Australian Broker Call

Bell Potter rates A4N as Buy (1) -

Alpha HPA has announced that its HPA (high-purity alumina) First Project Stage 2 has received credit approval for $320m in debt and $80m in cost overrun facilities, jointly funded by the Northern Australia Infrastructure Facility and Export Finance Australia.

EFA’s funding has been provided through the Australian Government’s $4bn Critical Minerals Facility. The debt facilities are subject to final documentation, customary conditions and offtake Letters of Intent for 10ktpa production.

The government-backed concessional debt facilities are a major de-risking catalyst, Bell Potter suggest, with extended tenor and what the broker expects to be a highly competitive cost of funds.

Target rises to $1.75 from $1.60, Buy retained.

Target price is $1.75 Current Price is $1.09 Difference: $0.66
If A4N meets the Bell Potter target it will return approximately 61% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Citi rates ANN as Neutral (3) -

Ansell will acquire Kimberly Clark's personal protective equipment (KCPPE) business for -$640m funded by both debt and around US$305m of equity at $22.45/share via a placement.

The transaction makes strategic sense to Citi given complementary products and customers, and it will also improve Ansell's growth profile by greater exposure to the Life Science segment.

Management expects to generate synergies of US$10m by the third year of ownership.

The target rises to $27.25 from $26 and the Neutral rating is unchanged.

Target price is $27.25 Current Price is $24.91 Difference: $2.34
If ANN meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $27.43, suggesting upside of 10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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 BOQ as Sell (5) -

Bank of Queensland's 1H cash earnings exceeded prior forecasts made by Citi and consensus by 6%, but was arguably a low-quality result driven by lower opex (more costs being capitalised) and lower bad and doubtful debts. 

While the broker feels the bottom has been reached for the current earnings contraction cycle, the analysts see uncertainty for the medium-term outlook. Management conceded there was no discernible pathway to the company's FY26 targets, highlight the analysts.

The Sell rating and $5.05 target are maintained.

Target price is $5.05 Current Price is $6.10 Difference: minus $1.05 (current price is over target).
If BOQ meets the Citi target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

Macquarie rates BOQ as Underperform (5) -

Macquarie was disappointed by Bank of Queensland's 1H result which lacked positive catalysts, and management seemed to be conceding the difficulty of achieving FY26 targets.

The resulted highlighted to the analyst weak balance sheet growth, while the underlying margin fell by -6bps. Deposit funding costs remain under pressure from competition and low mortgage returns will result in management reducing involvement in this area.

The broker highlights the difficulty for management in achieving the twin tasks of reducing expenditure and improving profitability while also trying to invest for the future.

The $4.75 target and Underperform rating is unchanged.

Target price is $4.75 Current Price is $6.10 Difference: minus $1.35 (current price is over target).
If BOQ meets the Macquarie target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

Morgan Stanley rates BOQ as Underweight (5) -

Bank of Queensland's interim update has received a mixed response at Morgan Stanley. The broker has lifted its cash EPS estimate for FY24 by approximately 1% due to lower impairment charges, although this was somewhat offset by higher expenses and taxes.

For FY25 and FY26, cash EPS forecasts have been downgraded by about -5-6%, driven by rising expenses and tax rates, despite smaller expected loan losses.

There are no anticipated buybacks for FY26, reflecting constrained capital flexibility. Additionally, the broker noted margin pressures are expected to moderate in 2H24, although significant revenue recovery over the next 12 months is not anticipated.

The broker also highlighted ongoing investment and cost pressures that could challenge the turnaround strategy, including a necessary transformation program and execution risks.

Morgan Stanley maintains the Underweight rating, alongside an unchanged price target of $5.60. Sector view is In-Line.

Target price is $5.60 Current Price is $6.10 Difference: minus $0.5 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

Morgans rates BOQ as Reduce (5) -

Bank of Queensland's 1H result surprised positively with a smaller-than-anticipated decline accompanied by a larger dividend payout.

Morgans does highlight it appears management at the regional bank is preparing for a scaling back of earlier expressed FY26 financial targets.

Estimates have been upgraded by 2-7%.Target lifts 4% to $5.24 (was $5.05). As the yield on offer is not compensating for the implied loss in capital, Morgans sticks by its Reduce rating.

Target price is $5.24 Current Price is $6.10 Difference: minus $0.86 (current price is over target).
If BOQ meets the Morgans target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

UBS rates BOQ as Sell (5) -

UBS states the H1 performance from Bank of Queensland was slightly better than anticipated, but also of low quality due to underperforming retail banking profitability, which has notably decreased by about -60% year-on-year.

Key financial indicators such as net interest income and non-interest income have shown declines, contributing to a total revenue drop of -6% to $796m, which the broker assesses as slightly below consensus.

Sell rating retained with UBS concerned over the bank's structural challenges, especially in a high-interest rate environment. This outlook implies a cautious stance on the bank's near-term financial performance prospects, the broker qualifies.

Target rises to $5.50 from $5.00.

Target price is $5.50 Current Price is $6.10 Difference: minus $0.6 (current price is over target).
If BOQ meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

UBS rates BWP as Upgrade to Buy from Sell (1) -

UBS has upgraded BWP Trust to Buy from Hold, having first incorporated the Newmark acquisition in its modeling. Price target has lifted to $3.80.

The broker highlights BWP Trust has the lowest gearing in the sector locally which means it benefits most in a "higher for longer" environment.

Add a defensive nature of income and shares trading at a -30% discount to the 10 year average premium of 26% and we've just discovered the rationale behind the upgrade.

Target price is $3.80 Current Price is $3.42 Difference: $0.38
If BWP meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.57, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

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

Evolution Mining's 3Q production and costs (AISC) missed Macquarie's forecast by -5% and -13%, respectively. Compared to consensus forecasts, production was in line while costs missed by -4%.

Management retained FY24 guidance despite year-to-date production accounting for only 67% of the bottom end of the range. Both Macquarie and consensus are expecting a modest miss against FY24 guidance.

The broker's target rises by 8% to $4.10 on long-term EPS upgrades and a roll-forward of the valuation period. The rating is downgraded to Neutral from Outperform due to elevated guidance risk and a strong recent share price.

Target price is $4.10 Current Price is $4.16 Difference: minus $0.06 (current price is over target).
If EVN meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.18, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Morgan Stanley rates EVN as Overweight (1) -

Morgan Stanley maintains an Overweight rating on Evolution Mining with a price target of $4.16, up from $3.90 16 days ago.

The broker forecasts several potential catalysts over the next 6-12 months involving Evolution Mining's assets at Red Lake, Northparkes, Ernest Henry, and Cowal.

The broker notes positive drilling results at Ernest Henry could extend the mine's life, with a feasibility study due by March 2025, though already a life span until 2040 is anticipated.

For Cowal, regulatory approval for the Open Pit Continuation project is expected by FY24/25, with significant stockpiles to support operations if delayed.

Target price is $4.16 Current Price is $4.16 Difference: $0
If EVN meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Ord Minnett rates EVN as Accumulate (2) -

Ord Minnett has labeled Evolution Mining's latest quarterly update as "decent", considering rainfall challenges during the period.

The gold producer has left FY24 guidance unchanged, which is seen as "important", with management holding high expectations for the closing quarter.

The Accumulate rating remains in place and, on higher forecasts, the price target improves to $4.40.

Target price is $4.40 Current Price is $4.16 Difference: $0.24
If EVN meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

UBS rates EVN as Buy (1) -

Evolution Mining's March Q production of 185koz gold and 20kt copper was in line with UBS with costs slightly above. The strong market reaction suggests to the broker some expectations were low and the credibility rebuild may have commenced.

Guidance is unchanged targeting the low end of gold, high end of copper and costs. To get there, Evolution requires a very strong June Q for gold production (+34% quarter-on-quarter) on higher grades across Cowal, Mungari and Red Lake, UBS warns.

Buy and $4.35 target retained.

Target price is $4.35 Current Price is $4.16 Difference: $0.19
If EVN meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Citi rates JHX as Buy (1) -

In a negative outcome for James Hardie Industries, according to Citi, March single family housing starts in the US fell by -12% month-on-month in an apparent correlation with rising yields.

After a year of consecutive monthly gains, permits also dropped, suggesting to the broker there may be implications for James Hardie's FY24 guidance, when the housing starts numbers are also taken into account.

However, despite the sequential fall, mathematically starts are still up for the quarter by around 28% on average, highlights the broker.

The Buy rating and $63 target are maintained.

Target price is $63.00 Current Price is $54.02 Difference: $8.98
If JHX meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $61.58, suggesting upside of 14.4% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

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

Morgan Stanley rates MAQ as Underweight (5) -

Looks like Morgan Stanley has returned after a hiatus of some 18 months, upgraded its rating on Macquarie Technology Group to Overweight from Underweight, with a revised price target of $100, up from $50.

The upgrade reflects increased confidence in Macquarie Technology's Data Centre assets, deemed undervalued, particularly with the rising strategic value driven by AI, which demands higher compute power.

Financial forecasts have been adjusted with a projected Data Centre Revenue and EBITDA CAGR of 20% and 11% respectively, from FY23-26.

The broker highlights the substantial discount in the shares compared to main peer, NextDC ((NXT)), which trades around 45-50x EBITDA, against 15x.

The broker also points out Macquarie Technology's diversified and less capital-intensive approach as advantageous in the current market. Industry view is Attractive.

Target price is $100.00 Current Price is $75.31 Difference: $24.69
If MAQ meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -1.0

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

UBS rates ORA as Neutral (3) -

UBS analysts are on an investor tour in France, organised by Orora, with site tours included to some of recently acquired Saverglass facilities.

The analysts report management has reiterated its FY24 earnings guidance, having recently downgraded guidance. FY24 capex guidance of -$300m was also reiterated, while initial FY25 interest guidance was provided of $132.5m.

Regarding Saverglass, market conditions remain challenging. Orora has also seen early signals destocking in the USA is more advanced than Europe/Asia.

Target of $2.56 and Neutral rating remain in place.

Target price is $2.56 Current Price is $2.07 Difference: $0.49
If ORA meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 26.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Citi rates RIO as Buy (1) -

While production in the March quarter for Rio Tinto was moderately weaker than Citi was expecting, the Buy rating and target price of $137.00 are retained.

Management left 2024 production, cost and capex guidance unchanged.

Citi highlights the current valuation is supportive and a strong period is commencing for Chinese steel production, at a time when China’s steel mills have returned to a level of profitability.

The broker's earnings changes incorporate a 2Q forecast price for iron ore of US$110/t, down from US$120/t. 

Target price is $137.00 Current Price is $128.72 Difference: $8.28
If RIO meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $128.00, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.2

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

Macquarie rates RIO as Neutral (3) -

Rio Tinto's 1Q operational result was generally in line with Macquarie's forecasts though copper production missed on weakness at Escondida and Kennecott.

The ramp-up at Oyu Tolgoi beat the broker's expectations on total milled volume, with underground volume and grade beats of 45% and 4%, respectively.

The Neutral rating and $121 target are unchanged. Macquarie still prefers Rio Tinto over BHP Group ((BHP)) for superior iron ore capacity utilisation and copper growth.

Target price is $121.00 Current Price is $128.72 Difference: minus $7.72 (current price is over target).
If RIO meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $128.00, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.2

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

Morgan Stanley rates RIO as Overweight (1) -

Morgan Stanley maintains its Overweight rating on Rio Tinto with a price target of $139, up from $128.70. The quarterly update overall revealed in-line performances with guidance unchanged.

Key points include weaker copper production due to an unplanned conveyor failure at Kenecott and lower grades at the Oyu Tolgoi open pit, though underground performance was seen as strong.

Iron ore shipments and production were nearly in line with estimates, with a slight underperformance versus consensus, the analysts observe.

Bauxite production was -3.1% lower versus Morgan Stanley's estimates but showed a marginal improvement over consensus. Only minor changes were made to financial forecasts. Industry view is Attractive.

Target price is $139.00 Current Price is $128.72 Difference: $10.28
If RIO meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $128.00, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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 RIO as Hold (3) -

Morgans spotted a weaker operational quarter from Rio Tinto, but also a share price rallying on positive market expectations regarding the outlook for aluminium and copper prices.

This has the broker worried that investors are too keen to price in future upside in today's share price. Management has left production and unit cost guidances for 2024 unchanged, the broker notes.

Hold rating retained with a price target of $132, up from $128 in late March.

Target price is $132.00 Current Price is $128.72 Difference: $3.28
If RIO meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $128.00, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

UBS rates RIO as Neutral (3) -

Rio Tinto's March Q production was broadly in line with UBS and FY24 guidance is unchanged. While production is soft versus consensus, Rio has the rest of 2024 to catch up, the broker notes, and for iron ore the strongest quarters of the year are ahead.

The quarter was impacted by weather in iron ore, and unplanned outages.

It is encouraging that Kitimat is back at full capacity, UBS suggests, and the Oyu Tolgoi underground ramp-up is on track. The Western Range, Pilbara replacement and Simandou projects are also progressing to plan.

Neutral and $127 target retained.

Target price is $127.00 Current Price is $128.72 Difference: minus $1.72 (current price is over target).
If RIO 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 $128.00, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

UBS rates TLX as Buy (1) -

UBS reports Telix Pharmaceuticals's Q1 Illucix sales surprised to the upside. The broker has lifted its forecasts.

The price target has increased to $19.30 from $18.50. Buy.

The next catalyst to watch out for, note the analysts, are trials data for TLX591, a potential prostate cancer therapeutic, due mid year.

Target price is $19.30 Current Price is $12.54 Difference: $6.76
If TLX meets the UBS target it will return approximately 54% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Bell Potter rates TNE as Buy (1) -

When TechnologyOne reports second half earnings in May, Bell Potter expects mid-teens earnings growth to mostly be driven by strong top line growth with only a modest improvement in the margin, consistent with the first half result.

The broker expects management to provide its typical guidance of 10-15% profit growth for the full year, but believes this is conservative and likely to be exceeded.

The company exceeded guidance in FY23 with profit growth of 16% and Bell Potter currently forecasts growth of 18% in FY24.

Buy and $18.50 target retained.

Target price is $18.50 Current Price is $15.72 Difference: $2.78
If TNE meets the Bell Potter target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $16.07, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

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

Citi initiates coverage on Tuas which is transitioning to become a full-telecommunications service provider with a 5G offering and fibre broadband services.

The company was spun out after a merger between TPG Telecom ((TPG)) and Vodafone Hutchinson Australia and operations are solely in Singapore. 

The broker sees substantial revenue upside potential (after undertaking a comparative analysis between the company and peers in Singapore) based on above-market mobile subscriber growth.

The analysts also believe there are ample tailwinds to drive acceleration in Broadband take-up including increasing residential broadband connections and high household broadband penetration.

Citi begins with a Buy rating and $4.50 target price.

Target price is $4.50 Current Price is $3.84 Difference: $0.66
If TUA meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

UBS rates VEA as Buy (1) -

Viva Energy's March Q result saw the Geelong Refining Margin below UBS' forecast despite margins having benefited from global tightening of refining capacity. High plant availability at Geelong also supported Energy & Infrastructure earnings.

Fuel volumes came in softer than UBS' estimates across both the Convenience & Mobility and Commercial & Industrial segments. While management indicated that seasonality contributed to softer fuel volumes, sluggish fuel volume growth remains in the broker's focus.

Declining tobacco sales and cost of living pressures continue to weigh on convenience sales, despite food, drinks and confectionery driving a marginally higher convenience retail gross margin.

UBS has cut earnings estimates but retained a $3.75 target and Buy rating.

Target price is $3.75 Current Price is $3.53 Difference: $0.22
If VEA meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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