Australian Broker Call

Morgan Stanley rates AX1 as Equal-weight (3) -

Morgan Stanley believes JD Sports' recent share rally, up 9.7% following the company's first-half FY22 (to 1 August) beat with increased FY22 guidance, is a proxy for Accent Group once Australia reopens, which is currently on track for November 2021.

The broker believes the group is well-positioned to handle supply chain disruptions with its elevated levels of inventory and expects the group to benefit from pent-up demand similar that experienced in the US.

Target price is steady at $2.80. Equal-weight rating is retained. Industry view: In line.

Target price is $2.80 Current Price is $2.05 Difference: $0.75
If AX1 meets the Morgan Stanley target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $2.50, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.3

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

Ord Minnett rates BSL as Buy (1) -

Driven by strong US hot rolled coil prices, BlueScope Steel's North Star Division spreads have continued to rise, reporting an 8% increase in the past month. 

However, Ord Minnet notes Australian Steel Product spreads have fallen -16% in the same time period. The broker highlights a -20% drop in iron ore pricing was not sufficient to push the Australian Steel Product spread into the green. 

The Buy rating and target price of $35.00 are retained.

Target price is $35.00 Current Price is $24.07 Difference: $10.93
If BSL meets the Ord Minnett target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $29.05, suggesting upside of 22.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Citi rates BXB as Buy (1) -

Post the second day of Brambles' investor day presentations, Citi has retained a Buy rating and $13.58 target. It appears management is targeting 50bps in margin improvement, to be weighted towards H2.

Brambles also provided 5-7% sales guidance, of which 1-3% will have to come from net new contract wins, and Citi points out the latter is higher than historic rates.

Major news might be forthcoming as the company is mulling whether to move into plastic pallets, apparently desired by major customer Costco. A decision is expected by H2 FY22, the broker reports.

Target price is $13.58 Current Price is $11.24 Difference: $2.34
If BXB meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $12.75, suggesting upside of 16.6% (ex-dividends)

Forecast for FY22:

Forecast for FY23:

This company reports in USD. 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 BXB as Outperform (1) -

Brambles plans to deliver further automation, invest in digital and make improvements to pallet durability, requiring a heavy investment load in FY22-23. Credit Suisse believes the plans are positive but investors will need to be patient.

The focus is on delivering an incremental 10% in value and Brambles is guiding for 5-6% revenue growth in FY22 and 5-7% in FY23-25. The EBIT guidance for FY22 growth of 1-2% is significantly below the broker's estimates because of the higher transformation costs.

Outperform rating and $14.50 target maintained.

Target price is $14.15 Current Price is $11.24 Difference: $2.91
If BXB meets the Credit Suisse target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $12.75, suggesting upside of 16.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

This company reports in USD. 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

Macquarie rates BXB as Outperform (1) -

Guidance provided by Brambles Ltd to FY25 is the most ambitious under the current executive team, notes Macquarie, with the company hinting at a possible move into plastic pallets.

Macquarie suspects Costco, one of Brambles customers - which represents around 10% of the US pallet volume - is pushing for a plastic pallet solution and is expected to do so over the next three years with or without the company's involvement.

The capex for Brambles to enter this segment, notes Macquarie is around US$450-700m but the broker expects it to be offset by around -US$150-180m of reduced capital investment in wooden pallets during implementation.

Macquarie sits at the low end of the 5–7% revenue targets but still sees the potential for operating leverage in FY23.

Overall, on a constant-forex basis, the broker expects 6% underlying profit compound annual growth to FY25 with capex and dividends for the most part covered by cash generation.

Outperform retained. Target increases to $13.05 from $13.00.

Target price is $13.05 Current Price is $11.24 Difference: $1.81
If BXB meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $12.75, suggesting upside of 16.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

This company reports in USD. 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 CRN as Outperform (1) -

Credit Suisse notes Australian metallurgical coal prices have experienced another rally and are now well above estimates. The backdrop: Chinese domestic coal output suppressed under safety and pollution controls, Mongolian exports constrained by the pandemic, Canadian exports affected by wildfires and a tight labour market in the US, all signalling the coal market is unlikely to soften soon.

Under a spot scenario the broker expects Coronado Global could reach net cash of US$140m by the end of the year. With a buoyant price in Australia and the US, the broker is positive about the stock and envisages upside with the share price trending towards the target of $1.60. Outperform maintained.

Target price is $1.60 Current Price is $1.23 Difference: $0.37
If CRN meets the Credit Suisse target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $1.40, suggesting upside of 7.9% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

Macquarie rates ELD as Outperform (1) -

Driven by 20% and 4% upgrades to crop and livestock production, the estimated value of farm production for 2020/21 by ABARES was revised 2% upwards to $67.8bn and is expected to be up 10% versus the previous period.

To reflect these updated macro drivers - re current ABARES forecasts - Macquarie has increased Elders' FY21, FY22, and FY23 earnings per share (EPS) estimates by low to mid-single digits.

Beyond strong agricultural conditions, Elders has numerous levers to pull, including backward integration, bolt-on acquisitions, footprint growth, with which to drive its 5-10% earnings growth expected through the cycle, observes the broker.

Outperform retained, target increases to $14.12 from $13.96.

Target price is $14.12 Current Price is $11.94 Difference: $2.18
If ELD meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $13.07, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in September.

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 HDN as Add (1) -

The company has acquired six assets for $222m, to be funded via replacement and new debt. Distribution guidance for FY22 is now 8.25c.

Morgans adjusts forecasts to allow for the acquisitions, placement and distribution reinvestment plan and expects further accretive acquisitions that will drive upside.

The broker considers the portfolio well-positioned, a beneficiary of click and collect trends. Add rating maintained. Target rises to $1.69 from $1.62.

Target price is $1.69 Current Price is $1.60 Difference: $0.09
If HDN meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.65, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Ord Minnett rates HPI as Accumulate (2) -

Hotel Property Investments has entered into an agreement to acquire a pub, while also in advanced stages on a second pub acquisition and in the process of acquiring an additional 249 gaming machine operating authorities, the combined cost of which is -$75m. 

Transactions are set to be funded by $50m in equity, $10m via a security purchase plan, and the remainder from existing debt facilities. Ord Minnett estimates these acquisitions will be -2% dilutive to earnings per share. 

The Accumulate rating and target price of $3.60 are retained. 

Target price is $3.60 Current Price is $3.60 Difference: $0
If HPI meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgans rates IPL as Add (1) -

US ammonia production has been affected by Hurricane Ida and, while this is out of the company's control, Morgans reminds investors of the many issues that faced the Waggaman plant over FY21.

It also results in a material downgrade to earnings estimates as the ammonia price is at historically high levels. The broker leaves FY22-23 estimates mostly unchanged and notes there is material upside if fertiliser prices hold up and there are no more manufacturing problems.

Morgans reiterates an Add rating and $3.05 target, acknowledging the Waggaman plant needs to run smoothly for an extended period in order for the market to re-rate the stock.

Target price is $3.05 Current Price is $2.75 Difference: $0.3
If IPL meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.06, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates KSL as Add (1) -

The PNG competition regulator has denied Kina Banks' proposed acquisition of Westpac's ((WBC)) stake in Westpac PNG.

Regardless, Morgans still believes Kina Securities is in a good position to acquire Westpac customers organically and acquisition funding risks overhanging the stock have now been removed.

The broker reminds the market that Kina Securities has regulatory approval to acquire Westpac's Fiji operations, although undertaking a separate sale process for that asset will require Westpac's approval. Both are now considering the implications of the regulator's decision.

Add rating retained. Target is reduced to $1.31 from $1.57.

Target price is $1.31 Current Price is $0.85 Difference: $0.46
If KSL meets the Morgans target it will return approximately 54% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 1.0

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

Morgan Stanley rates LLC as Underweight (5) -

While Morgan Stanley doesn't think they should be factored into Lendlease Group's base case investment thesis, the broker highlights possible events that could deliver upside surprise in FY22/23 and impact the broker's current cautious outlook on the stock.

Firstly, the broker believes that the full divestment of the group's communities business  - which the company has flagged for review - in a more imminent timeframe, could be a positive.

Secondly, the broker notes there's the forward sale of Melbourne Qtr (office) - to be completed in FY24 - to NPS, a South Korean company.  Given that the group booked $55m earnings for the sale in FY21 - reflecting that 23% of the building has been leased - the broker assumes there's another $180m of earnings to be booked, depending on derisking progress.

Thirdly, there's the chance, notes the broker, that the group could sell down a stake in Sydney Place, TRX (LLC 60%), and Victoria Cross assets prior to completion in FY23-25, which could also deliver upside surprise prior to FY24.

Underweight rating and target of $11.40 are both retained. Industry view is In-Line.

Target price is $11.40 Current Price is $11.25 Difference: $0.15
If LLC meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $12.69, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Morgans rates MX1 as Add (1) -

Morgans assesses there is an opportunity in Micro-X, when comparing its technology and commercial outcomes with the US-based Nanox which operates in a similar segment.

Both are developing technology to militarise x-rays, with applications not only in hospitals but also in security and military settings.

Micro-X has also received Australia's Therapeutic Goods Authority approval for the Rover and the company estimates the market size is $10m. Morgans maintains a positive stance on the stock and the Speculative Buy rating is maintained. Target is $0.58.

Target price is $0.58 Current Price is $0.30 Difference: $0.28
If MX1 meets the Morgans target it will return approximately 93% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Macquarie rates OGC as Outperform (1) -

OceanaGold Corp's restart plan for Didipio is expected to see both processing and mining resume in fourth quarter 2021, with the miner’s 2021 guidance in line with Macquarie's estimates.

The company expects the underground operation to be fully ramped up within the next 10 months, six months earlier than the broker expected.

As a result of the faster ramp-up at Didipio, Macquarie lifts 2022 and 2023 earnings per share (EPS) estimates by 7% and 4%, with a -2% reduction in 2025 based on adjusted mine inventory assumptions.

The broker leaves its Outperform rating and the target increases to $2.90 from $2.50.

Target price is $2.90 Current Price is $2.58 Difference: $0.32
If OGC meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.43, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.7

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

UBS rates ORG as Buy (1) -

UBS lifts spot price forecasts for LNG and now expects Asian prices will remain around US$14/MMBtu throughout the second half. As a result earnings growth is anticipated for Origin Energy from higher APLNG distributions and its own supply book.

Estimates for earnings per share are lifted in FY23-24 by 3-10%. FY22 estimates are cut by -6% as higher spot LNG prices are offset by hedging losses. Buy rating unchanged. Target is raised to $5.10 from $4.80.

Target price is $5.10 Current Price is $4.58 Difference: $0.52
If ORG meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.88, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

UBS rates OSH as Buy (1) -

Oil Search and Santos ((STO)) have completed due diligence and entered a merger agreement whereby Oil Search shareholders will receive 0.6275 Santos shares for each share they hold.

The merger provides Oil Search shareholders with exposure to diverse growth projects including Barossa, Dorado and decarbonisation plans via carbon capture and storage as well as a share in $90-115m in pre-tax synergies.

The broker suspects Santos may exit Oil Search's Alaskan oil project altogether, as its main intention is to increase exposure to PNG.

Buy rating maintained. Target rises to $4.80 from $4.65.

Target price is $4.80 Current Price is $3.94 Difference: $0.86
If OSH meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.52, suggesting upside of 18.3% (ex-dividends)

The company's fiscal year ends in December.

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: 0.5

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

Macquarie rates PLS as Outperform (1) -

Pilbara Minerals second spot sale has been completed at a 130% premium to Macquarie's forecast realised price for the company's spodumene shipments in FY22.

Macquarie observes spot price momentum is a key share price driver for the company, and while the spot sales have accounted for around 5% of total FY22 volumes, the broker thinks the realised price suggests positive price momentum is most likely to continue.

The broker's earnings forecasts for the company are 46% higher than consensus averages for FY22 and 38% higher for FY23.

The broker retains an Outperform rating and a $2.70 target.

Target price is $2.70 Current Price is $2.26 Difference: $0.44
If PLS meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.15, suggesting downside of -12.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

UBS rates PPH as Neutral (3) -

Pushpay Holdings has highlighted the importance of its integrated product portfolio and, at its investor briefing, noted competition is intensifying while online church gatherings are here to stay.

The latter reinforces the need for a digital platform to track engagement. The focus is now shifting to growth and medium-sized churches in the US rather than geographic expansion.

UBS retains a Neutral rating and raises the target to NZ$1.90 from NZ$1.80.

Current Price is $1.80. Target price not assessed.

Current consensus price target is $1.90, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in USD. 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

Macquarie rates QBE as Neutral (3) -

Macquarie believes that divesting non-core assets, including Australian Home and Motor, LMI, and US Crop - which comprise 18% of group gross written premium - could be one way for new management to address QBE Insurance Group’s perennial valuation discount versus global peers.

In the eventuality of these portfolios being exited, which Macquarie assumes could attract between US$1.55bn and US$1.8bn, the broker believes capital management would not be implemented.

Instead, the broker expects proceeds to be reinvested in organic growth opportunities to improve scale in other portfolios.

Macquarie retains a Neutral rating and target of $12.10.

Target price is $12.10 Current Price is $11.97 Difference: $0.13
If QBE meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $13.94, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Citi rates RIO as Buy (1) -

Today's update is all about rapidly changing market dynamics for aluminium. Citi analysts have lifted their aluminium price forecasts to an average of US$2,475/t in 2021 and US$3,010/t in 2022, from respectively US$2,450/t and US$2,765/t prior.

Also noteworthy, the analysts believe spot aluminium prices can touch US$2,900/t in 0-3 month and US$3,100/t in 6-12 months as structural supply constraints spur on traders and speculators.

For Rio Tinto, rising costs are eating away some of the benefits for its aluminium operations and Citi has only increased EPS forecasts by 1% and 3% for this year and next.

Citi retains a Buy rating alongside a price target of $125.

Target price is $125.00 Current Price is $106.66 Difference: $18.34
If RIO meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $130.43, suggesting upside of 24.6% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates STO as Buy (1) -

Santos and Oil Search ((OSH)) have completed due diligence and entered a merger agreement whereby Oil Search shareholders will receive 0.6275 Santos shares for each share they hold. Santos is targeting pre-tax synergies of US$90-115m.

UBS still believes the merger will not dilute Santos shareholder interest, provided more than -$100m per annum in synergies is achieved. The broker suspects Santos may exit the Alaskan oil project altogether, as its main intention is to increase exposure to PNG.

Buy rating maintained. Target is raised to $8.45 from $8.30.

Target price is $8.45 Current Price is $6.49 Difference: $1.96
If STO meets the UBS target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $8.02, suggesting upside of 28.3% (ex-dividends)

The company's fiscal year ends in May.

Forecast for FY22:

Forecast for FY23:

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

UBS rates WPL as Buy (1) -

Amid robust demand for gas, UBS lifts its forecasts for Asian LNG prices. In turn, estimates for Woodside Petroleum's earnings per share are lifted by 3-11% over 2021-23.

UBS maintains a Buy rating, expecting the sector will benefit from a recovery in oil prices as well. Moreover, company-specific issues have been de-risked following the plans to merge with BHP Group's ((BHP)) petroleum business. Target is raised to $25.00 from $24.80.

Target price is $25.00 Current Price is $20.81 Difference: $4.19
If WPL meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $25.97, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Macquarie rates XRO as Underperform (5) -

Macquarie believes the net effect of Intuit's acquisition of Mailchimp for US412bn could be that Mailchimp may no longer integrate with other accounting software.

Give that Mailchimp is currently an ecosystem partner that connects to Xero, the broker notes Intuit’s acquisition of Mailchimp could result in lost subscriptions for Xero.

The broker suspects Intuit’s stronger platform could be a springboard for more aggressive market share expansion outside of the US which could dampen Xero’s growth momentum in some of its key markets.

Underperform rating and target of $130 are both retained.

Target price is $130.00 Current Price is $147.49 Difference: minus $17.49 (current price is over target).
If XRO meets the Macquarie target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $124.45, suggesting downside of -16.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: -0.2

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