Australian Broker Call

Bell Potter rates ASB as Initiation of coverage with Buy (1) -

Bell Potter initiates coverage on Australian shipbuilder and defence contractor Austal with a Buy rating and $3.10 target price.

The company provides design, manufacturing and support capabilities for defence and commercial customers and operates five shipyards across four countries.

The deep pipeline of work for the next decade appeals to the analyst, with the around $4.3bn OPC and $4.7bn TAGOS contracts, and the likely award of the $1.25bn EMS contract.

Naval shipbuilding is experiencing tailwinds from record defence expenditure globally, notes the broker, and renewed emphasis on maritime capabilities.

Moreover, Bell Potter points to increased work domestically due to the AUKUS agreement and release of the 2023 Defense Strategic Review. 

Target price is $3.10 Current Price is $2.38 Difference: $0.72
If ASB meets the Bell Potter target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting upside of 10.3% (ex-dividends)

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

Ord Minnett rates CHL as Buy (1) -

Camplify Holdings has provided increased clarity around the scale of the RV insurance opportunity. Ord Minnett observes the market is watching with interest the company's progress as it develops insurance products for both those hiring and owners of RVs.

The broker emphasises the company's enviable position of having a significant footprint and understanding of the RV segment in Australasia and Europe, envisaging material upside risk to its numbers should the insurance initiative prove successful.

Buy rating maintained. Target rises to $2.64 from $2.60.

Target price is $2.64 Current Price is $2.01 Difference: $0.63
If CHL meets the Ord Minnett target it will return approximately 31% (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

Citi rates CLW as Downgrade to Neutral from Buy (3) -

After allowing for higher interest costs and June revaluations, Citi downgrades its rating for Charter Hall Long WALE REIT to Neutral from Buy and lowers its target to $4.40 from $5.00.

Higher gearing and interest rates place the earnings growth outlook at risk, suggests the broker, despite the 50% rental income
linked to CPI, which could benefit from a higher near-term CPI.

The analysts anticipate further downside to asset values due to prospects for a further increase in cap rates.

Target price is $4.40 Current Price is $4.08 Difference: $0.32
If CLW meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.61, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Morgans rates CWY as Hold (3) -

Cleanaway Waste Management confirmed FY23 earnings guidance during its strategy day briefing, though Morgans materially downgrades forecasts on lower implied 2H net revenue from earnings (EBIT) margin guidance.

The broker also notes the potential value uplift from the proposed Energy-from-Waste projects has fallen. Management explained various issues are impacting on the projects in Melbourne and SE Queensland including increased capex estimates.

Value is being created by progressing the projects, notes the analyst, and the company indicated selling down equity stakes is on the table.

The target falls to $2.49 from $2.74. Hold.

Target price is $2.49 Current Price is $2.59 Difference: minus $0.1 (current price is over target).
If CWY meets the Morgans target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

UBS rates DEG as Buy (1) -

De Grey Mining has signed an exploration agreement with Novo Resources for the Egina project. The agreement provides the company with the right to 50% interest in the Novo tenements and project management, with a $10m equity investment meaning it will hold 11.6% of Novo Resources.

UBS observes recent drilling at the Egina Becher deposit, just south of De Grey's Withnell, has sparked the interest and the deal is strategic as, while early days, it could sit in a "Hemi-like" setting. Buy rating and $1.75 target maintained.

Target price is $1.75 Current Price is $1.34 Difference: $0.415
If DEG meets the UBS target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $1.82, suggesting upside of 40.8% (ex-dividends)

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

Bell Potter rates ERD as Downgrade to Hold from Buy (3) -

Having already acquired a 17.73% interest in Eroad's shares, Canadian-based Brillian APAC Pty Ltd is making a non-binding indicative offer for the company at NZ$1.30/share.

Given the stake already accumulated and because NZ$1.30/share is at a substantial (around 69%) premium to the previous close, Bell Potter feels this is a knock-out bid.

The rating is downgraded to Hold from Buy on valuation and the $1.25 target is unchanged.

Target price is $1.25 Current Price is $1.13 Difference: $0.12
If ERD meets the Bell Potter target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.0

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

Ord Minnett rates FBU as Accumulate (2) -

Reflecting the challenging operating outlook for Fletcher Building, Ord Minnett downgrades FY23 EBIT forecasts for by -3% to NZ$800m. Around half of the company's revenue is tied to residential building which has slowed considerably in recent months.

The broker also expects a softening of non-residential activity. That said, the long-term view on the stock remains intact and Ord Minnett maintains an Accumulate rating with a $5.50 target.

Target price is $5.50 Current Price is $4.74 Difference: $0.76
If FBU meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.30, suggesting upside of 9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.6

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

Bell Potter rates GOR as Buy (1) -

Gold Road Resources has lowered FY23 production guidance (on a 100% basis) for Gruyere to 320koz-350koz from 340koz-370koz, which compares to Bell Potter's prior forecast of 348koz.

A combination of factors resulted in the downgrade including a rain event and availability of blasting resources, explains the analyst. All-in sustaining cost (AISC) guidance will follow with the June 2023 quarterly report, and is now expected to be higher (due to lower production).

The target falls to $1.95 from $2.05, while the broker's Buy rating is unchanged. The company's 19.74% holding in De Grey Mining ((DEG)) was also marked-to-market after a recent share price decline.

Target price is $1.95 Current Price is $1.60 Difference: $0.35
If GOR meets the Bell Potter target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting upside of 31.6% (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

Ord Minnett rates GOR as Buy (1) -

Gold Road Resources has downgraded 2023 production guidance as drill and blast problems were exacerbated by inclement weather during the June quarter. This has delayed access to high-grade sections of the Gruyere open pit.

Ord Minnett notes this is a reminder of the risk involved with single-asset producers but should not detract from the quality of the asset in question.

Gruyere is a tier-1 asset in a market that the broker observes is starved of opportunities as M&A heats up in the sector globally. Buy rating maintained. Target is lowered to $1.90 from $2.05.

Target price is $1.90 Current Price is $1.60 Difference: $0.3
If GOR meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting upside of 31.6% (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

UBS rates GOR as Buy (1) -

UBS previews fourth quarter and FY23 production results, looking ahead to FY24. Gold Road Resources' production expectations are lowered after wet weather delays at Gruyere. Buy rating maintained. Target is reduced to $2.25 from $2.35.

Target price is $2.25 Current Price is $1.60 Difference: $0.65
If GOR meets the UBS target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting upside of 31.6% (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

Shaw and Partners rates HLO as Buy (1) -

Helloworld Travel has acquired Express Travel Group for $70m which will be earnings accretive beyond FY24. Express Travel operates an air ticket consolidation business, retail travel networks and cruise and package wholesaling in Australasia.

Shaw and Partners observes travel is one of the sub-sectors of retail that still has some traction in its recovery and suspects Helloworld will beat earnings guidance of $38-42m in FY23.

The Buy rating and $3.40 target are unchanged.

Target price is $3.40 Current Price is $2.57 Difference: $0.83
If HLO meets the Shaw and Partners target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $3.16, suggesting upside of 27.9% (ex-dividends)

The company's fiscal year ends in June.

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

Bell Potter rates JLG as Downgrade to Hold from Buy (3) -

Bell Potter suspects the relative infancy of Johns Lyng's US business has driven the majority of the margin compression experienced in 2H of FY23 for business-as-usual.

Overall FY23 revenue guidance (excluding the soon to be exited Commercial Construction division) was raised by around $110m to $1.19bn. For earnings, there was a catastrophe upgrade, offset by a Construction downgrade along with a -$2.3m bad debt.

The broker downgrades its rating to Hold from Buy on expectations for a softer domestic demand outlook heading into El Nino. The target falls to $5.90 from $7.90 on lower EPS forecasts for FY24 and FY25.

Target price is $5.90 Current Price is $5.24 Difference: $0.66
If JLG meets the Bell Potter target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $6.63, suggesting upside of 28.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Citi rates JLG as Buy (1) -

While CAT guidance was better-than-expected, Citi attributes yesterday's sell-off in shares of Johns Lyng to business-as-usual (BAU) growth, which fell -23% short of the analyst's forecast.

The broker lowers its FY24 and FY25 earnings (EBITDA) forecasts by -5% and -7%, respectively, in anticipation of a more gradual ramp-up in BAU, with margin improvement accelerating into FY25.

Cautious sentiment on BAU will likely remain an overhang and Citi also awaits delivery of the company's US growth strategy.

The target falls to $6.50 from $9.65. Buy.

Target price is $6.50 Current Price is $5.24 Difference: $1.26
If JLG meets the Citi target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $6.63, suggesting upside of 28.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Macquarie rates JLG as Outperform (1) -

Towards the end of May, Macquarie initiated coverage on integrated building services company Johns Lyng with an Outperform rating and $7.50 target.

Yesterday, management upgraded revenue and earnings (EBITDA) guidance by 8.9% and 4.3%, respectively. The former was a 5.3% beat versus the broker's forecast while earnings guidance was in line. The broker keeps the rating and target unchanged.

Earnings guidance reflected a $7.2m catastrophe (CAT) upgrade, offset by a -$5m Construction downgrade along with a -$2.3m bad debt. Management is seeing an ongoing increase in the size and duration of work linked to CAT events.

The company noted record levels of 'work-in-hand' and stated the integration in the US is tracking to plan with CAT now a leading line of business.

Target price is $7.50 Current Price is $5.24 Difference: $2.26
If JLG meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $6.63, suggesting upside of 28.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

UBS rates MTS as Buy (1) -

Metcash will report its FY23 results on June 26 and UBS forecasts underlying profit of $312m, up 6.4%, with EBIT of $508m, up 9.9%. The broker notes volume declines, given elevated food inflation, are expected to have materialised in the second half.

Market share losses are also occurring, although the broker is confident in-store investment by independents will see some share gains retained.

Meanwhile, hardware should benefit from housing strength, albeit weighed down by poor weather in late 2022. Buy rating maintained. Target is reduced to $4.75 from $5.00.

Target price is $4.75 Current Price is $3.60 Difference: $1.15
If MTS meets the UBS target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $4.19, suggesting upside of 16.6% (ex-dividends)

The company's fiscal year ends in April.

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 NST as Neutral (3) -

In Citi's view, shareholders of Northern Star Resources should view upcoming capex requirements for the KCGM mill expansion as a down-payment for unlocking the region.

Management has approved the $1.5bn expansion which the analyst believes will deliver lower processing costs and improved reliability. The capex will come from existing liquidity and cashflows.

The Neutral rating is unchanged and the target rises to $12.30 from $12.10.

Target price is $12.30 Current Price is $12.62 Difference: minus $0.32 (current price is over target).
If NST meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.39, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in June.

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

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

Morgan Stanley provides further rationale after yesterday lowering its rating for Northern Star Resources to Equal-weight from Overweight on valuation. The target was also reduced to $13.15 from $13.65. Industry View: Attractive.

The broker highlights from management's presentation on the KCGM mill expansion that capex will be -36% higher than the analyst expected. Also, while milling rates are 12.5% higher, gold production is in line, indicating softer-than-expected economics.

Construction will commence from FY24-26 (the analysts had predicted FY25-28) and ramp-up from FY27-28 compared to Morgan Stanley's FY28-30 forecast. No additional changes are made to either the rating or target.

Target price is $13.15 Current Price is $12.62 Difference: $0.53
If NST meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.39, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates NST as Accumulate (2) -

Northern Star Resources has approved the KCGM expansion. Ord Minnett finds the financial metrics compelling and the asset should move into the top five global producing mines while simultaneously moving down the second quartile cost curve.

Estimates are adjusted to account for higher capital expenditure and an improved production profile over the longer term, with net asset valuation reduced by -5% and FY24 earnings reduced by the same amount on higher inflationary input.

Accumulate maintained. Target is reduced to $13.50 from $14.20.

Target price is $13.50 Current Price is $12.62 Difference: $0.88
If NST meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $13.39, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates NST as Neutral (3) -

UBS previews fourth quarter and FY23 production results, looking ahead to FY24. For Northern Star Resources the broker incorporates the KCGM mill expansion which should produce more gold but slightly higher expenditure.

The broker points out the company's growth and sustaining expenditure could remain above $1.2bn for the next 3-4 years but on its price deck and an Australian gold price of $2600/oz, cash flow remains positive even after maintaining dividends.

Neutral rating maintained. Target is raised to $13.00 from $12.70.

Target price is $13.00 Current Price is $12.62 Difference: $0.38
If NST meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $13.39, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates PME as Downgrade to Reduce from Hold (5) -

Morgans downgrades its rating for Pro Medicus to Reduce from Hold on valuation after a recent share price rally.

The analysts suggest existing investors trim overweight positions and new investors wait for a better entry point.

The broker's forecasts are unchanged, as is the $61.35 target price.

Target price is $61.35 Current Price is $67.02 Difference: minus $5.67 (current price is over target).
If PME meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $52.84, suggesting downside of -18.9% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates RRL as Downgrade to Neutral from Buy (3) -

UBS previews fourth quarter and FY23 production results, looking ahead to FY24. Regis Resources is downgraded to Neutral from Buy after its -2.9m resource reduction, which came primarily from Duketon and signals a shorter mine life.

The broker now forecasts a reduced production outlook, potentially falling back to 450,000 ozpa over FY26-27 before getting back to around 500,000 ozpa by the end of the decade with McPhillamys. Target is lowered to $2.00 from $2.35.

Target price is $2.00 Current Price is $1.95 Difference: $0.05
If RRL meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $2.36, suggesting upside of 27.1% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates SDF as Hold (3) -

Steadfast Group, Australia's largest insurance broker, has benefited from higher premiums and Ord Minnett assesses this benefit unlikely to abate in the short term.

The broker's forecast for profit growth is 4% ahead of the top end of management's guidance range, based on premiums increasing around 10% on average.

Ord Minnett likes the business and outlook but notes the shares are currently trading at an 8% premium to its $5.70 fair value estimate. Hold rating and $5.70 target price retained.

Target price is $5.70 Current Price is $6.06 Difference: minus $0.36 (current price is over target).
If SDF meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.27, suggesting upside of 4.6% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SSR as Buy (1) -

UBS previews fourth quarter and FY23 production results, looking ahead to FY24.  The broker continues to be attracted to the Hod Maden resource and values SSR Mining's share at $890m (40%).

UBS points out this high-grade and high-margin project contrasts with a Western Australian gold sector that is challenged by ageing ore bodies and struggling to generate free cash flow.

The broker retains a Buy rating and raises the target to $28.10 from $26.50.

Target price is $28.10 Current Price is $20.57 Difference: $7.53
If SSR meets the UBS target it will return approximately 37% (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

UBS rates TPG as Downgrade to Neutral from Buy (3) -

UBS downgrades TPG Telecom to Neutral from Buy as expectations for a successful MOCN decision by the Australian Competition Tribunal did not eventuate.

At current levels the broker believes the stock is fairly priced for continuing momentum in mobiles, which probably led to the soft upgrade to underlying EBITDA guidance of 1% at the mid point.

The broker raises FY23-25 estimates for EBITDA by around 1.5% to reflect the better-than-expected mobile performance in post-paid and pre-paid.

FY23-25 estimates for EPS are cut by an average of -17% to remove the incremental mobile subscribers in FY25 UBS had assumed from a successful outcome of the MOCN end deal. Target is reduced $5.55 from $6.00.

Target price is $5.55 Current Price is $5.12 Difference: $0.43
If TPG meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.93, suggesting upside of 15.8% (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