Key points
- Macquarie comes out with a list of downgrades today
- The 3 ASX shares are all concentrated in resources and mining
- The ASX 200 Resources Index has fallen 8% this week after collapsing on 20 January.
The benchmark S&P/ASX 200 index (ASX: XJO) failed an attempted intraday snapback rally earlier this week after suffering extensive losses and is now down more than 7% for the month.
Meanwhile, as the selling impulse extends its reach throughout the markets, the S&P/ASX 200 Resources Index (XJR) also turned sharply last Thursday and is now 8% in the red for this week.
Amid the recent market calamity, investors are starting to unwind their exposure to growth and are budgeting less risk with their positioning.
That's true as companies who lack robust fundamentals and balance sheet credentials can't withstand a rates shock or economic downturn compared to their 'healthy' counterparts. As Warren Buffet said, "only when the tide goes out do you discover who's been swimming naked".
As such, the team at Macquarie just downgraded these three ASX shares. Let's take a look.
Cooper Energy Ltd. (ASX: COE)
Macquarie slashed its recommendation on Cooper Energy and now reckons the stock is set to underperform in 2022.
Analyst Mark Wiseman slashed the broker's valuation on Cooper by 14% to 24 cents, which implies a 19% downside potential at the time of writing.
The downgrade comes after the company released its quarterly update for the three months ended 31 December 2021 yesterday.
In its report, Cooper recognised a "record year to date production sales volume, and revenue", as YTD production is up 35% to 1.57MMboe and sales volume is up 67% to 2.02MMboe.
On this, revenue had climbed 96% to $95.4 million according to the earnings release. However, with respect to quarterly production, sales volume and revenue, the situation was in reverse.
"Total production down 6% to 0.76 MMboe, sales volume down 4% to 0.99 MMboe and revenue down 2% to $47.3 million; mainly impacted by planned downtime associated with the cut over from the Iona Gas Plant to the Athena Gas Plant" the company said.
In fact, compared to Q1 FY22, the company saw a net decrease in all items of sale volume and revenue quarter on quarter, whereas average realised prices increased marginally.
Hence, with this result in mind, Macquarie is less rosy on the outlook of Cooper rolling through the remainder of FY22. On last check, shares were down less than 1% on the day at 29.8 cents apiece.
OZ Minerals Limited (ASX: OZL)
Macquarie downgraded OZ Minerals to neutral from outperform following the release of its quarterly results yesterday as well.
Despite achieving record FY revenue of $2.1 billion and meeting guidance for the 7th consecutive quarter, investors continued applying the selling pressure yesterday as shares finished in the red.
However, the OZ Minerals share price is stuck in a downward spiral that's been in situ since 20 January, in lock-step with a selloff in the wider market.
For instance, the S&P/ASX 200 Resources Index (XJR) has collapsed over 7% in the past week whereas OZ has plunged 14%.
Macquarie isn't so rosy on the outlook in 2022 and 2023 for the company and joined a slew of fellow brokers in downgrading OZ from a buy following the report.
Analyst Hayden Bairstow cut the recommendation in a note today and also cut the investment bank's price target on the stock by 21% to $29.10 in doing so.
Curiously, Bloomberg Intelligence reports that "Investors who followed Bairstow's recommendation received a 36% return [on OZ] in the past year, compared with a 35% return on the [OZ Minerals] shares".
Mincor Resources NL (ASX:MCR)
Another ASX share that Macquarie revised downwards today was Mincor Resources. This time Bairstow cut the broker's recommendation from an outperform to neutral.
However, even with the revised sentiment, Bairstow actually increased Macquarie's valuation on Mincor by 10% to $1.70 per share.
Each of these moves occurred following the release of Mincor's quarterly activities report as well, to which the broker was hoping for more juice that's worth the squeeze.
Macquarie's valuation of Mincor now sits above the consensus price target of $1.60 per share, which is curious given the broker's decision to change its rating to the downside. Although, notably, the theme for the broker's downgrades today have been resource/mining based.
Indications of sector sentiment from Macquarie? It's hard to say. Although, the broad sector is certainly facing challenges on the charts early in 2022.
Plus it's not hard to see Macquarie's stance in the near-term, given the market correction that's been in place since January 1 at least.
Throughout its analysis of Mincor, Macquarie upgraded the company to a buy in December after starting coverage at neutral in August 2021. When the stock was rated to outperform, it gained circa 33%, whereas it climbed just 13% in the time it was rated a hold.
Time will tell if the broker's thesis comes to fruition in any way. At the time of writing, the Mincor Resources share price has climbed more than 1% and is now fetching $1.62 apiece, after rallying more than 57% in the last 12 months.
