Australian Broker Call

Morgans rates ADH as Add (1) -

In what Morgans considers a fair price, Adairs will acquire Focus on Furniture next week for $80m, with $74m in cash and $6m in new Adairs' shares. It's believed this will complement the core business and may provide opportunities for network expansion.

The broker estimates 11% EPS accretion in FY23, the first full year of ownership. Target price rises to $4.80 from $4.20 and the analyst feels the company's shares are cheap for the growth and dividend income on offer. The Add rating is unchanged.

Target price is $4.80 Current Price is $3.64 Difference: $1.16
If ADH meets the Morgans target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $4.93, suggesting upside of 34.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

UBS rates ALL as Buy (1) -

Following Aristocrat Leisure's FY21 results, UBS looks at market share data and concludes the company's premium portfolio is materially
outperforming the other manufacturers. The Buy rating and $53.60 target price are unchanged.

The company has four of the top five premium cabinets and three of the top five non-premium cabinets. Meanwhile, 'Crazy Rich Asians' and 'Buffalo Link' are within the top three new premium titles, points out the analyst.

Target price is $53.60 Current Price is $44.80 Difference: $8.8
If ALL meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $49.19, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Citi rates AMP as Neutral (3) -

AMP's announced additional -$325m of impairments lowers its capital position by around -$220m, Citi estimates, but AMP has generated around $250m of capital from improved hybrid utilisation (convertible debt).

A key question for the broker is whether this will be sufficient to fund planned growth in infrastructure funds post its private capital division demerger. More will hopefully be revealed at tomorrow's investor day.

Neutral (High Risk) and $1.25 target retained for now.

Target price is $1.25 Current Price is $1.00 Difference: $0.25
If AMP meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting upside of 17.8% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates AMP as Hold (3) -

Ord Minnett maintains its Hold rating and $1.20 price target after AMP announced it is taking an additional -$325m post-tax charge in its
2021 result.

Until there is some stabilisation in the business, the broker finds it hard to establish conviction on net tangible asset (NTA) value or earnings.

Target price is $1.20 Current Price is $1.00 Difference: $0.2
If AMP meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting upside of 17.8% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates BEN as Neutral (3) -

Bendigo & Adelaide Bank has revealed details of its digital transformation plans underway for the last 12 months, intended to attract millennials away from new fintech platforms, with another three years to go.

Citi suggests investors will be disappointed management chose not to outline more detailed rationalisation benefits that will emerge from this investment.

Otherwise, the bank has reaffirmed FY22 guidance, expecting increased loan volumes to offset the margin pressure being felt across the sector. The cost of aforementioned investment lowers the broker's target price to $9.25 from $10.50. Neutral (High Risk) retained.

Target price is $9.25 Current Price is $8.53 Difference: $0.72
If BEN meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $10.06, suggesting upside of 17.2% (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

Ord Minnett rates BEN as Hold (3) -

Following what Ord Minnett assesses has been a slow start to the fiscal year (around system growth in mortgages, negative growth in business), revenue forecasts for Bendigo & Adelaide Bank are lowered slightly. The target price falls to $9.60 from $10.00 and the Hold rating is unchanged.

Regarding a digital transformation update, management is positive on prospects for the Up mobile banking business.  Among the regional banks, the broker has a preference for Bank Of Queensland ((BOQ)).

Target price is $9.60 Current Price is $8.53 Difference: $1.07
If BEN meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $10.06, suggesting upside of 17.2% (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

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

Macquarie initiates coverage on De Grey Mining as the company continues to de-risk the 9.0m ounce resource Mallina gold project. The broker expects first production in early FY26, and an average $400m free cash flow per annum in the first five production years. 

According to Macquarie, Mallina shows tier-1 potential before further growth, and while the project has an assumed base ten-year production life the broker expects continued discovery and resource conversion can increase this a further five years. 

The broker initiates with a Outperform rating and a target price of $1.70. 

Target price is $1.70 Current Price is $1.26 Difference: $0.44
If DEG meets the Macquarie target it will return approximately 35% (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

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

After Damstra Holdings downgraded FY22 revenue guidance to $30-34m from $35.9-38.9m previously, Morgan Stanley lowers its target price to $0.45 from $0.68. The broker feels liquidity constraints should be the focus given a further step-down in annual recurring revenue.

The analyst is concerned around volatility of key metrics and notes the lowering of guidance comes within a month of the 1Q update. It's felt delivery on the revised guidance is critical for a re-rate. The Equal-weight rating is unchanged. Industry view: In-Line.

Target price is $0.45 Current Price is $0.43 Difference: $0.02
If DTC meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

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

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

QBE Insurance Group ((QBE)) stands to benefit the most of insurance stocks under Morgan Stanley's coverage from record commercial line growth in the September quarter Australian industry data. 

While personal lines growth slowed to around to around 5.5%, with Insurance Australia Group below 5%, the broker sees modest upside risk for gross written premium (GWP) growth. The Equal-weight rating and $4.80 target price are retained for IAG. Industry view: In-Line.

Target price is $4.80 Current Price is $4.42 Difference: $0.38
If IAG meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.35, suggesting upside of 21.9% (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 JHX as Outperform (1) -

Macquarie takes a positive outlook on James Hardie Industries' long-term Europe prospects given improved performance and position compared to regional competitors, as the company progresses with investment site selection. 

Elsewhere, strong demand and supply chain constraints have benefited US pricing, and while Macquarie analysts are cautious of a global slowdown in 2022 they noted James Hardie Industries' has a history of outperforming peers during cycle downturns. 

The Outperform rating and target price of $61.75 are retained. 

Target price is $61.75 Current Price is $54.57 Difference: $7.18
If JHX meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $58.43, suggesting upside of 6.2% (ex-dividends)

The company's fiscal year ends in March.

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: 0.8

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

Morgans rates NAM as Add (1) -

Morgans resumes coverage on Namoi Cotton with an Add rating and $0.56 price target. With ample water in dams and storage, as well as higher forecast crops, the Australian cotton agribusiness is thought well placed for earnings growth over the next couple of years.

The analyst points out the -34% discount to net tangible assets should narrow after taking into account improved earnings/cashflow potential and the recent removal of the 20% shareholder cap.

Target price is $0.56 Current Price is $0.43 Difference: $0.13
If NAM meets the Morgans target it will return approximately 30% (excluding dividends, fees and charges).

The company's fiscal year ends in February.

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

Morgan Stanley rates QBE as Overweight (1) -

QBE Insurance Group stands to benefit the most of insurance stocks under Morgan Stanley's coverage from record commercial line growth in the September quarter Australian industry data. The group experienced around 15% gross written premium (GWP) growth.

The broker retains the group as its preferred General Insurance exposure. The Overweight rating and $14 target price are unchanged. Industry View: In-Line.

Target price is $14.00 Current Price is $11.92 Difference: $2.08
If QBE meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $14.15, suggesting upside of 21.8% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Morgans rates RIO as Hold (3) -

After a meeting with Simon Trott, Rio Tinto's Chief Executive of Iron Ore, Morgans existing concerns deepened around the long-term impact of what the analyst considers has been a significant underspend in the Pilbara. Target price falls to $104 from $112.

The broker notes the company is mine constrained (with infrastructure normally the key bottleneck). It's thought there's an increasingly tight schedule to bring on new replacement mines. Additional red tape after Juukan Gorge and covid travel restrictions further weigh.

The broker's Hold rating is maintained.

Target price is $104.00 Current Price is $94.46 Difference: $9.54
If RIO meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $107.29, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in December.

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: 0.4

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

Macquarie rates S32 as Outperform (1) -

South32 has acquired a 45% stake in the Sierra Gorda copper project after KGHM Polska Miedz S.A. chose not to exercise its right to the interest. Macquarie finds the addition a strategic fit, expanding copper exposure  and adding upside benefit as decarbonisation continues. 

The total cost of US$1.55bn will be funded through a US$1.0bn debt facility and cash reserves, and the purchase benefits Macquarie's earnings per share forecasts by an average of 4% per year between FY22 and FY26. 

The Outperform rating is retained and target increases to $5.00 from $4.90.

Target price is $5.00 Current Price is $3.56 Difference: $1.44
If S32 meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $4.42, suggesting upside of 23.9% (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 SDR as Initiation of coverage with Buy (1) -

Ord Minnett initiates coverage on hotel software product company SiteMinder with a Buy rating and $7.36 target price.

The company is evolving towards offering a range of global Hotel solutions from dependence on the Hotel software product, called Channel Manager, explains the analyst. It's thought impetus will come from increased global travel, a change in the revenue mix and new initiatives.

Property growth and a strong uplift in average revenue per user (ARPU) should result in post-pandemic compound annual growth in revenue of circa 30% per annum, estimates the broker.

Target price is $7.36 Current Price is $5.85 Difference: $1.51
If SDR meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

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

Citi rates SHV as Buy (1) -

Select Harvests reported an FY21 profit of $15.1m, down from FY20's record $25m, after a record crop had almond prices falling and supply chain challenges impacted.

Citi continues to view the current almond price weakness as temporary, with early signs of a revival in export demand and the Californian drought expected to continue over winter. To that end the company will wait before committing to sales of the FY22 crop.

Average FY22 almond prices will nonetheless be lower, on Citi's forecast, hence target falls to $9.00 from $9.85. Buy retained.

Target price is $9.00 Current Price is $6.88 Difference: $2.12
If SHV meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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 SHV as Buy (1) -

Despite Select Harvests delivering a 25% beat versus FY21 consensus earnings (EBITDA) estimates, UBS lowers its target price to $8.60 from $9.50. This comes as the broker tempers its forecast earnings recovery in the face of almond price uncertainty.

Over the medium term, the analyst expects a recovery in prices predicated on a severe drought in California, combined with a healthy underlying demand. Industry feedback suggests further downside risk to pricing is relatively limited, notes UBS. Buy rating retained.

Target price is $8.60 Current Price is $6.88 Difference: $1.72
If SHV meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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 SKO as Buy (1) -

Ord Minnett sees a desirable range of growth alternatives for Serko following the interim result and $85m capital raising. The Buy rating is retained and the target price rises to $8.10 from $7.38.

The analyst believes the vital deal with Booking.com is on track. That company's focus on the “Connected Trip” should result in demand for an increasing range of products (Rail, Air, Car Rentals etc) globally, points out the broker.

Target price is $8.10 Current Price is $6.70 Difference: $1.4
If SKO meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $8.10, suggesting upside of 32.8% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in NZD. 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 SUN as Equal-weight (3) -

QBE Insurance Group ((QBE)) stands to benefit the most of insurance stocks under Morgan Stanley's coverage from record commercial line growth in the September quarter Australian industry data. 

While personal lines growth slowed to around to around 5.5%, with Suncorp Group below 5%, the broker sees modest upside risk for gross written premium (GWP) growth. The Equal-weight rating and $11.90 target price are retained. Industry view: In-Line.

Target price is $11.90 Current Price is $10.80 Difference: $1.1
If SUN meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $13.13, suggesting upside of 22.8% (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

Macquarie rates UNI as Outperform (1) -

Universal Store Holdings has noted impact on its year-to-date metrics from lockdowns in early FY22, and is guiding to a -$7-9m earnings before tax impact. Macquarie notes November month-to-date total sales are already up 8.3%, and like-for-like sales up 3.8%. 

More positively, the company now totals 76 stores following 9 store openings in FY22. Marketing costs will almost double to around $9m to benefit accelerated sales. Earnings per share forecasts for FY22 decreases -28% but increases 2% and 7% for FY23 and FY24. 

The Outperform rating is retained and the target price increases to $9.60 from $8.90.

Target price is $9.60 Current Price is $7.81 Difference: $1.79
If UNI meets the Macquarie target it will return approximately 23% (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

Ord Minnett rates WSP as Buy (1) -

Despite Whispir upgrading revenue and earnings (EBITDA) guidance, Ord Minnett lowers its target price to $3.45 from $3.89. This reflects decreasing multiples for smaller software companies and higher risk-free rates, explains the analyst.

The Buy rating is unchanged.

Management is targeting annual recurring revenue (ARR) of $100m by the end of FY23, and is investing for continued rapid expansion in the US and Asia, notes the broker.

Target price is $3.45 Current Price is $2.14 Difference: $1.31
If WSP meets the Ord Minnett target it will return approximately 61% (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