating is downgraded to Neutral from Outperform following the recently strong share price.

Woolworths Group reports on August 28.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup <img src="https://www.fnarena.com/charts/fnarena/3dbar.php?mydata=1&mylabels=BellPotter,Citi,Macquarie,MorganStanley,Morgans,OrdMinnett,ShawandPartners,UBS&b0=191,130,166,94,230,240,160,140&h0=100,133,173,117,174,147,23,155&s0=8,39,36,52,18,41,5,31″ style=”border:1px solid #000000;”>

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