Australian Broker Call

Morgans rates ADH as Add (1) -

Taking into account the upcoming easing of lockdowns and the recent moderation of strength in the homewares and furniture space, Morgans feels consumers may look to spend on other categories.

The broker cautions this has negative short-term implications for stocks like Adairs. The Add rating and $4.20 target are retained.

Target price is $4.20 Current Price is $3.84 Difference: $0.36
If ADH meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.57, suggesting upside of 18.3% (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

Citi rates APX as Buy (1) -

Citi's analysis suggests headwinds to traffic data on Google and Facebook are increasing in response to media reports and US congressional hearings relating to consumer harm.

While it is unclear whether this relates to projects that Appen could be working on, the broker expects any impact will be short lived and product development work will be maintained.

Buy rating and $17 target maintained.

Target price is $17.00 Current Price is $8.93 Difference: $8.07
If APX meets the Citi target it will return approximately 90% (excluding dividends, fees and charges).

Current consensus price target is $13.33, suggesting upside of 51.6% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates AX1 as Hold (3) -

After the easing of lockdowns, Morgans feels companies in the clothing space will benefit from pent-up demand. It's thought Accent Group is likely to see a strong bounce in sales. The Hold rating and $2.57 target are retained.

The analyst points to the 21% year-on-year jump in clothing sales last November, which followed the lifting of the lockdown in Victoria on 27 October, 2020.

Target price is $2.57 Current Price is $2.45 Difference: $0.12
If AX1 meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.50, suggesting upside of 0.9% (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 BLX as Add (1) -

Taking into account the upcoming easing of lockdowns and the recent moderation of strength in the homewares and furniture space, Morgans feels consumers may look to spend on other categories.

The broker cautions this has negative short-term implications for stocks like Beacon Lighting Group. The Add rating and $2.30 target are retained.

Target price is $2.30 Current Price is $2.35 Difference: minus $0.05 (current price is over target).
If BLX meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Citi rates BSL as Buy (1) -

Citi believes investors are nervous because of high US prices and a strong Australian housing market. Yet, even with a normalisation of steel spreads in FY24, the broker considers the valuation metrics of BlueScope Steel are attractive.

Australian GDP, outside of housing demand, is expected to contract -3.1% in the September quarter followed by a 1.5% rebound in the December quarter.

The broker expects growth will get back on track in 2022 and the labour market recover, and therefore the overall risk to the company's domestic dispatches in FY22/23 is modest. Citi maintains a Buy rating and $27.50 target.

Target price is $27.50 Current Price is $20.28 Difference: $7.22
If BSL meets the Citi target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $28.28, suggesting upside of 35.8% (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

Morgan Stanley rates CBA as Underweight (5) -

The recent macroprudential direction by APRA prompts Morgan Stanley to remind us that Australian housing loans account for more than 60% of Commonwealth Bank's total loan balance. The broker retains its Underweight rating and $90 target price. Industry view: In-Line.

New housing loan approvals are a driver of mortgage loan growth, which in turn drives bank revenues and earnings, explains the analyst. Hence, APRA's decisions are thought to have the potential to lead to lower housing loan approvals in the months ahead.

Target price is $90.00 Current Price is $104.45 Difference: minus $14.45 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $90.50, suggesting downside of -13.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.8

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

Macquarie rates CKF as Outperform (1) -

Collins Foods has signed an agreement with Yum! to become the KFC corporate franchisee in the Netherlands. Collins Foods will develop, manage, market and operate the KFC business including oversight of existing and future franchisees.

Macquarie considers the Netherlands "fertile" ground for KFC and this is a further indicator that Yum! is confident that Collins Foods can develop this growing market. Outperform rating and $12.50 target maintained.

Target price is $12.50 Current Price is $13.19 Difference: minus $0.69 (current price is over target).
If CKF meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.72, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in May.

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

Morgans rates DTL as Upgrade to Add from Hold (1) -

After a recent share price fall, and with the current share price -20% adrift of Credit Suisse's $5.92 target price, the broker upgrades its rating to Add from Hold. 

The analyst points out the AGM is set for Thursday 28th October.

Target price is $5.92 Current Price is $5.27 Difference: $0.65
If DTL meets the Morgans target it will return approximately 12% (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

Ord Minnett rates EML as Buy (1) -

Further correspondence from Ireland's CBI, mentioning proposed limits on existing programs, suggests a potential material impact on the European operations of the EML Payments subsidiary, PFS Card Services.

Ord Minnett assesses the timeframe for any significant resolution has been pushed back by months.

Nevertheless, the broker continues to believe there is upside to the stock in the medium term once issues are resolved. Buy rating. Target is reduced to $4.02 from $4.38.

Target price is $4.02 Current Price is $3.16 Difference: $0.86
If EML meets the Ord Minnett target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $4.46, suggesting upside of 40.6% (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

UBS rates EML as Buy (1) -

Irish subsidiary PFS Card Services has received further correspondence regarding regulatory concerns, which EML Payments indicates could materially affect the European operations. Dialogue is ongoing, with PFS Card Services making submissions in relation to potential directions by October 28.

The main risk, UBS assesses, is around the ability to take on board new customers if the regulator, CBI, sets limits that are too close to expected growth from existing customers.

Still, the broker believes the drop in the EML Payments share price is excessive. Buy rating and $4.80 target unchanged.

Target price is $4.80 Current Price is $3.16 Difference: $1.64
If EML meets the UBS target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $4.46, suggesting upside of 40.6% (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

Ord Minnett rates FMG as Buy (1) -

Ord Minnett downgrades iron ore price forecasts by -4% in 2021, -16% in 2022 and -13% in 2023.

The broker notes near-term earnings pressure on Fortescue Metals but believes there is significant valuation support.

Buy rating retained. Target is reduced to $25 from $26.

Target price is $25.00 Current Price is $14.25 Difference: $10.75
If FMG meets the Ord Minnett target it will return approximately 75% (excluding dividends, fees and charges).

Current consensus price target is $18.16, suggesting upside of 21.1% (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: 0.0

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

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

Morgan Stanley expects a modest uplift in insurers’ stock prices, after a win in the second test case on business interruption re prevention of access. This is because a court appeal is set for November with a December verdict likely.

The analyst points out Insurance Australia Group has the most capital relief if this win holds on appeal, though it needs to renew its quota share (Q/S) reinsurance before contemplating any capital management.

The Equal-weight rating and target price of $4.80 are retained. Industry view: In-line. 

Target price is $4.80 Current Price is $5.19 Difference: minus $0.39 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.54, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates IEL as Overweight (1) -

Given potential benefits from a global international English language testing system (IELTS) consolidation scenario, Morgan Stanley lifts its price target to $40.20 from $33, with a bull case scenario of $55. Industry view is In-Line.

The analyst points out the recent acquisition of British Council's (BC) India IELTS operations has been a major catalyst. There is expected upside from a single-pricing strategy, accelerated digitisation and a more-efficient cost structure.

Morgan Stanley sees $6.3m earnings (EBIT) upside for every 1% price rise ex-China, where IDP Education and BC India currently compete.

Target price is $40.20 Current Price is $33.88 Difference: $6.32
If IEL meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $34.96, suggesting upside of 4.3% (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

Ord Minnett rates MIN as Hold (3) -

Ord Minnett downgrades iron ore price forecasts by -4% in 2021, -16% in 2022 and -13% in 2023.

The windfall from the company's existing iron ore mines was expected to fund the Ashburton project yet now the timing is uncertain and Ord Minnett notes there is still no news on South West Creek.

With weaker iron ore prices, Ord Minnett expects net debt will rise materially in order to build Ashburton. Hold maintained. Target is reduced to $52 from $57.

Target price is $52.00 Current Price is $43.50 Difference: $8.5
If MIN meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $59.50, suggesting upside of 32.8% (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

UBS rates MTS as Buy (1) -

CEO Jeff Adams will retire next year and will be replaced by Doug Jones, currently CEO of Masswarehouse in South Africa. This is a surprise to UBS, yet the Metcash strategy is not expected to change significantly.

Still, e-commerce, an area of increasing focus, is expected to become even more prominent. Hardware remains the key growth driver, and UBS retains a Buy rating and $4.60 target.

Target price is $4.60 Current Price is $4.00 Difference: $0.6
If MTS meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.30, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgans rates MYD as Add (1) -

Taking into account the upcoming easing of lockdowns and the recent moderation of strength in the homewares and furniture space, Morgans feels consumers may look to spend on other categories.

The broker cautions this has negative short-term implications for stocks like MyDeal.com.au. The Add rating and $0.9 target are retained.

Target price is $0.90 Current Price is $0.74 Difference: $0.16
If MYD meets the Morgans target it will return approximately 22% (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

Macquarie rates ORG as Outperform (1) -

The company's 20% stake in Octopus has appreciated, as implied by the Generation Investment Management investment of US$300m with an option to invest a further US$300m in June 2022 for a total stake of 13%.

Origin Energy has the ability to maintain its interest, which Macquarie calculates is around US$55m over FY22. Octopus has a substantial ability to spend on acquisitions and growth, such as Bulb in the UK or possibly Just Energy in the US, Macquarie observes.

While Macquarie is bearish on the domestic energy market outlook beyond FY23, Origin Energy has leverage to a stronger gas or oil price as well as any demonstration of the value in Octopus. Outperform rating maintained. Target rises to $5.54 from $5.32.

Target price is $5.54 Current Price is $5.07 Difference: $0.47
If ORG meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.11, suggesting upside of 0.8% (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

Macquarie rates PRN as Outperform (1) -

FY22 guidance is unchanged at $2-2.2bn in revenue, of which 90% is all ready secured, Macquarie notes. The company also reiterated guidance for earnings (EBITA) of $165-185m at its AGM.

Despite borders being closed and the cost headwinds, Macquarie considers the outlook positive and expects margins should remain stable. The broker retains an Outperform rating and raises the target to $1.10 from $0.95.

Target price is $1.10 Current Price is $0.95 Difference: $0.15
If PRN meets the Macquarie target it will return approximately 16% (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

Credit Suisse rates PTM as Underperform (5) -

Larger than expected net outflows and negative market movements in the first quarter prompts Credit Suisse to lower its target price to $3.20 from $3.30. Around 75% of the outflows occurred in the month of September, driven by the International Fund and Asia Fund.

The broker expects outflows to continue for some time, which poses downside risk to earnings and limits earnings growth. Credit Suisse retains its Underperform rating.

Target price is $3.20 Current Price is $3.39 Difference: minus $0.19 (current price is over target).
If PTM meets the Credit Suisse target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.69, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.8

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

Morgan Stanley rates QBE as Overweight (1) -

Morgan Stanley expects a modest uplift in insurers’ stock prices after a win in the second test case on business interruption re prevention of access. This is because a court appeal is set for November with a December verdict likely.

The Overweight rating and $14 target price are retained. Industry view: In-line. 

Target price is $14.00 Current Price is $12.23 Difference: $1.77
If QBE meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $13.94, suggesting upside of 16.8% (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: 0.8

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

Ord Minnett rates RIO as Buy (1) -

Ord Minnett downgrades iron ore price forecasts by -4% in 2021, -16% in 2022 and -13% in 2023. The broker notes diversification helps Rio Tinto and marking to market of base metals has a positive offset to lower iron ore prices.

The broker believes investors will be well rewarded by owning the stock once sentiment regarding growth in China improves. Buy rating retained. Target is reduced to $144 from $150.

Target price is $144.00 Current Price is $100.40 Difference: $43.6
If RIO meets the Ord Minnett target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $124.43, suggesting upside of 21.7% (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: 0.4

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

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

Morgan Stanley expects a modest uplift in insurers’ stock prices after a win in the second test case on business interruption re prevention of access. This is because a court appeal is set for November with a December verdict likely.

The Equal-weight rating and target price of $11.90 are retained. Industry view: In-line.

Target price is $11.90 Current Price is $12.69 Difference: minus $0.79 (current price is over target).
If SUN meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.42, suggesting upside of 5.1% (ex-dividends)

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

Macquarie rates TPW as Neutral (3) -

Macquarie benchmarks Temple & Webster forecasts against US peer Wayfair and finds the former, pre-pandemic, was five years behind Wayfair. The broker retains short-term earnings forecasts but raises the long-term EBITDA margin to 9% for FY31.

Macquarie considers the risk to the upside but expects short-term trading will be driven by the uncertainty surrounding post-pandemic expectations.

Macquarie retains its $12.60 target price and Neutral rating.

Target price is $12.60 Current Price is $12.34 Difference: $0.26
If TPW meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $14.78, suggesting upside of 20.3% (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

Citi rates TWE as Neutral (3) -

Citi believes premiumisation is a sensible strategy in the current environment as high-end wine categories are growing ahead of the market.

The results from competitor Constellation Brands have signalled net sales in this category grew by double digits during the August quarter.

Nevertheless, despite the upside that exists from US wholesalers stockpiling in the fourth quarter, the broker remains cautious about how quickly some of the higher-margin channels can rebound, given the Delta variant.

Neutral rating and $12.86 target maintained.

Target price is $12.86 Current Price is $12.05 Difference: $0.81
If TWE meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $12.21, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.2

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

Morgans rates UNI as Add (1) -

After the easing of lockdowns, Morgans feels companies in the clothing space will benefit from pent-up demand. It's thought Universal Store Holdings is likely to see a strong bounce in sales. The Add rating and $8.82 target are retained.

The analyst points to the 21% year-on-year jump in clothing sales last November, which followed the lifting of the lockdown in Victoria on 27 October, 2020.

Target price is $8.72 Current Price is $8.08 Difference: $0.64
If UNI meets the Morgans target it will return approximately 8% (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 VCX as Underweight (5) -

Morgan Stanley gleans some information from Vicinity Centres' Notice of Meeting (preparations for upcoming AGM). A lowering of hurdles for long-term incentive (LTI) grants in FY22 is thought to suggest distribution headwinds or continued challenges in asset valuation, or both.

Elsewhere, the REIT has proposed a change in its Constitution allowing greater flexibility in relation to the amount and timing of distributions. Underweight rating retained. Price target is steady at $1.59. Industry view is: In-Line.

Target price is $1.59 Current Price is $1.72 Difference: minus $0.13 (current price is over target).
If VCX meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.64, suggesting downside of -2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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