Australian Broker Call

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

In research penned on June 15, Morgan Stanley anticipated a positive reaction by the market to AGL Energy's new FY24 earnings guidance. 

Management see an improved electricity market outlook helping to offset inflation and higher activity costs, explains the analyst.

FY23 profit guidance was raised by 13% (a 2% beat against consensus), while new FY24 guidance came in 15% ahead of consensus.

Morgan Stanley highlights AGL is reducing its dividend payout target to 50-75% of profit from FY24 from around 75%, to help fund the development pipeline and ongoing rehabilitation works.

Equal-weight rating. Target $8.88. Industry View: Cautious.

Target price is $8.88 Current Price is $10.60 Difference: minus $1.72 (current price is over target).
If AGL meets the Morgan Stanley target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.56, suggesting downside of -11.1% (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

Ord Minnett rates AGL as Accumulate (2) -

AGL Energy has signalled a recovery is well underway, narrowing its FY23 guidance range and signalling a strong rebound in FY24. Ord Minnett increases FY23 net profit forecast by 10% to $270m and FY24 by 4% to $680m, around the middle of guidance.

The improved guidance reflects increased reliability for power stations and growth in retail customers. High wholesale electricity prices being passed on to customers will deliver accelerated earnings in FY24.

Ord Minnettt assesses the increased expenditure on batteries, pumped hydro and renewable energy, up to $6bn by 2030, will be funded by incremental debt, retained earnings and, potentially, asset sales. Accumulate rating and $12.80 target.

Target price is $12.80 Current Price is $10.60 Difference: $2.2
If AGL meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $9.56, suggesting downside of -11.1% (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 AKE as Outperform (1) -

Allkem has upgraded reserves at Mount Cattlin and highlighted the extension to mine life. This has translated to an extension to Macquarie's base case forecasts amid further upside potential from the underground.

Mount Cattlin ore reserves are up 34% to 7.8mt at 1.2% lithium and 130ppm tantalum. Incorporating the update and adjusting cost assumptions results in mixed forecast with FY24 earnings forecasts cut by -2% and FY26-29 raised by 3-9%.

Target is upgraded to $17.50 from $16.70 and an Outperform rating is maintained.

Target price is $17.50 Current Price is $15.88 Difference: $1.62
If AKE meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $17.13, suggesting upside of 7.9% (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 AVG as Hold (3) -

A tough trading environment for Australian Vintage has continued into the 2H, observes Morgans, and elevated sea freight costs are still impacting upon margins. Management has been unable to offset inflationary costs via price rises, explain the analysts.

The company provided first time FY23 guidance with revenue and EBITDAS broadly in line with the broker's forecasts, while EBITS was a -16.7% miss due to a higher D&A charge.

Management is taking positive steps, according to Morgans, by suspending the FY23 dividend and announcing an around -$9m cost-out program. A -$9m non-cash fixed cost write-off is also being taken to benefit gross margin in future years.

The Hold rating is unchanged and the target falls to 46c from 60c.

Target price is $0.46 Current Price is $0.45 Difference: $0.015
If AVG meets the Morgans target it will return approximately 3% (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 BOQ as Neutral (3) -

Despite a weak share price an an attractive dividend yield, Citi feels the time to buy Bank of Queensland shares has not yet arrived.

The broker highlights the bank is relatively more susceptible to the deteriorating asset quality cycle and rising competition for deposits, given it is currently experiencing strong growth in costs. It's felt better risk/return profiles may be found elsewhere.

Citi's current top pick in the sector is ANZ Bank ((ANZ)), which also has an attractive dividend, a lower exposure to retail banking and more institutional exposure.

The broker's Neutral rating and $5.75 target are maintained for Bank of Queensland.

Target price is $5.75 Current Price is $5.51 Difference: $0.24
If BOQ meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.43, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in August.

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

UBS rates COL as Neutral (3) -

UBS assesses the sales outlook for Australian food is positive and upgrades sales estimates for Coles while lowering EBIT margins because of higher labour costs.

Going forward, the broker would be more upbeat on the sales outlook for Coles if there was greater focus on store investment, execution and online.

Nevertheless, it is less exposed to the downturn than discretionary retailers as it enjoys leverage to population growth and sells essential goods. Neutral maintained. Target is raised to $18.50 from $17.75.

Target price is $18.50 Current Price is $18.09 Difference: $0.41
If COL meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $17.76, suggesting downside of -3.1% (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

UBS rates CSL as Buy (1) -

UBS observes the key debates with investors over the past few days include whether it is too cautious regarding further downside in plasma donor fees and what levers will contribute to improvements in the CSL Behring gross margin.

There is also the issue of the upcoming trial data from Argenx for a potential competitor product to immunoglobulin in CIDP. This data is due in July. If the Argenx Adhere trial fails then this would represent some small unexpected upside for CSL, the broker asserts.

Buy rating retained. Target price is $340.

Target price is $340.00 Current Price is $277.86 Difference: $62.14
If CSL meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $331.17, suggesting upside of 16.4% (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

Morgan Stanley rates CTD as Overweight (1) -

Morgan Stanley assigns a 70% probability Corporate Travel Management retains its Whole of Australian Government (WOAG) contract in an announcement due by June 30.

Should retention be accompanied by reiterated guidance, the broker anticipates around 15% upside risk for the share price. On the flipside, a loss of the contract is expected to negatively impact both earnings and sentiment.

The Overweight rating and $28.60 target are maintained. Industry view: In-line.

Target price is $28.60 Current Price is $20.00 Difference: $8.6
If CTD meets the Morgan Stanley target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $23.02, suggesting upside of 17.3% (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

Shaw and Partners rates GL1 as Buy (1) -

Global Lithium Resources has a land access agreement to explore at Manna while also undertaking its drill program at Marble Bar.

Shaw and Partners notes the many catalysts ahead, including further exploration results, geotechnical surveys, test work and feasibility studies all before the end of the year.

The broker also remains positive regarding the lithium price heading into the second half of 2023. Buy rating maintained. Target is $3.50, based on the company further expanding its resource base by 25% over the next 12 months.

Target price is $3.50 Current Price is $1.49 Difference: $2.015
If GL1 meets the Shaw and Partners target it will return approximately 136% (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

UBS rates ILU as Downgrade to Sell from Neutral (5) -

UBS has downgraded Iluka Resources to Sell from Neutral with its price target reduced to $10.90 from $11.95. The broker refers to the steep 25% increase in the share price year-to-date which is in sharp contrast to mineral sands prices over the period (flat).

UBS sees headwinds building from global economies and the Chinese property market and thus believes mineral sands prices are due for weakness. Forecasts have been cut.

For Iluka, EPS estimates have been culled by -5/-27/-40% for this year and the two following. The broker retains a positive view on the company's rare earth project, but believes meaningful production from Enneabba should not be expected until 2026.

Target price is $10.90 Current Price is $11.94 Difference: minus $1.04 (current price is over target).
If ILU meets the UBS target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.08, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates IMD as Neutral (3) -

UBS expects Imdex will deliver FY24 earnings of $144m. The stock has underperformed significantly over the last six months, the broker observes, in line with a moderation of the exploration cycle.

The stock is now trading on a FY24 PE of 15x, below its long-term average of 16x. UBS believes the lower multiple is fair, based on the uncertainty that exists at present and retains a Neutral rating. Target is reduced to $2.10 from $2.75.

Target price is $2.10 Current Price is $1.90 Difference: $0.2
If IMD meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.57, suggesting upside of 40.3% (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

Macquarie rates MIN as Outperform (1) -

Mineral Resources has a gas discovery at North Erregulla Deep-1, at the northern section of the Perth Basin. Plans are underway to conduct a composition and flow test. Meanwhile, the Mount Marion exploration program to date supports a potential for open cut extensions and underground mining.

FY23 spodumene shipments at Mount Marion have been lowered because of timing. An update on the ramp up at Wodgina and progress on the Onslow iron ore project present the near-term catalysts, Macquarie notes.

Mineral Resources has also agreed with Ganfeng to terminate the tolling agreement from June 1, which will be value accretive for the former in the near term, the broker adds.

Target is reduced to $109 from $113. Outperform maintained.

Target price is $109.00 Current Price is $73.00 Difference: $36
If MIN meets the Macquarie target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $89.14, suggesting upside of 21.5% (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

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

Mineral Resources has lowered FY23 spodumene shipment guidance by -9% at the group level and Wodgina cost guidance was around 9% higher than previously, notes Morgan Stanley.

Management also confirmed the mutual early termination of the agreement with Ganfeng Lithium Co to convert Mt Marion spodumene concentrate into lithium battery chemicals. The broker feels this termination will likely provide relief on potential losses.

Construction of the Mt Marion processing plant completed in June and is commissioning now, highlight the analysts.

The Equal-Weight rating and $72 target are retained. Industry view: Attractive.

Target price is $72.00 Current Price is $73.00 Difference: minus $1 (current price is over target).
If MIN meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $89.14, suggesting upside of 21.5% (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

Ord Minnett rates MND as Hold (3) -

Monadelphous Group has announced contracts worth more than $1.5bn so far in FY23, the highest number since FY18, which bodes well for future revenue.

Ord Minnett notes the company is experiencing a significant number of prospects across a broad range of commodity markets and the transition to clean energy should provide wind and hydrogen work.

The broker forecasts a midcycle earnings margin of 8.1%, compared with the 5.5% in the first half of FY23. This assumes the proportion of higher-margin engineering construction work will increase. Hold rating maintained. Target is raised to $14.25 from $13.65.

Target price is $14.25 Current Price is $12.28 Difference: $1.97
If MND meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $13.51, suggesting upside of 10.7% (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

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

Last December, the ACCC rejected the proposed TPG Telecom and Telstra ((TLS)) spectrum and infrastructure sharing deal, By this Wednesday, an appeal of this rejection is being decided by the Australian Competition Tribunal (ACT).

Morgan Stanley believes the consensus view is the ACT allows the deal to proceed, which should be a mild positive for shares given the company's regional footprint and total addressable market would be increased.

A denial of the appeal would be more of a surprise to the market, according to the broker, and have a larger (negative) impact on the share price.

The Equal-weight rating and $5.60 target are unchanged. Industry View: In-line.

Target price is $5.60 Current Price is $5.50 Difference: $0.1
If TPG meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $6.01, suggesting upside of 9.1% (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

UBS rates WOW as Upgrade to Buy from Neutral (1) -

UBS assesses the sales outlook for Australian food is positive and there is greater confidence that Woolworths can gain further market share. Productivity initiatives and operating leverage support EBIT margin expansion despite rising labour costs.

Despite the elevated multiples and continued PE multiple premium to rival Coles, UBS believes the premium can increase and upgrades to Buy from Neutral. Target is raised to $43.00 from $38.50.

Target price is $43.00 Current Price is $38.62 Difference: $4.38
If WOW meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $36.65, suggesting downside of -7.4% (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

Ord Minnett rates XRO as Sell (5) -

Ord Minnett believes the market is overestimating the quality of the Xero business while underestimating the ongoing expenditure on sales and marketing that is required to maintain it, particularly in international markets.

The main challenges are relatively low quality of his SME customers, which inherently have higher business failures than larger corporates, the broker assesses.

Moreover, the previous three years have been "unusually supportive". Ord Minnett retains a Sell rating and raises the target to $75 from $66 following the transfer of coverage to a new analyst.

Target price is $75.00 Current Price is $116.72 Difference: minus $41.72 (current price is over target).
If XRO meets the Ord Minnett target it will return approximately minus 36% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $107.45, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.3

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