Australian Broker Call

Citi rates BXB as Buy (1) -

Buy-rated Brambles has decided not to proceed with major customer Costco's transition to plastic pallets and Citi analysts suggest this is a positive.

Despite Brambles throwing in a lot of effort and resources, the analysts note the company could still not make plastic pallets "work", i.e. the return achievable was deemed as too low.

Citi is of the view this diminishes the chances of a competitor grabbing a chunk of market share through plastic pallets, even if this competitor were to accept a lower return. There's also the added complication of a high oil price.

Price target $12.29.

Target price is $12.29 Current Price is $10.71 Difference: $1.58
If BXB meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $12.11, suggesting upside of 9.1% (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: 0.4

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

Morgan Stanley rates BXB as Underweight (5) -

Morgan Stanley believes Brambles has done well to avoid a material capex bill via its decision not to proceed with plastic pallets supply for Costco. That being said, the threat of a Costco transition to a competitor and flow-on negative impacts is thought to remain.

The Underweight rating and $10.20 target price are unchanged. Industry View: In-Line.

Target price is $10.20 Current Price is $10.71 Difference: minus $0.51 (current price is over target).
If BXB meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.11, suggesting upside of 9.1% (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: 0.4

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

Ord Minnett rates BXB as Buy (1) -

Ord Minnett admires the strong and positive stance taken by Brambles not to proceed with trials to enable a transition to plastic
pallets for its major customer Costco in the US.

Should Costco find an alternate supplier, the broker feels the slack from lost wooden pallet work may be picked up via transformational initiatives and new business wins. The Buy rating and $13.50 target price are retained.

Target price is $13.50 Current Price is $10.71 Difference: $2.79
If BXB meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $12.11, suggesting upside of 9.1% (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: 0.4

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

UBS rates BXB as Buy (1) -

UBS sees some negatives in Brambles not investing in major customer Costco's proposed transition to plastic pallets. These include not participating in a high return project and the potential for losing Costco volume.

However, the broker likes that Brambles stuck to its capital discipline. Trial outcomes showed a lesser return on capital than required by the company. The Buy rating and $13.70 target are retained.

Target price is $13.70 Current Price is $10.71 Difference: $2.99
If BXB meets the UBS target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $12.11, suggesting upside of 9.1% (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: 0.4

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

Macquarie rates FCL as Outperform (1) -

Taking readthroughs from recent industry commentary, Macquarie has reduced its revenue forecasts for Fineos Corp -8% for both FY23 and FY24, and earnings by -22% and -29% for the same years, with sales cycles not expected to normalise until FY23.

The broker expects Fineos Corp can deliver software revenue growth of 26.0% to June, compared to peers Duck Creek and Guidewire's reported 21.1% and 4.5% growth. Despite this, the broker finds Fineos Corp to be trading at an excessive -75% discount to peers. 

The Outperform rating is retained and the target price decreases to $2.89 from $3.06.

Target price is $2.89 Current Price is $1.48 Difference: $1.41
If FCL meets the Macquarie target it will return approximately 95% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

This company reports in EUR. 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 GOZ as Neutral (3) -

With Growthpoint Properties Australia announcing an upgrade to its funds from operations guidance to at least $27.70 cents per share, Credit Suisse has lifted its own forecast 0.9% accordingly, noting higher than expected funding costs remain a risk to earnings.

The broker notes the increase was driven by acquisitions and leasing success in the year, both of which Credit Suisse had already captured in its forecast. The broker expects the benefit will not extend beyond the current year, and retains forecasts past FY22.

The Neutral rating and target price of $4.27 are retained.

Target price is $4.27 Current Price is $3.41 Difference: $0.86
If GOZ meets the Credit Suisse target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.28, suggesting upside of 23.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Ord Minnett rates JDO as Initiation of coverage with Buy (1) -

Ord Minnett believes Judo Capital will continue to take share in the SME lending market, and initiates coverage with a Buy rating and $1.70 target price. 

The broker points out utilisation of the cloud allows the bank to adopt a much simpler architecture, than banks with legacy IT systems, and should drive material cost savings.

The analyst acknowledges risk to asset quality, and should economic conditions deteriorate further, Judo would be more exposed than peers given the shape of its book.

Target price is $1.70 Current Price is $1.21 Difference: $0.49
If JDO meets the Ord Minnett target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $2.13, suggesting upside of 70.0% (ex-dividends)

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

Morgans rates PPE as Add (1) -

Following a recent presentation by PeopleIn (and change of analyst) at Morgans, the broker reiterates its Add rating.

The analyst likes the company's exposure to a robust and growing employment market, aided by labour shortages and increased government spending. Around one-third of the business is in healthcare, which should benefit from an increased government spend.

On a change in valuation method, the analyst lowers the target price to $4.25 from $5.15.

Target price is $4.25 Current Price is $2.89 Difference: $1.36
If PPE meets the Morgans target it will return approximately 47% (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 QAN as Overweight (1) -

Upgraded net debt guidance by Qantas Airways shows Morgan Stanley that the balance sheet is being repaired faster than expected. It's also thought the market is including little value for cost-out and the Overweight rating is maintained. Industry View: In-Line.

The broker downgrades earnings due to rising fuel prices and lowers its target price to $6.60 from $7.10. Much of the increased fuel cost is expected to be offset by higher airfares and reduced capacity/improved load factors.

Target price is $6.60 Current Price is $4.47 Difference: $2.13
If QAN meets the Morgan Stanley target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $6.08

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Citi rates SFR as Buy (1) -

Sandfire Resources has released a JORC-compliant increase for the Matsa resource and Citi analysts highlight they will be visiting the project in mid-September.

Buy/High Risk. Price target $7.20.

Target price is $7.20 Current Price is $4.45 Difference: $2.75
If SFR meets the Citi target it will return approximately 62% (excluding dividends, fees and charges).

Current consensus price target is $6.79, suggesting upside of 54.2% (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: 0.6

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

Macquarie rates SFR as Outperform (1) -

Sandfire Resources issued an update to its MATSA project base resource, with contained metals lifting 10% across copper, zinc, lead and silver, while ore tonnes increased 21%, with Macquarie noting the biggest impact is an expansion of zinc and copper production beyond FY29.

With zinc and copper pricing currently below the broker's FY23 forecasts, Macquarie notes a spot price scenario could drive a -33% decline to its earnings forecast, but that pricing should drive earnings upside from FY24.

The Outperform rating and target price of $8.00 are retained.

Target price is $8.00 Current Price is $4.45 Difference: $3.55
If SFR meets the Macquarie target it will return approximately 80% (excluding dividends, fees and charges).

Current consensus price target is $6.79, suggesting upside of 54.2% (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: 0.6

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

Ord Minnett rates SNL as Initiation of coverage with Accumulate (2) -

Ord Minnett initiates coverage on Supply Network, the supplier of aftermarket bus and truck parts to the commercial vehicle industry, with an Accumulate rating and $10.00 target price. The company operates under the Multispares brand in A&NZ.

The broker feels the company is set to benefit from increasing complexity of vehicles and the increasing level of freight required. Also, it's thought opportunities may present for market share gains via industry consolidation.

Earnings growth is dependent upon a combination of underlying industry growth supported by further investment into the company’s branch network, explains the analyst.

Target price is $10.00 Current Price is $9.45 Difference: $0.55
If SNL meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Citi rates TWE as Buy (1) -

Buy-rated Treasury Wine Estates' guidance is for its US operations to perform similarly to H1 in H2 this calendar year, though Citi believes this looks like a rather conservative stance by management at the company.

The broker's view is partially based on the view that wine demand should be relatively more resilient to inflation and interest rates compared to other alcohol products.

Having said all of the above, recent industry data indicate growth for wine consumption is slowing in the US. Citi is maintaining a forecast of FY23 EBITS growth of 33% (with price rises yet to follow).

Target price $13.78. The broker continues to see significant medium-term earnings growth opportunities for the company.

Target price is $13.78 Current Price is $11.35 Difference: $2.43
If TWE meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $13.41, suggesting upside of 17.7% (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

Credit Suisse rates VCX as Neutral (3) -

Credit Suisse has lifted its funds from operations per share forecasts for Vicinity Centres by 3.8%, 2.6% and 2.7%, reflecting improved cash collection. The broker also notes the company is yet to declare its second half dividend, and anticipates a 95% payout. 

The broker highlights Vicinity Centres was hit harder than peers by covid impacts given its high exposure to Victoria and CBD locations, but believes earnings recovery is possible in FY23.

The Neutral rating and target price of $1.97 are retained.

Target price is $1.97 Current Price is $1.84 Difference: $0.13
If VCX meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.90, suggesting upside of 3.4% (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

Morgans rates XRO as Initiation of coverage with Add (1) -

Morgans initiates coverage on cloud-based accounting software platform Xero with an Add rating and target price of $90.25.

The broker believes additional subscribers and average revenue per user (ARPU) growth (via product expansion) should create substantial barriers to entry/network effects.

Significant runway for customer growth is anticipated with less than 10% penetration of an over 45m (small-to medium sized business) total addressable market (TAM).

Target price is $90.25 Current Price is $76.96 Difference: $13.29
If XRO meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $98.88, suggesting upside of 28.5% (ex-dividends)

The company's fiscal year ends in March.

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