Broker Watch

The ASX 200 stocks attracting the biggest broker upgrades: Paladin Energy, Megaport

Mon 05 Feb 24, 10:47am (AEDT)
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Key Points

  • Paladin Energy experienced the largest week-on-week uplift in consensus target prices last week
  • During this time, uranium prices crossed US$107 for the first time since 2007, driven by mounting supply side setbacks and increasing demand
  • Megaport shares soared almost 40% last week after announcing a stronger-than-expected set of numbers for Q2 FY24

Uranium is the gift that keeps on giving in 2024, with spot prices crossing US$107/lb last week, up around 17% year-to-date to the highest level since 2007.

Citi upgraded Paladin Energy (ASX: PDN) to a Buy last week, with a $1.45 target price (from $1.05) to reflect higher near-and-long term uranium price forecasts.

"Our commodity team has raised its near-and-long term U3O8 price forecasts on the back of a more imminent Russian nuclear fuel ban, and potential continuations of problems with mine development in Kazakhstan and Niger," the analysts said in a note dated 25 January.

"The main driver of the uranium bull market has been the closure of mines due to low prices last decade, exacerbated by the shift towards non-Russian enrichment capacity that led to overfeeding and raised uranium demand."

The average uranium price forecast was raised to US$101 in 2024 and US$110 in 2025, with long-term pricing raised to US$115 (from $87). The new price assumptions resulted in 30% higher EBITDA assumptions for Paladin Energy between FY25-27.


Biggest ASX 200 Upgrades

Ticker

Company

Close

1-Week

Target Price

Prev Target Price

% Dif

PDN

Paladin Energy

$1.38

11.8%

$1.45

$1.30

11.5%

MP1

Megaport

$13.00

37.9%

$14.17

$12.82

10.5%

CCP

Credit Corp

$17.93

4.2%

$20.88

$19.06

9.5%

BOE

Boss Energy

$6.11

9.5%

$5.55

$5.24

5.9%

CAR

Car Group

$33.58

2.3%

$31.88

$30.18

5.6%

ALU

Altium

$51.85

6.6%

$45.80

$43.64

4.9%

RMS

Ramelius Resources

$1.61

3.6%

$1.84

$1.76

4.5%

CIA

Champion Iron

$8.58

5.8%

$8.96

$8.60

4.2%

SFR

Sandfire Resources

$7.28

3.3%

$7.25

$6.96

4.2%

REA

REA Group

$184.62

0.3%

$173.95

$167.63

3.8%

NWL

Netwealth Group

$16.76

-3.5%

$15.93

$15.40

3.4%

HVN

Harvey Norman

$4.40

-0.2%

$3.89

$3.77

3.2%

JHX

James Hardie

$59.35

6.8%

$56.55

$54.88

3.0%

'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between Thursday, 25 January and Friday, 2 February 2024

Megaport shares rallied almost 40% last week after reporting a better-than-expected second quarter FY24 result. The key numbers include:

  • Q2 revenue of $48.6 million, EBITDA of $15.1 million and net cash up $6.9 million

  • FY24 guidance unchanged – EBITDA $51-57 million, Revenue $190-195 million

  • FY24 capex guidance lowered to $20-22 million (previously $28-30 million)

  • Key KPIs QoQ growth: Customers +1%, Ports +2% and Total Services +3%

The EBITDA figure was 11.8% ahead of Citi expectations and 33.6% ahead of consensus. While the capex guidance was lowered by 8 million or 27.5% lower than previous guidance.

Some of the key takeaways from brokers include:

  • Citi: "2Q ARR was in-line with expectations and was boosted by a large global WAN deal. We see potential for consensus EBITDA upgrades due to the better than expected 1H result."

  • Morgan Stanley: "Key new information was lower ~A$8mn capex budget now expected for FY24 that should improve overall cashflow."

  • Macquarie: "Investment thesis is unchanged. Strong sales productivity and demand bode well for reinvestment in sales. Operating leverage with high-fixed cost base and completion of capital projects in FY23 provide a platform for strong double-digit FCF growth over the forecast period."

 

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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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