Australian Broker Call

UBS rates AGL as Neutral (3) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects medium-term gas demand to remain resilient as coal-fired capacity retires.

The higher domestic gas prices will pass on further gas margin pressure for AGL Energy, suggests the broker, which needs to procure  additional gas supply over the next few years. The target price falls to $8.35 from $8.50. The Neutral rating is unchanged.

Target price is $8.35 Current Price is $8.19 Difference: $0.16
If AGL meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $9.22, suggesting upside of 12.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

UBS rates BPT as Buy (1) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects medium-term gas demand to remain resilient as coal-fired capacity retires.

Among stocks under the brokers Energy coverage, Beach Energy has the most production exposure (56%) to east coast domestic gas. However, some sales restrictions exist on a material portion of uncontracted gas from the 2H of 2023.

The Buy rating is maintained and the target price rises to $1.95 from $1.80.

Target price is $1.95 Current Price is $1.59 Difference: $0.36
If BPT meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $1.86, suggesting upside of 11.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Macquarie rates BSL as Outperform (1) -

Reviewing BlueScope Steel's outlook, Macquarie notes it expects Asian hot rolled coil prices to increase marginally from the second half given easing policies implemented in China, while US prices remain largely unchanged. 

Coupled with a weaker Australian dollar, the broker has revised its earnings per share forecasts by 0%, 4% and 6% through to FY24. 

The Outperform rating is retained and the target price decreases to $19.55 from $24.40.

Target price is $19.55 Current Price is $15.63 Difference: $3.92
If BSL meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $23.56, suggesting upside of 45.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Citi rates CBA as Sell (5) -

Citi poses the question: could sharply rising rates and falling house prices be the catalyst for a reversion of CommBank's valuation back closer to peers?

The broker concludes that while falling house prices should be a factor in any reversion, a larger impact would derive from an improved operational performance from the other major banks.

As Citi expects the other majors to deliver better core profit growth in FY23 compared to CommBank, the current valuation gap is expected to narrow. The Sell rating and $90.75 target price are maintained.

Target price is $90.75 Current Price is $90.16 Difference: $0.59
If CBA meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $89.76, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.6

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

Ord Minnett rates CBA as Hold (3) -

Ord Minnett notes the market has been quick to price in the Reserve Bank's outlook, with the sector declining -15% since the RBA's recent 50 basis point interest rate increase. 

The broker highlights it is CommBank's expensive relative valuation that is the driver of its rating, and notes the bank's franchise quality, technology and digital investment and leverage to rising rates as positives. 

CommBank is the broker's least preferred pick for the Australian banking sector. The Hold rating is retained and the target price decreases to $83.80 from $90.16.

Target price is $83.80 Current Price is $90.16 Difference: minus $6.36 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $89.76, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.6

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

Macquarie rates CCX as Outperform (1) -

Given recent performance from other apparel retailers Macquarie has reiterated its expectations that City Chic Collective's second half earnings will exceed its first half by $2.0m, noting online traffic and a lesser impact from lockdowns should support the result. 

The broker anticipates a economic recession in the US in 2023, but expects Australia will experience only an economic downturn, but has lowered FY23 and FY23 forecasts to account for a potential consumer demand decline. 

The Outperform rating is retained and the target price decreases to $2.50 from $3.20.

Target price is $2.50 Current Price is $1.92 Difference: $0.58
If CCX meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.10, suggesting upside of 56.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

UBS rates IEL as Buy (1) -

UBS suggests the shares of IDP Education currently represent an attractive buying opportunity based on a low multiple relative tothe multiple's three year average.

This view is based upon an overall step change in momentum over the last three months for the rate of improvement within Australian visa data, despite marginally softer May figures. 

The Buy rating and $34.60 target price are maintained.

Target price is $34.60 Current Price is $23.89 Difference: $10.71
If IEL meets the UBS target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $35.18, suggesting upside of 43.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Macquarie rates IGO as Outperform (1) -

Macquarie describes IGO's lithium business as world class given stakes in key lithium projects, noting its Kwinana Lithium project interest is set to triple company earnings in FY23, and highlighting that the company trades at a discount to pure play lithium peers.

While Nova remains the company's core nickel asset, the broker  notes the acquisition of Western Areas should see nickel production maintained at 35-40,000 tonnes per annum, and provides the company with a longer-term growth option.

Following a period of research restrictions, Macquarie reinitiates with an Outperform rating and a target price of $17.00.

Target price is $17.00 Current Price is $10.06 Difference: $6.94
If IGO meets the Macquarie target it will return approximately 69% (excluding dividends, fees and charges).

Current consensus price target is $13.24, suggesting upside of 28.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Macquarie rates MAH as Outperform (1) -

Macquarie has made downgrades across its mining services outlook as cost and labour headwinds, and increasing competition, continue to impact on margins. In a worst-case scenario, the broker notes labour shortages could see providers default on contracts.

The broker notes Macmahon's stock has already declined -26% in 2022 year-to-date. With an order book exceeding $5.0bn, the broker highlights that Macmahon remains focused on shifting its portfolio to an even split of surface, underground and support services.

The Outperform rating is retained and the target price decreases to $0.20 from $0.30.

Target price is $0.20 Current Price is $0.14 Difference: $0.06
If MAH meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Citi rates MTS as Neutral (3) -

Metcash earlier today released FY22 financials and Citi, upon early assessment, reports the result marks "a strong beat" both vis-a-vis Citi's forecasts and market consensus.

Citi points towards increasing food inflation and market share gains generating better sales for independent supermarkets as two key drivers for the strong beat, but earnings from the Hardware and Liquor divisions were equally better-than-expected.

Given the elevated savings rate and the willingness of consumers to reduce the rate of saving, and thus continue spending, Citi suggests the outlook remains favourable.

Neutral. Target price $4.20.

Target price is $4.20 Current Price is $4.13 Difference: $0.07
If MTS meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.19, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Macquarie rates MVF as Outperform (1) -

Following the release of Medicare statistics for May, Macquarie notes cycles declined -4.6% in May on the previous comparable period, while the second half to date is down -6.6% and in line with the broker's expected -6.8% decline for the full half.

Given the company's policy requiring patients wait eight weeks post-covid for their cycle, Macquarie anticipates further pent-up demand volumes in the remainder of FY22, and that Monash IVF will take a -25 basis point market share loss in the second half due to its exposure to Victoria.

The Outperform rating and target price of $1.20 are retained.

Target price is $1.20 Current Price is $0.96 Difference: $0.24
If MVF meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $1.24, suggesting upside of 28.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Ord Minnett rates NAB as Accumulate (2) -

Ord Minnett notes the market has been quick to price in the Reserve Bank's outlook, with the sector declining -15% since the RBA's recent 50 basis point interest rate increase. 

The broker highlights National Australia Bank has delivered the strongest underlying performance of the the majors over the last year and it anticipates this will continue, forecasting a 13% compound annual growth rate through to FY24.

National Australia Bank is the broker's preferred pick for the Australian banking sector. The Accumulate rating is retained and the target price decreases to $30.50 from $34.50.

Target price is $30.50 Current Price is $27.02 Difference: $3.48
If NAB meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $31.82, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.2

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

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

Macquarie has made downgrades across its mining services outlook as cost and labour headwinds, and increasing competition, continue to impact on margins. In a worst-case scenario, the broker notes labour shortages could see providers default on contracts.

The broker notes renewed spend in iron ore in the Pilbara will be a key catalyst for NRW Holdings, but expects development are 6-12 months away, leaving risk of a short-term earnings gap. 

The rating is downgraded to Neutral from Outperform and the target price decreases to $1.80 from $2.30.

Target price is $1.80 Current Price is $1.75 Difference: $0.05
If NWH meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

UBS rates ORG as Buy (1) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects expect medium-term gas demand to remain resilient as coal-fired capacity retires.

Now that Eraring power station is producing back at full capacity, the broker sees Origin Energy as best placed to benefit from rising domestic gas prices. The Buy rating is retained and the target rises to $7.70 from $7.55.

Target price is $7.50 Current Price is $5.55 Difference: $1.95
If ORG meets the UBS target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $6.50, suggesting upside of 13.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Macquarie rates PRN as Outperform (1) -

Macquarie has made downgrades across its mining services outlook as cost and labour headwinds, and increasing competition, continue to impact on margins. In a worst-case scenario, the broker notes labour shortages could see providers default on contracts.

The broker notes Perenti Global's stock has already declined -35% in 2022 year-to-date, but the company continues to guide to stronger earnings and lower capital expenditure in FY23 and retains a 2025 revenue foal of $2.5bn. 

The Outperform rating is retained and the target price decreases to $0.80 from $1.20.

Target price is $0.80 Current Price is $0.66 Difference: $0.14
If PRN meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates QAN as Underperform (5) -

Given elevated jet fuel spreads, Credit Suisse warns that fuel costs will likely hit an all-time peak for Qantas Airways in FY23. Compared to a US$10 per barrel historical average, the broker assumes jet fuel refining spreads of US$40 in the first half of FY23, before a decline to US$20 in the second half, and US$10 in FY24.

This sees Credit Suisse lift its fuel cost assumption assumption for FY23 by 33%, and while the broker assumes the airline will be able to offset 60% of increased fuel costs by cutting capacity and increasing average ticket prices, it assumes a -43% reduction to profit before tax.

The Underperform rating is retained and the target price decreases to $4.35 from $5.05.

Target price is $4.35 Current Price is $4.45 Difference: minus $0.1 (current price is over target).
If QAN meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.20, suggesting upside of 33.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgan Stanley rates QAN as Overweight (1) -

In a market update, Qantas Airways has left 2H guidance unchanged and noted demand remains strong for both domestic and international flights.

The broker suggests the announcement that net debt will fall by -$500m by the end of FY22 versus April 22 is a key positive. 

The Overweight rating and $7.10 target are retained, with the analyst expecting significant upside by comparison to pre-pandemic earnings in the medium-term. Industry View: In-Line.

Target price is $7.10 Current Price is $4.45 Difference: $2.65
If QAN meets the Morgan Stanley target it will return approximately 60% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting upside of 33.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Ord Minnett rates QAN as Accumulate (2) -

While Qantas Airways has issued further capacity reductions for FY23 in an effort to offset high fuel costs, Ord Minnett notes the reduction is supply driven as demand remains strong.

The broker also highlighted net debt continues to improve, expected to decline to -$4.0bn by end of June from more than -$6.0bn in FY21.

The rating is upgraded to Buy from Accumulate and the target price increases to $6.90 from $6.40.

Target price is $6.90 Current Price is $4.45 Difference: $2.45
If QAN meets the Ord Minnett target it will return approximately 55% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting upside of 33.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Macquarie rates SGM as Neutral (3) -

Amid a weaker ferrous scrap market, and a surge in China's finished steel exports, Macquarie has reduced its scrap price estimates for the first half of 2022, and raised them in 2024.

Coupled with anticipated lower volumes as Europe and the US head toward a likely recession, the broker revises its forecasts 2%, -15% and -36% through to FY24.

The Neutral rating is retained and the target price decreases to $14.75 from $19.70.

Target price is $14.75 Current Price is $13.83 Difference: $0.92
If SGM meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $20.93, suggesting upside of 48.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Credit Suisse rates SGR as Neutral (3) -

Credit Suisse reinstates coverage on Star Entertainment, noting its conservative valuation compared to consensus accounts for assumed reduced discretionary spending in FY24, as well as a potential $450m in fines. 

The broker also predicts the regulator will install an independent monitor for two years that will make it difficult for Star Entertainment to attract VIP players. Credit Suisse assumes the company will not resume international VIP play until FY25.

The broker reinitiates with a Neutral rating and a target price of $2.95.

Target price is $2.95 Current Price is $2.68 Difference: $0.27
If SGR meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.94, suggesting upside of 43.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

UBS rates STO as Buy (1) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects medium-term gas demand to remain resilient as coal-fired capacity retires.

Among stocks under the brokers Energy coverage, Santos has the second most production exposure (more than 30%) to domestic gas, though the near term remains well contracted. The Buy rating is maintained, while the target falls to $9.70 from $9.90.

Target price is $9.70 Current Price is $7.22 Difference: $2.48
If STO meets the UBS target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $9.77, suggesting upside of 32.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: 0.9

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

Ord Minnett rates VCX as Hold (3) -

With Vicinity Centres providing further detail on its $2.9bn pipeline, Ord Minnett notes it sees some execution risk with the company's mixed-use strategy as it starts to execute on it.

The broker notes merit to the strategy, including benefits to existing retail estate assets and maximising the value of land, but highlights substantial capital expenditure required. The company has guided to capex of $200-250m in FY23, increasing to $300-400m annually. 

The Hold rating and target price of $2.00 are retained. 

Target price is $2.00 Current Price is $1.86 Difference: $0.14
If VCX meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.91, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

UBS rates VEA as Buy (1) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects medium-term gas demand to remain resilient as coal-fired capacity retires.

The Buy rating is maintained for Viva Energy, while the target price slips to $3.00 from $3.05.

Target price is $3.00 Current Price is $2.75 Difference: $0.25
If VEA meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.14, suggesting upside of 11.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

UBS rates WDS as Neutral (3) -

UBS lifts its forecasts for east coast contract gas prices due to few sources for material new gas supply and expects medium-term gas demand to remain resilient as coal-fired capacity retires.

The broker lifts its price target for Woodside Energy to $32.00 from $31.80 as higher gas sales revenues should arise from its 50% interest in its Gippsland basin assets. The Neutral rating is unchanged.

Target price is $32.00 Current Price is $30.61 Difference: $1.39
If WDS meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $33.55, suggesting upside of 7.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

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