Australian Broker Call

Ord Minnett rates AIZ as Accumulate (2) -

As Ord Minnett anticipated in its prior research, elevated profitability at Air New Zealand has now been impacted by price competition as capacity bottlenecks ease and customer demand moderates.

Management highlighted softening domestic corporate and government travel due to the economic backdrop.

Interestingly, the analyst points out long-term profitability for airlines in general has little to do with fuel costs, as all players are impacted equally and extra profits are competed away.

The Accumulate rating and 88c target are unchanged.

Target price is $0.88 Current Price is $0.65 Difference: $0.23
If AIZ meets the Ord Minnett target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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: 0.8

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

Macquarie rates ALD as Outperform (1) -

Macquarie anticipates a strong upcoming 3Q result for Ampol due to a smooth quarter of operations at the Lytton refinery, and suggests indications are promising for a special dividend in February.

The broker expects Refining earnings (EBIT) of $166m, which would make the 3Q the best for the division since the record 2Q of 2022.

The target falls slightly to $37.25 from $37.50. Outperform.

Target price is $37.25 Current Price is $31.77 Difference: $5.48
If ALD meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $34.64, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

Bell Potter rates CYG as Buy (1) -

Industrial supply and services group Coventry Group is in for a strong FY24, according to management, after releasing a 1Q trading update last week.

On a run-rate basis, the group is tracking comfortably ahead of Bell Potter's FY24 ($19m) expectations at an annualised $21.8m. Year-on-year, Trade Distribution sales and Fluid Systems revenue rose by 3.1% and 10.8%, respectively. 

Pre-AASB 16 earnings (EBITDA) margins rose by 100bps (compared to the the 2H of FY23) to 5.8%, largely driven by Trade Distribution, according to management.

Given the early stage of the financial year the broker conservatively raises its target to $1.40 from $1.35 on a higher capitalisation
multiple for Trade Distribution. Buy.

Target price is $1.40 Current Price is $1.10 Difference: $0.3
If CYG meets the Bell Potter target it will return approximately 27% (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

UBS rates DMP as Sell (5) -

UBS remains cautious on Domino's Pizza Enterprises's delivery metrics, despite delivery returning to growth in A&NZ in the new financial year. Deliveries in Europe were largely flat, and down in Asia, with higher prices driving customers to other brands. 

Strong competitor offers and a slowing consumer across some of Domino's markets drives the broker's ongoing caution around delivery, but UBS does remain confident on growth for carry-out operations. 

The Sell rating and target price of $43.00 are retained. 

Target price is $43.00 Current Price is $54.55 Difference: minus $11.55 (current price is over target).
If DMP meets the UBS target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $57.43, suggesting upside of 9.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Macquarie rates FBU as Outperform (1) -

Macquarie suggests the -7% post-result sell-off in shares of Fletcher Building due to the Iplex provision (leaking) issue will be recouped quite quickly.

Fletcher Building and its advisers consider the independent adviser for BGC (the main group builder in WA which installed the Iplex Pro-fit product) lacks credibility. Fletcher's advisers conclude issues are centered on WA installation.

The Outperform rating and NZ$6.70 target are unchanged.

Current Price is $4.46. Target price not assessed.

Current consensus price target is $5.30, suggesting upside of 30.1% (ex-dividends)

The company's fiscal year ends in June.

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: 0.7

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

Ord Minnett rates FBU as Accumulate (2) -

Since October 11, trading in shares of Fletcher Building have been halted due to leaking complaints around Iplex Australia's Pro-fit polybutylene pipe plumbing product. Iplex is owned by Fletcher Building and supplies pipes to commercial and residential plumbers.

Trading will resume on October 16 after management updated and provided two hypothetical cost scenarios of between -$50-100m. Management is adamant this is not a product fault and relates to installation issues in WA homes.

Ord Minnett assumes -$85m to mend the leaks, but makes no change to its $5.50 target since the cost has already been taken up in its forecasts.

The Accumulate rating is unchanged.

Target price is $5.50 Current Price is $4.46 Difference: $1.04
If FBU meets the Ord Minnett target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $5.30, suggesting upside of 30.1% (ex-dividends)

The company's fiscal year ends in June.

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: 0.7

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

Bell Potter rates IMU as Speculative Buy (1) -

While recent share price falls leads Bell Potter to halve its target for Imugene to 10c, the Speculative Buy rating is maintained given positives relating to its developmental allogeneic CD19 CAR-T Azer-cel.

However, an in-license transaction for Azer-cel may require up to US$29m/$46m in cash within 12-15 months.

While Imugene holds the option to settle all but the US$8m upfront component in scrip, the broker feels this is the least preferable option particularly at the current market price.

Just under 20% of around 60,000 patients affected by diffuse Large B Cell Lymphoma (DLBCL) are potential candidates for Azer-cel, point out the analysts.

Target price is $0.10 Current Price is $0.05 Difference: $0.05
If IMU meets the Bell Potter target it will return approximately 100% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates LTR as Downgrade to Sell from Neutral (5) -

Suitor Albemarle has decided not to proceed with the intended takeover of Liontown Resources and Citi analysts, in immediate response, have downgraded their rating for Liontown Resources to Sell from Neutral.

The price target has been cut by -70c to $2.30 from $3. Citi analysts are concerned about capital costs and ramp-up expectations while Albermarle's 4.3% shareholding is likely to come on market when management and Hancock Prospecting own circa 40% of the capital.

Citi does not think Hancock (19.9% equity) will now launch its own bid for the company given existing offtakes are locked in until 2030, plus there are still plenty of risks associated with Liontown's ramp-up, the broker adds.

Target price is $2.30 Current Price is $2.79 Difference: minus $0.49 (current price is over target).
If LTR meets the Citi target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.91, suggesting upside of 4.4% (ex-dividends)

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

Morgans rates MLG as Add (1) -

Morgans sees potential for MLG Oz to win more work in the Leonora region (near Esperance ,WA), after being awarded a three-year contract to provide integrated site services and haulage work for Genesis Minerals ((GEN)).

MLG Oz has a regional presence and scale of support structure needed in the Goldfields region for additional work, explains the analyst.

Full year revenue from the new contract should be around $15m, growing to circa $30m in FY26, observes the broker.

The Add rating and 98c target are unchanged.

Target price is $0.98 Current Price is $0.52 Difference: $0.46
If MLG meets the Morgans target it will return approximately 88% (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

Citi rates PDN as Sell (5) -

Citi reinitiates coverage on Paladin Energy, a "play on rising uranium demand". While the company's majority owned Langer Heinrich mine has been closed since 2018 given a prolonged decline in uranium prices, production is expected to restart in the first quarter of 2024. 

While the broker expects there is still room for demand growth for uranium, it anticipates price stabilisation in the fourth quarter of 2023 at US$65 per pound. 

Citi reinitiates coverage with a Sell rating and a target price of 90 cents.

Target price is $0.90 Current Price is $0.99 Difference: minus $0.09 (current price is over target).
If PDN meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.17, suggesting upside of 21.4% (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: 0.3

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

Bell Potter rates PPT as Buy (1) -

Bell Potter assesses a reasonably good 1Q update by Perpetual. In the face of market weakness the company showed steady assets under management (AUM) and ongoing inflows to Corporate Trust and Wealth Management.

Moreover, the Pendal integration remains on track (ultimately providing added strategies and enhanced distribution) and expense guidance was reiterated, highlight the analysts.

The target eases to $27.09 from $27.34. Buy.

Target price is $27.09 Current Price is $21.31 Difference: $5.78
If PPT meets the Bell Potter target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $26.45, suggesting upside of 28.8% (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

Citi rates PPT as Neutral (3) -

While Citi is skeptical a full turnaround is imminent for Perpetual, the broker notes $0.1bn of net inflows for the September quarter was reasonable given the market backdrop. Some moderation of outflows from JO Hambro was also considered a positive.

Management highlighted strong interest in both the JO Hambro and Barrow Hanley strategies, and expects positive momentum into Q2, yet the broker anticipates difficulties in maintaining flow consistency.

The Neutral rating and $22.10 target are unchanged.

Target price is $22.10 Current Price is $21.31 Difference: $0.79
If PPT meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $26.45, suggesting upside of 28.8% (ex-dividends)

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 PPT as Outperform (1) -

Macquarie highlights a significant 1Q FY24 improvement in net flows for Perpetual compared to a disappointing June quarter. Management maintained guidance for expenses and synergy targets.

However, the broker lowers its EPS estimates due to the impact of market movements and higher-than-forecast expenses, partially offset by better-than-expected net inflows and currency movements.

The target falls to $27.50 from $30.00. Outperform.

Target price is $27.50 Current Price is $21.31 Difference: $6.19
If PPT meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $26.45, suggesting upside of 28.8% (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

Morgan Stanley rates PPT as Overweight (1) -

Morgan Stanley expects a positive share price reaction to last Friday's 1Q update showing total Investments flows for Perpetual were a material beat against the consensus expectation.

While total Investments funds under management (FUM) was a -2% miss versus the broker's forecast on weaker markets, the 
investment performance was strong, with 77% of strategies outperforming over three years.

Overweight. Target $28. Industry view: In-Line.

Target price is $28.00 Current Price is $21.31 Difference: $6.69
If PPT meets the Morgan Stanley target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $26.45, suggesting upside of 28.8% (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

UBS rates PPT as Neutral (3) -

Despite headline metrics from Perpetual's first quarter being in-line with UBS's expectations, the result was lower quality than the broker had anticipated.

While the company reported funds under management of $212bn and net inflows totaling $0.1bn, the broker notes the low cash margin of $1.3bn suggests net outflows of -$1.4bn. 

The broker continues to question the merit of Perpetual's acquisition of Pendal, with the Pendal boutiques reporting broad-based net outflows. The Neutral rating and target price of $23.50 are retained.

Target price is $23.50 Current Price is $21.31 Difference: $2.19
If PPT meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $26.45, suggesting upside of 28.8% (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

Morgans rates TAH as Add (1) -

Tabcorp Holdings issued an unscheduled 1Q trading update showing a -6.1% decline in revenue. Management attributed the outcome to a softer macroeconomic backdrop and unfavourable wagering results, especially in Sports.

While Morgans anticipated the -12.7% decline in Gaming Services revenue, an expected uplift from higher Wagering and Media turnover did not eventuate, and fell by -5.4%. Unfavourable racing and sports results impacted fixed odds yields, explain the analysts.

The broker's target falls to $1.15 from $1.30 after FY24 and FY25 earnings (EBITDA) estimates were reduced by -10% and -6%, respectively. The Add rating is kept as market expectations are considered low and current valuation multiples are at a discount to peers.

Target price is $1.15 Current Price is $0.91 Difference: $0.24
If TAH meets the Morgans target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $1.10, suggesting upside of 22.7% (ex-dividends)

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

Ord Minnett rates TAH as Accumulate (2) -

While Ord Minnett maintains its Accumulate rating and $1.10 target for Tabcorp Holdings, its FY24 earnings (EBIT) forecast is slashed by -20% following a 1Q update showing a -6% decline in revenue. The broker's longer-term assumption remain largely intact.

A 1% lift for digital wagering failed to offset the -1% fall for Wagering turnover due to the high level of online competition, explains the analyst. It's noted digital technology has eroded the value of Tabcorp's state-based physical wagering exclusivity.

Target price is $1.10 Current Price is $0.91 Difference: $0.19
If TAH meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $1.10, suggesting upside of 22.7% (ex-dividends)

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

Macquarie rates VEA as Outperform (1) -

Prior to 3Q results for Viva Energy, Macquarie lowers its 2023 EPS forecasts by -6% to reflect slightly lower Geelong refinery
utilisation.

The analyst expects management will provide clarity on Geelong refining operations post-repairs and forecasts normal levels for Q4, but with margins now lower.

The broker's $3.60 target and Outperform rating are unchanged.

Target price is $3.60 Current Price is $2.85 Difference: $0.75
If VEA meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.38, suggesting upside of 19.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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