Australian Broker Call

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

The Australian Pharmaceutical board has suggested the $1.38 takeover offer from Wesfarmers ((WES)) undervalues the company, despite recently downgrading expectations due to new lockdowns and a closure of nine Priceline stores.

The broker also notes that as well as the bid being conditional, it will require ACCC approval. The price represents a 20% premium to the prior closing price and 10% on the broker's prior target ($1.25). On a sum-of-the-parts valuation, the broker could justify $1.45-1.75.

The broker has chosen instead a blended SOTP/discounted cash flow model to lift its target to $1.40, and maintains Equal-weight. Industry view: In Line.

Target price is $1.40 Current Price is $1.38 Difference: $0.02
If API meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.38, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in August.

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 APT as Outperform (1) -

Following hot on the heels of news announcements made by PayPal (in Australia) and Apple (BNPL product for Apple Pay), Macquarie sees competition intensifying in BNPL, as expected.

In broad perspective, Macquarie is anticipating a period of consolidation within the industry before a better outlook for the industry overall will once again emerge.

The broker equally stipulates recent changes to forecasts have already factored in market share loss in Australia, partially reflecting the increasing competitive landscape provided by new entrants including Paypal, StepPay as well as Citi.

Price target has dropped to $130 from $140.

Target price is $130.00 Current Price is $118.35 Difference: $11.65
If APT meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $122.57, suggesting upside of 14.6% (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

Ord Minnett rates CNI as Accumulate (2) -

Centuria Capital's assets under management have lifted to $16.8bn following its takeover offer of Primewest Group ((PWG)) becoming unconditional in June. This is a $1.3bn increase to assets under management since April. 

Ord Minnett notes the acquisition is expected to be 3-4% accretive to earnings over FY22-FY24, largely based on tax savings. The broker expects the company to transition to an organic growth focus through asset acquisition and development following four major fund management acquisitions in the last five years.

The Accumulate rating is retained and the target price increases to $3.30 from $3.00. 

Target price is $3.30 Current Price is $2.99 Difference: $0.31
If CNI meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.86, suggesting downside of -4.6% (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 COH as Overweight (1) -

The broker believes Cochlear's FY21 earnings result due next month will be above pre-pandemic levels, as channel checks suggest a US recovery is still underway.

However the recovery remains uneven, with implant surgeries still down in the likes of Texas. The broker otherwise assures Cochlear has gained market share. Overweight and $227 target retained.

Industry view: In-Line.

Target price is $227.00 Current Price is $240.19 Difference: minus $13.19 (current price is over target).
If COH meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $216.87, suggesting downside of -10.9% (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 EPY as Add (1) -

Earlypay reaffirmed  FY21 guidance. Morgans notes the business continues to see solid momentum in core products, with FY22 profit (NPATA) expected to be up around 40% on the pcp.

The broker highlights funding capacity now looks secured for the medium term, after the recent $19m equity raise. It's believed the demand environment has improved and the execution of a refocused strategy and technology improvement should enable a step-up in earnings. 

The Add rating is maintained by Morgans. The target price falls to $0.53 from $0.54, after incorporating the capital raised, underlying core business strength and additional returns from the capital raised.

Target price is $0.53 Current Price is $0.45 Difference: $0.08
If EPY meets the Morgans target it will return approximately 18% (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

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

Ahead of the August reporting season, Morgan Stanley is highlighting seven mid-cap stocks it believes can out/underperform over the next year. G8 Education is in the latter camp.

The company is most at risk from lockdowns, the broker warns, and government subsidies only ensure survival, not earnings growth. Lockdowns aside, the broker sees further occupancy downside risk simply from parents unwilling to risk new variants which are affecting children.

Equal-weight and $1.00 target retained. Industry view: In-Line.

Target price is $1.00 Current Price is $1.00 Difference: $0
If GEM meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.12, suggesting upside of 12.8% (ex-dividends)

The company's fiscal year ends in December.

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 GXY as Upgrade to Buy from Accumulate (1) -

Ord Minnett has provided an update to its lithium supply-and-demand model and near-term pricing, resulting in boosted earnings estimates to lithium stocks. 

The broker has increased demand for lithium carbonate equivalent by 7% by 2030. Although supply constraints will ease in the later part of the decade, near-term supply is lower and risk is attached to an aggressive demand increase. Ord Minnett notes a forecasted 10% market deficit to 2024 supports higher near-term prices. 

Based on the assumption that Galaxy's proposed merger with Orocobre will go ahead, the rating is upgraded to Buy and the target price increases to $4.80 from $4.20. 

Target price is $4.80 Current Price is $4.03 Difference: $0.77
If GXY meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting downside of -5.2% (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

Morgans rates ICQ as Hold (3) -

iCar Asia has received a ‘competing’ indicative acquisition proposal from Malaysian based Carsome, pitched at $0.55 a share. This bid exceeds the $0.50 indicative bid received by Autohome Group in October 2020, and Morgans sees it as attractive to shareholders.

Catcha Group, the largest shareholder, has effectively become a 'joint bidder', after entering into an agreement to sell an initial 19.9% stake for Carsome stock, explains the analyst. The target moves to $0.50 from $0.38, factoring-in a 75% chance of the bid becoming final.

Morgans maintains a Hold rating.

Target price is $0.50 Current Price is $0.48 Difference: $0.02
If ICQ meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Macquarie rates IPL as Outperform (1) -

Macquarie is pleased to see improved manufacturing performance after a number of hiccups this year, with the announcement that the Waggaman ammonia plant has run at nameplate for six weeks. In addition, the Moranbah turnaround has gone to plan.

This should allow the company to better capture the cycle with fertiliser prices unseasonably strong at present, reflecting buoyant soft commodity prices and tight supply, explains the broker.

The analyst lifts FY21-23 EPS forecasts by 24%, 7% and 0.4%, on higher fertiliser prices, given ongoing fertiliser price strength and a higher base effect in FY22. The target price increases to $3.05 from $2.91.

Target price is $3.05 Current Price is $2.57 Difference: $0.48
If IPL meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 16.9% (ex-dividends)

The company's fiscal year ends in September.

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 IPL as Overweight (1) -

Incitec Pivot has announced its troublesome Waggaman ammonia plant in Louisiana returned to full production on June 1. Given recent reliability issues, the broker sees this as a positive milestone.

However the broker believes the market will need to see 12-18 months of relaible production before regaining confidence. The broker has upgraded earnings forecasts, but mostly to refelct the highest ammonia, urea and DAP prices in five years.

Overweight retained, target rises to $2.95 from $2.85. Industry view: In-Line.

Target price is $2.95 Current Price is $2.57 Difference: $0.38
If IPL meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 16.9% (ex-dividends)

The company's fiscal year ends in September.

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 IPL as Buy (1) -

Incitec Pivot provided a positive update on its Waggaman ammonia plant, with Ord Minnett forecasting the project to generate US$62m in earnings in the second half. 

The broker is currently guiding to earnings for FY22 of $626m, but with lifted ammonia and gas forecasts notes this estimate could increase to as much as $940m. 

Ord Minnett also notes that company's share price recovered 5.8% on Tuesday, and the broker expects further appreciation to push the share price equal to, or above, previous highs. 

The Buy rating is retained and the target price increases to $3.10 from $3.00. 

Target price is $3.10 Current Price is $2.57 Difference: $0.53
If IPL meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 16.9% (ex-dividends)

The company's fiscal year ends in September.

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 IPL as Buy (1) -

In-line with the expectations of UBS, management has announced the Waggaman ammonia plant was successfully re-started and has been operating at nameplate production since 1 June.

The broker estimates the current share price appears to imply a FY22 DAP price of US$370t versus spot of US$575t, and an ammonia price of US$370t versus spot of US$585t. The analyst raises the target price to $2.91 from $2.88 and maintains the Buy rating.

Target price is $2.91 Current Price is $2.57 Difference: $0.34
If IPL meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 16.9% (ex-dividends)

The company's fiscal year ends in September.

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 MIN as Hold (3) -

Ord Minnett has provided an update to its lithium supply-and-demand model and near-term pricing, resulting in boosted earnings estimates to lithium stocks. 

The broker has increased demand for lithium carbonate equivalent by 7% by 2030. Although supply constraints will ease in the later part of the decade, near-term supply is lower and risk is attached to an aggressive demand increase. Ord Minnett notes a forecasted 10% market deficit to 2024 supports higher near-term prices. 

The Hold rating on Mineral Resources is retained and the target price increases to $65.00 from $64.00.

Target price is $65.00 Current Price is $59.28 Difference: $5.72
If MIN meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $54.96, suggesting downside of -8.4% (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

Citi rates NEA as Neutral (3) -

Citi reports legal proceedings from Eagleview don't appear to be impacting on Nearmap, as the company provided a solid trading update showing record annual contract value growth in the US. 

Despite this, the broker does note US growth could still be impacted as the company moves into FY22, highlighting potential difficulty in signing new partners in the region. Citi is now guiding to annual contract value growth for the US region of 24% in FY22, at the lower end of company guidance. 

Nearmap's Australian and New Zealand region reported $2.5m in incremental annual contract growth over the second half, and while softer than expected, Citi notes growth is positive when considering increased competition. 

The Neutral rating is retained and the target price increases to $2.35 from $2.00.

Target price is $2.35 Current Price is $2.27 Difference: $0.08
If NEA meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting upside of 21.8% (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 NEA as Neutral (3) -

Macquarie analysts note Nearmap has upgraded its guidance for FY21 annual contract value (ACV) income to $128.2m and $133.8m on a constant currency basis.

Clearly, the broker states, sales momentum is positive. At the release of the interim result, management had guided towards the upper end of its original guidance range of $120m-$128m.

The broker also points out ACV from North America now makes up some 54% of the group's total porfolio. Macquarie maintains its Neutral rating with a target price of $2.60 while forecasts are under review.

Target price is $2.60 Current Price is $2.27 Difference: $0.33
If NEA meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting upside of 21.8% (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 NEA as Overweight (1) -

Nearmap has upgraded FY21 annual contract value guidance to above the broker's forecast. The positive market reaction reflected not just the strength of the beat, the broker suggests, but the fact it was attributable to the larger, early-stage North American market.

In other news, Nearmap has lodged a motion to dismiss patent claims made by competitor Eagleview on the basis of ineligibility.

Overweight and $3.20 target retained. Industry view: In-Line.

Target price is $3.20 Current Price is $2.27 Difference: $0.93
If NEA meets the Morgan Stanley target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting upside of 21.8% (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 NWH as Outperform (1) -

NRW Holdings has announced the sale of its mobile mining assets to Boggabri Coal for $81m, which will see group pre-tax earnings decrease by -1%-2% and net debt reduce to $34m.

The broker remains cautious on margin compression in the near term though notes the company continues to benefit from a large order book and tender pipeline. The analyst maintains the Outperform rating and $2.10 target price.

Target price is $2.10 Current Price is $1.82 Difference: $0.28
If NWH meets the Macquarie target it will return approximately 15% (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

Ord Minnett rates ORE as Upgrade to Buy from Accumulate (1) -

Ord Minnett has provided an update to its lithium supply-and-demand model and near-term pricing, resulting in boosted earnings estimates to lithium stocks. 

The broker has increased demand for lithium carbonate equivalent by 7% by 2030. Although supply constraints will ease in the later part of the decade, near-term supply is lower and risk is attached to an aggressive demand increase. Ord Minnett notes a forecasted 10% market deficit to 2024 supports higher near-term prices. 

Based on the assumption that Orocobre's proposed merger with Galaxy Resources will go ahead, the rating is upgraded to Buy and the target price increases to $8.45 from $7.40. 

Target price is $8.45 Current Price is $7.11 Difference: $1.34
If ORE meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $6.82, suggesting downside of -5.6% (ex-dividends)

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 PLS as Upgrade to Hold from Lighten (3) -

Ord Minnett has provided an update to its lithium supply-and-demand model and near-term pricing, resulting in boosted earnings estimates to lithium stocks. 

The broker has increased demand for lithium carbonate equivalent by 7% by 2030. Although supply constraints will ease in the later part of the decade, near-term supply is lower and risk is attached to an aggressive demand increase. Ord Minnett notes a forecasted 10% market deficit to 2024 supports higher near-term prices. 

The rating on Pilbara Minerals is upgraded to Hold and the target price increases to $1.50 from $1.05.

Target price is $1.50 Current Price is $1.56 Difference: minus $0.06 (current price is over target).
If PLS meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.45, suggesting downside of -7.4% (ex-dividends)

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 QUB as Accumulate (2) -

Qube Holdings has entered into a binding transaction document for the sale of Moorebank land and warehousing assets to the LOGOS consortium.

The sale is comprised of an upfront payment of $1.36bn, expected to settle in the December quarter, and an additional deferred payment of $312m. Proceeds from the sale could materially reduce the company's net debt balance and fund growth and merger and acquisition projects. 

Ord Minnett's underlying profit expectations remain largely unchanged, but the broker is forecasting earnings per share growth of 11.9% for FY21. 

The Accumulate rating and target price of $3.31 are retained.

Target price is $3.31 Current Price is $2.94 Difference: $0.37
If QUB meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.16, suggesting upside of 5.7% (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

Credit Suisse rates RMD as Outperform (1) -

Philips’ recall of its CPAP and BiPAP DreamStation 1 devices has provided ResMed with an unprecedented opportunity to structurally increase its market share, according to Credit Suisse.

The broker highlights Philips will be unable to service new patients while it replaces its current installed base, and ResMed has no other cloud-connected competitor. Credit Suisse lifts the target price to $37 from $29. The Outperform rating is unchanged.

On a long-term basis, the analyst forecasts ResMed will capture 5% additional market share (65% total share) of the global CPAP market, though still considers Philips a strong competitor going forward.

Target price is $37.00 Current Price is $33.18 Difference: $3.82
If RMD meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $32.15, suggesting downside of -4.1% (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: 0.6

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

Citi rates SHV as Buy (1) -

Citi is guiding to Select Harvests achieving an average almond price per kilo of $7.75 for FY22, with the higher medium-term pricing driving the broker's reiterated upside risk for the company. 

With the prospect of a multi-year drought, all eyes are on harvest yields for 2021 and 2022, with the first of these to start in August. Citi notes California droughts are becoming more frequent and more intense and the current drought may continue into 2022. 

The Buy rating is retained and the target price increases to $8.10 from $6.80. 

Target price is $8.10 Current Price is $7.53 Difference: $0.57
If SHV meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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 VEA as Overweight (1) -

Viva Energy's trading update and lift in FY21 guidance to well above consensus forecasts leads the broker to believe the company has managed a difficult year well, particularly given rising oil prices which are a headwind for retail margins.

No divisional breakdown was provided, so it is unclear exactly where the beat was sourced, but cost management seems to be part of it. The broker also suggests the upgrade should provide a positive read-through for rival Ampol ((ALD)).

Overweight retained, target rises to $2.50 from $2.30. Industry view: Attractive.

Target price is $2.50 Current Price is $2.16 Difference: $0.34
If VEA meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.38, suggesting upside of 11.3% (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

Macquarie rates WPL as Outperform (1) -

Macquarie estimates Woodside Petroleum should be on-track to take a final investment decision (FID) on Scarborough/Pluto T2 in the second half of 2021. However, the opportunity to lock in bottom-of the-cycle costs is considered to have passed.

While Scarborough project returns are at the low end, the analyst believes the company should proceed, given duration and portfolio benefits. The broker lowers the price target to $27.75 from $28.60, on higher Scarborough capex.

The analyst on average raises EPS forecasts for FY21-23, on stronger spot LNG prices (2021), delayed ramp-up of Pluto-NWS interconnector (2022) and other production revisions. The Outperform rating is unchanged.

Target price is $27.75 Current Price is $23.11 Difference: $4.64
If WPL meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $27.56, suggesting upside of 18.6% (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: 0.7

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