Australian Broker Call

Morgan Stanley rates A1N as Underweight (5) -

Morgan Stanley believes structural growth of Retail Media provides a medium-term incremental headwind to ARN Media's radio/TV revenues, and is not priced into the current valuation.

Previously, explain the analysts, industry Retail Media spending was funded via the trade/marketing spend budget, but increasingly traditional media brand advertising budgets are being tapped.

The broker forecasts Retail Media spending on in-house/owned advertising platforms will be $2.8bn in 2027, up from around $1bn in 2022.

Morgan Stanley keeps an Underweight rating because of the characteristically high fixed costs of ARN Media's radio businesses. Target 80c.

Target price is $0.80 Current Price is $0.97 Difference: minus $0.17 (current price is over target).
If A1N meets the Morgan Stanley target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Shaw and Partners rates BC8 as Buy (1) -

Black Cat Syndicate's shareholders have approved the Paulsens funding package, with Chinese investment groups Fuyang Mingjin and Southeast Mingqing to be issued 100m shares each at 22.5 cents per share, with the former also providing a $15m debt facility.

Shaw and Partners notes the agreement will see each investment company hold a 19.9% stake in Black Cat Syndicate, with fund expected to be received in March. The company has recently reported a 24% increase to the Paulsens resource.

The Buy rating is retained and the target price decreases to 49 cents from 55 cents.

Target price is $0.49 Current Price is $0.27 Difference: $0.225
If BC8 meets the Shaw and Partners target it will return approximately 85% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates COL as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley upgrades its rating for Coles Group to Equal-weight from Underweight partly due to future benefits from supply chain investments. The target price also rises to $16.50 from $14.75.

The broker believes e-commerce will return to growth in FY24 and suggests a shift of grocery spend online remains the largest e-commerce opportunity. Online penetration rates in the US and the UK (for example) are far above Australia, explain the analysts.

Morgan Stanley's also sees an improvement in FY24 margins for Coles due to benefits from stock loss reversal. Industry View: In-Line. 

Target price is $16.50 Current Price is $15.17 Difference: $1.33
If COL meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $16.46, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Bell Potter rates DVP as Buy (1) -

Develop Global has been awarded an underground development contract at the Mt Marion lithium mine in WA, which highlights to Bell Potter a deepening relationship with Mineral Resources ((MIN)).

This outcome follows the increased stake by Mineral Resources in Develop Global to around 14% from 12.9% in November this year, and the former using its 20.0% interest in Essential Metals ((ESS)) to vote in favour of the Develop Global’s acquisition proposal.

The Buy rating and $4.30 target are unchanged.

Target price is $4.30 Current Price is $2.92 Difference: $1.38
If DVP meets the Bell Potter target it will return approximately 47% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates EDV as Upgrade to Buy from Neutral (1) -

UBS upgrades its rating for Endeavour Group to Buy from Neutral on valuation and increases its target to $6.00 from $5.40. It's felt markets concerns are overdone around further regulation following government imposition of spending limits on Tasmanian poker machines in September last year.

The Endeavour Group share price has fallen -33% since that time. However, an around -40-50% decline in gaming earnings (EBIT) from FY27 onwards would be required to justify the current share price, point out the analysts.

The company is not as strong a gaming operator relative to peers, notes the broker, and gaming revenue is recovering following smoking bans introduced in mid-2000s.

Also, government budgets are not currently forecasting a decline in gaming revenues, highlights UBS.

Target price is $6.00 Current Price is $5.00 Difference: $1
If EDV meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $5.69, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Bell Potter rates EOS as Speculative Buy (1) -

On the basis of higher-than-expected revenue in October and an anticipated strong end to the year, explains Bell Potter, Electro Optic Systems has provided 2023 revenue guidance of between $210m-$230m. Management also anticipates a strong end to 2023.

This new guidance exceeds forecasts by the broker and consensus for $176.9m and $177.5m, respectively, partly due to ongoing work from the major Middle East contract and initial work from EM Solutions on the Royal Australian Navy contract.

A remote weapons systems (RWS) contract with a Western European customer for $51m also helps to boost revenue for FY23, note the analysts.

The Buy rating is unchanged and the target rises to $1.50 from $1.25.

Target price is $1.50 Current Price is $0.97 Difference: $0.535
If EOS meets the Bell Potter target it will return approximately 55% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates FPR as Buy (1) -

Citi reinitiates coverage on FleetPartners Group, estimating the company is capable of growing earnings per share at a 7% compound annual growth rate through to FY27 as it progresses its buyback and vehicle supply improves.

The broker sits 10% ahead of consensus expectations on full year net profit, anticipating strong novated lease demand. Citi considers the electric vehicle transition thematic to be positive for FleetPartners Group, expect if electric vehicles reach price parity.

The broker reinitiates with a Buy rating a target price of $3.60.

Target price is $3.60 Current Price is $2.86 Difference: $0.74
If FPR meets the Citi target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.20, suggesting upside of 9.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates IRE as Buy (1) -

Ord Minnett believes the turnaround at Iress is progressing well after a strategy update by management confirmed the broker's view a temporary earnings blip will reverse in 2024. The target rises to $9.60 from $9.20 on lower anticipated operating expense growth.

The broker suggests there will be ongoing balance sheet progress from divestment of non-core businesses and improving earnings. Over the forecast period, the net debt/EBITDA ratio is expected to average 1.3 times compared to the current 2.3 times.

The analyst also remains confident on the growth outlook for the company's key segment, Superannuation, due to ongoing customer wins and numerous upcoming project implementations. Buy.

Target price is $9.60 Current Price is $7.36 Difference: $2.24
If IRE meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $8.56, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates MTS as Neutral (3) -

Upon initial analysis of today's 1H results by Metcash, Citi notes earnings (EBIT) - including associates - of $247m were in-line with forecasts by the broker and consensus of $248m and $245m, respectively.

Food earnings were above the broker's forecast on margin management, while Hardware disappointed on higher-than-anticipated costs, with the earnings margin in that division declining by -50bps. Overall sales were in line with Citi's forecast.

As expected by the analysts, sales growth remains weak into the 2H, only rising by 0.8% in the first four weeks of trading largely due to ongoing weak Food sales.

Despite the in-line result, Citi questions the sustainability of Food earnings given ongoing market share loss and falling food inflation.

Neutral rating. Target $4.

Target price is $4.00 Current Price is $3.55 Difference: $0.45
If MTS meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 12.2% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates MTS as Buy (1) -

In an initial assessment of today's 1H results by Metcash, UBS notes underlying earnings (EBIT) exceeded the consensus forecast by 1% with outperformance by the Food and Liquor segments.

The broker was pleased by the resilience exhibited by Food (margins rising by 6bps) as divisional results included a -$2.8m restructuring charge. However, Hardware disappointed due to rising costs worse-than-expected operating de-leverage.

Buy rating. Target $4.25.

Target price is $4.25 Current Price is $3.55 Difference: $0.7
If MTS meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 12.2% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates NEC as Overweight (1) -

While Morgan Stanley believes structural growth of Retail Media provides an incremental headwind to Nine Entertainment's revenues, a buffer is provided by a diversified business mix. Digital and subscription businesses account for greater than 50% of revenues.

Previously, explain the analysts, industry Retail Media spending was funded via the trade/marketing spend budget, but increasingly traditional media brand advertising budgets are being tapped.

The broker forecasts Retail Media spending on in-house/owned advertising platforms will be $2.8bn in 2027, up from around $1bn in 2022.

The Overweight rating is maintained. Target $2.30. Industry View: Attractive.

Target price is $2.30 Current Price is $1.90 Difference: $0.4
If NEC meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $2.31, suggesting upside of 19.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates OML as Equal-weight (3) -

While Morgan Stanley believes structural growth of Retail Media provides a medium-term headwind to oOh!media's out-of-home (OOH) revenues, the company is relatively less exposed than peers.

Previously, explain the analysts, industry Retail Media spending was funded via the trade/marketing spend budget, but increasingly traditional media brand advertising budgets are being tapped.

The broker forecasts Retail Media spending on in-house/owned advertising platforms will be $2.8bn in 2027, up from around $1bn in 2022.

Morgan Stanley hasn't updated research on oOh!media for some time. A target of $1.55 is set. Equal-weight.

Target price is $1.55 Current Price is $1.44 Difference: $0.11
If OML meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.77, suggesting upside of 23.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates PMV as Neutral (3) -

Premier Investments has guided to first half earnings of $200m, compared to consensus expectations of $181m. As per Citi, this could imply better than expected revenue growth, consistent with peers, but the broker expects a resilient profit margin to be the likely cause.

Citi finds the update encouraging, particularly given the pressures facing customers. With apparel and footwear retailing holding up well in recent months and benign updates from peers, the broker lifts its first half revenue growth forecast to -2% year-on-year, from -5%.

The Neutral rating is retained and the target price increases to $26.50 from $24.90.

Target price is $26.50 Current Price is $25.11 Difference: $1.39
If PMV meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $25.62, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates PMV as Overweight (1) -

Premier Investments remains Morgan Stanley's preferred small/mid cap exposure in retail following provision of 1H earnings (EBIT) guidance of around $200m, implying FY24 earnings of $323m (based on a 62%:38% 1H:2H split).

The broker sees upside to this guidance with upcoming key selling periods and management's track record of beating expectations.

Target $32.00. Overweight rating. Industry view: In-Line.

Target price is $32.00 Current Price is $25.11 Difference: $6.89
If PMV meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $25.62, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates PMV as Sell (5) -

With Premier Investments achieving record sales during the Black Friday trading week, and the company confident in being well prepared for approaching key holiday trading periods, it is expecting to deliver first half earnings of $200m.

The company also commented on its strategic reviews of its brands, noting a first phase focus on assessing future growth plans and optimal operating structures of each, including considering a demerger of the Smiggle and Peter Alexander brands.

The Sell rating is retained and the target price increases to $24.00 from $23.50.

Target price is $24.00 Current Price is $25.11 Difference: minus $1.11 (current price is over target).
If PMV meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.62, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates QUB as Buy (1) -

AGM commentary highlighted to Ord Minnett positive growth within Qube Holdings' operating division, supported by growth in the Auto, Energy, Ports/Bulk segments. Three acquisitions during FY24 to-date also contributed to growth.

The broker anticipates only modest EPS growth in FY24, with management re-affirming expectations for positive underlying earnings
growth, albeit at a slower pace than during FY23.

The Buy rating is maintained and the target eases to $3.34 from $3.35.

Target price is $3.34 Current Price is $2.92 Difference: $0.42
If QUB meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.44, suggesting upside of 15.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Bell Potter rates RFG as Buy (1) -

Bell Potter increases its target for Retail Food to 13c from 12c following a broadly in-line AGM trading update for the first 17 weeks of FY24, and announcement of a Queensland-based acquisition.

The company will pay -$10m for Beefy’s Pies, a vertically integrated cafe business with nine retail outlets. The acquisition will provide an opportunity to rollout the domestic brand in franchisee format, explains the broker.

The Buy rating is unchanged.

Target price is $0.13 Current Price is $0.06 Difference: $0.068
If RFG meets the Bell Potter target it will return approximately 110% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates S32 as Add (1) -

South32's share price has declined broadly in line with fellow mining midcap peers over the last year, observes Morgans.

The broker attributes this share price weakness to a short-term deterioration in earnings but also notes the fast-tracking of the Hermosa development will be insufficient to plug a gap in South32's growth profile.

Because of this gap, the broker's Add recommendation is reliant upon a recovery in impacted base metal markets including coal, copper, aluminium and nickel. The target is lowered to $4.80 from $5.20 

Target price is $4.80 Current Price is $3.09 Difference: $1.71
If S32 meets the Morgans target it will return approximately 55% (excluding dividends, fees and charges).

Current consensus price target is $4.03, suggesting upside of 28.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates SHL as Overweight (1) -

Morgan Stanley highlights November medicare data showing pathology and diagnostic imaging benefits growing strongly above pre-
pandemic levels.

Sonic Healthcare remains the broker's top for domestic health services. Morgan Stanley's $35.55 target and Overweight rating are unchanged. Industry view is In-Line.

Target price is $35.55 Current Price is $29.12 Difference: $6.43
If SHL meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $34.46, suggesting upside of 19.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates SXL as Underweight (5) -

Morgan Stanley believes structural growth of Retail Media provides a medium-term incremental headwind to Southern Cross Media's  revenues, and is not priced into the current valuation.

Previously, explain the analysts, industry Retail Media spending was funded via the trade/marketing spend budget, but increasingly traditional media brand advertising budgets are being tapped.

The broker forecasts Retail Media spending on in-house/owned advertising platforms will be $2.8bn in 2027, up from around -$1bn in 2022.

The price target for Southern Cross Media slips to 70c from 75c. Underweight.

Target price is $0.70 Current Price is $1.03 Difference: minus $0.335 (current price is over target).
If SXL meets the Morgan Stanley target it will return approximately minus 32% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.01, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates TUA as Overweight (1) -

Following an AGM trading update by Tuas, Morgan Stanley feels it had previously underestimated the company's technology and cost advantage. Mobile net adds in the 1Q continued to grow, while cash flow conversion and margins beat the broker's forecasts.

The analysts explain the company's performance metrics are now comparable to, or better than, incumbents for network availability, tunnel coverage and indoor/outdoor coverage. A highly efficient cost base is also noted, supported by a digital-led distribution strategy.

The target rises to $3.15 from $2.40 and the Overweight rating is maintained. Industry view is In-Line.

Target price is $3.15 Current Price is $2.65 Difference: $0.5
If TUA meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates UNI as Upgrade to Buy from Neutral (1) -

With several indicators of a strong Black Friday sales period for Universal Store, Citi has upgraded its rating on the retailer. The broker does note risk that Christmas and Boxing Day shopping may have been pulled forward, it feels potential downside is relatively subdued.

The broker's data suggested improvement in both foot traffic and sales across Australian clothing retailers during the recent Black Friday sales, relative to the preceding weeks.

The rating is upgraded to Buy from Neutral and the target price increases to $3.93 from $3.70.

Target price is $3.93 Current Price is $3.53 Difference: $0.4
If UNI meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting upside of 17.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WOW as Underweight (5) -

Morgan Stanley increases its target for Woolworths Group to $34.50 from $33 partly due to future benefits from supply chain investments. 

The broker believes e-commerce will return to growth in FY24 and suggests a shift of grocery spend online remains the largest e-commerce opportunity. Online penetration rates in the US and the UK (for example) are far above Australia, explain the analysts.

Underweight rating. Industry View: In-line. Coles Group (Equal-weight) is Morgan Stanley's preferred exposure.

Target price is $34.50 Current Price is $34.56 Difference: minus $0.06 (current price is over target).
If WOW meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $37.02, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources