Australian Broker Call

Morgans rates A2M as Hold (3) -

FY23 revenue is now likely to increase to low double-digit growth compared to high single-digit growth previously (thanks largely to currency benefits), according to management at a2 Milk Co, in an AGM trading update.

Management also stated it is on track to achieve its target to grow sales to US$2bn by FY26 and improve earnings (EBITDA) margins over time.

Morgans increases its forecasts and raises its target to $6.35 from $5.87. The Hold rating is retained due to regulatory risk and a full valuation, explains Morgans.

Target price is $6.35 Current Price is $6.04 Difference: $0.31
If A2M meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.10, suggesting downside of -17.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.5

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

Morgans rates GEN as Initiation of coverage with Speculative Buy (1) -

Genmin owns the Baniaka iron ore project in Gabon, a shallow open pit mine that is on-track for first production in the 2H of 2024.

Morgans likes the scale of the resource (760mt and growing) and its ESG attributes, and initiates coverage with a Speculative Buy rating and 52c target price. 

Looking beyond the findings from the pre-feasability study on Stage 1 development for the project, the broker envisages a likely Stage 2 development of a self-funded rail link. It's felt this link to a larger rail network would add extra iron ore capacity.

A final investment decision is due in the 2Q of 2023.

Target price is $0.52 Current Price is $0.21 Difference: $0.31
If GEN meets the Morgans target it will return approximately 148% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Credit Suisse rates LNK as Neutral (3) -

Link Administration has announced it will proceed with a in-specie distribution of 90% of its Pexa Group ((PXA)) holding, alongside a sale of the remaining 10% stake. Credit Suisse highlights proceeds will be deployed to reduce net debt.

Excluding its Pexa Group stake, the broker values Link Administration at $1.20 per share but has a bull case valuation of $4.00 per share accounting for the sale valuation of the company's Corporate Markets, Banking and Credit Management, Retirement and Superannuation Solutions and Fund Solutions businesses. 

The Neutral rating is retained and the target price decreases to $3.50 from $4.50.

Target price is $3.50 Current Price is $3.41 Difference: $0.09
If LNK meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.83, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley - Cessation of coverage

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

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

Morgans suggests investors trim overweight positions in Pro Medicus after a recent share price rally and reduces its rating to Hold from Add. The $58.18 target price is unchanged.

The company provided no guidance at its AGM, as expected by the analyst, though noted the business was running ahead of internal budgets.

An overhanging risk, in the broker's view, is the assumption that all major contracts will renew. While there is no reason to think otherwise, some contracts are overdue for renewal, explains the analyst.

Target price is $58.18 Current Price is $57.88 Difference: $0.3
If PME meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates QBE as Buy (1) -

A sudden deterioration, apparently, in US crop protection claims has surprised Citi. The message was included in QBE Insurance's Q3 update and has not been matched by peers - not thus far.

Citi analysts see ongoing risks, also with regards to QBE's reinsurance renewal, but all in all remain quite comfortable with the outlook, also supported by higher rates from fixed income.

Nevertheless, additional claims costs and a negative mismatch adjustment have forced Citi to reduce FY22 EPS forecast by -12%, but there's small compensation in the fact EPS forecasts for both FY23 and FY24 rise by 2%.

The valuation falls in USD, but rises in AUD. Hence the price target has lifted to $15.40. Buy.

Target price is $15.40 Current Price is $12.33 Difference: $3.07
If QBE meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

Credit Suisse rates QBE as Outperform (1) -

Catastrophe claim headwinds have seen QBE Insurance downgrade combined operating ratio guidance to 94% from less than 94%. Credit Suisse reports catastrophe claims have exceeded allowance, but sees limited risk of further surprises in the remainder of the year. 

Investment yields are improving and growth continues to be robust according to the broker, and the company anticipates a supportive premium rate environment to continue into the new year. 

The Outperform rating is retained and the target price decreases to $16.94 from $17.32.

Target price is $16.94 Current Price is $12.33 Difference: $4.61
If QBE meets the Credit Suisse target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

Macquarie rates QBE as Outperform (1) -

A trading update from QBE Insurance revealed the company has increased its catastrophe cost expectations in 2022. Macquarie expects another increase will be forthcoming in 2023. Gross written premium growth nevertheless remains strong.

QBE will also strengthen reserves further, equally offset by releases from covid-related risk margins, but did not provide numbers.

Heading into the renewal of QBE’s group reinsurance program, Macquarie sees heightened risk of downgrades to 2023 consensus catastrophe expectations in the coming 1-2 months but believes the stock is trading at a large enough discount to peers.

Outperform and $14.00 target retained.

Target price is $14.00 Current Price is $12.33 Difference: $1.67
If QBE meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 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) -

Following an AGM update, Morgan Stanley believes higher catastrophe and crop claims (implying -20% downside to Morgan Stanley's FY23 forecast) are a modest setback.

The broker forecasts these claims will be more than offset in FY23 by stronger pricing and premium growth and better yields.

Management at QBE Insurance announced 3Q gross wriiten premium (GWP) growth of 6%, exceeding the analyst's forecast, while pricing increased by 8.2% on the 2Q.

The Overweight rating is retained. Morgan Stanley's target increases to $17.00 from $16.00 on additional support provided by a lower Australian dollar forecast of US67c, down from US70c. Industry view: In-Line.

Target price is $17.00 Current Price is $12.33 Difference: $4.67
If QBE meets the Morgan Stanley target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

Morgans rates QBE as Add (1) -

Following an investor update by QBE Insurance showing higher catastrophe claims costs than expected, Morgans lowers its FY22 EPS forecast by -6%. To counter this in the broker's forecasts, higher investment yield assumptions lift the FY23 EPS forecast by 5%.

The analyst considers the stock is inexpensive and retains an Add rating. It's believed rising bond yields, premium rate increases and reduced costs will provide tailwinds going forward. The target slips to $14.89 from $14.93.

Target price is $14.89 Current Price is $12.33 Difference: $2.56
If QBE meets the Morgans target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

UBS rates QBE as Buy (1) -

QBE Insurance reports premium volumes and rates remain buoyant in its recent trading update, but warns that catastrophe costs, inflation and running yields will drag in FY22 results. 

Catastrophe costs have exceeded budget by around -$100m, and UBS anticipates the company will lift its catastrophe budget 7.1% in the coming year. With these headwinds underpinned by known risks, UBS anticipates a bumper FY23.  

The Buy rating and target price of $17.00 are retained.

Target price is $17.00 Current Price is $12.33 Difference: $4.67
If QBE meets the UBS target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $16.03, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in December.

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: 1.0

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

Macquarie rates RHC as Outperform (1) -

In response to media speculation Ramsay Health Care is considering the divestment of its stake in Ramsay Sante in France, Macquarie has run the numbers.

In the near term, the broker sees the potential sale of Ramsay Sante as providing scope for a re-rating of the Australian operating business and an improved group return on invested capital and balance sheet position.

Macquarie remains positive on a medium-longer tem view. Outperform and $69.15 target retained.

Target price is $69.15 Current Price is $63.28 Difference: $5.87
If RHC meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $67.16, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates SDF as Outperform (1) -

Macquarie expects Steadfast Group to unveil its plans for UnisonSteadfast over coming months. The broker sees various ways the company can benefit from ownership in UnisonSteadfast, with most of the upside from M&A.

The broker believes UnisonSteadfast "is like Steadfast 20 year ago". However it does not see the roll-out of Steadfast’s technology as a driver of offshore growth, thus a multi-year investment program is unlikely at this time.

Outperform and $6.20 target retained.

Target price is $6.20 Current Price is $5.26 Difference: $0.94
If SDF meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $6.03, suggesting upside of 14.6% (ex-dividends)

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

Credit Suisse rates STX as Outperform (1) -

Credit Suisse has lifted its pricing assumptions for West Australian gas as the market tightens, which it expects to benefit Strike Energy. The broker's long-term price forecast increases 14% to $7 per gigajoule. 

A long awaited consolidation of the Perth Basin is underway, with a clearer line of sight to a tighter market outlook finally driving merger and acquisition proposals according to Credit Suisse. The broker lifts earnings per share forecasts 22-93% through to FY25 on higher prices and production.

The Outperform rating is retained and the target price increases to $0.39 from $0.34.

Target price is $0.39 Current Price is $0.25 Difference: $0.14
If STX meets the Credit Suisse target it will return approximately 56% (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

Macquarie rates VUK as Outperform (1) -

Virgin Money UK’s leverage to rising interest rates continued to shine through in the second half, Macquarie notes, providing margin upside into FY23. The announced buyback is small, but given the stock trades at only 0.4x net tangible assets, highly earnings accretive.

Add in a relatively resilient expected margin performance and the broker believes Virgin Money should broadly sustain and potentially grow its earnings even as impairment charges rise.

While there is scope for the stock to re-rate, the main upside risk will likely be driven by the broader sector, Macquarie suggests. Outperform retained, target rises to $4.20 from $3.95.

Target price is $4.20 Current Price is $2.54 Difference: $1.66
If VUK meets the Macquarie target it will return approximately 65% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

This company reports in GBP. 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