Weekly Ratings, Targets, Forecast Changes - 12-06-20 Jun 15, 2020 By Rudi Filapek-Vandyck, Editor FNArena Guide: The FNArena database tabulates the views of seven major Australian and international stock brokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett 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 June 8 to Friday June 12, 2020 Total Upgrades: 12 Total Downgrades: 14 Net Ratings Breakdown: Buy 50.14%; Hold 40.66%; Sell 9.20% Above average volatility has hit the local share market, but the balance between upgrades and downgrades in stockbroker ratings for ASX-listed stocks remains remarkably stable thus far in June. For the week ending Friday, 12th June 2020 FNArena counted 12 upgrades versus 14 downgrades issued by the seven stockbrokers monitored daily. One of the observations to make is the total percentage of Buy and equivalent ratings has now crossed the 50% mark, against 40% holds and 9.20% Sell ratings. Given the strong rally in the share market, that high percentage in Buy ratings is a reminder of how polarised the share market remains in 2020, irrespective of covid-19 impacts andFNArena fall-outs. Equally remarkable, Citi, Credit Suisse and Morgans are all carrying more Buy ratings than Hold/Neutrals, with Ord Minnett evenly balanced. This means Macquarie, Morgan Stanley and UBS have their majority recommendations grouped together in the Hold basket. Macquarie carries the most Sell ratings of all seven. In what can possibly be interpreted as a sign of the times, all 12 upgrades for the week moved to a fresh Buy with gold producers prominently represented. The opposite side shows five downgrades to Sell, with Computershare, JB Hi-Fi, South32, Webjet and Worley the receivers. The indisputably positive news for the week is located in analysts’ adjustments to valuations and price targets, where the bias has turned decisively in favour of positive revisions. Whereas the week’s table for negative updates hardly reveals anything worth mentioning, possibly with the exception of Sims Metal Management, positive updates are now flowing in from all directions. The largest consensus target increase for the week befall Integral Diagnostics, followed by Harvey Norman and JB Hi-Fi. All three companies delivered a positive market update. All three enjoyed double-digit percentage increases to the target. In contrast, both upgrades and downgrades to forecasts show multiple hefty adjustments, with the week’s overview for positive revisions showcasing numerous hefty increases, led by Qantas, OceanaGold and JB Hi-Fi. On the negative side, Sims Metal Management received the heaviest cuts for the week, only just beating oOh!media for the bottom spot, with Cooper Energy, Graincorp, Perseus Mining, and Nufarm all seeing forecasts drop by double-digit percentages. Upgrade ALACER GOLD CORP ((AQG)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/1/0 Credit Suisse increases gold price forecasts for 2020-22, again. Fundamentals underpinning the gold sector include low and negative yields, a weakening US dollar and expectations that significant fiscal stimulus from various governments will ultimately be highly inflationary. Alacer Gold's rating is upgraded to Outperform from Neutral and the target is raised to $9.40 from $8.60. AVENTUS GROUP ((AVN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/1/0 Macquarie believes Aventus Group is well placed to benefit from the reopening of the economy and a residential rebound. Peer disclosure implies rental abatements of 32-37% over the lockdowns and the broker has applied the same assumption for Aventus. The broker also suggests Aventus' higher quality portfolio implies upside risk. Gearing is elevated, but asset values are relatively defensive, the broker notes, and on an 8% plus yield and -12% discount to net tangible asset value. The broker seesFNArena the stock as a sustainable longer term discretionary play. Upgrade to Outperform from Neutral, target rises to $2.57 from $2.43. BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/3/1 Ord Minnett has greater confidence in the economic outlook, finding evidence of an improving funding cost environment and anticipating less downside from the economic downturn for Bendigo and Adelaide Bank compared with peers. The broker notes the capital position appears solid and should be less pro-cyclical. Rating is upgraded to Accumulate from Hold, with the target raised to $8.10 from $6.00. BWP TRUST ((BWP)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 1/1/1 Ord Minnett assesses assets with long lease expiries are typically -20% undervalued. Early indicators suggest equity inflows are returning to preferred property sectors quickly. Ord Minnett recommends increasing exposure to long weighted average lease expiry (WALE) A-REITs as part of its view on the recovery post the pandemic. The broker upgrades to Buy from Hold and raises the target to $4.40 from $3.50. CHARTER HALL LONG WALE REIT ((CLW)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 3/1/0 Ord Minnett upgrades to Buy from Hold. The broker assesses assets with long lease expiries are typically -20% undervalued. Early indicators suggest equity inflows are returning to preferred property sectors quickly. Ord Minnett recommends increasing exposure to long weighted average lease expiry (WALE) A-REITs as part of its view on the recovery post the pandemic. Target is raised to $5.80 from $4.80. EVOLUTION MINING LIMITED ((EVN)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/3/2 Credit Suisse increases gold price forecasts for 2020-22, again. Fundamentals underpinning the gold sector include low and negative yields, a weakening US dollar and expectations that significant fiscal stimulus from various governments will ultimately be highly inflationary. Evolution Mining's rating is upgraded to Outperform from Neutral and the target is raised to $5.65 from $4.85. HEALIUS LIMITED ((HLS)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/1/0 Macquarie reviews the near-term growth assumptions and assumes a less substantial impact from the pandemic. The broker believes Healius is positively leveraged to improved activity levels heading into FY21. The company has highlighted the potential divestment of its medical centres, and if proceeds are used to repay debt, Macquarie calculates this would reduce pro forma gearing to 1.5x from 2.7x. Rating is upgraded to Outperform from Neutral and the target is raised to $3.00 from $2.70. IPH LIMITEDFNArena ((IPH)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0 IPH announced the acquisition of New Zealand based Baldwins Intellectual Property for circa $7.4m, considered a strategically sound move by Morgans. The broker also expects patent filing activity in the second half to be down with a weak final quarter. Overall, FY20 operating income is expected to go down by -1.5% to $114.5m while FY21-22 forecasts stand reduced. Despite this, the company is well-positioned and operates in a defensive sector, notes the broker. Morgans upgrades its rating to Add from Hold. Target decreased to $8.69 from $9.78. JB HI-FI LIMITED ((JBH)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/4/1 JB Hi-Fi’s trading update reports strong sales growth for JB Australia and The Good Guys for the five months to May. Ord Minnett considers JB Hi-Fi a winner in the retail sector with an attractive product mix, diversified channel and location mix. Earnings forecasts have been revised by the broker for FY20-22 with FY20 growth expected to be driven by JB Australia and The Good Guys. The broker is also confident about FY21 with the ongoing momentum to continue into the first half while the combination of product and channel/location mix is expected to support the second half. Ord Minnett upgrades its rating to Accumulate from Hold with target increased to $44 from $37. See also JBH downgrade. NORTHERN STAR RESOURCES LTD ((NST)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/2/2 Credit Suisse increases gold price forecasts for 2020-22, again. Fundamentals underpinning the gold sector include low and negative yields, a weakening US dollar and expectations that significant fiscal stimulus from various governments will ultimately be highly inflationary. The broker prefers the large gold stocks such as Northern Star and believes it offers the best value. Rating is upgraded to Outperform from Neutral and the target is raised to $14.70 from $13.00. SIMS METAL MANAGEMENT LIMITED ((SGM)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/4/0 UBS assesses limited visibility and volatile trading have driven the stock to trade at, or below, net tangible assets. However, scrap markets are expected to improve as the US economy re-opens. UBS upgrades to Buy from Neutral as a result. In addition, the push into cloud recycling offers the opportunity for more stable volumes. Target is reduced to $10.20 from $10.80. WORLEY LIMITED ((WOR)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 4/1/1 Credit Suisse assesses the company has more exposure to less volatile industries and a recovery in theFNArena next 6-12 months is expected. Worley is now less exposed to oil & gas capital projects but has a higher exposure to oil & gas customer operating activities.