Australian Broker Call

Ord Minnett rates ABP as Upgrade to Accumulate from Hold (2) -

The acquisition of ezStorage by Public Storage in the US highlights for Ord Minnett the material difference in implied capitalisation rates between large US and UK listed self storage entities and Australia's Abacus Property and National Storage ((NSR)).

Both the Australian companies remain industry consolidators and the broker believes Australian self storage assets are undervalued. Abacus Property is upgraded to Accumulate from Hold. Target is steady at $3.10.

Target price is $3.10 Current Price is $2.84 Difference: $0.26
If ABP meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.98, suggesting upside of 4.6% (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

UBS rates ABY as Buy (1) -

UBS conducted a survey of more than 4000 female consumers in the US, UK, France and Brazil. The broker believes the results provide a backdrop for Adore Beauty's strategy and market proposition.

The survey is positive for the company's category of skincare and haircare, with positive purchase intentions signalled for the next 12 months compared with negative intentions for make up and fragrance. Buy rating and $6.20 target retained.

Target price is $6.20 Current Price is $4.95 Difference: $1.25
If ABY meets the UBS target it will return approximately 25% (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 AGL as Underweight (5) -

Investors have signalled to Morgan Stanley they are unsure about AGL Energy's demerger proposal. The broker suspects "New AGL"  re-rating and potential upside is the key opportunity.

The main challenges is the limited debt and equity appetite for 'PrimeCo' where the valuation will be sensitive to its high-carbon intensity along with long-term pool price forecasts.

In the shorter term, the terms of the offtake agreement between New AGL and PrimeCo is the main uncertainty in creating value because of PrimeCo's high exposure to emissions and sensitivity to commodity prices without a customer hedge.

Underweight rating. Target is $9.28. Industry view: Cautious.

Target price is $9.28 Current Price is $9.41 Difference: minus $0.13 (current price is over target).
If AGL 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 $10.11, suggesting upside of 7.8% (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

Morgan Stanley rates APT as Overweight (1) -

Morgan Stanley notes Afterpay's US app downloads were particularly strong in March, at 760,000 and exceeded levels of December 2020 and US BNPL peers did not experience such a large increase.

The company has recently announced a global partnership with Adyen, similar to the Stripe partnership. The broker notes Afterpay is also expanding into the travel vertical in Australasia with its Play Travel brand.

Overweight rating retained. Target is $149. Industry view: In-Line.

Target price is $149.00 Current Price is $127.85 Difference: $21.15
If APT meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $121.44, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

Ord Minnett rates AQR as Accumulate (2) -

Ord Minnett notes demand for service stations in the direct market is strong, with rising bond yields doing little to dampen investor interest. The broker believes APN Convenience is likely to benefit from further capitalisation rate compression.

While acquisition opportunities are limited, Ord Minnett believes earnings growth via buybacks could be an alternative. Accumulate rating and $3.90 target retained.

Target price is $3.90 Current Price is $3.54 Difference: $0.36
If AQR meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

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 AUB as Outperform (1) -

Macquarie observes third quarter premium rate increases of 4%. Importantly, property class rate increases appear set to continue while the moderation in commercial motor premiums has reverted.

A lower interest-rate environment, assuming claims are unchanged, also means there is a need for higher premiums to support underwriting profitability, the broker asserts. Outperform rating and $20.40 target unchanged.

Target price is $20.40 Current Price is $19.49 Difference: $0.91
If AUB meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $20.79, suggesting upside of 6.0% (ex-dividends)

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

Macquarie rates AZJ as Outperform (1) -

Coal volumes were weaker in the March quarter, which reflected the wet weather in NSW. Queensland volumes were consistent with expectations.

While there is limited growth in coal, Macquarie notes there are incremental opportunities in freight. A key opportunity includes the re-tender by CBH for grade haulage in Western Australia. Outperform rating and $4.40 target maintained.

Target price is $4.40 Current Price is $3.90 Difference: $0.5
If AZJ meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 19.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Morgans rates GDG as Add (1) -

Morgans assesses the March quarter funds under management (FUM) update was very strong, with record sales up 52% on the pcp and 24% sequentially. FUM rose 8% for the quarter to $1.6bn, broadly in-line with the growth rates seen in the second quarter FY21.

The broker lifts FY21 and FY22 EPS forecasts by 1% and 5% on an increase in sales assumptions. The price target rises to $1.03 from $0.90. The Add rating is unchanged. The company is considered to remain well positioned to execute on compound earnings growth. 

The analyst predicts the recent Lonsec acquisition and development of the new lifetime annuity product have the potential to turbo-charge that growth.

Target price is $1.03 Current Price is $0.90 Difference: $0.13
If GDG meets the Morgans target it will return approximately 14% (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

Citi rates GXY as Neutral (3) -

Citi's believes the release of the development plan and updated feasibility study on Sal de Vida (SDV) brings clarity to the development pathway and valuation. Management plans to produce battery-grade lithium carbonate from SDV in 3 stages of 10.7ktpa each.

Stage 1 is guided to commission by the end 2022 and the company is targeting 80% of the product to be battery-grade lithium carbonate (10% primary and 10% industrial).

The Neutral rating is maintained and the target price rises to $3.80 from $3.10, helped along by mark-to-market of spodumene prices.

For subsequent stages, the intention is to use operating cash flow from stage 1 and Mt Cattlin operations. The company is also in
discussion with banks to increase the existing US$40m undrawn debt facility.

Target price is $3.80 Current Price is $3.53 Difference: $0.27
If GXY meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.35, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Macquarie rates GXY as Outperform (1) -

Galaxy Resources has provided an updated development plan for Sal de Vida as well as preliminary production at Mount Cattlin.

In terms of Sal de Vida the plan has delivered production rates that are 28% higher than expected, underpinning Macquarie's recent upgrade to Outperform. This comes with a slower ramping up but no additional capital costs.

The broker upgrades its expectations for Sal de Vida to match the plan and raises the target to $4.50 from $4.20. Meanwhile, earnings at Mount Cattlin are improving, buoyed by rising spodumene prices.

Target price is $4.50 Current Price is $3.53 Difference: $0.97
If GXY meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $3.35, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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 GXY as Underweight (5) -

The metrics for Sal de Vida are in line with Morgan Stanley's forecasts. The broker considers expansion opportunities are more than fully incorporated in the current share price.

Stages 1 and 2 are expected to be ramped up by 2026. Production from all stages is anticipated to be around 10,700tpa.

Underweight. Target is $1.80. Industry view: Attractive.

Target price is $1.80 Current Price is $3.53 Difference: minus $1.73 (current price is over target).
If GXY meets the Morgan Stanley target it will return approximately minus 49% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.35, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Ord Minnett rates GXY as Buy (1) -

Ord Minnett now includes a larger Sal de Vida project in its estimates after the company's update. The broker calculates the project will deliver 32,000tpa of lithium carbonate equivalent by 2028, a higher rate than previously modelled.

Potential upside includes more battery grade material along with higher reserve grades and plant throughput. Ord Minnett retains a Buy rating and raises the target to $4.30 from $3.80.

Target price is $4.30 Current Price is $3.53 Difference: $0.77
If GXY meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $3.35, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Citi rates MIN as Initiation of coverage with Buy (1) -

Citi initiates coverage of Mineral Resources with a Buy rating and $47 target price.The company is considered to have a unique business model that provides annuity style income from its crushing/mining services business, which comprise around 50% of NPV.

At the same time there's leverage to commodities such as lithium and iron ore through direct equity interest in mines, explains the broker. The valuation is considered undemanding at less than 3 times earnings (EBITDA) on spot iron ore/spodumene prices. 

The analyst expects iron ore export volumes to increase over 3 times to 26mt in FY22 from under 8mt in FY18, driven by ramp-ups at Koolyanobbing and Wonmunna. There's considered growth optionality from Ashburton and the South West Creek hub.

Target price is $47.00 Current Price is $43.49 Difference: $3.51
If MIN meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $45.44, suggesting upside of 1.2% (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

Ord Minnett rates NSR as Downgrade to Hold from Accumulate (3) -

The acquisition of ezStorage by Public Storage in the US highlights for Ord Minnett the material difference in implied capitalisation rates between large US and UK listed self storage entities and Australia's Abacus Property ((ABP)) and National Storage.

Both the Australian companies remain industry consolidators and the broker believes Australian self storage assets are undervalued.

Yet Ord Minnett downgrades National Storage to Hold from Accumulate based on valuation. Target is $2.05.

Target price is $2.05 Current Price is $2.17 Difference: minus $0.12 (current price is over target).
If NSR meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.94, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.3

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

Macquarie rates ORE as Outperform (1) -

March quarter production revealed sales volumes that were -13% lower than Macquarie forecast although lithium carbonate pricing was 6% higher.

Macquarie observes a recovery in regional lithium prices is occurring at a faster rate than previously expected. Updates on the progress of Stage 2 at Olaroz and Naraha present the near-term catalysts.

Outperform maintained. Target unchanged at $7.10.

Target price is $7.10 Current Price is $5.97 Difference: $1.13
If ORE meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.79, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

Ord Minnett rates RHC as Accumulate (2) -

Ord Minnett notes press speculation regarding a bid being developed by Ramsay Health Care and Pacific Equity Partners for rival Healthe Care's hospitals.

While there is little information regarding the likelihood of this progressing, or any pricing, Ord Minnett considers it would be a positive development.

The reason being it would open the door to Ramsay Health deploying capital on attractive domestic assets that appeared previously to be beyond its reach. Accumulate rating and $75 target maintained.

Target price is $75.00 Current Price is $68.01 Difference: $6.99
If RHC meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $69.06, suggesting upside of 2.0% (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

Morgans rates RRL as Add (1) -

Morgans believes the agreement to purchase a 30% interest in the Tropicana gold mine for $903m is transformational for the long-term outlook and an immediate lift for production and cash flow. The Add rating is unchanged and the target price falls to $4.01 from $4.44.

The broker sees substantial long-term potential for the asset with a number of deposits open at depth and a large land package with minimal exploration to date.

Anglogold, the manager and majority owner, maintains its right to match any offer for the 30% stake. Regis Resources has guided that if the bid is successful operating cash flow will be sufficient to internally fund development of McPhillamys. 

Target price is $4.01 Current Price is $3.22 Difference: $0.79
If RRL meets the Morgans target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting upside of 43.7% (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

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

Regis Resources will buy a 30% stake in the Tropicana gold mine from IGO Ltd, to be funded with debt and equity. Ord Minnett observes the deal is dilutive on most valuation metrics and was disappointed there was no updated guidance for the asset.

Still, the acquisition should improve asset quality and increase the mine life for the company. Rating is downgraded to Hold from Buy. Target is reduced to $3.40 from $4.20.

Target price is $3.40 Current Price is $3.22 Difference: $0.18
If RRL meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting upside of 43.7% (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

Citi rates RSG as Neutral (3) -

Citi believes shareholders will be relieved that there’s scope to realise some value from Bibiani, after news the mining lease in Ghana has been reinstated. This may occur either via development by Resolute Mining or divestment to an ‘approved’ third party.

Management stated debt repayments can be met. The broker agrees after removing the US$105m cash from financial models plus the US$10m in break fees from the foregone sale to Chifeng.

Separately, after a higher-than-expected life of mine (LoM) cost outlook at Syama, Citi now expects all the bad news is priced in. The Neutral rating and $0.75 target price are retained.

Target price is $0.75 Current Price is $0.54 Difference: $0.21
If RSG meets the Citi target it will return approximately 39% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.0

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

Macquarie rates RSG as Neutral (3) -

The mining license for Bibiani has been restored by the Ghana government yet Macquarie notes conditions imposed make the US$105m sale to Chifeng unlikely.

The company is required to submit a report detailing the full state of affairs at Bibiani along with a detailed plan for redevelopment.

Without the sale, de-leveraging of the balance sheet is reliant on operating cash flows, Macquarie points out. A commitment to develop Bibiani will require some form of capital investment, the broker adds. Target is raised to $0.60 from $0.50. Neutral maintained.

Target price is $0.60 Current Price is $0.54 Difference: $0.06
If RSG meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.0

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

Macquarie rates SDF as Outperform (1) -

Steadfast Group's March quarter premium rate data review shows premium rate rises continued to be supportive and were up 3.7%. Macquarie highlights the premium growth rate remains positive despite cycling more than four years of positive comparatives.

Even more important, in the broker's opinion, property class rate increases appear set to continue while the moderation in commercial motor rates has reverted.

Outperform rating with a target of $4.40.

Target price is $4.40 Current Price is $4.10 Difference: $0.3
If SDF meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.49, suggesting upside of 8.7% (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

Ord Minnett rates WEB as Buy (1) -

Ord Minnett observes Webjet has significant cash reserves which enable it to strengthen its competitive position. This is particularly pertinent to the B2B segment, where the broker assesses some key competitors are under financial pressure.

While the timing of the global travel recovery is uncertain, Ord Minnett considers FY25 the worst-case scenario and uses this as a reference point for valuing all stocks in the sector.

Estimates are updated to account for the recent convertible note transactions. Buy rating retained. Target is raised to $7.15 from $5.85.

Target price is $7.15 Current Price is $5.17 Difference: $1.98
If WEB meets the Ord Minnett target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $5.54, suggesting upside of 4.8% (ex-dividends)

The company's fiscal year ends in March.

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

Ord Minnett rates WES as Upgrade to Hold from Lighten (3) -

Having reviewed the financial performance of the Wesfarmers retail businesses, Ord Minnett acknowledges its previous Lighten recommendation was the wrong call as the company has allocated capital in a firm manner and benefited from the pandemic.

The broker finds Bunnings is well-positioned in most trading environments and increased home investment is a positive aspect that will allow it to cycle tough comparables.

Catch Group is also proving to be a prescient acquisition with strong growth expected in coming years although operating earnings are likely to remain modest. Hence, Ord Minnett upgrades to Hold and raises the target to $53 from $50.

Target price is $53.00 Current Price is $55.07 Difference: minus $2.07 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $53.06, suggesting downside of -3.9% (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

Ord Minnett rates WPR as Buy (1) -

Ord Minnett notes demand for service stations in the direct market is strong, with rising bond yields doing little to dampen investor interest. The broker believes Waypoint is likely to benefit from further capitalisation rate compression.

While acquisition opportunities are limited, Ord Minnett believes earnings growth via buybacks could be an alternative. Buy rating and $2.95 target maintained.

Target price is $2.95 Current Price is $2.53 Difference: $0.42
If WPR meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.80, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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