Don’t be discouraged by the market sell-off today as there’s still value to be found judging by the latest broker upgrades.
The S&P/ASX 200 Index (Index:^AXJO) is on track to close the week with a 0.7% loss as it struggles to decisively break above 6,000.
But the Coca-Cola Amatil Ltd (ASX: CCL) share price is bucking the downtrend on Friday. Shares in the beverage maker jumped 1.8% to $8.49 as we enter the last hour of trade.
Looking more appetising
The Coca-Cola share price got a boost after Goldman Sachs upgraded the stock to “buy” from “neutral”.
The broker turned positive on the underperformer after management posted its latest trading update. Coca-Cola is starting to look compelling after it shed a quarter of its value in 2020 while Goldman became more confident in its outlook.
“Although there remains risk that earnings momentum stays under downward pressure in the short term due to shutdowns, we are becoming increasingly compelled by the asymmetric opportunity that CCL’s longer-term earnings potential underpins,” said the broker.
“The line of sight to these future earnings is also underpinned by CCL’s BBB+/A3 credit rating and balance sheet liquidity.”
Trading at discount to the sector
Further, Goldman noted that the stock is trading on a CY2022 forecast price-earnings multiple of around 14.5 times.
This represents a significant discount to the Coles Group Ltd (ASX: COL) share price and Woolworths Group Ltd (ASX: WOW) share price. The supermarkets are on multiples that are well over 20 times each.
Room to boom
Another stock that Goldman thinks is too cheap to ignore is the Incitec Pivot Ltd (ASX: IPL) share price.
The explosives and fertiliser supplier shed a third of its value since January, but things are starting to turn for Incitec.
For one, poor demand for its explosives from global miners may be about to reverse in the next few months. The broker is expecting the industry to return to growth in FY21 and FY22, particularly for coal miners.
“While we remain below consensus (FY21E EBITDA -3%) on expectations for muted phosphate pricing, we see compelling risk-reward for IPL shares even in the absence of a sustained DAP recovery,” said Goldman.
“The stock’s current valuation implies minimal value for the Fertilizers segment on a SOTP basis as well, which we view as overly punitive.”
Goldman upgraded Incitec to “buy” and lifted its price target on the stock to $2.62 from $2.50 a share.
Low hanging fruit
Finally, the Vitalharvest Freehold Trust (ASX: VTH) share price got lifted to “buy” from “hold” by Bell Potter.
The broker pointed to improving prices for corps that are grown on its properties and its better dividend outlook for the upgrade.
Costa Group Holdings Ltd (ASX: CGC) rents farms from Vitalharvest to grow citrus fruits like oranges and blueberries.
Rents to get a boost
Strong overseas demand for these fruits is helping to push prices higher and Vitalharvest gets paid extra rent if prices of the soft commodities are strong.
“In addition, while early in the water year, we note that allocation prices in the southern MDB are down 33% YOY in Jul’20, which would imply a lower cost for unowned water for the 2020/21 citrus season,” said Bell Potter.
The broker’s 12-month price target on the stock is $0.84 a share.
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