In the good books
Fairfax (FXJ) was upgraded to Outperform from Neutral by Macquarie and to Buy from Neutral by Citi. B/H/S 4/3/0. Macquarie says the medium-term outlook is bolstered by proposed cooperation with rival News Corp (NWS) for printing and distribution, and an advertising partnership with Google. While Domain's earlier result indicates it is well-placed for growth. Macquarie raised its target to 79c from 71c. Citi analysts have been biding their time, waiting for that trigger that would allow for the gap between share price and valuation to close. It appears they now think the interim report release might be that trigger. Target price rises by 14% to $2.14.
Domain Holdings Australia (DHG) and was upgraded to Outperform from Neutral by Credit Suisse and Macquarie. B/H/S 4/1/2. Credit Suisse believes uncertainty about management in the near term - the CEO has departed - has created an opportunity to buy into the longer-term growth story at an attractive price. Target is reduced to $3.50 from $3.55. Macquarie considers the result a strong debut, with revenue momentum holding up through the period. Price rises, the adoption of depth products and moderating cost growth all contributed. The broker sees Domain as well-positioned in the longer term given opportunities in both the developed markets of Syd/Melb and Canberra, and the "emerging markets" of everywhere else, specifically Qld and the commercial space, as well as adjacent businesses. Target unchanged at $3.50.
GWA Group (GWA) was upgraded to Neutral from Sell by Citi, to Outperform from Underperform by Credit Suisse and Add from Hold by Morgans. B/H/S 2/3/1. GWA Group's half-year result impressed Citi, who says it heralds a new era for the company. Citi expects the prolonging of the completions cycle should protect earnings from a softening in the housing cycle and upgrades earnings-per-share forecasts for FY18-FY20 to 9% from 4%. Target price jumps 18% to $2.93. Credit Suisse observes the early stages of the reinvestment in brand and product has allowed for growth despite the current stagnation of the housing cycle. Credit Suisse’s target is raised to $3.40 from $2.90. Morgans increases FY18 earnings estimates by 4%. Despite some uncertainty surrounding the residential building market, Morgans believes the valuation is attractive, given the lightly geared balance sheet and strong returns. Target rises to $3.30 from $3.07.