Australian Broker Call

Citi rates API as Buy (1) -

Citi points out Australian Pharmaceutical Industries acquired Clear Skincare clinics for $127m in 2018 to diversify into the services market and away from the slow growth pharmacy distribution and retail industry.

The broker estimates Clear Skincare to be worth around $235m at 9x EV/EBITDA FY23, implying that the rest of the business trades at circa 6x. 

Citi also assumes the number of clinics will peak at 90 in FY23 and that revenue per clinics will reach $1m/year, roughly in line with pre-covid numbers in FY19. An operating income of $26m is expected in FY23. 

Buy with the target price rising to $1.50 from $1.40.

Target price is $1.50 Current Price is $1.32 Difference: $0.18
If API meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.32, suggesting downside of -1.7% (ex-dividends)

The company's fiscal year ends in August.

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

Morgan Stanley rates DHG as Overweight (1) -

Morgan Stanley assesses a sharp increase in Australia searching for new homes and considers this important for Domain Holdings.

The broker's investment thesis centres on the potential for an earnings super cycle in 2021-22, driven by positive listings growth and additional houses for sale, given there appears to be evidence Australians are actually re-thinking where they want to live.

Overweight retained. Target is $5.50. Industry view is Attractive. 

Target price is $5.50 Current Price is $4.77 Difference: $0.73
If DHG meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.83, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in May.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Ord Minnett rates HMY as Buy (1) -

March quarter originations were NZ$120m and Ord Minnett notes, importantly, the overall loan book expanded by 13%. No profit and loss metrics were disclosed although the broker believes Harmony Corp is on track for $85m in pro forma revenue in FY21.

The broker also expects the -49% discount to the peer group is likely to narrow as the company demonstrates continued acceleration in the loan book and builds critical mass. Buy rating retained. Target is reduced to $3.36 from $3.90.

Target price is $3.36 Current Price is $2.02 Difference: $1.34
If HMY meets the Ord Minnett target it will return approximately 66% (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

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

The company will sell its 30% interest in Tropicana gold mine. The cash consideration of $903m is considered a good outcome for IGO and a significant premium to Morgan Stanley's valuation of the asset at $551m.

The broker notes the deal is subject to a waiver from AngloGold Ashanti as it has a right of last refusal within 60 days.

Equal-weight. Target price is $5.65. Industry view: Attractive.

Target price is $5.65 Current Price is $6.76 Difference: minus $1.11 (current price is over target).
If IGO meets the Morgan Stanley target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.25, suggesting downside of -8.2% (ex-dividends)

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 JIN as Overweight (1) -

Morgan Stanley envisages greater upside in the migration to online lotteries over the longer term and notes, after a soft first half for jackpots, the second half is showing a strong rebound.

Overweight rating. Target is $15.20. Industry view: In-line.

Target price is $15.20 Current Price is $13.60 Difference: $1.6
If JIN meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $14.64, suggesting upside of 6.7% (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

Morgans rates MX1 as Add (1) -

The third quarter cashflow report shows to Morgans the business is well funded to achieve a number of key growth objectives over the next three years.

Nano sales are expected to accelerate in upcoming quarters, with additional distributor agreements a likely catalyst, explains the broker. Another catalyst is considered to be regulatory clearance for the Rover in Europe.

The Buy (Speculative) rating and $0.61 price target are unchanged. The downside risk is a delay in securing further Nano and Rover orders, cautions the analyst.

Target price is $0.61 Current Price is $0.33 Difference: $0.28
If MX1 meets the Morgans target it will return approximately 85% (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

Ord Minnett rates NCM as Buy (1) -

Fruta del Norte, 32% owned by Newcrest Mining, produced 104,000 ozs of gold in the March quarter, exceeding Ord Minnett's forecasts because of higher grades and a faster ramp up of the mill expansion.

The mill is expected to reach 1.5mtpa in nameplate capacity by the end of 2021. Buy rating and $36.50 target maintained.

Target price is $36.50 Current Price is $26.13 Difference: $10.37
If NCM meets the Ord Minnett target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $31.35, suggesting upside of 15.1% (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: 1.0

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

Morgan Stanley rates NWS as Overweight (1) -

Morgan Stanley assesses scale is becoming increasingly important in global book publishing and this is a better business than what the market is generally acknowledging.

News Corp has a track record of astute buying of book businesses, the broker suggests, and the Houghton Mifflin Harcourt transaction is low risk, strategically sound and financially attractive. News Corp will pay US$349m for the business.

Overweight rating retained. Industry view: Attractive. Target is US$31.

Current Price is $32.34. Target price not assessed.

Current consensus price target is $34.17, suggesting upside of 7.5% (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: 1.0

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

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

Morgan Stanley assesses Orocobre is benefiting from higher brine grades while having a predictable and expanding production profile. It remains the preferred lithium exposure.

In the third quarter sales were weaker than expected and the broker believes this needs clarification, which was not provided.

Morgan Stanley suspects delayed shipments, or the company is holding back tonnage to get a better price in the fourth quarter, which has been flagged at US$7400/t.

Equal-weight rating. Industry view: Attractive. Target is $4.35.

Target price is $4.35 Current Price is $5.83 Difference: minus $1.48 (current price is over target).
If ORE meets the Morgan Stanley target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.79, suggesting downside of -3.0% (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 ORE as Hold (3) -

The quarterly activities report has reinforced Ord Minnett's view that lithium prices have come off their lows and should trend higher.

Forward pricing guidance of US$7400/t is around 20% above prior guidance and compares with the broker's forecast of US$6800/t for the March quarter. Ord Minnett retains a Hold rating and $5.50 target.

Target price is $5.50 Current Price is $5.83 Difference: minus $0.33 (current price is over target).
If ORE 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 $5.79, suggesting downside of -3.0% (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

Morgan Stanley rates REA as Overweight (1) -

Morgan Stanley assesses a sharp increase in Australians searching for new homes carries important implications for REA Group.

The broker's investment thesis centres on the potential for an earnings super cycle in 2021-22, driven by positive listings growth and additional houses for sale, given there appears to be evidence Australians are actually re-thinking where they want to live.

Overweight rating. Target is $175. Industry view: Attractive.

Target price is $175.00 Current Price is $153.01 Difference: $21.99
If REA meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $152.40, suggesting downside of -2.3% (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

Citi rates RRL as Neutral (3) -

Regis Resources has bid $903m for IGO’s ((IGO)) 30% non-controlling stake in Tropicana Gold mine.  The 26% premium looks hefty to Citi especially given a lack of corporate synergies and the non-operating nature of the stake.

Even so, the broker notes the deal brings production visibility to circa 2030 at the expensive of dilution to earnings/NAV on its deck.

Citi retains a Neutral rating for Regis Resources and reduces the target to $3.40 from $3.85.

Target price is $3.40 Current Price is $3.22 Difference: $0.18
If RRL meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 27.5% (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

Credit Suisse rates RRL as Outperform (1) -

Regis Resources will acquire the 30% interest belonging to IGO Ltd ((IGO)) in Tropicana gold mine for $903m. The deal would be funded by equity and debt. The main risk for this deal to go ahead is the 70% owner, AngloGold Ashanti, imposing its last right of refusal to match the offer.

In the event this occurs Regis Resources will receive a $25m break fee from IGO Ltd if exercised prior to a capital raising or $40m post a capital raising.

Credit Suisse believes Tropicana will enhance the portfolio in many respects although the transaction is dilutive, factoring in the equity raising at a -46% discount to prior value. Outperform retained. Target is reduced to $4.40 from $5.05.

Target price is $4.40 Current Price is $3.22 Difference: $1.18
If RRL meets the Credit Suisse target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 27.5% (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 RRL as Overweight (1) -

Regis Resources will buy the 30% stake in Tropicana gold mine belonging to IGO Ltd for $903m. Morgan Stanley values the asset for IGO at $551m and believes the price to be paid is expensive.

Nevertheless, Regis Resources is likely to benefit from increased scale and diversity. The long-life Tropicana fits this strategy while the debt raised appears manageable given high margins and a strong net cash position.

Overweight maintained. Target is $4.35. Industry view: Attractive.

Target price is $4.35 Current Price is $3.22 Difference: $1.13
If RRL meets the Morgan Stanley target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 27.5% (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 WTC as Overweight (1) -

Morgan Stanley considers the improved guidance from DHL points to a continued firming in the freight forwarding market and this is positive for WiseTech Global.

While not all parts of the global economy have returned to pre-pandemic levels and a strong Australian dollar is a limiting factor, the broker assesses, importantly, the improving trends are observable.

The price target is increased to $34.00 from $29.75. Overweight rating. Industry view is Attractive.

Target price is $34.00 Current Price is $31.38 Difference: $2.62
If WTC meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $32.00, suggesting downside of -1.3% (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 Z1P as Upgrade to Buy from Neutral (1) -

While Citi had expected strong customer growth from Quadpay, the key highlight from Zip Co’s third-quarter update was stronger than expected volume growth.

The growth was led by Quadpay's total transaction value, up 31% ahead of Citi's forecast and up 14% over the last quarter on a seasonally strong December quarter. With Quadpay continuing to beat expectations, Citi upgrades to Buy from Neutral. 

The target drops to $11.30 from $11.35.

Target price is $11.30 Current Price is $9.73 Difference: $1.57
If Z1P meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $9.18, suggesting downside of -4.4% (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

Morgans rates Z1P as Add (1) -

Morgans highlights another strong quarterly performance with group revenue, merchants and customers all rising by 10%-20% on the sequential quarter.

The US was the standout as QuadPay delivered strong sequential 16% growth in revenue, transactions increased 7% and customers rose by 19%, explains the broker. As at  March, Quadpay is now annualising an impressive US$2.8bn of transaction volume, notes the analyst. 

The Add rating is unchanged. Morgans lowers EPS forecasts for FY21-22 fall by -2% and -4% on minor adjustments to sales and profit margins forecasts. As a result, the target price falls to $10.92 from $12.10.

Target price is $10.92 Current Price is $9.73 Difference: $1.19
If Z1P meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.18, suggesting downside of -4.4% (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 Z1P as Accumulate (2) -

Ord Minnett notes the acceleration in QuadPay in the March quarter. 674,000 new shoppers were added to the US platform and the broker notes this is a seasonally quiet period for retail/BNPL.

Australasia also performed ahead of the broker's expectations. Moreover, growth has not come at the expense of quality, as bad debts are trending down. Ord Minnett retains an Accumulate rating and raises the target to $11.50 from $11.40.

Target price is $11.50 Current Price is $9.73 Difference: $1.77
If Z1P meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $9.18, suggesting downside of -4.4% (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 Z1P as Sell (5) -

UBS believes the BNPL sector has been a material beneficiary of economic stimulus and is wary that the short-term outlook is uncertain as policy measures are wound back.

Zip Co produced another strong quarter of top-line metrics, the broker notes, although cost items were not disclosed. In Australasia total transaction value grew 61% and active customers increased by 4%.

QuadPay transaction value growth of 234% was slightly ahead of forecasts. UBS lifts second half transaction value forecasts for QuadPay by 13%.

UBS retains a Sell rating and raises the target to $6.50 from $6.40.

Target price is $6.50 Current Price is $9.73 Difference: minus $3.23 (current price is over target).
If Z1P meets the UBS target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.18, suggesting downside of -4.4% (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