Australian Broker Call

Credit Suisse rates AST as Neutral (3) -

Credit Suisse revises forecasts for the upcoming draft determination in Victoria, increasing FY22 forecasts for operating earnings (EBITDA) by 6% and net profit by 22.9%.

Ausnet has proposed to carve out the SCADA/Network control assets installed prior to 2016 and apply a remaining life of 5.3 years rather than the assumed 30-50 years. While this would add around $400m to annual revenue, the broker suspects the regulator will not allow it.

Credit Suisse expects the regulator will deem the company's operating expenditure efficient. Neutral retained. Target rises to $1.90 from $1.85.

Target price is $1.90 Current Price is $1.90 Difference: $0
If AST meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.80, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

Macquarie rates ECX as Outperform (1) -

Eclipx Group's end of lease income, a key measure of asset risk, contributed circa 34% of its core operating income in the first half and 36% in FY19. Management expects the second half end of lease income to be circa 90% of its first-half.

While the commentary was specific to the second-half earnings, Macquarie notes the current auto market conditions also reduce risk and support for the end of lease income. 

In a period of economic uncertainty, reduced asset risk from sustained high used car prices is positive, comments the broker. 

Macquarie retains its Outperform rating with a target price of $1.70.

Target price is $1.70 Current Price is $1.45 Difference: $0.25
If ECX meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.68, suggesting upside of 15.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates FPH as Sell (5) -

UBS finds home high flow therapy (HFT) to be an exciting opportunity and a natural extension of Fisher and Paykel Healthcare Corp's technology from hospital into the home. However, the broker also admits progress has been "painfully slow" when it comes to building clinical evidence and gaining insurance coverage.

Also, UBS finds it unlikely HFT will bridge the valuation gap to Fisher's current share price created by the pandemic related hospital sales. For now, UBS continues to take a cautious approach and reaffirms its Sell rating with a target price of NZ$20.20.

Current Price is $28.77. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: -0.5

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

Credit Suisse rates HLS as Outperform (1) -

The Australian government has extended coronavirus testing reimbursement post September 30. Importantly, Credit Suisse notes, this means for Healius the current $100 fee will continue, with $85 reimbursement.

The broker had previously assumed the test fee in Australia would be reduced to $50 and now forecasts a $100 fee will persist until March 31, 2021.

Moreover, the extension of funding of telehealth items supports an earnings recovery in base pathology, imaging and day hospital business. Outperform rating retained. Target rises to $3.52 from $3.45.

Target price is $3.52 Current Price is $3.33 Difference: $0.19
If HLS meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.52, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

UBS rates HLS as No Rating (-1) -

With no change to the Australian covid PCR reimbursement rate, UBS assumes covid reimbursement will remain unchanged through to March 31, 2021. This was considered by UBS a key near term risk for both Sonic Healthcare ((SHL)) and Healius.

Healius's earnings forecasts have been upgraded for FY21-22. The broker notes management is focusing on investing in the key diagnostics divisions and improving business processes. 

UBS is under research restriction on Healius.

Current Price is $3.33. Target price not assessed.

Current consensus price target is $3.52, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Citi rates HVN as Buy (1) -

Harvey Norman released yet another set of strong growth numbers over July and August, but Citi analysts are pointing out growth has already started to fade from the July peak.

Citi is forecasting this fade will continue over the course of FY21. Meanwhile, forecasts have been increased; FY21 by 14% but subsequent years only by 3%.

Buy rating retained with a price target of $5.20 (up by 20c). For now, the analysts maintain the outlook remains "upbeat" for the first half of FY21, also because the retailer is cycling bushfire-impacted sales.

Target price is $5.20 Current Price is $4.44 Difference: $0.76
If HVN meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Credit Suisse rates HVN as Outperform (1) -

Increasingly, data are supportive of above-trend household goods expenditure. Credit Suisse upgrades first quarter sales assumptions, resulting in an 8% upgrade to Harvey Norman's FY21 forecast earnings.

Rather than a quarterly focus, the broker believes the current change in spending behaviour should be considered as part of a multi-year reallocation and FY21 is likely to account for a significantly higher-than-usual proportion of expenditure on household goods.

Outperform retained. Target rises to $5.06 from $5.01.

Target price is $5.06 Current Price is $4.44 Difference: $0.62
If HVN meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Macquarie rates HVN as Outperform (1) -

Harvey Norman's sales revenue for the first 11 weeks of FY21 rose 31% versus last year with profit before tax up 186%.

Macquarie highlights the strong demand for consumer durables across the group’s ANZ and European operations with Australian demand seeing spending shift to goods from travel and services.

Earnings forecasts have been upgraded for FY21-23. The broker considers the update high-quality and believes the group's move to reduce exposure to ancillary investments may encourage new investors.

Outperform retained, target rises to $4.70 from $4.50.

Target price is $4.70 Current Price is $4.44 Difference: $0.26
If HVN meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

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

Strong sales growth has continued into September. Total Australian franchisee sales growth was 33.8% from July 1 to September 17. Morgan Stanley notes this includes the adverse impact of 18 franchised complexes being closed because of stage 4 restrictions in Melbourne.

Moreover, profit growth has been stronger with the company disclosing pre-tax profit for July/August was up 186%. This is well ahead of the broker's estimates and significant upgrades to consensus forecasts are expected.

Morgan Stanley retains an Equal-weight rating, $4.80 target and Cautious industry view.

Target price is $4.80 Current Price is $4.44 Difference: $0.36
If HVN meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Ord Minnett rates HVN as Accumulate (2) -

Ord Minnett expects momentum in the franchising operation to continue, assisted by an increasing focus on the home and with Harvey Norman enjoying significant operating leverage.

While the international business has been strong, the broker notes the pace of recovery is variable. Aggregate sales growth was 30.6% for July 1 to September 17, with underlying pre-tax profit up 186%.

Ord Minnett notes the valuation support and maintains an Accumulate rating and $5 target.

Target price is $5.00 Current Price is $4.44 Difference: $0.56
If HVN meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

UBS rates HVN as Buy (1) -

Harvey Norman's first-half update was strong with July-August's group profit up almost 186%. Earnings forecast has been upgraded for FY21 with ongoing potential upside risk while outer year estimates remain unchanged.

Looking at the undemanding valuation, scope for capital management and a neutral 2021 macro outlook, UBS retains its Buy rating. Target rises to $4.90 from $4.70.

Target price is $4.90 Current Price is $4.44 Difference: $0.46
If HVN meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Citi rates MFG as Neutral (3) -

Citi assesses the investment in Barrenjoey Capital is somewhat unconventional and likely to be dilutive to return on equity, although the size of the investment is relatively modest.

Nevertheless, the core business is showing solid flows and the broker remains attracted to the stock. Still, given the limited detail on one of the key growth items, the Retirement Income Fund, the broker retains a Neutral call. Target is reduced to $60 from $67.

Target price is $60.00 Current Price is $54.99 Difference: $5.01
If MFG meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $59.75, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

Credit Suisse rates MFG as Outperform (1) -

Magellan Financial has invested $158m for a 40% economic interest in Barrenjoey Capital Partners. The company expects attractive returns for its principal investment division amid an expansion of investment options.

Magellan will have no involvement in day-to-day operations and the acquisition represents just 1.5% of its market capitalisation. Credit Suisse believes the investment provides upside should Barrenjoey grow into a profitable operation.

The broker is confident inflows over the next 2-3 years should support earnings growth and allow the business to maintain its current above-peer multiple. Outperform rating and $65 target retained.

Target price is $65.00 Current Price is $54.99 Difference: $10.01
If MFG meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $59.75, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

Morgan Stanley rates MFG as Underweight (5) -

Magellan Financial is taking a 40% economic stake in Barrenjoey Capital Partners. The CEO will join the board but Magellan will not have an operating involvement.

Morgan Stanley notes the company is investing $90m in cash and 1.2m new Magellan Financial shares, so this is not a large investment.

The broker assesses it will be difficult for the company to return to more than a 55% return on equity and considers it one of the most expensive asset managers in the world.

Morgan Stanley maintains its Underweight rating. Industry view: In-line. Target is $48.

Target price is $48.00 Current Price is $54.99 Difference: minus $6.99 (current price is over target).
If MFG meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $59.75, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

UBS rates MFG as Neutral (3) -

Magellan Financial Group owns 40% in the foundation investment in Barrenjoey Capital Partners which is an Australian-based full service investment bank. The group will invest $155m comprising $90m cash and a $65m share placement to Barrenjoey.

UBS considers the investment to be mostly financial, with the group seeking to earn more than 10% per annum pre-tax returns. 

Neutral maintained. Target decreases to $58.65 from $61.25.

Target price is $58.65 Current Price is $54.99 Difference: $3.66
If MFG meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $59.75, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

Ord Minnett rates RHP as Accumulate (2) -

The company has acquired NZ-based IT services provider Parallo, which specialises in Microsoft Azure and VMware.

Although the acquisition is small, Ord Minnett considers it an enabler that will drive customer growth and retention of Rhipe's rapidly expanding Microsoft cloud service, as well as growth in adoption of the Microsoft office productivity suite.

Accumulate rating retained. Target rises to $2.45 from $2.35.

Target price is $2.45 Current Price is $1.78 Difference: $0.67
If RHP meets the Ord Minnett target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

UBS rates RMD as Neutral (3) -

ResMed previewed the Lumis high flow therapy device for home-based treatment of hypoxic COPD at the recent European Respiratory Society meeting. UBS believes Europe will be the initial target market for the device with the US a longer-term opportunity.

The broker calculates the theoretical market for high flow therapy in COPD is large with oxygen therapy being the incumbent form. In the short term, the broker thinks the market will remain focused on recovery in sleep-related sales.

UBS maintains its Neutral rating with a target price of US$200.

Current Price is $23.15. Target price not assessed.

Current consensus price target is $24.96, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: -0.1

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

Credit Suisse rates SHL as Outperform (1) -

Credit Suisse observes Sonic Healthcare is benefiting from economies re-opening and the persistence of the pandemic. The extension of funding to telehealth items in Australia supports an earnings recovery in the base business.

Credit Suisse had previously assumed the coronavirus test fee in Australia would be reduced to $50 from October 1 but now expects the $100 fee will persist until March 31. The broker upgrades FY21 estimates by 3%. Outperform rating and $37.50 target retained.

Target price is $37.50 Current Price is $33.27 Difference: $4.23
If SHL meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $34.33, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

UBS rates SHL as Neutral (3) -

With no change to the Australian covid PCR reimbursement rate, UBS assumes covid reimbursement will remain unchanged through to March 31, 2021. This was considered by UBS a key near term risk for both Sonic Healthcare and Healius ((HLS)).

Near term earnings forecasts have been upgraded. The broker thinks Sonic Healthcare looks better placed to grow earnings with contribution from covid-19 testing along with routine testing returning to historic levels in most regions.

UBS maintains its Neutral rating and raises the target to $32.70 from $32.10.

Target price is $32.70 Current Price is $33.27 Difference: minus $0.57 (current price is over target).
If SHL meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.33, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

Credit Suisse rates SXY as Outperform (1) -

The expansion of Atlas capacity by 50% has surprised Credit Suisse, being double the expansion previously flagged at the FY20 result. The broker observes a growth path is becoming clearer and presents 35% upside to FY23 operating earnings (EBITDA).

As highlighted in today's research update, Roma North gas production could increase by 33% in FY22 and Atlas by 50% in FY23.

The next major catalyst is likely to be capital management, in the broker's view. Management remains committed to returning value to shareholders alongside its growth plans. Outperform rating retained. Target rises to $0.42 from $0.39.

Target price is $0.42 Current Price is $0.33 Difference: $0.09
If SXY meets the Credit Suisse target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $0.40, suggesting upside of 16.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Morgans rates SXY as Add (1) -

Senex Energy has been awarded preferred tenderer status on two new blocks in the Surat and Bowen Basins.

The Surat acreage awarded is adjacent to the company’s flagship Atlas operation, boosting the acreage of the company’s highest value asset by 31%, calculates Morgans.

The broker highlights this increases the ultimate earnings potential for the company, while also lifting future earnings quality. The company is considered a dependable developer of new gas supply on the east coast, helping it to secure new acreage.

Morgans lifts EPS estimates for FY22 and FY23 by 4% and 14%, respectively.

The Add rating is unchanged and the target price is increased to $0.48 from $0.424.

Target price is $0.48 Current Price is $0.33 Difference: $0.15
If SXY meets the Morgans target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $0.40, suggesting upside of 16.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Ord Minnett rates SXY as Accumulate (2) -

Senex Energy has been awarded additional gas tenements in Queensland, including a block adjacent to Atlas. This will allow an expansion of the Jemena gas processing plant to double capacity, with first gas from 2022.

Ord Minnett considers this a clear positive for the business, with incremental gas reserves coming at effectively no cost. Overall, the broker estimates incremental production from Atlas represents 1-2% of east coast gas demand.

Accumulate rating retained. Target rises to $0.39 from $0.35.

Target price is $0.39 Current Price is $0.33 Difference: $0.06
If SXY meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $0.40, suggesting upside of 16.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

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

Tabcorp has sold its 11.6% interest in Jumbo Interactive ((JIN)) for $13.52 a share or $98m. A one-off net profit on the sale of $69m will be recorded in the first half and proceeds will be used to pay down debt.

Morgan Stanley assesses this has a marginal impact on earnings and suggests: it could signal pressure may be building on the balance sheet and, therefore, the company has had to sell one of its quality structural growth assets or, it could also mean Tabcorp has extracted the maximum value it perceives and will focus more on digital lotteries growth.

Morgan Stanley maintains its Equal-weight rating and $3.50 target. Industry view: Cautious.

Target price is $3.50 Current Price is $3.38 Difference: $0.12
If TAH meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.86, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

UBS rates TLS as Buy (1) -

UBS thinks the market is already pricing in the downside risks to Telstra Corp's earnings and dividends while not taking into account the positives. These, elaborates the broker, include upside from Telstra's 5G monetisation and longer term InfraCo / NBN optionality.

The broker notes the risk versus reward to be very favourable and considers Telstra as its preferred pick.

Buy rating and $3.70 target maintained.

Target price is $3.70 Current Price is $2.83 Difference: $0.87
If TLS meets the UBS target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.45, suggesting upside of 22.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

Macquarie rates TNE as Neutral (3) -

Macquarie notes TechnologyOne's forecasts and valuation, adjusted to capture AASB 16, have led to an increase in amortisation (capitalised software expense). Macquarie's revised FY20 profit before tax is -2% year on year, below guidance and consensus.

While a high-quality software business, the broker considers the company's transition to SaaS is progressing slower than expected. Acceleration in the SaaS business is needed if the company hopes to achieve its "optimistic" target of circa $500m annual recurring revenue in FY24, asserts the broker.

Macquarie retains its Neutral rating. Target falls to $8.20 from $9.50.

Target price is $8.20 Current Price is $7.75 Difference: $0.45
If TNE meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.12, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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