Australian Broker Call

Citi rates ALL as Buy (1) -

Citi notes Aristocrat Leisure seems to be gaining share and is seeing better profitability in both land-based and digital markets.

Even so, the broker keeps its earnings outlook largely unchanged albeit with small downgrades to FY21-22 forecasts (-1.1-1.7%) on higher rates of reinvestment.

In the broker's view, digital margins are the key source of upside given the monetisation of RAID and the shift to Plarium Play. Citi suggests Aristocrat’s balance sheet remains undervalued given the capacity it provides for acquisitions and reinvestment.

Citi maintains its Buy rating with the target rising to $46.60 from $44.50.

Target price is $46.00 Current Price is $40.70 Difference: $5.3
If ALL meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates ALL as Outperform (1) -

Credit Suisse upgrades EPS forecasts for FY21 and FY22 by around 4%, in the belief earnings (EBIT) and sales margins from the Digital Division can be sustained. Margins are partly increasing as the yield in social casino climbs, explains the analyst.

Part of the margin expansion is also due to successfully bringing RAID players onto the company's proprietary game platform and avoiding Apple and Alphabet platform fees, explains the broker. It's now assumed RAID reaches revenues of US$650m by FY25. 

The outperform rating is unchanged and the target increases to $43.25 from $41.25.

Target price is $43.25 Current Price is $40.70 Difference: $2.55
If ALL meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates ALL as Neutral (3) -

First half results were in line with recent guidance and Macquarie assesses net profit could exceed $1bn in FY22, above the pre-pandemic peak. The results signal operating leverage and ongoing recovery in the business.

The broker also suspects M&A could be on the agenda, although the transaction may not be large. This view stems from a low dividend pay-out ratio of 23%.

The broker continues to believe the stock is fair value and retains a Neutral rating with a $39 target.

Target price is $39.00 Current Price is $40.70 Difference: minus $1.7 (current price is over target).
If ALL meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates ALL as Downgrade to Equal-weight from Overweight (3) -

Aristocrat Leisure added 886 machines to the North American installed base during the first half, ahead of Morgan Stanley's expected 600.

The broker notes the company continues to reinvest ahead of peers, with design and development spend up 2% versus the NYSE listed International Game Technology PLC's -23%. In the broker's view, this leaves it well placed to add machines and gain market share.

IDFA changes were implemented in late April and the impact on Aristocrat Leisure has been limited so far, highlights the broker while warning it is too early to tell.

Morgan Stanley believes the results support the thesis that the company will emerge from covid in a better position with considerable balance sheet optionality.

Noting the company outperformed the ASX200 by almost 30% and looks fairly valued, Morgan Stanley downgrades to Equal-Weight from Overweight with the price target lifting to $41 from $38. There is no industry rating.

Target price is $41.00 Current Price is $40.70 Difference: $0.3
If ALL meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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 ALL as Accumulate (2) -

Aristocrat Leisure's first-half net profit before amortisation of acquired intangibles is $411.6m, up 11.8% over last year and in line with Ord Minnett’s forecast of $411.7m.

The broker was disappointed with Aristocrat declaring a fully franked interim payout of 15c per share, well short of the 26c estimate. Ord Minnett takes a conservative approach and assumes margin contraction with an estimated FY21 operating income margin of 26.2%.

Also, the broker sees upside in the second half of FY21 and in FY22 for the digital business from real-money gaming, the scaling of EverMerge and RAID, and an upcoming new game launch.

Accumulate rating with the target price increasing to $45 from $42.

Target price is $45.00 Current Price is $40.70 Difference: $4.3
If ALL meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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 ALL as Buy (1) -

Aristocrat Leisure posted net profit of $412m for the first half, in line with the trading update. Strength across North America and Australasia was offset by a slower recovery in Latin America.

The upcoming second half presents a difficult comparable for digital business, although UBS expects land-based earnings will grow sequentially. The broker reduces estimates for FY21 by -3% and upgrades FY22-23 by 1-2%. Buy rating maintained. Target is raised to $44.40 from $42.50.

Target price is $44.40 Current Price is $40.70 Difference: $3.7
If ALL meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $42.28, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates ASX as Neutral (3) -

The ability to regularly and consistently raise prices is a key infrastructure-like quality of the ASX that Credit Suisse admires. Capitalising on buoyant market conditions, some fees (eg annual listing fees) will have strong increases in FY22, explains the broker.

Credit Suisse upgrades earnings forecasts by 1-2% in FY22-23 for the higher listing fee profile though maintains its Neutral rating due to a full valuation. The target price rises to $75 from $74.

Target price is $75.00 Current Price is $74.33 Difference: $0.67
If ASX meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $70.47, suggesting downside of -6.8% (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

Citi rates AX1 as Neutral (3) -

Accent Group's Vans’ sales performance till March end was inline with guidance, observes Citi, but likely below market expectations.

VF Corp has guided towards 7-9% revenue growth for Vans in FY22 versus the drop of -16% in FY21 and expects Vans to recover the revenue lost during covid.

Citi sees the return to growth for Vans as positive for the group given the brand contributes circa 9% of Accent’s group sales, according to the broker's calculations.

Neutral rating with a target price of $3.10.

Target price is $3.10 Current Price is $2.66 Difference: $0.44
If AX1 meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.82, suggesting upside of 3.6% (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

Macquarie rates CSL as Outperform (1) -

Macquarie notes around 100 of the company's US-based collection centres have experienced increased foot traffic in recent weeks and the trends support forecasts for improved immunoglobulin revenue into FY23.

Current foot traffic is at the highest level across the broker's data series and this has coincided with reduced new coronavirus cases in the US and the ongoing administration of covid-19 vaccines across the US population. Outperform rating and $312 target retained.

Target price is $312.00 Current Price is $289.27 Difference: $22.73
If CSL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $300.19, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in June.

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: 0.7

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

Ord Minnett rates HPI as Accumulate (2) -

Hotel Property Investments has acquired six pubs for $32.7m via debt funding and has entered into 20-year leases to Australian Venue Company. The broker notes these acquisitions are 4% accretive to earnings and will increase gearing by 250bps to about 40.5%.

Ord Minnet notes these two are partnering to acquire operating pubs where Hotel Property Investments will acquire the land and buildings while Australian Venue Company will operate the pubs on long-term leases.

Accumulate rating and $3.60 target maintained.

Target price is $3.60 Current Price is $3.18 Difference: $0.42
If HPI meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

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 KMD as Neutral (3) -

Supporting Macquarie's Neutral rating is the view that a recovery in outdoor categories is well understood. Fourth quarter sales for competitor brand The North Face were broadly in line with pre-pandemic levels.

Nevertheless, the broker believes the experience of The North Face is insufficient to justify a review of top-line forecasts for Kathmandu's outdoor segment. Target is steady at $1.30.

Target price is $1.30 Current Price is $1.41 Difference: minus $0.11 (current price is over target).
If KMD meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.38, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

This company reports in NZD. 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

Credit Suisse rates NHC as Downgrade to Neutral from Outperform (3) -

Total coal sales for the March quarter were softer than Credit Suisse had expected, as were the Bengalla realised prices. The company rating is lowered to Neutral from Outperform after a recent rally in the share price. The price target of $1.30 is unchanged.

With earnings continuing to concentrate to Bengalla, the broker believes the company will likely need the successful approval and execution of the Acland extension to trigger a re-rate.

Target price is $1.30 Current Price is $1.35 Difference: minus $0.05 (current price is over target).
If NHC meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.49, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates QAN as Underperform (5) -

After reviewing domestic routes that Rex Airlines is now flying, Credit Suisse believes higher competition is likely to offset part of the benefit of Qantas' -$1bn cost-cutting. Additionally, the Qantas fleet is ageing and the broker estimates capex will step up to -$3bn annually. 

Credit Suisse maintains the Underperform rating and believes the share price doesn't adequately reflect the risk of further covid disruptions. The target is kept at $4.15.

Target price is $4.15 Current Price is $4.72 Difference: minus $0.57 (current price is over target).
If QAN meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting upside of 20.4% (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

Macquarie rates SCG as Underperform (5) -

Macquarie observes the leasing environment has disconnected from the strength in system retail sales, with downtime and negative leasing spreads placing pressure on underlying cash flow.

This brings into question the short-term defensiveness of such assets, with the pandemic altering the hierarchy of what is perceived to be resilient, the broker points out.

Despite the headwinds, Macquarie notes first quarter cash collection was positively impacted by increased receivables. Underperform rating and $2.62 target maintained.

Target price is $2.62 Current Price is $2.68 Difference: minus $0.06 (current price is over target).
If SCG meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.84, suggesting upside of 5.3% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates SM1 as Upgrade to Hold from Reduce (3) -

Despite FY21 guidance being lowered to a loss of -NZ$20-30m from March’s breakeven expectation, Morgans believes issues will be largely confined to FY21. The rating rises to Hold from Reduce and the target price falls to $2.55 from $2.58.

The broker explains lower guidance was due to ongoing shipping delays and lower-than-expected ingredient sales prices due to sales phasing impacts and volume pressure. Also, there's a more conservative approach to year-end inventory volumes and valuations.

The analyst feels investors could start to look through existing issues if the company can start to rebuild confidence in a FY22 earnings recovery at the FY21 result. The broker continues to believe gearing is too high though management states a raising is not in prospect. 

Target price is $2.55 Current Price is $2.82 Difference: minus $0.27 (current price is over target).
If SM1 meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.55, suggesting downside of -9.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.3

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

UBS rates SM1 as Buy (1) -

UBS believes the recent profit warning is an extension of the issues created by sharply lower FY21 infant formula sales. Hence, importantly, a large rise in the manufacturing requirements from a2 Milk ((A2M)) over the next three years could be a key mitigating factor.

Adult nutritional volume should also materially offset the partial internalisation of a2 Milk's manufacturing over the longer term. The stock trades on a record discount to book value and the broker retains a Buy rating. Target is reduced to NZ$5.35 from NZ$5.55.

Current Price is $2.82. Target price not assessed.

Current consensus price target is $2.55, suggesting downside of -9.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.3

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

Macquarie rates SO4 as Outperform (1) -

The $28m capital raising took place at a -13% discount to the previous close and should allow for the final drawdown of debt to fund Lake Way. Nevertheless, the company's cost expectations have increased by 16%, a material amount in Macquarie's view.

Regardless, Lake Way presents a strong long-term investment case that the broker believes should enable the company to progressively develop other salt lakes within the portfolio. Outperform maintained. Target is reduced to $0.65 from $0.80. 

Target price is $0.65 Current Price is $0.36 Difference: $0.29
If SO4 meets the Macquarie target it will return approximately 81% (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

UBS rates Z1P as Sell (5) -

The company is acquiring the remaining shares in European BNPL provider Twisto Payments and UAE provider Spotii. Zip Co currently holds minority stakes in both and has had a call option to acquire both businesses since its initial investment.

While the potential market is large, UBS notes both are relatively early stage operations, highlighting the capital intensity required to scale up. Sell rating and $6.75 target retained.

Target price is $6.75 Current Price is $7.10 Difference: minus $0.35 (current price is over target).
If Z1P meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.13, suggesting upside of 26.8% (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