Weekly Reports | Mar 31 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 March 24 to Friday March 28, 2025
Total Upgrades: 10
Total Downgrades: 6
Net Ratings Breakdown: Buy 61.41%; Hold 31.99%; Sell 6.60%
For the week ended Friday, March 28, 2025, FNArena tracked ten upgrades and six downgrades for ASX-listed companies from brokers monitored daily.
Declines in average target prices outweighed increases and downward revisions to average earnings forecasts were more substantial than any upgrades, as shown in the tables below.
After entering a binding Scheme Implementation Agreement with Canadian-listed Dollarama, the Reject Shop received the largest increase in average target from brokers.
Under the scheme, all Reject Shop stock will be acquired for $6.68 per share, representing a 112% premium to the previous close, and a 117% premium to the six-month volume weighted average price.
Should the Scheme be effective, the board, which unanimously recommends the transaction to Reject Shop shareholders, intends to distribute a fully franked special dividend of 77 cents per share, to be deducted from the acquisition price.
Raphael Geminder's Kin Group, which has a 20.8% stake in the Reject Shop, intends to vote all shares in favour of the Scheme.
Dollarama has indicated it is targeting an acceleration of the store rollout to 30 (net) new Reject Shop stores per annum, growing the Australian footprint to 700 stores from 392 by 2034.
After raising its target to align with the offer price, Ord Minnett has downgraded its rating to Hold from Buy.
Regarding earnings forecast upgrades, here Synlait Milk topped the list last week following interim results.
Earnings landed at the top end of management's guidance range, marking a return to profitability. Still, management struck a cautious tone on the second-half outlook, suggesting the next improvement in earnings won't match first-half levels.
During the first half, all core business units delivered margin improvement. Advanced Nutrition benefited from 28% volume growth, Ingredients was supported by stronger stream returns (i.e. processing milk into higher-value components), and Consumer saw gains through ongoing business improvement initiatives.
Bell Potter raised its earnings estimates by 3% for FY25 and 7% for FY26, though cautioned Synlait remains vulnerable to a2 Milk integrating its supply chain vertically through 2025, potentially weighing on the Advanced Nutrition segment.
Next up is gas production and exploration company Amplitude Energy with a 14% rise in its FY25 average earnings forecast.
Striking a reworked joint venture agreement for its East Coast Supply Project provides greater development and funding certainty as explained at https://fnarena.com/index.php/2025/03/28/upping-the-east-coast-amplitude/
On the negative side of the ledger, Coronado Global Resources and Chalice Mining fill the top two places in the tables for negative change to earnings forecast and target price.
Buy-rated Bell Potter cut its target price for Coronado to 50c from 95c after marking-to-market coal prices for the March quarter to date and lowering its June quarter forecast for hard coking coal (HCC) to US$180/t from US$190/t.
This broker also warned a sustained spot HCC price of US$170/t, or any further decline, could pose balance sheet risks for the company in the second half given Coronado's strong reliance on cash flow generated from higher prices.
Management is chasing volume expansions at its Curragh mine in Queensland and in the US (Buchanan mine) to lower unit costs, noted the analysts.
Both Macquarie and Morgans lowered earnings forecasts for Chalice Mining prior to the pre-feasibility study (PFS) due in mid-2025 for the Gonneville platinum group elements (PGE)-nickel-copper-cobalt project in WA.
The company recently announced a significant metallurgical advancement at the project, allowing recoverability of metals through flotation and Carbon in Leach (CIL).
No longer is a hydrometallurgical process for nickel concentrate required, which is expected to reduce technical risk, process complexity, and capital operating costs.
The new processing method forced Macquarie to forecast a smaller production scenario with throughput capacity of 5mtpa versus the 15-30mtpa suggested by the initial Scoping Study.
Nine companies in the Mining sector fill a possible ten places in the earnings downgrade table below with uranium exposures Paladin Energy, Lotus Resources, and Boss Energy featuring prominently.
In case you are curious: Premier Investments is the sole non-miner in the table.
Paladin Energy resumed operations following the recent rain event at its Heinrich Langer mine in Namibia with management highlighting damage to access, haul roads, and minor civil infrastructure.
The rain delayed some mining equipment delivery and because of the impact on production, the company withdrew production guidance for FY25.
Ord Minnett revised its forecasts to reflect a slower mining ramp-up, deferring the start of higher-grade ore extraction to the December quarter of 2025. As a result, the broker halved its FY26 earnings forecast and trimmed FY27 estimates by -6%.
Macquarie responded by upgrading Paladin to Outperform from Neutral, citing the currently discounted share price. This broker also noted the acquisition of Patterson Lake South via the Fission Energy deal has enhanced the overall quality of the company's asset base.
For Lotus Resources, the small average earnings forecast numbers by brokers exaggerated the percentage decline last week after Ord Minnett adjusted its estimates.
Presenting at the broker's recent Mining Conference, management at Lotus highlighted a greater commitment to the Letlhakane uranium project in Botswana than the analyst had assumed, with some of the cash flows from Kayelekera in Malawi to be reinvested in its drill-out.
At the Conference, general commentary by management at Lotus, Paladin and Boss Energy suggested the falling spot price for uranium is due to uncertainty over whether miners or utilities will pay looming tariffs. Also, utilities may be wary due to the ban and counter-ban on US fuel buying from Russia.
Ord Minnett lowered its target price for Boss Energy to $4.70 from $4.80 on higher projected costs at the Alta Mesa project in South Texas.
Following a site visit at the company's Honeymoon operations in South Australia, analysts at Citi and Bell Potter noted the ramp-up is proceeding smoothly, with the latter expecting FY25 production guidance of 850klbs will be exceeded.
The average 2025 earnings forecasts for Woodside Energy also fell by circa -23% even though 2024 earnings of US$9.3bn and net profit of US$2.9bn were slightly ahead of Ord Minnett's expectations. The dividend was also larger-than-expected, with an 80% dividend payout maintained.
Management reaffirmed key operational guidance for 2025, with the Louisiana LNG project sell down to -50% seen as a key de-gearing catalyst.
Certainly, the analysts at UBS believe investor focus is currently on the Louisiana sell-down, with a final investment decision anticipated by March 2025. The project is valued by the broker at US$2.77 per share.
Back on March 24, James Hardie Industries announced a takeover of US building materials company Azek for -US$8.75bn.
While new CEO Aaron Erter detailed a bold growth strategy, the market was having none of perceived high-priced acquisitions in the current macroeconomic backdrop, and the share price fell by around -20%.
Broker views varied with Morgan Stanley believing the sell-down in shares (over -30% from January) is overdone while Macquarie applied a lower valuation multiple for FY26 earnings estimates and lowered its target to $44 from $65.
Further broker views on the transaction are at https://fnarena.com/index.php/2025/03/25/james-hardie-pursues-growth-at-what-cost/
Total Buy ratings in the database comprise 60.83% of the total, versus 32.22% on Neutral/Hold, while Sell ratings account for the remaining 6.95%.
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