Australian Broker Call

Ord Minnett rates ARB as Downgrade to Hold from Buy (3) -

Following a 13% share price rally over the past month, Ord Minnett lowers its rating for ARB Corp by two notches to Hold from Buy (by-passing Accumulate) as the broker awaits more attractive valuation multiples. The $36 target is unchanged.

The stock is also removed from the broker's "Conviction List".

The analysts predict the upcoming 1H result will be constrained by lower sales growth, albeit partly offset by improved gross profit margins.

Target price is $36.00 Current Price is $36.30 Difference: minus $0.3 (current price is over target).
If ARB meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $31.85, suggesting downside of -10.7% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates AVD as No Rating (-1) -

While not providing either a rating or a target price, Morgans has issued new research on founder led, ASX-listed traffic management services company Avada Group.

In a highly fragmented industry, the company has an extensive network of operations in A&NZ, notes the broker, and there is a long list of potential accretive M&A opportunities.

Avada Group delivers a number of core services to major public and private sector clients, including: planning and permits, traffic control, equipment hire, event management and incident response.

The analyst highlights a number of key trends driving the Traffic Management Services (TMS) sector, including population growth, urbanisation and increasing government infrastructure spending.

Current Price is $0.53. Target price not assessed.

The company's fiscal year ends in June.

Market Sentiment: 1.0

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

Morgans rates AVH as Add (1) -

Looking out to February 2024, Morgans points to a number of significant news items that should impact upon the Avita Medical share price.

Most importantly, the broker expects an indication from management in which quarter of CY2025 positive cash flow will be achieved. Also, a regulatory update on Recell Go is anticipated, along with full year revenue guidance.

The $5.90 target and Add rating are maintained.

Target price is $5.90 Current Price is $3.79 Difference: $2.11
If AVH meets the Morgans target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $5.88, suggesting upside of 50.5% (ex-dividends)

The company's fiscal year ends in December.

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 EBO as Add (1) -

As previously flagged by management, Ebos Group will increase its stake in independent medical device distributor Transmedic to 90% from 51%. The $135m transaction will be funded via existing debt facilities.

Transmedic distributes in Southeast Asia and has key relationships with global medical device manufacturers.

Morgans' forecasts are unchanged and the $39.43 target and Add rating are maintained.

Target price is $39.43 Current Price is $33.65 Difference: $5.78
If EBO meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $35.49, suggesting upside of 5.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Citi rates EVN as Neutral (3) -

After a period of research restriction on Evolution Mining, Citi resumes with an unchanged Neutral rating and a target of $3.95, up from $3.60 after including the acquisition of an 80% interest in the Northparkes copper/gold mine.

Evolution Mining paid around $600m for the stake, with no cost-out expansion targets, notes the broker, suspecting management has learned the lesson from its Red Lake experience.

Citi believes the market will recognise the asset quality and potential copper upside.

Target price is $3.95 Current Price is $3.80 Difference: $0.15
If EVN meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.83, suggesting downside of -1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

UBS rates GEM as Neutral (3) -

A trading update by G8 Education shows year-to-date occupancy in line with UBS' expectations. Profit beat the brokers forecasts by 7% and consensus by 8%, driven by impressive cost control.

Management's 2023 guidance is for operating earnings (EBIT) of $99-102m and operating profit in a range of $62-64m. UBS upgrades its 2023 profit (pre-AASB 16) forecast by 3%.

The target rises to $1.15 from $1.05 and the Neutral rating is maintained.

Target price is $1.15 Current Price is $1.13 Difference: $0.02
If GEM meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

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

Shaw and Partners rates GL1 as Buy, High Risk (1) -

Shaw and Partners highlights the latest results from resource and infill drilling at the Manna Lithium project include the best drill intercept to-date of 26m at 1.53% Li2O.

Drilling in the North-east extension continues the trend of being deeper but higher grade than the existing resource, notes the analyst.

The Buy, High Risk rating and $3.20 target are unchanged.

Target price is $3.20 Current Price is $1.24 Difference: $1.96
If GL1 meets the Shaw and Partners target it will return approximately 158% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Ord Minnett rates IEL as Hold (3) -

Ord Minnett sees little risk in IDP Education transitioning to a new CFO following news of Murray Walton's decision to step down next March.

Mr Walton will provide transitional support in a part time role and will help develop commercial leaders in the business.

The broker considers the business is in good shape and retains a Hold rating and $23.50 target.

Target price is $23.50 Current Price is $20.50 Difference: $3
If IEL meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $27.84, suggesting upside of 34.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Citi rates ILU as Downgrade to Neutral from Buy (3) -

Citi highlights property starts in China continue to bump along the bottom and sees indications rutile markets are being pressured. The analyst sees limited near term upside for either zircon or rutile pricing.

Additionally, management is expecting a likely material increase in refinery capex (to be confirmed later) and no first production until 2026.

After taking into account these three negatives, the broker downgrades its rating to Neutral from Buy and lowers the target to $7.50 from $10.20.

Target price is $7.50 Current Price is $6.74 Difference: $0.76
If ILU meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.25, suggesting upside of 22.2% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates KAR as Outperform (1) -

The Who Dat acquisition enables Karoon Energy's entry to the Gulf of Mexico and provides asset diversification, Macquarie notes. With Bauna/Patola past peak production with less than 10 years of life, it was important for Karoon to bring another asset into the portfolio.

The acquisition coincided with lower oil price and Bauna production issues. Weak sentiment now presents an opportunity for investors, the broker suggests.

The share price currently reflects producing assets only, Macquarie notes, and not material upside from Neon/Goia and Who Dat East.

Target falls to $2.50 from $3.20, Outperform retained.

Target price is $2.50 Current Price is $2.03 Difference: $0.47
If KAR meets the Macquarie target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $2.87, suggesting upside of 37.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Macquarie rates MVF as Outperform (1) -

Monash IVF is to acquire 80% of Fertility North for an initial cash consideration of $12m, funded through operating cash flow and/
or debt facilities available. Monash IVF may acquire the remaining 20%, no earlier than three years from completion.

Detailed transaction metrics have not been disclosed, although Macquarie expects potential earn-out payments over 1-3 years based on performance. The acquisition is subject to certain conditions, including ACCC approval.

Management anticipates Fertility North to have some 15% market share in WA. Should the transaction complete, Macquarie estimates Monash IVF's total market share in WA to be around 25%.

Outperform. No change to forecasts or $1.50 target until the deal is completed.

Target price is $1.50 Current Price is $1.35 Difference: $0.15
If MVF meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.44, suggesting upside of 5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

Morgans rates MVF as Add (1) -

Monash IVF is acquiring 80% of Perth-based fertility group Fertility North for an upfront cash payment of -$12m, with additional earn-out payments due upon achieving certain targets.

The transaction will be funded by cashflow and/or debt facilities and is subject to ACCC approval, note the analysts.

After taking into account the acquisition and recent management guidance for the 1H, Morgans upgrades FY25 and FY26 forecasts and the target rises to $1.50 from $1.29. Add.

Target price is $1.50 Current Price is $1.35 Difference: $0.15
If MVF meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.44, suggesting upside of 5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

Ord Minnett rates NAN as Lighten (4) -

Ord Minnett feels the market is too optimistic regarding future growth for Nanosonics and retains a Lighten recommendation. An overall downtrend is expected for new trophon installations in North America.

In Europe, the Middle East and Africa (EMEA), the analyst highlights the company has struggled to break through due to competition and difficulties around revising cleaning protocols in each country.

The target is steady at $4.00.

Target price is $4.00 Current Price is $4.55 Difference: minus $0.55 (current price is over target).
If NAN meets the Ord Minnett target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.52, suggesting upside of 0.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Macquarie rates ORG as Outperform (1) -

Origin Energy's 2.7-3.0% lift in investment in Octopus to 22.7-23% highlights the company's balance sheet is now in good order, Macquarie notes, and the debt maturity at the holding company is long-dated.

Near term, the investment is cash flow negative as Octopus is unlikely to move to a dividend any time soon, but the broker believes the need for more capital is getting smaller.

Impact on Origin's dividend outlook is minor, and Macquarie expects the dividend will remain at around 62cps.

Outperform and $9.26 target retained.

Target price is $9.26 Current Price is $8.28 Difference: $0.98
If ORG meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.80, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Morgan Stanley rates ORG as Overweight (1) -

Management had previously flagged a potential further investment in UK-based Octopus Energy to support growth, notes Morgan Stanley, and has now announced an increased stake of 23%, up from 20%.

The cost will be GBP280m. Origin's 23% share of revalued Octopus equity equates to approximately $2.43bn (or $1.41/share), which compares to cumulative historical cost to the company of $1.24b, explains the broker.

The broker's $8.88 target and Overweight rating are unchanged. Industry view: Cautious.

Target price is $8.88 Current Price is $8.28 Difference: $0.6
If ORG meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.80, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

UBS rates RIO as Neutral (3) -

Rio Tinto is targeting first production of iron ore from Simfer's Blocks 3 & 4 at Simandou in 2025. To check on progress, UBS is utilising satellite images, and notes meaningful progress along the railway, at Kindia tunnel and at the Simfer mine.

The broker expects iron ore prices to hold in the current trading range of US$100-135/t over the next two years as inventories are low, and supply/demand is balanced in 2024.

The Neutral rating and $130 target are unchanged.

Target price is $130.00 Current Price is $134.24 Difference: minus $4.24 (current price is over target).
If RIO meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $125.67, suggesting downside of -6.5% (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: 0.3

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

Macquarie rates SIG as Underperform (5) -

The Chemist Warehouse deal would be a game-changer for Sigma Healthcare, Macquarie suggests, but there is limited detail, an accelerated timetable, and uncertainty around franchise structure regulatory approval, making it a high risk trade.

Sigma has announced a $400m capital raise, with the intention of funding a working capital build, to meet the requirements of its latest
Chemist Warehouse contract due to start in July 2024, and to pay down debt.

Macquarie's key concern is that getting approval from the ACCC will be a challenge, given the potential lessening of competition from this merger. At current prices the stock is trading like the deal has already been approved. The broker sees risk/reward as out of balance, sell into strength.

Target rises to 88c from 82c, Underperform retained.

Target price is $0.88 Current Price is $0.98 Difference: minus $0.1 (current price is over target).
If SIG meets the Macquarie target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.83, suggesting downside of -16.2% (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

Macquarie rates TAH as Neutral (3) -

Tabcorp Holdings's has successfully secured a 20-year exclusive wagering licence in Victoria.

There had been concerns, Macquarie notes, that competitors were looking at the licence on an exclusive and non-exclusive basis, and as such, there is now more certainty on Tabcorp's Wagering & Media business, albeit it does not alleviate the  ongoing competitive nature of the industry and ongoing regulatory risks.

Macquarie remains cautions on the outlook for wagering, with industry volumes likely to track flat-to-down in the near term, impacted by the economic environment and some ongoing normalisation post-covid.
.
Over-and-above, the broker continues to see heightened regulatory risks, with likely changes to the industry impacting marketing. Target falls to 90c from $1.05, Neutral retained.

Target price is $0.90 Current Price is $0.86 Difference: $0.04
If TAH meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $1.05, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Ord Minnett rates TAH as Accumulate (2) -

The terms of Tabcorp Holdings' renegotiated wagering licence with the Victorian government are better than Ord Minnett anticipated. The company was expected to retain the license.

The broker points out the deal is a win for Tabcorp with no joint venture partner, 20 years of exclusivity and no industry funding obligations.

However, the lucrative transaction did not come cheap at $600m along with $30m annually for licence fees over 19 years, notes the analyst.

Target rises to $1.15 from $1.10 and the Accumulate rating is unchanged.

Target price is $1.15 Current Price is $0.86 Difference: $0.29
If TAH meets the Ord Minnett target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $1.05, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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