Weekly Reports | Mar 03 2025
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 February 24 to Friday February 28, 2025
Total Upgrades: 30
Total Downgrades: 27
Net Ratings Breakdown: Buy 59.62%; Hold 33.35%; Sell 7.03%
The busiest period of the February reporting season, the fourth week, concluded on Friday, 28th February 2025, with FNArena tracking thirty upgrades and twenty-seven downgrades for ASX-listed companies from brokers monitored daily.
Percentage declines in analysts' average earnings forecasts materially exceeded rises, while average target price changes were broadly equal.
All but two of the forty companies in the price target and earnings tables below feature in the Corporate Results Monitor, which summarises all the misses and beats from the reporting season at https://fnarena.com/index.php/reporting_season/
Pexa Group will appear in Monday's edition of the Monitor once more brokers update forecasts following first half results, while Chalice Mining's appearance in the earnings table is unrelated to financial reporting.
In an early assessment, UBS thought Pexa Group's interim results were in line with expectations.
On a divisional basis, the broker noted stronger Pexa Exchange earnings in Australia due to higher transaction volumes were offset by weaker International earnings (UK) due to higher costs, while the Digital Solutions segment performed in line with expectation.
Positively, group opex and capex are being well managed, in the analysts' view, with free cashflow up 82% and gearing down to 1.9 times from 2.4 times at FY24, enabling capital management with a new $50m buyback.
Regarding Chalice Mining, Morgans reviewed a major metallurgical breakthrough at the Gonneville project, announced to the market back on February 17. Saleable copper and nickel concentrates can now be produced from low-grade composites, removing the need for a complex, high-cost hydrometallurgical process.
This progress significantly lowers financial and execution risks for project development, explained the broker, by eliminating the need for a Mixed Hydroxide Precipitate circuit. Cost savings across the project's lifespan should be around -$1.6bn.
The new analyst at Morgans lowered the broker's target for Chalice to $2.80 from $3.35 and upgraded to Speculative Buy from Hold. The company is considered a solid counter-cyclical investment, offering option value against fluctuations in platinum group elements (PGE) pricing.
All ten negative changes to average target price in the table below correspond with a miss in the Corporate Results Monitor. Johns Lyng received the largest percentage decrease in average target price from analysts along with two downgrades from separate brokers to Hold (or equivalent) from Buy.
Conversely, Eagers Automotive headed up the list for positive change to targets and garnered two ratings downgrades on valuation, as well as two upgrades partly due to a stronger margin outlook.
Providing a measure of confirmation, EVT Ltd and oOh!media appear in both the positive change to target and earnings tables.
However, oOh!media, along with MA Financial, Codan, and Tabcorp all registered material increases in average target prices, yet their overall results and outlook were adjudged to be 'in line' in the commentary section of the Monitor.
Similarly, upticks in average FY25 earnings forecasts for Nickel Industries, 29Metals, Ampol (two ratings upgrades), and Gold Road Resources were insufficient to earn a 'beat', while falls in average earnings forecasts still allowed for in-line outcomes for Healius and Pilbara Resources and beats for Stanmore Resources and Karoon Energy.
Both Iress and Reece missed expectations when reporting respective final and interim results, yet each company received two ratings upgrades apiece from analysts, following a material decrease in targets.
On the flipside, Domain Holdings Australia received two ratings downgrades as brokers raised their targets to $4.20 to align with Nasdaq-listed CoStar Group's offer to acquire 100% of the company, having already built a 16.9% stake.
Ord Minnett felt CoStar's entrance could reshape the Australian property advertising market, though Nine Entertainment (Domain's majority owner) is expected to reject the initial bid, potentially leading to a higher offer.
Citi agreed, suggesting the bid price may need to increase, particularly as Domain's first-half results were positive and the bid reflects a -15% discount to Real Estate portal peers.
Even if successful, this broker believes it will be difficult for CoStar to break the network effects of REA Group, given REA's ability to flex its cost base and increase marketing spend.
Total Buy ratings in the database comprise 59.62% of the total, versus 33.35% on Neutral/Hold, while Sell ratings account for the remaining 7.03%.
Upgrade
AUSSIE BROADBAND LIMITED ((ABB)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/0/0
UBS upgrades Aussie Broadband to Buy from Neutral with a higher $4.80 target from $3.95, supported by an expected 26% three-year cash compound growth rate in EPS.
The analyst points to 1H25 EBITDA of $66m, up 13% year-on-year, or 22% excluding Buddy losses with double-digit subscriber growth of 12.5%, supporting continued market share gains.
A fully franked 2.4c special dividend was declared, alongside an acceleration in capex growth, with FY25 capex guidance raised to -$75$80m from -$55$60m.
UBS highlights the balance sheet remains strong with leverage at 0.3x.
Management upgraded FY25 EBITDA guidance to $133138m from $125$135m, driven by residential subscriber growth, improving margins, and a stronger contribution from Symbio.
AMPLITUDE ENERGY LIMITED ((AEL)) Upgrade to Buy from Hold by Bell Potter .B/H/S: 3/1/0
Amplitude Energy reported 1H25 underlying earnings of $93m, ahead of Bell Potter's $85m estimate. The company is negotiating terms with OG Energy regarding participation in the three-well East Coast Supply Project program.
The ECSP drill program and its capital costs are yet to be guided, and the development assumes exploration success.
However, the targets are considered low risk prospects, Amplitude's balance sheet is increasingly supportive and JV alignment is becoming clearer, the broker notes.
Bell Potter has upgraded to Buy from Hold in recognition of de-risking the ECSP's value over the next 12 months. Target rises to 26c from 22c.
AMPOL LIMITED ((ALD)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Buy from Neutral by UBS .B/H/S: 3/1/0
Ampol's second-half earnings (EBITDA) of $1,199m declined -32% year-on-year, with refining earnings (EBIT) at -$42m due to weaker margins, explains Macquarie.
Convenience Retail EBIT remained stable at $357m, supported by strong premium fuel penetration despite lower base-grade sales, observes the analyst.
Management re-affirmed guidance, with 2025 capital expenditure expected at -$600m and de-gearing anticipated in the second half as Ultra Low Sulfur Fuels project costs stabilise.
Macquarie lowers its target price to $29.45 from $30.65. Despite the weak 2024 result, the broker upgrades the rating to Outperform from Neutral, citing improving refining margins and strong retail execution.
UBS upgrades Ampol to Buy from Neutral, expecting EBIT growth across all divisions over the next two years.
The stock trades at 8.3x 2026 EBIT, a -19% discount to its five-year average. UBS forecasts 22% EBIT CAGR from 202426, driven by refining recovery, improved Lytton reliability, and consumer sentiment uplift.
2024 NPAT was in line, but net debt/EBITDA spiked to 2.6x. The final dividend payout was cut to 66% of NPAT to maintain balance sheet flexibility. UBS expects leverage to normalise within target by 202526, enabling higher payouts.
The analyst notes Convenience Retail remains resilient, benefiting from investment in premium sites and food offerings.
UBS cuts 202526 EPS estimates by -1% to -6% due to higher interest costs and weaker Z Energy & Fuels & Infrastructure trading.
Target rises to $31.40 from $31.25.
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