Australian Broker Call

Morgan Stanley rates AD8 as Overweight (1) -

Morgan Stanley believes Audinate's competitive position is improving, but transitory headwinds have masked underlying earnings power.

The broker sees top-line re-acceleration from FY22 that is underestimated by consensus. The structural growth story is considered intact and risk-reward compelling at these levels.

The $400m winner-take-most networked audio total addressable market (TAM) is the company's to lose, assesses the analyst. It's considered the company is leveraging its audio dominance into synergistic verticals with a combined $1bn-plus TAM.

The rating is Overweight with an unchanged target price of $7.50. Industry view: In-line.

Target price is $7.50 Current Price is $6.05 Difference: $1.45
If AD8 meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Morgan Stanley rates AIA as Downgrade to Equal-weight from Overweight (3) -

The Auckland Airport share price has rallied 77% from its March 2020 trough. Morgan Stanley thinks the company's leading domestic pax recovery and favourable leverage to the trans-tasman bubble are well appreciated by investors.

As a result of a survey of Chinese outbound travel intentions, Morgan Stanley tempers enthusiasm somewhat (noting Asia-NZ flights are longer haul). However, the broker hasn't changed its view on a long list of positives for the company including earnings diversity from the Mangere land bank and lack of competition.

Morgan Stanley downgrades the rating to Equal-weight from Overweight with the target price increasing to NZ$7.47 from NZ$7.07. Industry view: Cautious.

Current Price is $6.99. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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: 0.0

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

Credit Suisse rates AMC as Neutral (3) -

Credit Suisse assesses Amcor has further potential to penetrate the small customer base in North America. The small customer segment makes up an estimated US$5bn of a US$20bn industry.

The broker calculates the opportunity is around US$500m in sales at higher margins if executed well. Neutral rating and $15.50 target retained.

Target price is $15.50 Current Price is $15.82 Difference: minus $0.32 (current price is over target).
If AMC meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.87, suggesting upside of 7.2% (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: 0.6

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

Ord Minnett rates ANZ as Upgrade to Accumulate from Hold (2) -

Ord Minnett's stance on the major banks has turned somewhat positive. While the fundamental revenue outlook has not improved, the broker notes the stocks are cheap and trading below book values (except Commonwealth Bank).

House prices are holding up better than feared, points out Ord Minnett, and housing finance approvals continue to improve. This is further bolstered by the federal budget aiding the households and small- to medium-sized enterprises (SME).

The broker expects a rally in value stocks into year-end and also believes all the major banks will pay dividends this year. 

Reflecting its incrementally more positive view on the sector, Ord Minnett upgrades its recommendation on ANZ Banking Group to Accumulate from Hold. The target price rises to $20 from $19.50.

Target price is $20.00 Current Price is $18.61 Difference: $1.39
If ANZ meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $21.49, suggesting upside of 13.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Ord Minnett rates CBA as Hold (3) -

Ord Minnett's stance on the major banks has turned somewhat positive. While the fundamental revenue outlook has not improved, the broker notes the stocks are cheap and trading below book values except for Commonwealth Bank.

House prices are holding up better than feared, points out Ord Minnett, and housing finance approvals continue to improve. This is further bolstered by the federal budget aiding the households and small- to medium-sized enterprises (SME).

The broker expects a rally in value stocks into year-end and also believes all the major banks will pay dividends this year. 

Ord Minnett maintains its Hold recommendation with the target price rising to $66.30 from $65.30.

Target price is $66.30 Current Price is $67.71 Difference: minus $1.41 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $67.23, suggesting downside of -1.8% (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

Ord Minnett rates CIM as No Rating (-1) -

Following Cimic's third-quarter result, Ord Minnett has updated its financial model for the group. 2020-22 net profit estimates have been reduced largely due to increased depreciation and amortisation charges.

The broker assumes division wise margins will remain broadly consistent with the first half. Near-term revenue assumptions are reduced as project awards get delayed due to the pandemic. 

Ord Minnett is currently unable to provide a rating or target.

Current Price is $22.17. Target price not assessed.

Current consensus price target is $26.73, suggesting upside of 22.7% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CIM as Neutral (3) -

Cimic Group's third-quarter sales, operating income and net profit figures were in-line with UBS's estimate but the operating cash flow conversion,  impacted by the slowdown of revenues and new work due to covid-19 and reduced debtor factoring, was weaker than expected.

No formal earnings guidance was provided. UBS expects better operating conditions and momentum going into the fourth quarter. 

UBS maintains its Neutral rating with a target price of $23.

Target price is $23.00 Current Price is $22.17 Difference: $0.83
If CIM meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $26.73, suggesting upside of 22.7% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates CNU as Neutral (3) -

First quarter connection data signals trends are reverting to pre-pandemic levels.

Total fibre connections increased by 33,000. Copper connections decreased by -57,000 over the same period.

Macquarie retains a Neutral rating and NZ$7.65 target.

Current Price is $8.06. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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: -0.3

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

UBS rates CSL as Buy (1) -

UBS observes CSL's decline in plasma collection volumes over the last six months appears to be priced in with the stock underperforming the ASX200 by circa -20% over the period.

The broker decides to focus on the medium-term outlook for the business. Assuming CSL is able to manage its clinical trials successfully and complete commercialisation, the broker believes its valuation, based on future discounted cash flows (DCF methodology), falls in-line with its current price target for the stock.

That price target, explains the report, sits right in the middle of a successful outcome (valuation $427) and a negative outcome (valuation $255). UBS makes no changes to the Buy rating or $346 price target.

Target price is $346.00 Current Price is $295.32 Difference: $50.68
If CSL meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $311.11, suggesting upside of 5.0% (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: 0.4

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

Ord Minnett rates ILU as Hold (3) -

Iluka Resources's EGM will be held on October 16 for shareholders to vote on the proposed spin-off of MAC iron ore royalties to form Deterra Royalties ((DRR)).

Ord Minnett expects the decision to be 'yes' and expects Iluka to trade ex-Deterra rights from October 23 with Deterra commencing trading from November 3.

Assumptions and costs for Iluka have been revised and accordingly, the broker maintains its Hold rating with the target price rising to $9.50 from $8.90.

Target price is $9.50 Current Price is $9.44 Difference: $0.06
If ILU meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $10.07, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Credit Suisse rates JHG as Upgrade to Neutral from Underperform (3) -

Credit Suisse upgrades to Neutral from Underperform, following further analysis on the potential initiatives activist investor Trion could employ to enhance shareholder value.

Initiatives could include improving the operating margin by streamlining product and reducing the real estate footprint as well as leveraging the balance sheet and repurchasing stock. The broker raises the target to $26 from $16.

Target price is $26.00 Current Price is $37.27 Difference: minus $11.27 (current price is over target).
If JHG meets the Credit Suisse target it will return approximately minus 30% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.63, suggesting downside of -8.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.8

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

Macquarie rates MGX as Outperform (1) -

The update on the Shine project suggests it can produce 6mt in stage 1 and 2 over FY22-25. Macquarie expects this should materially boost the company's leverage to iron ore prices.

Production at Koolan Island is expected to double in FY22 and generate $1bn in free cash flow over the life of the mine. Macquarie maintains an Outperform rating and reduces the target to $0.93 from $0.95.

Target price is $0.93 Current Price is $0.73 Difference: $0.2
If MGX meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

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

Newcrest Mining will move to the second stage at the Cadia expansion project. This -US$175m expansion should be completed in late FY22.

The miner will also spend -US$65m at Lihir to pick up more gold. Citi believes consensus expectations at Lihir have been reset and earnings momentum is now positive.

Newcrest Mining will also list on the Toronto Stock Exchange this week but, as there is no equity issue with this secondary listing, liquidity could be challenging, Citi asserts, noting the TSX is "crowded with gold stocks".

Citi upgrades to Buy from Neutral and maintains a $37 target.

Target price is $37.00 Current Price is $31.26 Difference: $5.74
If NCM meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $36.09, suggesting upside of 13.1% (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: 0.6

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

Macquarie rates NCM as Neutral (3) -

The stage 2 expansion project at Cadia has been approved along with the front end recovery project at Lihir. This is in line with previous expectations.

Macquarie also expects a maiden inferred resource estimate for Havieron will be forthcoming in the first half of FY21, amid encouraging results.

The broker retains a Neutral rating and reduces the target by -6% to $33.

Target price is $33.00 Current Price is $31.26 Difference: $1.74
If NCM meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $36.09, suggesting upside of 13.1% (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: 0.6

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

Morgan Stanley rates NCM as Overweight (1) -

Newcrest Mining announced approvals at Cadia and Lihir.

Morgan Stanley had already assumed Cadia stage 2 expansion would happen given favourable economics, although approval is considered a positive step.

The broker calculates recovery upgrades at Lihir will benefit the long life mine with a strong 32% internal rate of return (IRR).

Morgan Stanley concludes both announcements are positive developments for the company's two key assets.

Overweight rating maintained with a target price of $37.40. Industry view: Attractive.

Target price is $37.40 Current Price is $31.26 Difference: $6.14
If NCM meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $36.09, suggesting upside of 13.1% (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: 0.6

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

Ord Minnett rates NCM as Accumulate (2) -

The news that Newcrest Mining got approval for expanding its projects at Cadia and Lihir has had a minimal impact on Ord Minnett's valuation. However, the broker notes this is a good reminder of the optionality remaining within these two long-life assets.

In Ord Minnett’s view, the key catalysts are updates on growth projects at Telfer (Havieron) and Red Chris.

For now, the broker maintains its Accumulate recommendation with the target price rising to $34.70 from $34.30.

Target price is $34.70 Current Price is $31.26 Difference: $3.44
If NCM meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $36.09, suggesting upside of 13.1% (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: 0.6

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

Morgans rates OTW as Hold (3) -

Over The Wire Holdings will acquire Digital Sense which provides customisable and scalable cloud offerings to enterprise and government customers.

The cloud services include infrastructure as a service, desktop as a service, storage as a service and data protection as a service. The three largest customers are local or state governments.

Cloud solution is one of three key pillars for Over The Wire Holdings. The three are cloud, connect and collaborate. Digital Sense is both a customer and supplier to the company and, according to the analyst, the business and its technical solutions are already well known to the company.

The deal makes strategic sense to Morgans and bolsters the company's cloud offering and enterprise and government base. It's also considered to make financial sense by delivering double-digit cash EPS accretion and double-digit cash return on equity (ROE).

Morgans upgrades cash EPS forecasts by 8% in FY21 and 20% in FY22.

The Hold rating is unchanged and the target price is increased to $5.01 from $4.38.

Target price is $5.01 Current Price is $4.60 Difference: $0.41
If OTW meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.0

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

Morgan Stanley rates PDL as Overweight (1) -

Morgan Stanley sees some downside risk to its own flow forecasts for Pendal Group for the September quarter. This is based on weaker retail flows in JO Hambro Capital Management (JOHCM). 

However, the broker thinks risks are mostly in the price and the circa 6% dividend yield is attractive. Additionally, it's considered September funds under management (FUM) is likely to beat the broker's forecast, given stronger markets.

Morgan Stanley also expects institutional flows to be a net positive in the September quarter.

Overweight rating reaffirmed with a target price of $7.30. Industry view: In-line.

Target price is $7.30 Current Price is $6.03 Difference: $1.27
If PDL meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $6.63, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Morgan Stanley rates SYD as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley believes green shoots in Sydney Airport's routes over the next 12 months should support a re-rating back towards (but not exceeding) historical valuations.

The broker considers the company could also benefit from proposed concessional corporate tax arrangements in FY21 and FY22 (100% capex write-offs), pushing out cash tax payments further in time.

Modest distributions may resume in late 2021, according to the broker.

The rating is upgraded to Overweight from Equal-weight and the target price is increased to $6.67 from $6.39. Industry View: cautious.

Target price is $6.67 Current Price is $6.02 Difference: $0.65
If SYD meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $5.87, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Ord Minnett rates WBC as Hold (3) -

Ord Minnett's stance on the major banks has turned somewhat positive. While the fundamental revenue outlook has not improved, the broker notes the stocks are cheap and trading below book values (except Commonwealth Bank).

House prices are holding up better than feared, points out Ord Minnett, and housing finance approvals continue to improve. This is further bolstered by the federal budget aiding the households and small- to medium-sized enterprises (SME).

The broker expects a rally in value stocks into year-end and also believes all the major banks will pay dividends this year. However, the prospects for Westpac Banking Corp are considered to be the most uncertain given the possible impact from below-the-line charges.

Ord Minnett maintains its Accumulate recommendation with the target price rising to $18.80 from $18.20.

Target price is $18.80 Current Price is $18.21 Difference: $0.59
If WBC meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $20.20, suggesting upside of 9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Macquarie rates WGX as Outperform (1) -

First quarter production results were in line with guidance. However, costs were better than expected. Macquarie observes the ramp up of Big Bell continues to gain momentum.

The broker has progressively improving production expectations over FY21. Outperform retained. Target is steady at $3.20. 

Target price is $3.20 Current Price is $2.64 Difference: $0.56
If WGX meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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