Australian Broker Call

Citi rates AFG as Buy (1) -

Citi views Australian Finance Group's alliance with and 7.6% investment in Volt for $15m as a strategically compelling move to bolster both the securities and aggregation businesses.

The two companies have agreed to a strategic alliance which provides access to Volt’s banking-as-a-service (BaaS) platform, as well as providing Volt with a white label product and broadening its distribution.

While financial benefits are likely down the track as the technology is integrated into Australian Finance Group's platform, the broker sees a clear strategic rationale and more profitable growth, should it be well executed.

Buy rating maintained with the target price unchanged at $3.40.

Target price is $3.40 Current Price is $2.77 Difference: $0.63
If AFG meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.12

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

Ord Minnett rates AGL as Hold (3) -

Ord Minnett has increased earnings estimates for AGL Energy by 16% in FY22 and 27% in FY23 based on current wholesale electricity forward prices, and is now more in line with consensus forecasts.

At spot prices, Ord Minnett sees material upgrade potential for forecasts. The broker also notes, current electricity price projections
also derive a positive valuation for the company’s generation assets.

However, the broker remains concerned about AGL’s plans to split its business and maintains a Hold recommendation, while lowering the target price to $8.80 from $11.00. 

Target price is $8.80 Current Price is $8.66 Difference: $0.14
If AGL meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.88, suggesting upside of 0.5% (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 ANZ as Equal-weight (3) -

Morgan Stanley estimates the major banks have around $19.5bn-$28bn of excess capital. A near-term conservative approach to capital management is considered likely, given that covid risks remain and APRA's revisions to the capital framework are not yet finalised.

Despite this, the broker expects ANZ Bank to announce a buyback of $2.5bn at its FY21 result.

An off-market buyback structure allows the distribution of surplus franking credits and may result in a slightly larger reduction in the number of shares for the same amount of capital, explains the analyst. The Equal-weight rating and $28 target are retained. Industry view: In-Line.

Target price is $28.00 Current Price is $28.77 Difference: minus $0.77 (current price is over target).
If ANZ meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.17, suggesting upside of 3.3% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates APE as Outperform (1) -

Macquarie expects the supply environment to remain constrained, but manageable, with demand continuing to outstrip supply. Recent
monthly data is showing early indications to the broker that supply is beginning to recover in key automotive manufacturing nations.

The analyst expects demand to remain elevated, due to the extension of the full expensing measure (24 months), international border
closures and the wealth effect.

Macquarie lifts EPS forecasts for FY21-23 by 42%, 20% and 15%, incorporating higher metal margins in 2021, and stated cost-out/efficiency benefits in later years. The target moves to $17.50 from $14.50 and Outperform is retained.

Target price is $17.50 Current Price is $15.97 Difference: $1.53
If APE meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $16.92, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates APT as Overweight (1) -

Morgan Stanley thinks Afterpay’s US app downloads in May 2021 (twice those of May 2020) were impressive for an off-peak month. It's considered the company is rapidly building a global BNPL platform. 

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

Target price is $149.00 Current Price is $95.25 Difference: $53.75
If APT meets the Morgan Stanley target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $121.47, suggesting upside of 28.4% (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

Citi rates BSL as Upgrade to Buy from Neutral (1) -

On the observation that prices for both steel and scrap remain in an uptrend, Citi analysts have lifted their EPS estimates for BlueScope Steel and Sims "materially".

For BlueScope Steel specifically, the analysts suggest volume expansion at North Star, while cash is building fast, can offset price weakness later on.

Citi predicts the company will announce large scale capital management within the next 24 months. Rating is upgraded to Buy from Neutral. Price target moves to $25 from $22.

Target price is $25.00 Current Price is $21.80 Difference: $3.2
If BSL meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $23.32, suggesting upside of 3.9% (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

Morgan Stanley rates CBA as Underweight (5) -

Morgan Stanley estimates the major banks have around $19.5bn-$28bn of excess capital. A near-term conservative approach to capital management is considered likely, given that covid risks remain and APRA's revisions to the capital framework are not yet finalised.

Despite this, the broker expects Commonwealth Bank of Australia to announce a buyback of $5.0bn at its FY21 result. It's felt the case for an off-market buyback for the bank is second in line to Westpac Bank ((WBC)).

An off-market buyback structure allows the distribution of surplus franking credits and may result in a slightly larger reduction in the number of shares for the same amount of capital, explains the analyst. 

The Underweight rating and $89.50 target are retained. Industry view: In-line.

Target price is $89.50 Current Price is $101.21 Difference: minus $11.71 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $87.75, suggesting downside of -14.3% (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 CMM as Neutral (3) -

Commissioning at Karlawinda is underway, with the company retaining its expectation of first gold before the end of June.

Macquarie believes delivering first production in the fourth quarter FY21 is important in the near term, while regional exploration could deliver longer-term upside. The target price is increased to $2 from $1.60, with production imminent.

Target price is $2.00 Current Price is $2.06 Difference: minus $0.06 (current price is over target).
If CMM meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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 ECF as Accumulate (2) -

Elanor Commercial Property Fund yesterday provided a leasing update, further increasing its occupancy, with 34 Corporate Drive now remaining its largest vacancy/upcoming expiry, representing around 6% of income.

Driven by the demand for suburban office space and a lack of contiguous space in Cannon Hill, Ord Minnett believes the asset will be leased by the end of the year.

Ord Minnett's Accumulate rating is retained with the target price increasing to $1.14 from $1.10, and the broker notes the company pays an attractive distribution yield of 8.9%.

Ord Minnett believes there is upside to forecasts and distributions as it conservatively forecasts 12 months downtime on all lease expiries.

Target price is $1.14 Current Price is $1.13 Difference: $0.01
If ECF meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

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

Macquarie rates FCL as Outperform (1) -

After third quarter results for peer company Guidewire, Macquarie looks at the relative valuation of Fineos Corp, Guidewire and Duck Creek. The estimated Fineos Corp discount to a combined Guidewire and Duck Creek multiple, ranges from -8% to -35%.

While noting reporting periods are not aligned, the broker highlights reported software growth of 35% for Fineos Corp to December 2020, compares to Duck Creek and Guidewire growth rates of 33% and 15%, respectively.

Gross Profit margins are broadly consistent across the comparatives and are in the 50%-55% range, explains the analyst. In short, the company continues to trade in-line with Guidewire (adjusted for revenue mix) and at a material discount to Duck Creek.

The broker expects new contract wins will drive relative performance and retains Outperform and a $4.63 target.

Target price is $4.63 Current Price is $3.70 Difference: $0.93
If FCL meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.51, suggesting upside of 18.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

This company reports in EUR. 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

Macquarie rates FMG as Outperform (1) -

Macquarie notes both metallurgical coal and thermal coal prices performed strongly, up 53% and 40% respectively, year to date.
Fortescue metals Group has increased capex guidance for Iron Bridge to US$3.3-3.5b, which was expected by the broker.

The Outperform rating and $23 target are retained.

Target price is $23.00 Current Price is $23.44 Difference: minus $0.44 (current price is over target).
If FMG 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 $21.65, suggesting downside of -5.7% (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: 0.3

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

Citi rates GXY as Neutral (3) -

Strong demand for lithium is unraveling latent supply, report analysts at Citi. It is their forecast the market will likely remain in surplus for quite some time, with many a producer operating their plants at full throttle.

Citi thinks the price of lithium is likely to remain range-bound over the next 18 months.

Price target for Galaxy Resources has lifted to $4.15 from $4. Neutral/High Risk.

Target price is $4.15 Current Price is $4.01 Difference: $0.14
If GXY meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.67, suggesting downside of -8.6% (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: 0.3

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

Macquarie rates GXY as Outperform (1) -

Spodumene production guidance for Mt Cattlin for FY21 has been upgraded, with the third quarter spodumene price also higher than Macquarie expected. However, increased material movements and a cut to the reserve drives minor downgrades to earnings forecasts.

Mt Cattlin reserves, and resources have fallen -7% and -14%, respectively. The cut to reserves reflects a reduction in average grade while resources fell due to lower grades and an adjustment to total ore tonnes, explains the broker. Outperform maintained. Target is $4.50.

Target price is $4.50 Current Price is $4.01 Difference: $0.49
If GXY meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.67, suggesting downside of -8.6% (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: 0.3

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

Morgan Stanley rates GXY as Underweight (5) -

Morgan Stanley was broadly in-line with upgraded production guidance though underestimated the increase in costs by -18%.

The company has almost doubled material mined, as pre-stripping in the 29W pit is brought forward, offset by an increase in grade of ore processed to 1.2-1.3%, explains the broker.

The analyst would like to understand how much of the pre-stripping is capitalised, to understand the extent of the cost increase attributed to higher movements. Underweight. Target is $1.80. Industry view: Attractive.

Target price is $1.80 Current Price is $4.01 Difference: minus $2.21 (current price is over target).
If GXY meets the Morgan Stanley target it will return approximately minus 55% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.67, suggesting downside of -8.6% (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: 0.3

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

Ord Minnett rates GXY as Downgrade to Accumulate from Buy (2) -

Galaxy Resources expects third quarter 2021 spodumene prices to be above US$750/t including cost of insurance and freight.

Ord Minnett notes, the price upgrade cycle has been confirmed by all players, including China-based Ganfeng Lithium, which holds less than one month’s inventory of both carbonate and hydroxide.

The broker has increased 2024 spodumene price by 25% to US$1,000/t, rivaling the previous cycle high.

Ord Minnett believes higher prices reflect spodumene catching up to the improving chemical prices, continued tightness along the lithium supply chain and the lack of any significant supply response.

With strong demand, low inventories and sidelined mines, Ord Minnett believes this looks set to continue.

The Buy rating is downgraded to Accumulate, and price target increases to $4.20 from $4.10.

Target price is $4.20 Current Price is $4.01 Difference: $0.19
If GXY meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.67, suggesting downside of -8.6% (ex-dividends)

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: 0.3

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

Macquarie rates HLS as Outperform (1) -

Macquarie highlights covid-19 testing volumes have increased over the past week, averaging around 56k tests per day for the seven days to 31 May 2021. Higher volumes in Victoria have accounted for the majority of the increase.

The broker incorporates revised testing assumptions for Healius and raises the target price to $4.70 from $4.65. Outperform rating maintained.

Target price is $4.70 Current Price is $4.32 Difference: $0.38
If HLS meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.36, suggesting upside of 0.8% (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

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

Morgans lifts the rating of Hotel Property Investments to Add from Hold after the purchase of six pubs for $32.7m. All properties are leased to Australian Venue Co and have an initial term of 20 years.

Potential catalysts include accretive acquisitions and asset revaluations. The target price is increased to $3.52 from $3.31.

Target price is $3.52 Current Price is $3.27 Difference: $0.25
If HPI meets the Morgans target it will return approximately 8% (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

UBS rates HUM as Buy (1) -

Humm Group has launched a new buy now pay later product. TAPP is a digital card that can be used at Humm's merchant partner's physical stores. 

UBS forecasts buy now pay later volume growth for Humm of 20% during FY22, and 18% in FY23, but notes this growth is below the expectations for FY21 of 29%. Offshore traction could drive change in buy now pay later top-line momentum. 

According to UBS, the product benefits both consumers and merchants. TAPP offers fewer steps to purchase, with the card available in the digital wallet rather than needing to generate a barcode, and offers immediate integration with Humm's merchant point-of-sale system. 

The Buy rating and target price of $1.60 are retained. 

Target price is $1.60 Current Price is $1.02 Difference: $0.58
If HUM meets the UBS target it will return approximately 57% (excluding dividends, fees and charges).

Current consensus price target is $1.37, suggesting upside of 24.2% (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

Citi rates IGO as Neutral (3) -

Strong demand for lithium is unraveling latent supply, report analysts at Citi. It is their forecast the market will likely remain in surplus for quite some time, with many a producer operating their plants at full throttle.

Citi thinks the price of lithium is likely to remain range-bound over the next 18 months.

Price target for IGO has lifted to $7.80. Neutral.

Target price is $7.80 Current Price is $7.95 Difference: minus $0.15 (current price is over target).
If IGO meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.85, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Macquarie rates IPL as Outperform (1) -

At the Wesfarmers ((WES)) strategy day, Macquarie noted Western Australian amonimium nitrate demand remains strong from customers (iron ore) resulting in lower exports and fertiliser sales.

Macquarie highlights that Incitec Pivot is fully sold and contracted at Moranbah over the next few years, so is relatively insulated. Mark-to-market for fertiser prices remains in positive territory and fertiliser prices are holding steady and in some cases strengthening (ie DAP).

The Outperform rating is maintained. The target price is $2.93.

Target price is $2.93 Current Price is $2.34 Difference: $0.59
If IPL meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $2.90, suggesting upside of 21.0% (ex-dividends)

The company's fiscal year ends in September.

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 KAR as Outperform (1) -

Karoon Energy has taken the final investment decision on the Patola development, which unlocks another 15m barrels of reserves through existing Bauna facilities.

Macquarie reduces EPS estimates for FY21 and FY22 by -4% and -10%, on trimmed Bauna production forecasts, while raising the FY23 forecast by 45%. The latter is predicated upon on a faster path to 30kb/day, with more certainty around Patola.

The target falls to $1.60 from $1.70 on higher Patola capex and the estimated cost of hedging implementation. Outperform unchanged.

Target price is $1.60 Current Price is $1.37 Difference: $0.23
If KAR meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.78, suggesting upside of 29.2% (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

Morgan Stanley rates KAR as Overweight (1) -

Morgan Stanley remains Overweight on Karoon Energy, after the company took a final investment decision on its Patola subsea tie-in project in Brazil. Expected capex is higher than previously disclosed albeit the previous figure was quite dated.

The broker feels agreed debt facilities remove risk. With Brent exceeding US$70/bbl, it's felt the company's near-term focus will be on delivering strong cash flow. Attractive industry view. Target is $1.85.

Target price is $1.85 Current Price is $1.37 Difference: $0.48
If KAR meets the Morgan Stanley target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $1.78, suggesting upside of 29.2% (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

Morgans rates KAR as Add (1) -

Given the high internal rate of return and fast payback period, Morgans saw little risk of the Patola oil field not reaching the announced final investment decision.

Management will hedge 40% of group production in the first year, and 30% in the second. The capex budget has been set at US$175-$185m. The Add rating is unchanged and the target price is increased to $1.90 from $1.80.

Target price is $1.90 Current Price is $1.37 Difference: $0.53
If KAR meets the Morgans target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $1.78, suggesting upside of 29.2% (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

Credit Suisse rates LFG as Outperform (1) -

On the back of a very strong first half performance Liberty Financial Group has upgraded its FY21 outlook for net profit (NPATA) to $200m-plus versus initial prospectus of $166m.

Despite potential areas of caution including the roll-off of government stimulus, Credit Suisse notes strong housing growth has continued into 2H21with banks and non-banks experiencing demand for mortgages and brokers seeing record levels of applications.

Due to higher loan growth in mortgages, lower funding costs and lower bad debts Credit Suisse has upgraded earnings 4-6% through the forecast period.

The broker is now forecasting FY21 net profit of $235m versus guidance of for ‘in excess of $200m’.

Outperform rating with the target rising to $9.0 from $8.90.

Target price is $9.00 Current Price is $7.25 Difference: $1.75
If LFG meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $8.84, suggesting upside of 17.7% (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

Citi rates MIN as Neutral (3) -

Strong demand for lithium is unraveling latent supply, report analysts at Citi. It is their forecast the market will likely remain in surplus for quite some time, with many a producer operating their plants at full throttle.

Citi thinks the price of lithium is likely to remain range-bound over the next 18 months.

Mineral Resources' price target has appreciated to $51. Neutral.

Target price is $51.00 Current Price is $48.50 Difference: $2.5
If MIN meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $47.24, suggesting downside of -1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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 retains a Hold rating on Mineral Resources ahead of modelling its iron ore projects.

Ord Minnett now includes within the broker's modelling more downstream capacity for Mineral Resources, assuming a desire for production to stay integrated and required to fully ramp up its mines (including Wodgina).

The broker expects further detail soon on its supply chains, funding requirements and locations.

 The target price is raised to $47.70 from $42.10.

Target price is $47.70 Current Price is $48.50 Difference: minus $0.8 (current price is over target).
If MIN meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $47.24, suggesting downside of -1.6% (ex-dividends)

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

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

Morgan Stanley estimates the major banks have around $19.5bn-$28bn of excess capital. A near-term conservative approach to capital management is considered likely, given that covid risks remain and APRA's revisions to the capital framework are not yet finalised.

Despite this, the broker expects National Australia Bank to announce a buyback of $4.0bn at its FY21 result. 

An off-market buyback structure allows the distribution of surplus franking credits and may result in a slightly larger reduction in the number of shares for the same amount of capital, explains the analyst.

The Equal-weight rating and $27.20 target are retained. Industry view: In-line.

Target price is $27.20 Current Price is $27.12 Difference: $0.08
If NAB meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $27.58, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Citi rates ORE as Buy (1) -

Strong demand for lithium is unraveling latent supply, report analysts at Citi. It is their forecast the market will likely remain in surplus for quite some time, with many a producer operating their plants at full throttle.

Citi thinks the price of lithium is likely to remain range-bound over the next 18 months.

Orocobre remains the broker's top favourite exposure to the sector in Australia. Target price $7.60. Buy.

Target price is $7.60 Current Price is $6.92 Difference: $0.68
If ORE meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $6.41, suggesting downside of -7.0% (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

Ord Minnett rates ORE as Accumulate (2) -

Given that the company's proposed merger with Galaxy Resources ((GXY)) will result in a unique, pure lithium producer, Orocobre remains one of Ord Minnett's key sector preferences.

The broker's long-term prices remain US$600/t for spodumene (SC6.0%), US$10,500/t for battery-grade lithium carbonate and US$12,000/t for battery grade lithium hydroxide.

The Accumulate rating is retained and target price increases to $7.40 from $7.15.

Target price is $7.40 Current Price is $6.92 Difference: $0.48
If ORE meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $6.41, suggesting downside of -7.0% (ex-dividends)

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

Ord Minnett rates ORG as Buy (1) -

Based on higher electricity price forecasts, Ord Minnett has increased earnings estimates for Origin Energy.

Given the strong expected cash flow generation from its Australia Pacific LNG (APLNG) operation, Origin remains the broker's key sector preference.

While previously concerned about what appeared to be overly optimistic consensus numbers, Ord Minnett's new forecasts are in line with the market.

With significant upgrade potential using spot prices – the broker estimates APLNG could generate an almost 18% free cash flow
yield for Origin at spot.

Buy recommendation with the target rising to $5.75 from $5.52.

Target price is $5.75 Current Price is $4.48 Difference: $1.27
If ORG meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $5.06, suggesting upside of 7.2% (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

Macquarie rates ORI as Neutral (3) -

At the Wesfarmers ((WES)) strategy day, Macquarie noted Western Australian amonimium nitrate (AN) demand remains strong from customers (iron ore) resulting in lower exports and fertiliser sales.

Orica's eastern Australian contracts are typically 3-4 year tenor, hence 25-30% is up for renewal each year. The broker expects the second half to benefit from recovering Eastern Australian demand as higher margin coal volumes normalise and the worst of covid passes.

The Neutral rating and $14 target are retained.

Target price is $14.00 Current Price is $13.89 Difference: $0.11
If ORI meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $14.30, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates PLS as Upgrade to Neutral from Sell (3) -

Strong demand for lithium is unraveling latent supply, report analysts at Citi. It is their forecast the market will likely remain in surplus for quite some time, with many a producer operating their plants at full throttle.

Citi thinks the price of lithium is likely to remain range-bound over the next 18 months.

Pilbara Minerals' price target has lifted to $1.30 from $1.10. Upgrade to Neutral/High Risk from Sell/High Risk.

Target price is $1.30 Current Price is $1.30 Difference: $0
If PLS meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.20, suggesting downside of -9.8% (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

Ord Minnett rates PLS as Upgrade to Lighten from Sell (4) -

As the only pure spodumene producer, Ord Minnett notes Pilbara Minerals is most leveraged to the broker's recently upgraded price forecasts of 10–25% over the next five years.

The broker notes, at the latest closing price of $1.30 the company is imputing a flat US$760/t spodumene price with other commodities at spot.

Ord Minnett's updated model sees the company's production ramping up from 290,000t in FY21 to 1.3Mtpa spodumene, or 155,000t lithium carbonate equivalent at all-in sustaining costs of US$400/t by FY27.

Ord Minnett's rating is upgraded to Lighten from Sell and target price increases to $1.05 from $0.80.

Target price is $1.05 Current Price is $1.30 Difference: minus $0.25 (current price is over target).
If PLS meets the Ord Minnett target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.20, suggesting downside of -9.8% (ex-dividends)

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 SBM as Underperform (5) -

St Barbara has withdrawn FY21 guidance for Simberi, due to an investigation of a fatality and a production stoppage.

Macquarie trims -8koz from FY21 production expectations though suspects production up to early on in FY22 could be impacted, given general uncertainty.

The Underperform rating is maintained. The target is reduced to $1.70 from $1.80.

Target price is $1.70 Current Price is $1.88 Difference: minus $0.18 (current price is over target).
If SBM meets the Macquarie target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.34, suggesting upside of 27.9% (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

Morgan Stanley rates SBM as Overweight (1) -

Following a previously announced fatality at Simberi, FY21 site guidance is withdrawn. Drill and blasting has resumed but mining is not yet permitted. Separately, the deep sea tailings placement pipeline had a failure.

As a result, FY21 production could be around -11koz below the Morgan Stanley estimate. It's felt production could be halted into FY22, and the broker forecasts 100koz in FY22 versus guidance of 100-115koz, giving some slack for operational issues.

The analyst retains an Overweight rating. Target is $2.75. Industry view is Attractive.

Target price is $2.75 Current Price is $1.88 Difference: $0.87
If SBM meets the Morgan Stanley target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $2.34, suggesting upside of 27.9% (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

Citi rates SGM as Neutral (3) -

On the observation that prices for both steel and scrap remain in an uptrend, Citi analysts have lifted their EPS estimates for BlueScope Steel and Sims "materially".

Price target for Sims has moved up to $18 from $17. Rating remains Neutral.

Observed: while EPS estimates have lifted significantly, DPS forecasts have remained unchanged.

Target price is $18.00 Current Price is $16.13 Difference: $1.87
If SGM meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $17.63, suggesting upside of 7.7% (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 SHL as Hold (3) -

Having already assumed a rapid drop in earnings from covid testing in FY22, Ord Minnett has made only minor revisions to earnings forecasts for Sonic Healthcare.

The broker expects a recovery in routine work and the potential for acquisitions to offset the headwind from declining covid revenues.

Despite a rapid decline in covid testing demand in the US, which accounted for more than 40% of Sonic’s covid earnings in the first half of FY21, Ord Minnett expects this drop to be offset by solid covid test volumes in other regions.

The broker has lowered FY21 earnings per share forecast by -1% and raised FY22 by 1%.

Ord Minnett retains the Hold rating and target price increases to $36.40 from $36.00.

Target price is $36.40 Current Price is $34.87 Difference: $1.53
If SHL meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $37.36, suggesting upside of 5.9% (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

Macquarie rates SKC as Outperform (1) -

Macquarie estimates a pathway to NZ$400m earnings (EBITDA) in the next four years, implying 5% average annual growth, from the NZ$303m reported in FY19. This was calculated on a pre-covid and continuing-operations basis.

The broker also highlights the potential for capital management within two-years, given leverage drops to appropriate levels in FY23, and may involve buybacks. It's considered M&A is unlikely.

SkyCity holds long-term exclusive licences with SkyCity Auckland, representing more than 70% of earnings, and as such, the analyst doesn't foresee competition risk. However, there is considered risk of a change in New Zealand’s gaming tax rate.

Macquarie retains its Outperform rating with the price target rising to NZ$4.05 from NZ$3.75.

Current Price is $3.33. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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

Macquarie rates SKO as Outperform (1) -

In the wake of the FY21 result, Macquarie believes Serko is well placed as corporate travel continues to recover and growth opportunities remain compelling. It's considered to have world class technology, and will likely benefit from industry consolidation.

The broker revises EPS forecasts (off a low base) for FY21-24 by -27%, 17% and 26%, respectively. This is to reflect a modest near-term downgrade on a slower Australia/Europe and opex tweaks.

US corporate travel activity continues to improve in the US, reaching -72% in May versus 2019, compared to -80% in January versus 2019. Outperform retained and the target rises to NZ$8.31 from NZ$7.25.

Current Price is $6.60. Target price not assessed.

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

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 WBC as Overweight (1) -

Morgan Stanley estimates the major banks have around $19.5bn-$28bn of excess capital. A near-term conservative approach to capital management is considered likely, given that covid risks remain and APRA's revisions to the capital framework are not yet finalised.

Despite this, the broker expects Westpac Bank to announce a buyback of $3.5bn at first half FY22 results. It's felt the case for an off-market buyback is strongest relative to peers.

An off-market buyback structure allows the distribution of surplus franking credits and may result in a slightly larger reduction in the number of shares for the same amount of capital, explains the analyst.

The Overweight rating and $29.20 target are retained. Industry view: In-line.

Target price is $29.20 Current Price is $26.50 Difference: $2.7
If WBC meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $28.49, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates WES as Sell (5) -

Wesfarmers' strategy day highlighted the need for incremental investment to position retail businesses for a likely medium- to long-term operating environment.

Citi has made small changes to earnings, as building in Adelaide Tools rollout largely offsets investment in data, digital and online.

Bunnings expects to roll out 75 specialist tools stores over the next 3-5 years following the Adelaide Tools acquisition.

While Citi estimates this will add $500m of sales and $40-50m to Bunnings earnings by FY25, the broker would expect some cannibalisation of Bunnings tool sales.

Citi retains Sell as the broker is not willing to factor in accretive capital management or acquisitions ahead of this being announced.

Target of $45 is unchanged on the back of relatively small earnings changes.

Target price is $45.00 Current Price is $55.11 Difference: minus $10.11 (current price is over target).
If WES meets the Citi target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $53.45, suggesting downside of -3.2% (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

Credit Suisse rates WES as Neutral (3) -

Credit Suisse believes Wesfarmers has gone a long way towards stabilising previous problems, including Target, and Blackwoods and is continuing to build interesting near- and longer-term growth in Kmart/Catch, Bunnings/Commercial, and Officeworks.

The Covalent lithium investment is Wesfarmers’ largest single investment commitment ($950mn) with completion planned for 2024.

In a departure from previous avoidance of increasing its commodity production footprint, an expansion of ammonia production capacity to replace current imports is being considered.

Credit Suisse believes expansion would be an investment of -$180m ($1,200/t for a brownfield expansion of ~150kt) and based on the broker's long-term forecasts for ammonia, Wesfarmers would need gas at $6/gj to make the economics sufficiently attractive.

The broker retains a Neutral rating and lowers the target to $57.23 from $57.32 after a few minor adjustments to chemicals forecasts.

Target price is $57.23 Current Price is $55.11 Difference: $2.12
If WES meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $53.45, suggesting downside of -3.2% (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 WES as Outperform (1) -

From Wesfarmers' strategy day, Macquarie highlights a focus upon expanding the professional trade segment through Adelaide Tools and Beaumont Tiles. For Kmart group, management revises pre-tax one-off non-operating costs to -$60-$70m in FY21 from -$90-$110m. 

The broker increases EPS forecasts for FY21-23 by 3.4%, 6.9% and 7.7%, respectively, on the back of stronger demand at Bunnings and Kmart. The target price increases to $58.12 from $56.60 and the Outperform rating is retained.

Target price is $58.12 Current Price is $55.11 Difference: $3.01
If WES meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $53.45, suggesting downside of -3.2% (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

Morgans rates WES as Hold (3) -

After a strategy briefing day, Morgans makes minimal changes to earnings forecasts and reduces the target price to $56.08 from $56.10. The Hold rating is maintained.

While customer demand has remained resilient, management noted year-on-year growth has generally moderated and been negative in some months for some businesses. It's considered this is due to elevated activity in the prior year.

Initial trading from the conversion of 81 Target stores to Kmart and K Hub stores is ahead of the company’s expectations. Bunnings will continue to expand in the commercial market to complement its current strong retail DIY presence, explains the broker.

Target price is $56.08 Current Price is $55.11 Difference: $0.97
If WES meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $53.45, suggesting downside of -3.2% (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