Australian Broker Call

Morgans rates ACF as Add (1) -

Acrow Formwork and Construction Services had a positive March with better than expected earnings and general trading environment.

Morgans notes weakness in commercial and residential activity and while civil infrastructure activity remains strong, it is not enough to offset the decline in the other two areas.

The broker has lowered FY20 operating income estimate by -11% to $14.1m but notes the stock is leveraged to increasing civil infrastructure activity.

Add rating retained by the broker with target reduced to $0.34 from $0.38.

Target price is $0.38 Current Price is $0.28 Difference: $0.1
If ACF meets the Morgans target it will return approximately 36% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgans rates ADI as Add (1) -

APN Industria REIT confirmed a fourth-quarter dividend distribution and while this was not quantified, Morgans expects it to be $0.041. REIT management has also announced a buy-back for up to 5% of issued securities.

The broker is comfortable with the gearing position and notes the main risk factors to be a tougher leasing market and covid-19 related uncertainty.

The broker retains its Add rating with a target price of $2.68.

Target price is $2.68 Current Price is $2.50 Difference: $0.18
If ADI meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Credit Suisse rates AIZ as Downgrade to Underperform from Neutral (5) -

As a result of actions to cut expenditure, Air New Zealand expects its FY21 monthly cash burn to reduce a further -NZ$50-60m, excluding any benefit from passenger revenue.

This suggests to Credit Suisse the cash burn reduces to -NZ$100m per month. A labour reduction of -30% has been confirmed.

The broker downgrades to Underperform from Neutral, forecasting material losses in both FY20 and FY21. Target is reduced to NZ$0.84 from NZ$0.95.

Current Price is $1.27. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

UBS rates AIZ as Sell (5) -

Air New Zealand expects cash burn to reduce by -NZ$50-60m per month in FY21, which UBS calculates implies cash burn of around -NZ$115m per month.

UBS considers the level of cash burn from the pandemic remains very uncertain. At this stage the broker includes a dilutive NZ$1.2bn equity recapitalisation into its base case.

Sell rating maintained. Target is NZ$0.60.

Current Price is $1.27. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Morgan Stanley rates AWC as Overweight (1) -

The pandemic has exacerbated the aluminium market surplus that was already building into 2020, Morgan Stanley asserts, as supply growth in China met reduced automotive demand.

The broker now forecasts a surplus of 3.8mt in 2020, depressing the price in the medium term. A better outcome is contingent on smelters cutting production but the response so far has been muted and China's capacity continues to expand.

The broker retains an Overweight rating and reduces the target to $2.05 from $2.45. In-Line industry view.

Target price is $2.05 Current Price is $1.52 Difference: $0.53
If AWC meets the Morgan Stanley target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $1.65, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Morgans rates AX1 as Upgrade to Add from Hold (1) -

Accent Group stores reopened in early May and the group is pursuing rent relief to cater to in-store sales deficits.

While store rollout has been a major growth driver, Morgans expects this to become difficult with an increase in online penetration. The broker believes this to be an enduring trend.

The factors in the group's favour are a dominant market position and covid-19 stimulus packages which could lead to a quicker pick up in sales.

Morgans upgrades its rating to Add from Hold and its target almost doubled to $1.45 from $0.74.

Target price is $1.45 Current Price is $1.37 Difference: $0.08
If AX1 meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.66, suggesting upside of 21.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Credit Suisse rates CAJ as Outperform (1) -

Credit Suisse suggests the focus is now on the recovery profile of the broader radiology industry and how this compares with other industrial sectors in a difficult economic environment.

The broker considers the stock cheap, with close to zero debt at the end of FY21. Conditions have improved into May and, with cost initiatives going to plan, the earnings performance is now ahead of expectations.

While making material upgrades to estimates, Credit Suisse points out the new numbers still carry upside risk. Outperform maintained. Target rises to $0.29 from $0.25.

Target price is $0.29 Current Price is $0.23 Difference: $0.06
If CAJ meets the Credit Suisse target it will return approximately 26% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Citi rates CCL as Buy (1) -

Citi expects volume trends will improve materially in the second half, with the company's swift action on cost savings and lower capital expenditure expected to mitigate the large drop in volumes in April and the first three weeks of May.

Citi reiterates a Buy rating and $9.85 target. EBIT is expected to be down -30% in the first half and down -8% in the second half.

Target price is $9.85 Current Price is $8.76 Difference: $1.09
If CCL meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates CCL as Outperform (1) -

Credit Suisse believes Coca-Cola Amatil can achieve a flat outcome for earnings per share in 2021 on the back of its cost reduction efforts.

The company is reviewing its cost structure in preparation for changes in consumption patterns and the possibility of a recession impacting demand.

A cost reduction program has not been announced as such but Credit Suisse models $65m in savings. In addition, around half of the $120m previously announced for cost reductions can be preserved in 2021.

The broker considers the balance sheet in good shape and retains an Outperform rating. Target is $10.

Target price is $10.00 Current Price is $8.76 Difference: $1.24
If CCL meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates CCL as Downgrade to Neutral from Outperform (3) -

Coca-Cola Amatil has noted Australian grocery volumes were down -10% in April as consumers appeared to be disinclined to replicate restaurant consumption at home.

New Zealand was strong, despite more stringent restrictions on movement. Indonesia remains weak with a negative impact from social distancing that affected Ramadan consumption.

Volumes are improving as Australia's restrictions ease, although Macquarie notes profitability remains challenged.

The broker remains concerned that some consumption habits may have structurally changed, downgrading to Neutral from Outperform and lowering the target to $9.30 from $10.00.

Target price is $9.30 Current Price is $8.76 Difference: $0.54
If CCL meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

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

Group volume declines of -33% in April and -26% in the first three weeks of May were worse than anticipated. Morgan Stanley notes New Zealand and PNG appear to be tracking better than Australia and Indonesia.

The leverage through the second quarter is the greatest source of uncertainty, in the broker's view, with channel shift and a loss of scale driving pronounced declines in earnings (EBIT) despite the cost savings.

Equal-weight rating. Target is $9.50. Cautious industry view.

Target price is $9.50 Current Price is $8.76 Difference: $0.74
If CCL meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgans rates CCL as Hold (3) -

Coca-Cola Amatil’s trading remains weak especially in the higher margin on-the-go channels. Morgans fears social distancing will continue to impact such channels for some time.

The broker has lowered forecasts due to uncertain earnings and weaker volumes. Earnings forecasts have been lowered for FY20-21 by -13.6% and -4%.

The broker holds onto its Hold rating with target price lowered to $8.93 from $8.96.

Target price is $8.93 Current Price is $8.76 Difference: $0.17
If CCL meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Ord Minnett rates CCL as Hold (3) -

Restrictions have resulted in significant weakness in volumes in revenue in April and the beginning of May, Coca-Cola Amatil pointed out at its AGM.

Management has reiterated the importance of the fourth quarter and remains confident, but Ord Minnett envisages a risk around the consumer returning in this period as fiscal stimulus unwinds in Australia.

The broker assesses the stock is somewhat of a play on a recovery in Australasia following the pandemic-induced weakness.

The economic risk is in Fiji, Indonesia and PNG, in the broker's assessment, which could stem upside. Hold rating maintained. Target is $9.

Target price is $9.00 Current Price is $8.76 Difference: $0.24
If CCL meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

UBS rates CCL as Neutral (3) -

The trading update was slightly better than UBS expected. Group volumes fell -33% in April but the first three weeks of May improved on this as lockdown restrictions eased.

Despite cost reductions, a negative mix in Australia has had a material impact on group margins and the broker factors this into short-term estimates.

UBS retains a Neutral rating and $9.10 target, noting longer-term margin risk still exists.

Target price is $9.10 Current Price is $8.76 Difference: $0.34
If CCL meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.38, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates CRN as Outperform (1) -

Coronado Global will recommence production at Buchanan and Logan from June 1. While this is a positive development, Credit Suisse points out there was no quantification of the levels of production as the business is only to operate at levels sufficient to satisfy domestic metallurgical contracts and limit its exposure to the volatility of European and Brazilian markets.

The company has also noted lenders have agreed to waive debt covenants until February 28, 2021. Credit Suisse considers the idling of US operations was prudent but if another leg down in pricing were to occur then there would be more pressure on the balance sheet.

Outperform maintained. Target is reduced to $2.60 from $2.80.

Target price is $2.60 Current Price is $1.10 Difference: $1.5
If CRN meets the Credit Suisse target it will return approximately 136% (excluding dividends, fees and charges).

Current consensus price target is $2.22, suggesting upside of 101.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.7

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

UBS rates EHE as Neutral (3) -

The company has revealed occupancy declined to 91.7% on April 26, where it has since stabilised. While duplicated costs and occupancy pressures should ease into FY21, UBS envisages limited scope for outperformance ahead of the final report from the Royal Commission.

The broker reduces estimates for earnings per share by -20% for FY21-22, predominantly on lower occupancy assumptions and higher staffing costs. Neutral maintained. Target is reduced to $1.55 from $2.30.

Target price is $1.55 Current Price is $1.57 Difference: minus $0.02 (current price is over target).
If EHE meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.66, suggesting upside of 5.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Morgans rates EHL as Add (1) -

Emeco Holdings has been able to implement covid-19 safe work practices along with sustaining volumes. The company notes no adverse impact due to the pandemic except for some incremental costs related to hygiene and distancing, reports Morgans.

However, the bnrker is concerned about a weak met coal outlook which will hit FY21 utilisation. Morgans has trimmed FY21-22 free cash flow estimates by -14-19%.

However, the broker feels a -50% share price fall is overdone and the stock is thus labeled a contrarian value buy.

The broker maintains its Add rating with the target reduced to $1.80 from $2.85.

Target price is $1.80 Current Price is $1.05 Difference: $0.75
If EHL meets the Morgans target it will return approximately 71% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates FXL as Buy (1) -

UBS considers FlexiGroup a play on the re-opening of the economy. The broker's survey has indicated the decline in spending intentions has been less than feared.

Uncertainties remain but recent feedback is generally positive with respect to customer arrears and the resilience of the sector. UBS retains a Buy rating and $1.60 target.

Target price is $1.60 Current Price is $1.19 Difference: $0.41
If FXL meets the UBS target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $1.28, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Ord Minnett rates MOE as Buy (1) -

Moelis Australia expects underlying earnings in the first half will be similar to the prior corresponding half, excluding mark to market income. Ord Minnett assesses this would be a solid outcome, given current conditions.

Corporate advisory has experienced an elevated level of activity, with the company linked to several restructuring engagements and executing on a number of deals.

Some headwinds remain, including the potential write-down of assets across hospitality and retail real estate. Ord Minnett retains a Buy rating and reduces the target to $4.65 from $5.88.

Target price is $4.65 Current Price is $3.61 Difference: $1.04
If MOE meets the Ord Minnett target it will return approximately 29% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

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

UBS notes Metcash has underperformed the ASX 200 since its capital raising in April, despite ongoing strength in the grocery sector.

The strong market backdrop and the outperformance of independent grocers as well as an improving outlook for hardware has caused the broker to upgrade to Buy from Neutral.

Forecasts remain unchanged but the near-term upside risk is building, UBS suspects, because of the favourable trends. Target is $2.85.

Target price is $2.85 Current Price is $2.66 Difference: $0.19
If MTS meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.87, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

UBS rates NCM as Upgrade to Neutral from Sell (3) -

UBS reviews the economics of Red Chris and Haveiron and, based on this work, upgrades to Neutral from Sell. Target is raised to $33 from $26.

The inclusion of these projects challenges market perceptions that production is peaking in 2020-21, the broker points out.

The broker estimates that Newcrest's interest in Red Chris could be worth around US$2bn or $3.50 while Haveiron could turn Telfer into a tier-2 asset.

Target price is $33.00 Current Price is $29.40 Difference: $3.6
If NCM meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $30.79, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 NGI as Upgrade to Outperform from Neutral (1) -

Funds under management in April were flat as the market impact offset the outflows.

Macquarie finds the valuation attractive, and while the company has previously highlighted an increase in redemptions, the vast majority are from a single platform client cutting hedge fund exposure.

To reflect the uncertainty over outflows, Macquarie includes around -US$3.1bn of net outflows across the second half and FY21.

The broker upgrades to Outperform from Neutral, supported by a valuation which already discounts the redemption risk. Target is reduced to $1.65 from $1.72.

Target price is $1.65 Current Price is $1.40 Difference: $0.25
If NGI meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in USD. 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

Credit Suisse rates ORG as Neutral (3) -

Credit Suisse warns Octopus Energy is not yet profitable and is operating in a UK market where the industry lost money in 2019. It is no longer the fastest-growing UK retailer, nor the first to go international.

Origin Energy, which announced a partnership and equity investment in Octopus on May 1, believes Octopus can deliver a -$100-150m cost reduction by FY24. Credit Suisse acknowledges there is enough evidence that, if delivered, this will translate to margin.

The broker reduces net profit forecast by -9.4% in FY21 and -2.5% in FY22, with accelerated depreciation of existing systems offsetting cost reductions in those years. The broker retains a Neutral rating and raises the target to $5.30 from $5.10.

Target price is $5.30 Current Price is $5.83 Difference: minus $0.53 (current price is over target).
If ORG meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.73, suggesting upside of 15.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgan Stanley rates S32 as Overweight (1) -

The pandemic has exacerbated the aluminium market surplus that was already building into 2020, Morgan Stanley asserts, as supply growth in China met reduced automotive demand.

The broker now forecasts a surplus of 3.8mt in 2020, depressing the price in the medium term. A better outcome is contingent on smelters cutting production but the response so far has been muted and China's capacity continues to expand.

The broker retains an Overweight rating. Target is reduced to $2.55 from $2.85. Industry view: In Line.

Target price is $2.55 Current Price is $1.97 Difference: $0.58
If S32 meets the Morgan Stanley target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $2.41, suggesting upside of 22.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 SXY as Outperform (1) -

FY20 earnings guidance has been upgraded by around 10% to $45-55m because of the narrowing of production guidance.

GLNG has requested the company divert 1PJ of gas through June-August to the domestic market, which will result in lower prices for the company.

Senex Energy remains one of Macquarie's preferred small energy stocks, given the strong gas growth profile in the Surat Basin.

While there is pressure on global LNG markets and east coast gas prices, the broker believes this is more than reflected in the share price.

Outperform rating maintained. Target is $0.29.

Target price is $0.29 Current Price is $0.24 Difference: $0.05
If SXY meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $0.35, suggesting upside of 45.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Ord Minnett rates SXY as Accumulate (2) -

Senex Energy has signalled a strong performance from the Surat Basin assets. Of more interest to Ord Minnett, the company has also indicated GLNG has requested reduced supply from Roma North under the current contract to re-direct gas to the domestic market until August 2020.

Ord Minnett estimates GLNG production in May 2020 could fall by -10-20% as output is reduced because of weak LNG conditions. Senex Energy now expects production of 2.0-2.1mmboe in FY20 and operating earnings (EBITDA) of $45-55m.

Accumulate rating and $0.34 target maintained.

Target price is $0.34 Current Price is $0.24 Difference: $0.1
If SXY meets the Ord Minnett target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $0.35, suggesting upside of 45.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Credit Suisse rates TLS as Outperform (1) -

Credit Suisse suspects there will be a number of pandemic-related factors that will affect the company in FY21, including a further hit to roaming revenue and a reduction in net additions in mobile as well as lower expenditure by enterprises.

To take into account the impact, the broker lowers estimates for FY21 underlying operating earnings (EBITDA) to $7.1bn, with lower earnings in mobile the biggest contributor to the downgrade.

Nevertheless, Credit Suisse assesses current trading levels appear to be unduly penalising the stock for cyclical weakness and retains an Outperform rating. Target is reduced to $4.10 from $4.20.

Target price is $4.10 Current Price is $3.17 Difference: $0.93
If TLS meets the Credit Suisse target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $3.84, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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