In the good books
- Asaleo Care (AHY) was upgraded to Outperform from Neutral by Credit Suisse
Pulp prices are falling and Credit Suisse now expects a -30% reduction in pulp costs for Asaleo in 2020, with 2019 supply already hedged. Now that local tissue business has been divested, the broker sees more stable revenue and margins ahead. Forecast cost relief leads to a forecast earnings increase of 18% in 2020. Target rises to $1.25 from 95 cents. Upgrade to Outperform from Neutral, noting a 5% yield.
- G.U.D. Holdings (GUD) was upgraded to Accumulate from Hold by Ord Minnett
While some dynamics will remain structural, such as weak first half cash flow, Ord Minnett believes the medium-term growth prospects for the business remain intact. The share price has de-rated and the broker upgrades to Accumulate from Hold. Ord Minnett believes the company can consistently generate more than 6% growth in organic earnings over the medium term. Market concerns about customer concentration in the automotive division are considered to be overstated. Target is raised to $12.70 from $12.00. This stock is not covered in-house by Ord Minnett. Instead, the broker white labels research by JP Morgan.