Australian Broker Call

Ord Minnett rates ALD as Accumulate (2) -

The sale of the Ampol portfolio of high-value retail sites is one of the strategic initiatives identified by the company in order to release capital.

In Ord Minnett's calculations, a sale of this portfolio would provide accretion of 3.3% in 2021 and 9.4% in 2022, based on buybacks in 2021 and 2022.

The broker believes the business is well leveraged to any recovery after the pandemic, with domestic transport fuel demand the first to recover, followed by some upside to refining margins and jet volumes. Accumulate rating and $30 target maintained.

Target price is $30.00 Current Price is $27.83 Difference: $2.17
If ALD meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $28.39, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Macquarie rates APX as Initiation of coverage with Outperform (1) -

Macquarie assesses Appen is one of two global players of scale in a fragmented and rapidly growing market. This provides a key competitive advantage.

The business is profitable and there are long-term opportunities for the core Relevance segment. Moreover, Appen has consistently upgraded and beat earnings guidance since its inception.

Macquarie initiates coverage with an Outperform rating and $38 target.

Target price is $38.00 Current Price is $29.50 Difference: $8.5
If APX meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $32.78, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Ord Minnett rates ASX as Downgrade to Lighten from Hold (4) -

Ord Minnett notes listing volumes and equity value traded are at high levels, although they have likely peaked and futures volumes may be under pressure.

The broker also expects capitalised costs will continue rising because of the delay in CHESS replacement.

Based on valuation, Ord Minnett considers ASX less attractive than other stocks under coverage and downgrades to Lighten from Hold. Target is reduced to $78 from $81.

Target price is $78.00 Current Price is $85.13 Difference: minus $7.13 (current price is over target).
If ASX meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $74.23, suggesting downside of -10.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.7

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

Citi rates CBA as Buy (1) -

Banking analysts at Citi believe governments and the RBA have effectively postponed the first credit event which was ready to take place in March, but is now likely to materialise later this calendar year.

The analysts also believe market dynamics post lockdowns are likely to benefit major banks over their smaller and regional competitors. As market intervention becomes less urgent, the sector's Net Interest Margin (NIM) should recover.

All in all, Citi is of the view that CommBank is best placed to benefit the most of these evolving sector dynamics, while Westpac's self-harm (reputational damage) on top of the need for reinvestment and restructuring considerations means the latter is least likely to benefit from the Big Four in Australia.

Target price is $68.75 Current Price is $67.32 Difference: $1.43
If CBA meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $62.09, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Ord Minnett rates CLH as Lighten (4) -

Collection House has provided more detail around the first half result and outlook. It has written down the PDL assets by -$89.9m which has led to breaching its debt covenants.

Ord Minnett notes, unfortunately, industry earnings remain very discretionary, although the write-down, albeit significant, brings implied return multiples in the existing book back down to 2.2x, broadly in line with industry leader Credit Corp ((CCP)).

The broker concludes that assessing earnings forecasts and the value of equity in the business is challenging until the agreements with the company's two lenders are finalised. Lighten rating and $1 target retained.

Target price is $1.00 Current Price is $1.09 Difference: minus $0.09 (current price is over target).
If CLH meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -1.0

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

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

Resumption of the Child Care Subsidy (CCS) from July provides upside risks to Morgan Stanley’s forecasts for G8 Education. However, it is difficult to bring in more accuracy at this point, admits the broker, upgrading its second-half estimates while leaving those for FY21 intact.

The biggest share price driver going forward, believes Morgan Stanley, will be the regulatory environment. 

Noting there are other opportunities available which present more certainty, Morgan Stanley reiterates its Equal-weight rating for now with a target price of $1. Industry view: In-line.

Target price is $1.00 Current Price is $0.93 Difference: $0.07
If GEM meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.24, suggesting upside of 36.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Morgan Stanley rates IEL as Overweight (1) -

There is a lot of uncertainty around IDP Education with investors divided over demand rebound, relaxation of travel regulations, and whether there will be any lasting impact of the pandemic. Morgan Stanley notes severe financial stress across segments in which the company operates including IELTS.

The broker highlights the company’s access to capital is a crucial differentiating factor and expects the downturn to increase reliance on the company, thereby having a positive long-term impact.

Morgan Stanley maintains its Overweight rating with a target price of $17.50. Industry view: In-line.

Target price is $17.50 Current Price is $16.35 Difference: $1.15
If IEL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $15.71, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgans rates NVX as Downgrade to Hold from Add (3) -

Novonix has raised $5.7m from institutions and will add another $52-57m from the St Baker Energy Innovation Fund and other existing shareholders, Morgans reports.

The funds will be used to repay debt and expand synthetic graphite production capacity. The company's first graphite customer, Samsung SDI, has shown impressive sales growth.

Novonix has also filed another patent related to its Dry Particle Microgranulation technique which targets cathode production. All of which has led to a share price rally.

While the broker sees much potential, it's still early in the game and risks remain. Hence a pullback to Hold from Speculative Buy and a target cut to $1.09 from $1.39 on dilution.

Target price is $1.09 Current Price is $1.18 Difference: minus $0.09 (current price is over target).
If NVX meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Credit Suisse rates RWC as Upgrade to Outperform from Neutral (1) -

Credit Suisse increases estimates for net profit by 53% in FY20 and 22% in FY21. The contractor outlook in the US has improved materially.

Reports are more mixed in the UK and sales are expected to be down -20-30% amid weakness in the renovation segment.

The broker is more confident Reliance Worldwide can outperform peers and upgrades to Outperform from Neutral. Target is raised to $3.25 from $2.70.

Target price is $3.25 Current Price is $2.97 Difference: $0.28
If RWC meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.29, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates SGP as Downgrade to Hold from Accumulate (3) -

Stockland has provided a positive update and Ord Minnett increases earnings estimates by 4% based on residential demand that is better than previously expected.

The stock sold off aggressively in February and March as the market priced in the potential impact of the pandemic but has since been the best performer among A-REITs.

As the stock is now trading broadly in line with the broker's target, the rating is downgraded to Hold from Accumulate. Target is raised to $3.50 from $3.10.

Target price is $3.50 Current Price is $3.61 Difference: minus $0.11 (current price is over target).
If SGP meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.54, suggesting upside of 1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Ord Minnett rates SIQ as Hold (3) -

Ord Minnett maintains a Hold rating, given the backdrop of the pandemic and the impact on sentiment and employment.

The broker highlights the attractive features of the business such as the leading position in novated leasing and salary packaging and a heavy skew towards government sectors.

However, this is considered factored into the current share price. Target is reduced to $6.70 from $7.90.

Target price is $6.70 Current Price is $6.31 Difference: $0.39
If SIQ meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $7.27, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Macquarie rates SO4 as Initiation of coverage with Outperform (1) -

Salt Lake Potash is developing the Lake Way project near Wiluna in Western Australia. This is expected to deliver a 245,000tpa production rate at a capital cost of $254m.

In addition, the company has rights over eight other salt lakes in WA. Resources have already been defined at Lake Wells and  some activity has been undertaken at Lake Ballard and Lake Marmion.

Macquarie initiates coverage with an Outperform rating and $1 target.

Target price is $1.00 Current Price is $0.51 Difference: $0.49
If SO4 meets the Macquarie target it will return approximately 96% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates STO as Outperform (1) -

The NSW government has recommended approval of the Narrabri gas project. This still requires Independent Planning Commission approval. Santos has not drilled Narrabri for six years and would need to mobilise a rig for 12-18 months of appraisal drilling.

Hence, Macquarie assesses break-even on wells will be key to valuation. Narrabri was previously written off and the company had focused on other areas in recent years. This includes the acquisition of the northern Australian assets from Conoco.

Hence, Macquarie considers the balance sheet a little more stretched than it would prefer in the current environment. Outperform rating maintained. Target is $6.05.

Target price is $6.05 Current Price is $5.40 Difference: $0.65
If STO meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.15, suggesting upside of 18.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Credit Suisse rates SVW as Outperform (1) -

Credit Suisse observes Seven Group continues to deliver but this is not reflected in the share price.

The broker understands there are some reservations around construction activity and the Coates business but points to pending stimulus and the order book at WesTrac, which has the highest visibility in more than eight years.

The broker believes the company's guidance numbers are achievable and retains an Outperform rating. A combined 11% growth is forecast for WesTrac and Coates, which Credit Suisse asserts is still potentially conservative. Target is raised to $20.35 from $17.95.

Target price is $20.35 Current Price is $17.35 Difference: $3
If SVW meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $18.66, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Macquarie rates SVW as Outperform (1) -

Macquarie observes WesTrac and Coates are performing well, amid material equipment orders for WesTrac from Fortescue Metals ((FMG)) and Newmont.

The broker notes $700m in new funding is available, providing ample facilities for growth. Outperform rating maintained. Target rises 19% to $19.10.

Target price is $19.10 Current Price is $17.35 Difference: $1.75
If SVW meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $18.66, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates SVW as Hold (3) -

Core operating businesses appear to be holding up well. WesTrac revenue has risen 15% in the year to May and Coates 2%.

While Coates is experiencing the impact of the cancellation of events, slower building construction and lower productivity because of social distancing, engineering demand remains strong.

Ord Minnett retains a Hold rating and raises the target to $16.20 from $13.50.

Target price is $16.20 Current Price is $17.35 Difference: minus $1.15 (current price is over target).
If SVW meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.66, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

UBS rates SVW as Buy (1) -

UBS notes WesTrac's revenue is up 15% year-on-year and Coates revenue up 2%. WesTrac has recently won 2 major truck and ancillary fleet orders with Fortescue Metals ((FMG)).

UBS expects these orders will be delivered through FY20-23 and this underpins forecasts for revenue growth over the next three years. Buy rating and $19 target maintained.

Target price is $19.00 Current Price is $17.35 Difference: $1.65
If SVW meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $18.66, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates URW as Hold (3) -

Ord Minnett notes the pandemic will have a significant impact on retail rents in the UK, while the pace of structural change, particularly towards online retail, will accelerate.

The broker also notes the prevalence of covenants across the company's debt profile, and that value declines of -38% would be required to reach a 60% loan-to-value ratio.

The broker's estimates do not include a decline of this magnitude but the possibility is not entirely ruled out. Hold maintained. Target is reduced to $4.80 from $6.30.

Target price is $4.80 Current Price is $4.55 Difference: $0.25
If URW meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.37, suggesting upside of 41.6% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

This company reports in EUR. 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

Credit Suisse rates VCX as Outperform (1) -

While the $1.2bn institutional placement is dilutive, gearing is reduced and there is now a buffer against further revaluation declines, Credit Suisse observes.

The broker acknowledges it was "wrong" in previously assessing no equity would be required at this stage. Asset sales are obviously, as a potential capital management alternative, not that easy to execute in the current environment.

The company has elected not to pay a second half dividend. FY20-22 estimates are lowered to reflect the impact of the placement as well as lower rent collections. Outperform maintained. Target is reduced to $1.82 from $1.93.

Target price is $1.82 Current Price is $1.58 Difference: $0.24
If VCX meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.61, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Macquarie rates WAF as Downgrade to Neutral from Outperform (3) -

Macquarie upgrades processing assumptions for Sanbrado as the performance to date has been strong.

The broker now assumes throughput of 3.2mtpa from mid 2022 to mid 2021 and then reducing to nameplate capacity by mid 2022.

Rating is downgraded to Neutral from Outperform, given recent share price strength. Target is $0.90.

Target price is $0.90 Current Price is $0.92 Difference: minus $0.02 (current price is over target).
If WAF meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Citi rates WBC as Buy (1) -

Banking analysts at Citi believe governments and the RBA have effectively postponed the first credit event which was ready to take place in March, but is now likely to materialise later this calendar year.

The analysts also believe market dynamics post lockdowns are likely to benefit major banks over their smaller and regional competitors. As market intervention becomes less urgent, the sector's Net Interest Margin (NIM) should recover.

All in all, Citi is of the view that CommBank is best placed to benefit the most of these evolving sector dynamics, while Westpac's self-harm (reputational damage) on top of the need for reinvestment and restructuring considerations means the latter is least likely to benefit from the Big Four in Australia.

Target price is $26.00 Current Price is $17.89 Difference: $8.11
If WBC meets the Citi target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $19.09, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

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

Australia's weak economic outlook will likely weigh on construction activity over the next 6-12 months, Morgans suggests, but government infrastructure spending will play an important role in the recovery.

Wagner's has contracts in place and a pipeline of tenders as of its first half result which should see the company well-positioned.

Leverage will peak as earnings trough in FY20, but Morgans believes the balance sheet can be managed and a debt facility extended, ahead of an earnings recovery in FY21.

On share price weakness, the broker upgrades to Add from Hold. Target unchanged at $1.20.

Target price is $1.20 Current Price is $1.04 Difference: $0.16
If WGN meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.00, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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 recent transformation of the company. The next step is the potential offering of a broader product range, courtesy of Quadpay, to the US market.

The recent capital raising means the business is also well-positioned to execute on its plans.

Despite a re-rating in the share price, Ord Minnett maintains an Accumulate rating and believes the business will continue to benefit from the acceleration of e-commerce. Target is raised to $6.75 from $3.40.

Target price is $6.75 Current Price is $6.30 Difference: $0.45
If Z1P meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $6.45, suggesting upside of 11.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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