In the good books
Atlas Arteria, formerly Macquarie Atlas Roads (ALX), was upgraded to Add from Hold by Morgans. B/H/S – 5/1/0. Atlas Arteria has made its final performance fee payments to Macquarie Group (MQG), from which it was originally spun off. Of the $115m paid, $90m was raised by issuing scrip to Macquarie at a 5% premium to yesterday’s close, eliciting exclamation from Morgans. The balance was paid in cash. Morgans has adjusted for the payment/raising and updated forex forecasts, noting particular exposure to the euro. Target rises to $6.76 from $6.53 and on a 10% plus forecast total shareholder return, the broker upgrades to Add from Hold.
FlexiGroup (FXL) was upgraded to Outperform from Neutral by Credit Suisse. B/H/S – 4/2/0. Credit Suisse believes that for the first time in a long time FlexiGroup has a reasonable chance of meeting FY earnings forecasts. FY19 should show flat to modest growth. The broker has thus upgraded to Outperform from Neutral but warns it is not so much of an “upgrade” story as it is “no more downgrades”. Even at a single digit multiple, FlexiGroup is not without its risks, the broker warns. But the Australian card business and cost-outs should prove key earnings drivers. Target rises to $2.45 from $1.85.
Iluka Resources (ILU) was upgraded to Buy from Neutral by Citi. B/H/S – 4/1/1. Citi has upgraded, citing higher production and sales, improved pricing and a weaker Australian dollar. Estimates for earnings before interest tax depreciation and amortisaton per share rise 9% in 2018 and 24% in 2019.Target price jumps to $13.70 from $10.72.
In the not-so-good books
AVEO Group (AOG) was downgraded to Neutral from Outperform by Macquarie. B/H/S – 3/1/0. Macquarie downgrades retirement village company AVEO Group to Neutral from Outperform, in response to signs of mounting pressure on fundamentals. The broker notes project completions are and will continue to outpace settlements and that this cash flow gap will exacerbate the risk arising from the weaker property market and compromise its capital position. The target price falls to $2.65 from $4.15 and is set at a discount to the broker’s valuation of $3.26 to reflect ongoing headwinds.
Domino’s Pizza (DMP) was downgraded to Sell from Neutral by Citi. B/H/S – 3/2/3. It was only three weeks ago that Citi upgraded to Neutral, but the analysts have nevertheless decided it’s time to once again downgrade to Sell. Two reasons for the reversal: a sharp rally in the share price plus the realisation operations in Japan are not meeting expectations. Citi believes market consensus forecasts are due for a downgrade. Price target lifts to $46.30 (was $44.60).
Magellan Financial Group (MFG) was downgraded to Underweight from Equal-weight by Morgan Stanley. B/H/S – 3/1/1. Morgan Stanley downgrades Magellan to Underweight from Equal-weight, contrary to consensus, on a persistent slowdown in retail funds flows. Inflows have slowed for the past months and risk turning negative, the broker suggests. Magellan also charges above-peer fees, suggesting these may come under pressure. Given the fund manager is maturing as a business, there are fewer growth options than previously, the broker notes. Target unchanged at $27. Industry view: In-Line.
The above was compiled from reports on FN Arena. The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
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