Australian Broker Call

Ord Minnett rates AGL as Hold (3) -

Soft wholesale electricity prices throughout summer have tested Ord Minnett's conviction regarding long-term prices. The broker calculates prices would need to be $70-80/megawatt-hour across cycles to generate appropriate returns.

Summer was characterised by weaker demand because of mild weather and the pandemic as well as suppressed fuel costs and good generator availability.

While both AGL Energy and Origin Energy ((ORG)) offer leverage to rising electricity prices, the broker retains a preference for Origin Energy given the risk around AGL Energy's proposal to split its business and the implications for debt.

Hold rating and $8.80 target maintained.

Target price is $8.80 Current Price is $9.03 Difference: minus $0.23 (current price is over target).
If AGL 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 $8.88, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.5

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

Credit Suisse rates ASB as Outperform (1) -

Management has downgraded FY21 guidance amid pandemic-related restrictions and resource challenges as well as the ASIC proceedings.

Still recent contracts in the US enable Austal to demonstrate its capabilities and Credit Suisse believes these contracts provide evidence of the company's stance in the US defence market.

Credit Suisse cuts FY21 EBIT estimates by -7% to $116m, within the guidance range of $112-118m, because of risks to throughput across Australia and the Philippines. Outperform rating and $2.75 target maintained.

Target price is $2.75 Current Price is $2.06 Difference: $0.69
If ASB meets the Credit Suisse target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $2.80, suggesting upside of 35.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Citi rates AX1 as Neutral (3) -

Citi highlights Nike's direct-to-consumer channel is now expected to contribute 60% of sales by FY25 which represents the medium-term risk to wholesale partners such as Accent Group.

Accent Group is seen mitigating the risk by increasing the penetration of licensed brands in its retail format, particularly Platypus, and investing in new verticals. Accent Group has previously indicated Nike represents just around 6% of group sales.

Neutral rating with a target price of $3.10.

Target price is $3.10 Current Price is $2.76 Difference: $0.34
If AX1 meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.92, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates BLD as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley commends Boral for its actions on the balance sheet and the sale of assets at attractive prices yet believes these are now reflected in the share price.

Boral has outperformed the ASX200 by 41% since January and the broker's building materials coverage by 18%. Capital management is now factored in, the analysts suggest.

Following the US divestments Boral will be a mature, Australia-focus construction materials operator. From here transformation benefits should boost earnings but outside of this future growth is less obvious to the broker.

Rating is downgraded to Equal-weight from Overweight. Target is $7.60. Industry view is in-line.

Target price is $7.60 Current Price is $7.34 Difference: $0.26
If BLD meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.82, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Citi rates CHC as Buy (1) -

Citi suggests further upside to FY21 guidance after Charter Hall reported funds under management will increase to $52bn as of June 30 2021.

The broker retains the stock as a top pick because of the strong operations and undemanding valuation and forecasts FY21 earnings per share of 58.7c.

Citi reiterates a Buy rating. The target is raised to $17.50 from $17.00.

Target price is $17.50 Current Price is $15.64 Difference: $1.86
If CHC meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $16.81, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Credit Suisse rates CHC as Neutral (3) -

Credit Suisse revises earnings estimates upwards after Charter Hall announced funds under management have increased to $52bn. This reflects 12% growth over the June half.

Credit Suisse anticipates a flow-on benefit to FY22 forecasts from increased base management fees.

Guidance is for earnings per security of at least $0.57 and the broker would not be surprised if the actual outcome is higher. Neutral rating maintained. Target rises to $15.43 from $14.40.

Target price is $15.43 Current Price is $15.64 Difference: minus $0.21 (current price is over target).
If CHC meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.81, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Macquarie rates CHC as Outperform (1) -

Charter Hall Group reported June-21 funds under management (FUM), which was $3bn ahead of Macquarie's estimate. Acquisitions and revaluations were also greater than expectations. The group announced positive revaluations of $3.3bn in the second half.

The broker now forecasts FY21 earnings (operating EPS) of 58.3cps, which is 2.2% ahead of guidance of at least 57cps. It's felt the increase in FUM bodes positively for upgrades to FY22 earnings.

The analyst lifts the target price to $17.42 from $16.12 to reflect higher funds management earnings, and an increase in net tangible assets (NTA) post the announced revaluations.

Target price is $17.42 Current Price is $15.64 Difference: $1.78
If CHC meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $16.81, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

UBS rates CHC as Buy (1) -

Charter Hall has announced funds under management of $52bn, ahead of UBS estimates. The broker revises up estimates for earnings per security by 2% for FY21 and by 5% for FY22.

No further update was provided on earnings for FY21, having upgraded guidance to $0.57 per security in May.

Guidance does not include any accrual for performance fees, and UBS assesses some performance fees in FY21 will be collected in FY22, so upside is possible. Buy rating maintained. Target rises to $17.00 from $16.10.

Target price is $17.00 Current Price is $15.64 Difference: $1.36
If CHC meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $16.81, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Macquarie rates EHL as Outperform (1) -

Emeco Holdings successfully priced $250m senior secured notes at 6.25%. The proceeds will fully repay the outstanding 9.25% March 2024 US notes and related hedges. Macquarie believes this reflects a strong medium-term outlook for the core equipment rental business. 

The broker considers management's reconfirmed guidance for operating earnings (EBITDA) of $235-238m is positive, given some commissioning issues on PNP, flagged in April, 2021. The Outperform rating and $1.30 target are maintained.

Target price is $1.30 Current Price is $1.01 Difference: $0.29
If EHL meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgan Stanley rates EVN as Downgrade to Underweight from Equal-weight (5) -

The main opportunities are the expansion of Red Lake and Cowal underground and are now incorporated into Morgan Stanley's forecasts, which limits further earnings upside.

The broker expects substantial expansion at Red Lake despite the execution risks, with the project reflecting 34% of DCF value. Cowal is expected to reach its target of 350,000 ounces per annum by FY24 and reflects 42% of DCF value.

Rating is downgraded to Underweight from Equal-weight as Morgan Stanley believes there is better gold exposure elsewhere. Target is $4.30. Industry view: Attractive.

Target price is $4.30 Current Price is $4.69 Difference: minus $0.39 (current price is over target).
If EVN meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates MPL as Neutral (3) -

In-line with the prior month, Macquarie estimates around 85 basis points (bps) of industry-margin expansion in the 2H21 versus 1H21, with every 50bps equating to 5-6% EPS impact for nib Holdings. 

The broker concludes claims growth is around -20bps lower than the 4.7% experienced pre-covid, which is comfortably lower than provisions. It's therefore implied there will be sizeable releases over the coming 18 months.

With post-covid exposures of travel insurance, and international students and workers taking longer to rebound, Macquarie maintains a preference for Medibank Private over nib Holdings ((NHF)). The Neutral rating and $2.80 target are maintained.

Target price is $2.80 Current Price is $3.14 Difference: minus $0.34 (current price is over target).
If MPL meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.13, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Macquarie rates NHF as Neutral (3) -

In-line with the prior month, Macquarie estimates around 85 basis points (bps) of industry-margin expansion in the 2H21 versus 1H21, with every 50bps equating to 5-6% EPS impact for nib Holdings. 

The broker concludes claims growth is around 20bps lower than the 4.7% experienced pre-covid, which is comfortably lower than provisions. It's therefore implied there will be sizeable releases over the coming 18 months.

With post-covid exposures of travel insurance, and international students and workers taking longer to rebound, Macquarie maintains a preference for Medibank Private ((MPL)) over nib Holdings. The Neutral rating and $5.95 target are maintained.

Target price is $5.95 Current Price is $6.39 Difference: minus $0.44 (current price is over target).
If NHF meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.27, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Ord Minnett rates ORG as Buy (1) -

Soft wholesale electricity prices throughout summer have tested Ord Minnett's conviction regarding long-term prices. The broker calculates prices would need to be $70-80/megawatt-hour across cycles to generate appropriate returns.

Summer was characterised by weaker demand because of mild weather and the pandemic as well as suppressed fuel costs and good generator availability.

While both AGL Energy ((AGL)) and Origin Energy offer leverage to rising electricity prices, the broker retains a preference for Origin Energy because of the amount of free cash flow as higher commodity prices are absorbed.

Buy rating and $5.75 target maintained.

Target price is $5.75 Current Price is $4.73 Difference: $1.02
If ORG meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $5.06, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

Morgans rates PTB as Add (1) -

Morgans thinks the $4.3m acquisition of United Turbine by PTB Group should drive faster near-term growth in the US business. The target is raised to $0.93 from $0.89. United Turbine provides maintenance, repair and overhaul (MRO) services on PT6 turboprop engines.

After cash outflows (including the acquisition, expected to close on 15 July) in FY22 of -$12.1m, the broker estimates there will be a  comfortable $5m margin. However, cash reserves may be tight by FY23, unless the company can refinance significant amounts of debt.

Alternatively, profits from US operations may grow faster than the analyst forecasts, if there is an accelerated uptake of the engine management program. The Add rating is unchanged.

Target price is $0.93 Current Price is $0.71 Difference: $0.22
If PTB meets the Morgans target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Ord Minnett rates SVW as Accumulate (2) -

Seven Group has announced its "last and final" offer for the shares in Boral ((BLD)) it does not own. The base offer is still $6.50 while the company is now offering $7.30 a share subject to acceptances sufficient to increase its interest to 29.5%, or more.

Alternatively $7.40 a share is on offer, subject to acceptances sufficient to increase its interest in Boral to 34.5%, or more. Seven Group has declared that under no circumstances will it offer more than $7.40 a share. The offer closes on July 2.

Ord Minnett retains an Accumulate rating and $26.50 target for Seven Group.

Target price is $26.50 Current Price is $20.30 Difference: $6.2
If SVW meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $27.14, suggesting upside of 33.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

UBS rates SXL as Buy (1) -

Southern Cross Media has signed an affiliation agreement with the Ten Network in selected markets, which UBS believes will remove an overhang.

The agreement covers regional Queensland, southern NSW and regional Victoria for two years commencing July 1, 2021. As the overhang has now been removed and advertising markets are continuing to improve, the broker retains a Buy rating. Target is $2.50.

Target price is $2.50 Current Price is $2.12 Difference: $0.38
If SXL meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates WOW as Neutral (3) -

Macquarie re-forecasts for Woolworths to reflect the new operating structure after the divestment of Endeavour Group ((EDV)). The broker revises EPS estimates for FY21-FY23 by 0%, -20% and -17% and the price target drops to $38.40 from $44.50.

The broker notes the next likely catalyst will be full year results on 26 August, where management will likely update the market on the core business. Within Staples, the analyst prefers Coles Group ((COL)). The Neutral rating is retained.

Target price is $38.40 Current Price is $36.78 Difference: $1.62
If WOW meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $40.67, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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