Australian Broker Call

Ord Minnett rates ABG as Buy (1) -

Having reviewed Abacus Group following the separation of Abacus Strorage King, Ord Minnett notes the retail portfolio is trading well, while the office portfolio faces new supply and soft demand.

The shares screen significantly undervalued, in the broker's view, although rising interest costs are likely to "roughly offset" revenue growth for the next three years.

While the older buildings in the portfolio are not well-positioned for the new hybrid working arrangements, Ord Minnett suspects rental downside is limited.

Two thirds of the commercial portfolio are from 15 offices while the other third is retail and other properties. Buy rating retained. Target is reduced to $1.75 from $1.90.

Target price is $1.75 Current Price is $1.15 Difference: $0.605
If ABG meets the Ord Minnett target it will return approximately 53% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Bell Potter rates BCI as Speculative Buy (1) -

Bell Potter incorporates the new details for the Mardie salt and potash project. BCI Minerals has highlighted base capital costs are up 57% on the 2021 FID and first salt production will now be in the second half of 2026 compared with prior estimates of 2024.

As of June 30 the construction was around 25% complete with -$369m spent. Conditional credit approval from lenders for up to $800m in undrawn debt finance has been received and other conditional debt facilities are being negotiated.

Bell Potter now makes a Speculative addition to its Buy rating to account for the gap between Iron Valley earnings and the delayed ramp up of the Mardie project. Target is raised to $0.44 from $0.32.

Target price is $0.44 Current Price is $0.28 Difference: $0.155
If BCI meets the Bell Potter target it will return approximately 54% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Morgan Stanley rates BTH as Overweight (1) -

After a softer-than-expected FY23 result from Bigtincan Holdings, which  was largely pre-guided, Morgan Stanley re-bases revenue and lowers operating expenditure assumptions.

The broker envisages lingering uncertainty despite the improved free cash flow and lowers earnings estimates to reflect a softer topline. Overweight. Target is reduced to $0.73 from $0.95. Industry view: In line.

Target price is $0.73 Current Price is $0.36 Difference: $0.375
If BTH meets the Morgan Stanley target it will return approximately 106% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Morgans rates CMW as Hold (3) -

Cromwell Property's FY23 operating profit of 6.06cps compared to Morgans forecast for 6.3cps due to lower contributions from funds management (no retail transactional fees) and impacts from asset sales.

Additionally, profits suffered from lower co-investment income and materially higher interest costs, explains the broker.

Gearing remains elevated, so management's focus remains on debt reduction via asset sales, points out Morgans.

While there was no formal FY24 guidance, management forecast a distribution of 0.83cpu will be paid for the September quarter, which if annualised, equates to 3.32cpu, down from 5.5cpu in FY23, explains the broker.

Target price is $0.70 Current Price is $0.47 Difference: $0.235
If CMW meets the Morgans target it will return approximately 51% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Morgan Stanley rates COH as Downgrade to Underweight from Equal-weight (5) -

Since the FY23 result Cochlear has rallied around 16%, outperforming the S&P/ASX200 industrials. As the stock is now trading "well north" of Morgan Stanley's price target of $240 and at a premium to its historical forward PE average, the rating is downgraded to Underweight from Equal-weight.

The company has guided to slowing unit growth into FY24 and the upgrades from the installed base are now captured in forecasts so the broker assesses there is limited upside surprise potential. Industry view: In-line.

Target price is $240.00 Current Price is $270.12 Difference: minus $30.12 (current price is over target).
If COH meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $235.73, suggesting downside of -11.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Shaw and Partners rates ELD as Buy (1) -

ABARES has reported the national winter crop will fall to slightly below the 10-year average, to 45.22mt and dry conditions in northern regions are likely to result in below-average yields.

Elders has recently downgraded its earnings guidance for FY23 and now expects underlying EBIT in the range of $165-175m.

While soft commodity prices have been largely stable, livestock prices have fallen further -10% since the company last updated, Shaw and Partners notes.

The broker points out conditions are challenging and Elders is now the fourth most shorted stock on ASX. Buy rating retained. Target is $9.

Target price is $9.00 Current Price is $6.43 Difference: $2.57
If ELD meets the Shaw and Partners target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $7.25, suggesting upside of 13.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Bell Potter rates EOS as Initiation of coverage with Speculative Buy (1) -

Bell Potter initiates coverage of Electro Optic Systems with a Speculative Buy rating and $1.25 target.

Following difficulties experienced in 2022, the broker comments a new management team is in the process of implementing a strategic turnaround, focused on cost discipline and "responsible" growth.

The company has been restructured around its core business lines and achieved -$25m in annualised cost savings, ceasing investment in the SpaceLink program.

The broker notes recent material contracts in both defence and space systems have provided significant visibility on revenue throughout 2023 and 2024.

Target price is $1.25 Current Price is $0.93 Difference: $0.325
If EOS meets the Bell Potter target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

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

Subsequent to Fisher & Paykel Healthcare's trading update on August 28, Morgan Stanley lowers earnings estimates by -3% for FY24 and by -2% for FY25 and thus lowers the target to $21.50 from $22.43. Equal-weight rating. Industry view: In-line.

Target price is $21.50 Current Price is $20.77 Difference: $0.73
If FPH meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $21.00, suggesting upside of 3.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

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

Bell Potter rates GNC as Buy (1) -

The ABARES east coast winter crop forecast is now raised to 20.8mt and the summer crop estimate broadly unchanged at 4.1mt.

Bell Potter continues to suspect the outcome will be softer than the forecaster estimates and suspects marketing returns are unlikely to be at the levels comparable to FY22-23.

The net impact is an upgrade to net profit estimates for Graincorp of 2% in FY24 and 6% in FY25. Buy rating and $9.45 target unchanged.

Target price is $9.45 Current Price is $7.45 Difference: $2
If GNC meets the Bell Potter target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $8.83, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Morgans rates GNC as Hold (3) -

ABARES has marginally increased its 2023/24 winter crop forecast from the June estimate, which will ultimately positively impact on GrainCorp's FY24 earnings. Beyond the current forecast, ABARES flagged clear downside risks given the BOM’s dry weather outlook.

The broker points out GrainCorp will also benefit in the near-term from above average carry over grain of around 3.75mt from FY23, helping to elevate exports.

The broker's target falls to $7.85 from $8.65 after leaving its FY23 earnings (EBITDA) forecast unchanged and lowering the FY24 forecast by -9.8%. The Hold rating is unchanged.

The lower FY24 forecast is due to a crop production payment of -$22m, more conservative grain marketing earnings and lower crush margin assumptions, explain the analysts.

Target price is $7.85 Current Price is $7.45 Difference: $0.4
If GNC meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.83, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Morgan Stanley rates HVN as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley reviews the divergent trends in the consumer sector, revealed by the reporting season. July trading updates highlight a slowdown in demand although the slowdown was in most cases less than expected and consumer resilience has surprised the broker.

The broker's overweight ratings are skewed to those retailers where growth is driven by offshore expansion or where there is strategic value. As a result, Harvey Norman is downgraded to Underweight from Equal-weight.

The downgrade is premised on exposure to big-ticket items and housing-related expenditure and franchisee margins being historically more volatile through economic cycles. Target is unchanged at $3.50. Industry view is In-Line.

Target price is $3.50 Current Price is $4.05 Difference: minus $0.55 (current price is over target).
If HVN meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.95, suggesting downside of -1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.2

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

Shaw and Partners rates LAU as Buy (1) -

Shaw and Partners transfers coverage to another analyst, observing Lindsay Australia is positioned for long-term profitable growth in a large and attractive target market. Debt is modest, the company pays a dividend and management expertise is high.

The broker updates forecasts to include the FY23 financial results and the acquisition of WB Hunter. FY24 revenue growth of 25.8% is expected along with underlying net profit growth of 16.4%.

Valuation is considered attractive and a Buy rating and $1.60 target are maintained.

Target price is $1.60 Current Price is $1.13 Difference: $0.475
If LAU meets the Shaw and Partners target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $1.55, suggesting upside of 40.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

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

Orora will acquire Saverglass for -$2.16bn. Mid single-digit accretion is expected within the first year, although Morgan Stanley notes this includes benefits from AASB 133 accounting and its analysis shows a more modest level of accretion after synergies.

Saverglass manufactures high-end bottles for premium and ultra-premium spirits and wine markets with a manufacturing footprint in Europe, Mexico and the UAE.

The transaction will be funded through an equity raising of $1.35bn and $875m in debt. The broker believes the deal is fair but notes this adds a third standalone asset rather than a complementary business. Target is $4 and an Equal-weight rating is maintained. Industry view: In-line.

Target price is $4.00 Current Price is $3.52 Difference: $0.48
If ORA meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 34.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

UBS rates ORA as Neutral (3) -

Orora will acquire Saverglass, a global manufacturer of high-end bottles, in a transaction valued at around -$2.2bn. UBS expects investors will be focused on the potential for Saverglass to add earnings growth to the existing Australasian beverage business and the North American distribution platform.

The broker's analysis indicates that around 10% EBITDA growth is required in both FY24 and FY25 to support the delivery of EPS accretion in FY25, given the dilution that will come from the $1.3bn in equity being raised to fund the transaction. Neutral retained. Target is $3.75.

Target price is $3.75 Current Price is $3.52 Difference: $0.23
If ORA meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 34.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Morgans rates PNV as Initiation of coverage with Add (1) -

Morgans initiates coverage on medical device company PolyNovo with an Add rating and $1.88 target. It's felt clinical trials will support expanded indications and entry into new geographies, resulting in yearly revenue growth of around 30% over the next three years.

The broker predicts breakeven for PolyNovo will be achieved in FY24, followed by profit growth from FY25 onward. The company specialises in the development and commercialisation of dermal regenerative solutions.

Approved products are NovoSorb BTM and NovoSorb MTX, which are synthetic polymer-based scaffolds designed to be used in the treatment of burns and surgical wounds, explain the analysts.

Target price is $1.88 Current Price is $1.35 Difference: $0.53
If PNV meets the Morgans target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $2.19, suggesting upside of 64.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Morgan Stanley rates QAN as Overweight (1) -

Morgan Stanley finds the announcement that CEO Alan Joyce will step down two months early "something of a surprise". No meaningful valuation or share price implications are taken, given the succession to Vanessa Hudson has been flagged for some time.

The news follows recent ACCC proceedings along with a "number of negative press reports" and it may provide a circuit breaker, the broker suggests, limiting brand damage. Overweight rating and $9 target maintained. Industrry view is In-Line.

Target price is $9.00 Current Price is $5.64 Difference: $3.36
If QAN meets the Morgan Stanley target it will return approximately 60% (excluding dividends, fees and charges).

Current consensus price target is $7.78, suggesting upside of 36.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

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

Since the FY23 result Morgan Stanley updates its sensitivity analysis in relation to anti-obesity medications, and as a result the associated element in its ResMed bear case.

Accounting for all the changes in its calculations, the broker lowers the target to $27.70 from $31.40. Equal-weight retained. Industry View: In-Line.

Target price is $27.70 Current Price is $24.52 Difference: $3.18
If RMD meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $35.83, suggesting upside of 50.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

UBS rates RMD as Downgrade to Neutral from Buy (3) -

Having previously argued the market was probably running ahead of reality by selling off ResMed shares on the basis of the ever growing popularity of the latest generation of ant-obesity drugs, FNArena believes ResMed shares have been downgraded to Neutral from Buy by UBS.

The broker now believes the competitive threat from these drugs on the sleep apnoea market stands ready to create an estimated -14% volume headwind for the company's sleep business by 2030.

There still is a wide dispersion in potential outcomes, the analysts argue, adding any impact won't be felt until many years into the future. UBS's forecasts drop significantly after 2030.

The target price has fallen to US$170 from US$265.

Current Price is $24.52. Target price not assessed.

Current consensus price target is $35.83, suggesting upside of 50.3% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

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 SHL as Overweight (1) -

Morgan Stanley again revises assumptions for Sonic Healthcare in the wake of the FY23 results. A longer-term margin contribution is anticipated from faster growth in specialist testing. The broker also reviews the cost of debt.

Target is raised to $36.60 from $34.80 as a result. Overweight. Industry view is In-Line.

Target price is $36.60 Current Price is $32.39 Difference: $4.21
If SHL meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $35.61, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Morgans rates TNC as Speculative Buy (1) -

Morgans begins research coverage with a Speculative Buy rating on True North Copper, an emerging copper producer from the Cloncurry District in northwest Queensland.

In the broker's opinion, the current market capitalisation is far too cheap by comparison to peers and after taking into account potential free cash flows of $40-50m per annum by FY25. It's felt quick cash generation via an efficient ramp-up will be a key re-rating catalyst.

The analyst explains immediate production from the Cloncurry Project should allow self-funded exploration across an extensive portfolio of known copper deposits.

Morgans sets a 45c target price.

Target price is $0.45 Current Price is $0.21 Difference: $0.245
If TNC meets the Morgans target it will return approximately 120% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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