Australian Broker Call

Bell Potter rates AKE as Buy (1) -

Allkem has disclosed high level metrics following updated technical studies as part of the merger process with Livent. Capital and operating cost outlooks have been lifted materially, consistent with inflation experienced across the resources sector.

But Bell Potter viewed the prior estimates as outdated and the updates now bringing cost base consistency. Allkem reiterated that its growth projects are expected to be fully funded from existing cash, cash flow from operations and debt finance.

A key negative is a delay to Sal de Vida first production, but the broker believes the merger will likely proceed and the merged entity will have an asset portfolio to support ongoing production and earnings growth into what Bell Potter expects to be an exceptionally strong market for lithium.

The Sal de Vida delay takes the broker's target down to $18.10 from $19.00, Buy retained.

Target price is $18.10 Current Price is $11.62 Difference: $6.48
If AKE meets the Bell Potter target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $17.35, suggesting upside of 50.9% (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

Citi rates AKE as Buy (1) -

Allkem has updated on its expenditure and production timing. Citi notes the main downgrade is the timing of Sal de Vida, which is pushed back to the second half of 2025, six months later than implied previously, and stage 2 production is expected from the first half of 2027.

Capital expenditure at James Bay is better than Citi expected, with total growth expenditure of US$382m. While there was no update on timing the broker models first production in the second half of 2025.

Citi remains a "believer" in the company's growth prospects and retains a Buy rating. Target is $18.50.

Target price is $18.50 Current Price is $11.62 Difference: $6.88
If AKE meets the Citi target it will return approximately 59% (excluding dividends, fees and charges).

Current consensus price target is $17.35, suggesting upside of 50.9% (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

Macquarie rates AKE as Outperform (1) -

Allkem has updated technical study results for its lithium projects. Higher costs were largely anticipated, Macquarie notes, while the delay to Sal de Vida was the main disappointment and this may weigh on earnings over the medium term.

Resource estimates for Sal de Vida were upgraded by 5% including a 41% increase in measured resources. The total resource for Olaroz has also increased by 10% while the resource for Cauchari was lowered by -6%.

The main catalyst, in the broker's view, will be an update on the merger proposal with Livent Corp. Outperform retained. Target is reduced to $17.50 from $19.60.

Target price is $17.50 Current Price is $11.62 Difference: $5.88
If AKE meets the Macquarie target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $17.35, suggesting upside of 50.9% (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

Morgans rates AKE as Upgrade to Add from Hold (1) -

Allkem has announced cost increases across its growth project and also increased its long-term commodity price assumptions. Estimated growth capital costs have increased significantly for James Bay, Sal de Vida and Cauchari. Operating costs are also forecast to be higher.

Morgans had largely factored in higher costs compared with earlier studies but also now increases forecasts for some projects. Offsetting this Cauchari is included in the valuation, which lifts the target to $15.30 from $14.20.

Rating is upgraded to Add from Hold as the broker envisages significant upside given recent share price weakness, although higher risk exists as valuation is dependent upon successfully delivering growth.

Target price is $15.30 Current Price is $11.62 Difference: $3.68
If AKE meets the Morgans target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $17.35, suggesting upside of 50.9% (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

Ord Minnett rates ALL as Hold (3) -

Ord Minnett assesses the market is now appropriately balancing Aristocrat Leisure's dominance in land-based gaming against the slowdown in the digital business.

The broker believes the company's highly popular and profitable machine titles will allow it to continue capturing share in both outright sales and leased machines in the North American market.

The competitive environment is not expected to ease up but Ord Minnett suspects it will prove difficult for competitors to capture material share against the dominance of Aristocrat Leisure. Hold rating and $43 target.

Target price is $43.00 Current Price is $41.33 Difference: $1.67
If ALL meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $44.66, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.8

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

Citi rates GPT as Buy (1) -

Citi considers the appointment of Russell Proutt, previously CFO at Charter Hall ((CHC)) a positive update for GPT Group. He is expected to commence no later than March 25, 2024 and this could potentially remove one of the overhangs on the stock, the broker adds.

Outgoing CEO Bob Johnston will remain until that date to ensure a smooth transition. Buy rating and $5 target.

Target price is $5.00 Current Price is $4.00 Difference: $1
If GPT meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.99, suggesting upside of 26.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

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

GPT Group has appointed Russell Proutt as CEO to replace Bob Johnston from no later than March 25, 2024. Morgan Stanley assesses this will remove a headwind for the company as many investors have been reluctant to consider it because of the uncertainty.

Given Proutt's experience in funds and asset management the broker suspects GPT Group may evolve with a more active "tilt" such as working with more external capital and developments.

Equal-weight. Target $4.70. Industry view: In-Line.

Target price is $4.70 Current Price is $4.00 Difference: $0.7
If GPT meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.99, suggesting upside of 26.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Ord Minnett rates IVC as Hold (3) -

Ord Minnett notes shareholders are set to vote on TPG Capital's proposed takeover of InvoCare. The $12.70 cash offer remains at a -12% discount to the broker's valuation of $14.50 a share, yet with unanimous support from the board it is likely a deal will proceed.

The scheme meeting is scheduled for October 31 and, if approved by shareholders and the court, implementation will occur November 24. Hold rating and $12.70 target.

Target price is $12.70 Current Price is $12.58 Difference: $0.12
If IVC meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.95, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Ord Minnett rates LNW as Initiation of coverage with Accumulate (2) -

Ord Minnett initiates coverage on Light & Wonder with a $135 target and an Accumulate rating. The broker suspects it will be difficult for the company to capture material share of the electronic gambling machine market as it is already highly competitive.

Ord Minnett does not believe the company has gained the appropriate intellectual property or brand assets to enjoy excess economic returns.

The company has significantly simplified its business by divesting lottery and sports betting assets yet the broker believes R&D investment will be necessary to ensure a healthy pipeline of new products and platform enhancements.

Target price is $135.00 Current Price is $113.91 Difference: $21.09
If LNW meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Market Sentiment: 0.5

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

Morgan Stanley rates LOV as Overweight (1) -

Morgan Stanley considers Lovisa Holdings a key pick out of the reporting season, having recently upgraded it to Overweight.

While the store roll-out rate has decelerated and this may concern investors, the broker points out the long-term store opportunity is expanding as the business opened in 12 new markets in FY23.

While modelling a comparable decline of -2% in FY24 after multiple years of tailwinds and price increases, the broker also believes a return to previous target growth rates of 3-5% is realistic from FY25.Target is $25.25. Industry View: In-Line.

Target price is $25.25 Current Price is $19.43 Difference: $5.82
If LOV meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $24.49, suggesting upside of 25.8% (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

Macquarie rates PMT as Outperform (1) -

Patriot Battery Metals has extended its cornerstone deposit, CV13, taking the total strike at CV5 to 4.35km. While intercepts of spodumene pegmatite have been reported, assays have been delayed because of limitations at the lab.

The main focus for drilling activities will be on the "gap" between CV5 and CV13 spodumene pegmatite dykes.

Macquarie assesses the company is expanding Corvette quickly, with seven rigs and ramping up to 10 by January. This is considered a world-class resource with plenty of upside and the broker retains an Outperform rating and $2.10 target.

Target price is $2.10 Current Price is $1.29 Difference: $0.81
If PMT meets the Macquarie target it will return approximately 63% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

This company reports in CAD. 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 PNV as Outperform (1) -

PolyNovo reported sales for FY24 in the year to date were up 93%, with momentum supported by sales in new markets and increased use across different specialities.

Macquarie envisages a number of near-term positive catalysts for the company and a significant longer-term opportunity. The main catalyst will be the first half result. Outperform rating and $2.70 target maintained.

Target price is $2.70 Current Price is $1.26 Difference: $1.44
If PNV meets the Macquarie target it will return approximately 114% (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

Citi rates QAN as Neutral (3) -

Citi suspects Qantas  Airways' willingness to absorb some costs, notably fuel-related, may be a potential sign that the recent public issues can leak into earnings. As a result, valuation is reduced more than earnings revisions to try and incorporate a higher risk premium.

It appears FY24 growth may already be under question, the broker adds, with consensus expecting flat or only modest growth prior to this update. Citi estimates around $330m in incremental costs may result in an earnings decline.

Yet the broker also believes there will be sharp falls in oil early next year and this leads to a lesser reduction in its FY24 estimates. Neutral rating retained. Target drops to $6.00 from $6.95.

Target price is $6.00 Current Price is $5.23 Difference: $0.77
If QAN meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 47.3% (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

Morgan Stanley rates QAN as Overweight (1) -

Qantas Airways has stated it will continue to absorb higher fuel costs but will also monitor fuel prices in the weeks ahead and may, "if current levels are sustained" adjust its "settings".

First half fuel cost guidance has increased to $2.8bn, driven by a 30% increase in fuel prices since May. The airline will also invest a further $80m in customer initiatives on top of the $150m it announced previously.

Morgan Stanley expects modest downgrades to consensus earnings forecasts for FY24 as a result. Overweight rating and $9 target maintained. Industry view is In-Line.

Target price is $9.00 Current Price is $5.23 Difference: $3.77
If QAN meets the Morgan Stanley target it will return approximately 72% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 47.3% (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

UBS rates QAN as Buy (1) -

Qantas Airways has added additional $80m cost per FY24 on customer initiatives and UBS expects roughly half of these costs will be recurring. Fuel costs will also be a headwind but the broker suspects this will eventually be offset through fares.

Although the airline stated it would "continue to absorb" higher costs it also signalled it would consider adjusting "settings" if fuel costs remained high.

UBS expects conditions in FY24 to be similar to FY23 and suspects the market is pricing in the risk of a material earnings correction.

The broker argues, if Qantas is able to deliver on its forecasts with more capital returns this should resolve concerns and drive a re-rating.  Buy rating and $8 target retained.

Target price is $8.00 Current Price is $5.23 Difference: $2.77
If QAN meets the UBS target it will return approximately 53% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 47.3% (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

Macquarie rates RMD as Outperform (1) -

Macquarie adds further research to its view on the impacts of weight-loss drug GLP-1 RA on ResMed's growth outlook. In capturing the impact, the broker incorporates assumptions relating to utilisation as well as weight loss.

Macquarie estimates baseline growth of 6% per annum to FY33 for moderate-to-severe OSA patients treated with PAP and, combined with increased uptake in OSA populations, believes there is an offset to potential impacts associated with GLP-1 RA.

Outperform retained. Target is $32.60.

Target price is $32.60 Current Price is $21.44 Difference: $11.16
If RMD meets the Macquarie target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $35.05, suggesting upside of 59.4% (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

Macquarie rates SGR as Outperform (1) -

Star Entertainment has reset its balance sheet with the refinancing of debt and a capital raising of $750m and can now serve the AUSTRAC fine.

Macquarie also notes, while the Queen's Wharf Brisbane debt refinance has been an issue, there is now room for the company to provide an equity top-up should that be required.

The broker forecasts $259m in EBITDA for FY24, which implies a -18% decline. Trading in the year to date is assessed to be slightly soft but should improve, with complimentary drinks reinstated in early September.

Outperform retained. Target is reduced to $0.75 from $1.25, as a result of the capital raising.

Target price is $0.75 Current Price is $0.75 Difference: $0
If SGR meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.30, suggesting upside of 73.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

Bell Potter rates SM1 as Buy (1) -

Synlait Milk reported FY23 underlying earnings slightly ahead of Bell Potter. No formal FY24 earnings guidance was offered other than earnings are expected to improve and Synlait is targeting net debt/EBITDA below 3.5x.

Executing a sale of Dairyworks, while delivering on cost reduction initiatives and non-recurrence of impairments and provisions, would give the company material headroom to execute on its five-year targets, the broker suggests, while reducing the risk of the need for fresh equity.

Assuming a sale of Dairyworks, target falls to $1.50 from $1.90. Buy retained.

Target price is $1.50 Current Price is $1.19 Difference: $0.315
If SM1 meets the Bell Potter target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $1.50, suggesting upside of 26.1% (ex-dividends)

The company's fiscal year ends in July.

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: 0.3

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

Macquarie rates SM1 as Underperform (5) -

FY23 results from Synlait Milk were consistent with guidance and the company provided no outlook for FY24. Macquarie suspects it will be softer because of a weaker volume outlook.

Normalising from the challenges associated with FY23 means there should be a firm tailwind, the broker adds, although some one-off benefits may also subside.

The company is guiding to a2 sales volumes falling -11% in FY24 while Advanced Nutrition volume growth is guided at 10-12%.

The stock has de-rated substantially and Macquarie flags slower volume improvement and new customer ramp-up, which leads to material downgrades to earnings estimates.

There are also balance sheet pressures if the Dairyworks sale does not proceed. Underperform retained. Target is reduced to NZ$1.25 from NZ$1.53.

Current Price is $1.19. Target price not assessed.

Current consensus price target is $1.50, suggesting upside of 26.1% (ex-dividends)

The company's fiscal year ends in July.

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: 0.3

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

Shaw and Partners rates STA as Buy (1) -

Strandline Resources has appointed Jozsef Patarica as managing director upon the resignation of Luke Graham. While not a surprise to Shaw and Partners the timing is earlier than expected.

The company has also announced the recent modification to the wet concentration plant is resulting in a significant improvement in efficiencies. The broker suggests, with Chinese demand for heavy mineral concentrate uncertain, producing the final product of premium zircon and rutile becomes even more important.

The broker continues to envisage upside for investors once Coburn reaches full capacity and maintains a Buy rating. Target is reduced to $0.57 from $0.65 post the recent dilution from the capital raising.

Target price is $0.57 Current Price is $0.11 Difference: $0.46
If STA meets the Shaw and Partners target it will return approximately 418% (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 TNE as Upgrade to Buy from Hold (1) -

Ahead of TechnologyOne's November result, Bell Potter has modestly upgraded EPS forecasts due to a small decrease in forecast shares on issue and rolled forward its discounted cash flow valuation, leading to a target increase to $17.75 from $17.50.

This takes total expected return to 18% hence the broker upgrades to Buy from Hold.

Bell Potter expects the result to be modestly above both guidance and consensus, and believes there is potential for the company to exceed its guidance of 40% growth in SaaS annual recurring revenue.

Target price is $17.75 Current Price is $15.87 Difference: $1.88
If TNE meets the Bell Potter target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $15.28, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Ord Minnett rates TNE as Lighten (4) -

TechnologyOne has a highly defensible market position, in Ord Minnett's view, and revenue is forecast to grow at a 10-year compound rate of 10% over the forecast period.

The broker transfers coverage to a new analyst and raises the target 25% to $14, primarily driven by a better appreciation of the switching costs of the company's product suite as well as the quality of its public sector customer base.

Across its coverage, the broker finds ERP software to be especially sticky because of its mission-critical nature and the limited benefit in switching providers. At current prices Ord Minnett assesses the shares screen slightly overvalued. Lighten maintained.

Target price is $14.00 Current Price is $15.87 Difference: minus $1.87 (current price is over target).
If TNE meets the Ord Minnett target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.28, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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