Australian Broker Call

Bell Potter rates 4DX as Speculative Buy (1) -

4DMedical as completed a $45m capital raising that Bell Potter observes was well supported by institutions and retail shareholders.

The company should have sufficient capital to achieve breakeven but the broker finds considerable uncertainty surrounding the timing of key events including large-scale contracts with the US Veterans Affairs department.

Bell Potter retains a Speculative Buy rating and raises the target to $1.10 from $1.05.

Target price is $1.10 Current Price is $0.85 Difference: $0.255
If 4DX meets the Bell Potter target it will return approximately 30% (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

Macquarie rates AFG as Neutral (3) -

Macquarie observes operating conditions to continue to put pressure on Australian Finance Group's earnings. In addition, price competition is contributing to elevated run-off and reduced levels of new business.

A combination of competition in the residential mortgage market and increases to the cash rate have put pressure on net interest margins. Macquarie forecasts net interest margins will stabilise between 120-125 basis points from the first half of FY24.

The broker maintains a Neutral rating and lowers the target to $1.61 from $1.67.

Target price is $1.61 Current Price is $1.75 Difference: minus $0.135 (current price is over target).
If AFG meets the Macquarie 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 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

Morgan Stanley rates APM as Overweight (1) -

Recent management commentary suggests to Morgan Stanley its circa 4% revenue compound annual growth rate (CAGR) estimate for from FY24 is conservative.

APM Human Services International also reiterated over 80% cash conversion.

The broker's Overweight rating and target price of $3.00 are retained. Industry view: In-Line.

Target price is $3.00 Current Price is $2.16 Difference: $0.84
If APM meets the Morgan Stanley target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $3.18, suggesting upside of 50.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.8

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

Morgans rates ASX as Hold (3) -

At the ASX investor day, operating expense and capital expenditure guidance was higher than consensus was expecting due to a greater focus by management on technology improvements, including the CHESS replacement.

Given a relatively benign revenue growth outlook, the broker's lower EPS forecasts (based on higher estimated expenses) result in an easing of the target price to $65.90 from $72.30. The Hold rating is unchanged.

Morgans notes a significant change in capital management policy which included a new dividend payout ratio policy (from FY24) to a range of between 80%-90%, down from 90%. The dividend reinvestment policy (DRP) may also be reactivated.

Target price is $65.90 Current Price is $61.99 Difference: $3.91
If ASX meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $65.47, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.1

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

Ord Minnett rates ASX as Accumulate (2) -

Following the investor briefing, Ord Minnett notes the share price fell -10% amid prospects of increased operating expenses and capital expenditure. The broker disagrees with the reaction and believes the shares are now materially undervalued.

Ord Minnett defends new management and its decisive commitment to retaining its social licence, having been under regulatory scrutiny after the failure to deliver a replacement for the CHESS system.

That said, the new five-year strategy is considered to lack adequate detail on how the company will allocate resources. Accumulate rating and $75 target maintained.

Target price is $75.00 Current Price is $61.99 Difference: $13.01
If ASX meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $65.47, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.1

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

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

Following on from yesterday's commentary from Morgan Stanley (below), the broker decides to lower its rating for Baby Bunting to Equal-weight from Overweight. Cyclical headwinds are expected to persist into FY24.

The target is also lowered to $1.65 from $3.50. Industry View: In-Line.

Yesterday's commentary: Morgan Stanley and consensus were already doubtful about Baby Bunting's prior profit guidance as it required a significant 2H skew.

Despite holding this view, the broker was still surprised by the extent of yesterday's guidance downgrade, which suggests trading has deteriorated materially in the last few months.

Profit guidance of $13.5-15m missed the analyst's forecasts by -30% and was -37% below prior guidance.

Target price is $1.65 Current Price is $1.25 Difference: $0.405
If BBN meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $1.56, suggesting upside of 25.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

Citi rates BKL as Neutral (3) -

Citi has lifted its price target by 16% to $95 in reflection of the Kirin bid price for the company.

Target price is $95.00 Current Price is $94.01 Difference: $0.99
If BKL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $91.75, suggesting downside of -2.5% (ex-dividends)

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 CHC as Buy (1) -

Citi points out Australian REITs are trading at an implied discount of around -20% compared to net tangible assets (NTA), excluding the fund managers, and suggests significant downside is already priced in.

Recent valuation evidence for convenience retail shopping centers show much less cap rate expansion than current market pricing, observes the analyst. Moreover, valuations on unlisted assets typically move slower than what the listed pricing indicates.

As a result of this positive read-through, Citi reiterates its Buy rating for Charter Hall and maintains its $14.60 target.

Target price is $14.60 Current Price is $10.94 Difference: $3.66
If CHC meets the Citi target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $14.79, suggesting upside of 34.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.8

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

Shaw and Partners rates CY5 as Buy (1) -

Cygnus Metals has drill results from its Bencubbin asset, a rare earth prospect in Western Australia which include 19m at 1541ppm TREO, 5m at 2356ppm, 25m at 1117ppm including 9m at 1608ppm.

Mineralisation is hosted in a clay profile up to 49m thick over rare enriched granite which indicates significant potential for scale. Assays are pending.

The exploration at Bencubbin is being conducted in parallel with lithium exploration in James Bay, Quebec. Shaw and Partners has a Buy rating and $0.46 target.

Target price is $0.46 Current Price is $0.22 Difference: $0.24
If CY5 meets the Shaw and Partners target it will return approximately 109% (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

Morgan Stanley rates DTL as Overweight (1) -

Recent management commentary clarified to Morgan Stanley that Data#3 is not exposed to headwinds in retail, consumer or SMEs, while tailwinds from digital transformation, cybersecurity and the cloud remain strong.

The company also noted buoyant 6% IT system growth, consistent with the company's experience.

Morgan Stanley's Overweight rating and target price of $8.00 are retained. Industry view: In-Line. 

Target price is $8.00 Current Price is $7.11 Difference: $0.89
If DTL meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Macquarie rates EBO as Outperform (1) -

Ebos Group has confirmed the loss of the Chemist Warehouse supply contract for PBS medicines in Australia. While this is a loss of business, Macquarie envisages an opportunity to focus on other prospects such as Terry White, medical technologies and animal care.

Nevertheless, the broker downgrades FY25 EBITDA by -9% while assuming the company can be successful in mitigating some of the impact with employee expense optimisation.

Outperform. Target is lowered to NZ$41.85 from NZ$47.93. 

Current Price is $32.70. Target price not assessed.

Current consensus price target is $35.36, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.4

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

Morgan Stanley rates EBO as Overweight (1) -

Thanks to Ebos Group's diversified business model, Morgan Stanley explains EPS downside is more muted than would otherwise be the case, following the loss of its Chemist Warehouse contract. 

The current contract for the supply of PBS medicines will not be renewed beyond expiry on June 30, 2024.

The share price fall following the announcemnet already accounts for the contract loss, in the analyst's view, and uncertainty associated with such a contract has been removed. Thus, the Overweight rating is maintained.

The target falls to NZ$44 from NZ$47.30. Industry view In-Line.

Current Price is $32.70. Target price not assessed.

Current consensus price target is $35.36, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.4

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

Citi rates FMG as Upgrade to Neutral from Sell (3) -

On hope for China stimulus, soon, Citi has upgraded Fortescue Metals to Neutral from Sell.

Target price is $18.20 Current Price is $20.50 Difference: minus $2.3 (current price is over target).
If FMG meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.34, suggesting downside of -21.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Bell Potter rates GT1 as Speculative Buy (1) -

Green Technology Metals has an initial resource at Root Bay, Canada, which is open along strike at depth. The 8.1mt at 1.32% lithium adds material scale to the company's inventory that now totals 22.5mt.

It also provides potential for a second mining hub to the west of the more advanced Seymour project. Infill and step-out drilling is now underway.

Amid further de-risking of the prospect, Bell Potter raises the target to $1.46 from $1.38 and retains a Speculative Buy rating.

Target price is $1.46 Current Price is $0.68 Difference: $0.78
If GT1 meets the Bell Potter target it will return approximately 115% (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 INA as Buy (1) -

Citi has welcomed Ingenia Communities' trading update as being "better than feared", with management confirming guidance for FY23.

The broker retains Ingenia Communities as one of preferred residential plays, given the strong outlook for land lease demand. Buy rating retained while the price target lifts to $4.70 (from $4.40).

Target price is $4.70 Current Price is $3.96 Difference: $0.74
If INA meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.41, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Macquarie rates ORG as Outperform (1) -

Brookfield/MidOcean has filed an application with the ACCC for authorisation of its transaction. Macquarie observes, by seeking authorisation, Brookfield can introduce a net benefit to the community i.e. accelerating Origin Energy's renewable ambitions.

Brookfield has also provided undertakings to keep management and people separate between Origin Energy and Ausnet. The broker notes the ACCC must make a decision within 90 days and a favourable decision may accelerate the timing of the transaction.

The broker retains an Outperform rating and $8.89 target, believing the stock remains attractive in an uncertain market while noting the risk remains if the ACCC rejects the authorisation.

Target price is $8.89 Current Price is $8.40 Difference: $0.49
If ORG meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.76, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates PNV as Outperform (1) -

Sales for PolyNovo in FY23 to date of $59.1m reveal an increase of 54.5% amid another record month in May. Macquarie notes sales are accelerating on a monthly basis, supported by new markets and the additional uptake of recently launched MTX in the US.

The broker believes the strength will continue with an expanded sales team and retains an Outperform rating. The target is $2.75.

Target price is $2.75 Current Price is $1.59 Difference: $1.165
If PNV meets the Macquarie target it will return approximately 74% (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

Morgans rates QAL as Add (1) -

Morgans believes Qualitas is nicely positioned to grow its market share in the debt funding of more affordable multi-unit metro developments, as the big four banks retreat from this type of commercial real estate lending.

Private credit is arguably the global alternative asset class of choice, and the analyst lists domestic tailwinds including historical under-building and limited listings for existing dwellings.

Moreover, increased migration and a post-covid return to cities supports the company's book of senior secured loans, explains the broker.

Morgans slightly improves its multiples for Qualitas to reflect greater confidence in the trajectory of funds under management (FUM) growth. The target rises to $3.35 from $3.15. Add.

Target price is $3.35 Current Price is $2.79 Difference: $0.56
If QAL meets the Morgans target it will return approximately 20% (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 RIO as Upgrade to Buy from Neutral (1) -

On hope for China stimulus, soon, Citi has upgraded Rio Tinto to Buy from Neutral.

Target price is $120.00 Current Price is $114.00 Difference: $6
If RIO meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $114.08, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.2

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

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

Morgan Stanley lowers its target price for ResMed to US$221 from US$229 (no changes to the Australian dollar target price as yet), as the high-efficiency anti-obesity thereapeutic market gains some momentum.

While penetration for injectable GLP-1 drugs is still nascent, these drugs could have an impact on the utilisation of continuous positive airway pressure (CPAP) machines.

The Equal-weight rating and $34.70 target are unchanged. industry View: In-Line.

Target price is $34.70 Current Price is $32.25 Difference: $2.45
If RMD meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $38.00, suggesting upside of 18.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Macquarie rates RMS as Outperform (1) -

Ramelius Resources has completed three levels of development and the first two stopes at Penny. The company estimates gold grades will range between 15-20 /t  for the second stopes, which is largely in line with Macquarie's expectations.

Approvals for large capacity road trains have been obtained, which is a critical positive for the ramp up. Macquarie lifts near-term forecasts and maintains an Outperform rating. Target rises to $1.59 from $1.43.

Target price is $1.59 Current Price is $1.42 Difference: $0.17
If RMS meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $1.53, suggesting upside of 4.1% (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

Shaw and Partners rates RMS as Buy (1) -

Shaw and Partners welcomes the update on the new Penny gold mine from Ramelius Resources. If the gold price stays around $3000/oz then FY24 is likely to be a year for record margins and earnings, the broker adds.

Operating costs are expected to move back towards $1500/oz as the high-grade Penny becomes a large portion of the mill feed. A second stope has been completed with grades ranging from 15-20g/t.

Furthermore, the company is in a strong financial position and is on the lookout for growth opportunities. The broker retains a Buy rating and $1.50 target.

Target price is $1.50 Current Price is $1.42 Difference: $0.08
If RMS meets the Shaw and Partners target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.53, suggesting upside of 4.1% (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

Morgan Stanley rates SIG as Upgrade to Equal-weight from Underweight (3) -

Given Sigma Healthcare's large fixed cost leverage, Morgan Stanley's EPS estimates for FY24 and FY25 rise dramatically after the signing of a contract with Chemist Warehouse.

The contract is to supply both PBS and fast-moving consumer products (FMCG) products for five years from July 1, 2024.

The broker lifts its rating to Equal-weight from Underweight and increases its target to 75c from 38c. Industry view is In-Line.

The analyst highlights Sigma has bought some certainty with the new contract by paying Chemist Warehouse with around -$80m of shares and providing a right to acquire "certain assets" for $24.5m.

Target price is $0.75 Current Price is $0.77 Difference: minus $0.02 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.76, suggesting downside of -5.3% (ex-dividends)

The company's fiscal year ends in January.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Ord Minnett rates VCX as Hold (3) -

Vicinity Centres has announced the sale of 50% of Broadmeadows Central in Victoria for $134.5m. The sale, other property transactions and valuation news from rival A-REITs reaffirms Ord Minnett's view that the stock is modestly undervalued.

Given ongoing interest-rate increases, the broker expects further pressure on the remaining asset valuations with its fair value estimate being -12% below current net tangible assets.

Hold rating and $2.05 target maintained.

Target price is $2.05 Current Price is $1.85 Difference: $0.2
If VCX meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.05, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

Macquarie rates VEA as Outperform (1) -

The turnaround of the Geelong refinery has been extended for another three months after originally being forecast to take eight weeks. A crane failure caused a hydrogen compressor to be dropped and this has caused damage which now needs to be repaired.

Viva Energy estimates refinery will be -$25-35m loss-making each month while insurance will provide some clawback, which Macquarie estimates "hopefully conservatively" at $45m.

The focus for investors, the broker asserts, is convenience retail, which should naturally reduce refining exposure and earnings cyclicality. Outperform rating maintained. Target is reduced to $3.40 from $3.60.

Target price is $3.40 Current Price is $3.01 Difference: $0.39
If VEA meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.32, suggesting upside of 9.7% (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