Australian Broker Call

UBS rates AGL as Upgrade to Neutral from Sell (3) -

As the share price is down -51% in the year to date, UBS assesses a higher cost of capital amid earnings headwinds from lower electricity prices and gas margin compression are factored in.

Despite the stock trading at a 5.5% dividend yield, the broker finds few positive catalysts supporting the case for new marginal buyers, as upside from rising electricity prices is hedged out until FY23.

UBS cuts FY22-24 estimates for earnings per share by -2-4% to reflect higher oil-linked gas supply costs. Target is reduced to $6.00 from $7.60 and the rating is upgraded to Neutral from Sell.

Target price is $6.00 Current Price is $5.90 Difference: $0.1
If AGL meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.02, suggesting upside of 22.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

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

UBS observes, for the first time, the most important buying factor for US customers is "availability" rather than price. Availability is considered a strength in CHEP. The broker suspects this will enable the company to achieve price increases beyond simply sharing cost inflation.

Moreover, the economic profit of Brambles is 82% correlated with shareholder returns and UBS expects yield on margins will continue to lift, supported by transformation benefits. The broker upgrades to Buy from Neutral and raises the target to $13.30 from $11.00.

Target price is $13.30 Current Price is $10.56 Difference: $2.74
If BXB meets the UBS target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $12.60, suggesting upside of 19.4% (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: 0.7

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

Ord Minnett rates EXP as Buy (1) -

Ord Minnett is impressed with the company's acquisition of the "perfect" asset for the current climate.

The $46.9m purchase of Trees Adventure appears to be an ideal fit as it has 14 sites across five states in Australia and with more than 85% of visitors, pre-pandemic, sourced from residents within driving distance.

The broker finds no reason why demand will not remain strong in coming years and growth is also expected from the roll-out of up to 10 new sites. Ord Minnett retains a Buy rating and raises the target to $0.48 from $0.33.

Target price is $0.48 Current Price is $0.40 Difference: $0.08
If EXP meets the Ord Minnett target it will return approximately 20% (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 GOR as Outperform (1) -

Gruyere's 2021 guidance has been updated following the unplanned shutdown of the ball mill. Guidance is now 250-260,000 ounces which is better than Macquarie had anticipated.

While there is some risk of further work, the broker notes stronger grade should also aid production growth in the medium term. Macquarie upgrades estimates for earnings per share by 6%. Outperform rating and $1.40 target maintained.

Target price is $1.40 Current Price is $1.25 Difference: $0.15
If GOR meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates NCK as No Rating (-1) -

Nick Scali has announced the acquisition of Plush-Think Sofas. The company has acquired the business for $103m in enterprise value with completion expected in the December quarter.

Nick Scali expects the acquisition will be accretive in the first full year of ownership before the realisation of synergies, which were not disclosed.

Plush is an Australian specialist sofa retailer in the mid market and Scali expects the acquisition will enhance its growth potential.

Macquarie is restricted from providing a rating or target at present.

Current Price is $12.12. Target price not assessed.

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

Ord Minnett rates PNI as Accumulate (2) -

Ord Minnett notes operating momentum is continuing. The company has acquired an additional 10% interest in Coolabah Capital having also expanded its distribution footprint when acquiring Winston Capital.

Funds under management were $91.2bn as of August, up 2% since June. This includes a low margin, -$3.9bn mandate loss from the Omega affiliate. Ord Minnett reiterates an Accumulate rating. Target is raised to $17.00 from $15.20.

Target price is $17.00 Current Price is $15.46 Difference: $1.54
If PNI meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $15.60, suggesting upside of 4.8% (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

Morgan Stanley rates RBL as Initiation of coverage with Overweight (1) -

Morgan Stanley initiates coverage on Redbubble with an Overweight rating and $6.50 target. The company is the largest global print-on-demand marketplace which connects over 700,000 independent artists. A third-party fulfillment network prints the products. 

The analysts like the large addressable market and the scope for  increasing the monetisation of the existing customer base. Moreover, there's considered to be highly profitable unit economics and a high free cashflow business model.

Threats may arise from various sources including competition, copyright infringement and management turnover, cautions the broker.

Target price is $6.50 Current Price is $4.17 Difference: $2.33
If RBL meets the Morgan Stanley target it will return approximately 56% (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

UBS rates S32 as Buy (1) -

South32 has exercised a pre-emptive right to acquire an additional 25% stake for US$250m in the Mozal aluminium smelter, Mozambique, lifting its holding to 72.1%. Mozal produces 570,000tpa of aluminium using hydropower, and exports mainly to Europe.

Aluminium prices are up 45% in the year to date amid strong demand, and given power restrictions are impacting supply in China.

UBS also notes Alcoa plans to start 268,000tpa of aluminium capacity at Alumar in Brazil, which is jointly owned with South32. South32 is expected to make a decision on whether to restarts it share (40%) by the end of the year.

UBS points out the decision appears compelling at current aluminium prices. Buy rating and $3.40 target are unchanged.

Target price is $3.40 Current Price is $3.58 Difference: minus $0.18 (current price is over target).
If S32 meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.95, suggesting upside of 9.1% (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: 0.9

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

Ord Minnett rates SFR as Hold (3) -

Having now integrated the MATSA acquisition into its valuation, Ord Minnett is concerned copper prices could trade lower. Property sector weakness in China and Power shortages could weigh.

The broker would become more positive once there is more stability in the macro economic backdrop and/or copper prices. Hold retained. Target is reduced to $5.70 from $6.40.

Target price is $5.70 Current Price is $5.36 Difference: $0.34
If SFR meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.49, suggesting upside of 24.8% (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 SLK as Buy (1) -

SeaLink Travel has not won the Melbourne Metro Bus Franchise (MMBF) contract. UBS had anticipated it would come down to a choice between SeaLink Travel and Kinetic, the latter being the winner. This is a relatively large contract to miss out on.

The investment view has not changed, and the broker does not include any contract wins in forecasts as the growth pipeline is strong. Nevetheless, UBS observes there is a level of expectation implied by the share price regarding winning contracts over the short term.

At a minimum either the Sydney Region 9 or the MMBF were needed just to meet market pricing so the importance of winning Region 9 has increased, in the broker's view. Buy rating maintained. Target is reduced to $10.20 from $10.50.

Target price is $10.20 Current Price is $8.30 Difference: $1.9
If SLK meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $9.90, suggesting upside of 26.8% (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

Macquarie rates WAF as Outperform (1) -

Sanbrado's production in the September quarter was 20% ahead of Macquarie's expectations. The broker notes a robust performance in both the underground and open pit.

The broker lifts estimates for earnings per share in 2021 by 10% but makes no changes to the $1.20 target. Macquarie expects West African Resources to continue the trend of rapid deleveraging via debt repayments. Outperform rating maintained.

Target price is $1.20 Current Price is $1.02 Difference: $0.18
If WAF meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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