- Morgan Stanley says CSL shares could have 33% upside, upgrades to overweight rating
- Moelis Australia initiates coverage of Silk Logistics Holdings with a buy rating
- CLSA upgrades Pro Medicus to accumulate and sees upside in the health imaging company
Amongst what seems like doom and gloom on share markets brokers are remaining optimistic and think there is value to be had for investors, upgrading stocks across various sectors.
There’s no denying the last couple of months have been rough for ASX. September once again lived up to its reputation as the worst month of the year for the Aussie bourse with large caps plunging 2.8% for the month, reducing YTD gains to a meagre 3.7%.
READ: ASX September winners: August was rough. September was brutal
And this month hasn’t got off to a good start with the ASX closing at a 100-day low on Tuesday as global economic uncertainty continues to take a toll.
So where do the brokers see value and which stocks are they upgrading?
Morgans has overweight rating on CSL
Current SP: $248.70; Target: $334
Broker Morgan Stanley reckons shares in Australia’s biggest healthcare stock blood products giant CSL (ASX:CSL) could have 33% upside potential from current levels of ~$252.
“If EPS momentum can be further enhanced through PBM (patient blood management program) execution, our valuation and price target may prove conservative,” analyst Sean Laaman says in The Australian.
“On the back of PBM execution/articulation, the perceived risk regarding Injectafer generics competition may diminish.”
Laaman says reasons for CSL’s share price underperformance this year are understood.
“We think this is due to recovery to pre-pandemic plasma GM in FY26-FY28 has been slower than we anticipated, FcRn disruption in CIDP possible in FY25, and generic competition nears for V4’s Injectafer in Europe,” he says.
Morgan Stanley has an overweight rating and $334 target price on CSL, which is down 11% YTD.
CLSA upgrades PME to accumulate
Current SP: $82.40; Target: $88.80
Broker CLSA has upgraded Pro Medicus (ASX:PME) to accumulate and reckons investors should get more shares in the health imaging company.
PME recently announced its wholly owned US subsidiary, Visage Imaging, had won a $140m, 10-year contract with Baylor Scott & White Health (BSWH), the largest not-for-profit healthcare system in Texas and one of the largest in the US.
Furthermore the company is looking to expand beyond radiology into dermatology, pathology and cardiology using feature functions of its Visage platform to help various departments of hospitals become less siloed.
It also sees upside with the growth of artificial intelligence and says medical imaging is particularly well suited to the emerging technology.
CLSA has a target price of $88.80 on PME, which is up 52% YTD.
JP Morgan upgrades Goodman Group to Overweight
Current SP: $21.22; Target: $25
JP Morgan has upgraded global industrial property specialist The Goodman Group (ASX:GMG) to overweight.
GMG operates in various regions, including Australia, New Zealand, Asia, Europe, the UK and the Americas and is the largest property group on the ASX with a market cap of $40 billion. It is also one of the largest listed specialist investment managers of industrial property globally.
The group’s property portfolio includes logistics and distribution centres, warehouses, light industrial, multi-storey industrial, business parks and data centres.
GMG is poised to emerge as a dominant force in the global data centre industry in the coming decade, capitalising on the growth of artificial intelligence.
JP Morgan has a price target of $25 on GMG, which is up 22.65% YTD.
Bell Potter upgrades Technology One to buy
Current SP: $15.34; Target: $17.75
Bell Potter has upgraded enterprise software company Technology One (ASX:TNE) to a buy from hold ahead of its full year FY23 November result.
The broker says it has modestly upgraded EPS forecasts due to a small decrease in forecast shares on issue and rolled forward its discounted cash flow valuation leading to a target increase to $17.75 from $17.50.
Bell Potter expects the FY23 result to be modestly above both guidance and consensus, and believes there is potential for the company to exceed its guidance of 40% growth in SaaS annual recurring revenue.
TNE recently announced CEO Edward Chung had been appointed to the board as managing director and CEO.
Chung was previously appointed as CEO in May 2017.
“Ed’s appointment is a natural progression given his strong leadership and performance in the CEO role at TechnologyOne,” TNE chairman Pat O’Sullivan says.
TNE is up 16% YTD.
Moelis Australia rate Silk Logistics a new buy
Current SP: $1.71; Target: $2.75
Moelis Australia have initiated coverage of Silk Logistics Holdings (ASX:SLH) with a buy rating and a $2.75 price target.
SLH is an integrated, port-to-door, logistics services business with locations in most of Australia’s major cities.
“SLH offers an integrated logistics exposure with FY23-25e 12% EPS CAGR at significant ~55% discount to peers,” the broker says.
Moelis says SLH boasts a tier one designation in port logistics and is well positioned to capitalise on forecasted growth in container volumes through the medium term, supported by recent Secon acquisition to bolster Victorian presence and wharfside bulks volume.
It also says SLH has an increased ancillary service suite and its cross sell strategy focus will help drive wallet share with 77% of clients on single service.
SLH’s warehousing and distribution capability complete the fully integrated service offering.
“Visibility on an additional 85 km2 capacity growth and matching demand supports our constructive view on the landside services of the business,” the broker says.
It says SLH has contracted revenue streams coupled with solid track record of acquisitions and strong management executing inorganic growth strategy.
The broker says its balance sheet firepower for medium term $1 billion revenue ambition is supported by modest 0.6x net debt (ex leases) to EBITDA leverage.
“SLH trades at 8.3x FY24e P/E, representing a deep ~55% discount to peers. Even after accounting for size and liquidity, we see compelling value in SLH given the forecast 14% 2-year EPS CAGR, driven by near term warehousing capacity expansion and cross sell opportunities to drive wallet share in port logistics,” the broker says.
The SLH share price is down 18% YTD.
Jarden Securities rates Champion Iron a new buy
Current SP: $6.06; Target: $7.33
Iron ore miner Champion Iron (ASX:CIA) has been rated a new buy by Jarden Securities. CIA recently provided an update for its Bloom Lake mine in northeast Quebec increasing measured and indicated resources by 40% and inferred resources by 360%.
The update to the 2019 feasibility study included an optimised mine plan with an 18-year life based on the mineral reserves for the project, north of Fermont.
“The combination of our expanded mineral resources, skilled workforce and supportive local stakeholders positions our company to continue to positively impact the region for generations,” CEO David Cataford said in a statement.
“The Labrador Trough, including Bloom Lake, contains one of the largest and purest iron ore resources globally and offers a unique opportunity for local stakeholders to participate in reducing steel industry emissions, which represents nearly 10% of global emissions.”
Jarden has a price target of $7.33 on CIA, which is down more than 16% YTD.
Ord Minnett rates Ramelius Resources a buy
Current SP: $1.45; Target: $2.05
A broker note out of Ord Minnett this week has helped boost the share price of gold miner Ramelius Resources (ASX:RMS), which was up 4% yesterday.
Ord Minnett analysts reckon RMS’s shares are low and expects them to rerate if the gold price strengthens.
The broker has a buy rating and $2.05 price target on its shares.
The CSL, PME, GMG, TNE,SLH,CIA & RMS share price today:
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