Australian Broker Call

Ord Minnett rates ARB as Buy (1) -

November was another record month of new vehicle sales in Australia, up 17.9% amid strong back orders and improvement in global supply chains.

ARB Corp reported strong new vehicle sales growth in key segments, with key makes and models up 40.6% following a 28.1% increase in October.

While positive news for ARB Corp's order book, Ord Minnett notes labour shortages continue to constrain the company's aftermarket sales through its retail sites.

The Buy rating and target price of $36.00 are retained.

Target price is $36.00 Current Price is $31.99 Difference: $4.01
If ARB meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $31.01, suggesting downside of -5.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Bell Potter rates ARU as Speculative Buy (1) -

Arafura Rare Earths has guided to first production from the Nolans project by the end of 2026, 12 months beyond initial guidance. This guidance is contingent upon a completion of financing, and binding offtake over the 2H of FY24.

The company announced it had received a non-binding letter of interest (LOI) from the Export-Import Bank of Korea for up to US$150m, US$75m as a direct loan, and the balance as a debt guarantee.

The broker notes this transaction reduces the reliance upon commercial debt support.

Speculative Buy rating retained. Target price falls to 44c from 65c on adjustments to the broker's development timeline and capex assumptions.

Target price is $0.44 Current Price is $0.20 Difference: $0.245
If ARU meets the Bell Potter target it will return approximately 126% (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

Morgans rates BOQ as Hold (3) -

Morgans materially downgrades its dividend forecasts after management at Bank of Queensland's AGM stated it will "continue to target the payment of dividends at the lower end of our payout ratio".

In a similar scenario to the rest of the banking sector, notes the analyst, management is expecting a tougher FY24, but is hopeful of better times over FY25-26.

No changes are made to the broker's earnings forecasts though the target drops to $5.02 from $5.18 due to slightly lower return on equity (ROE) assumptions. Hold.

Target price is $5.02 Current Price is $5.46 Difference: minus $0.44 (current price is over target).
If BOQ meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.57, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in August.

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

Morgan Stanley rates COF as Underweight (5) -

Property-related stocks exposed to the Office sub-sector have underperformed the Australian Property Index in the past 12 months, points out Morgan Stanley, and are trading at deep -35-40% discounts to net tangible assets (NTA).

Should multiples rebound (and rates peak), the broker feels cash flow pressure could still result in relative underperformance. Office remains Morgan Stanley's least preferred sub-sector.

The broker's Underweight rating for Centuria Office REIT is unchanged and the target falls to $1.26 from $1.30. Industry view: In-Line. 

Target price is $1.26 Current Price is $1.28 Difference: minus $0.02 (current price is over target).
If COF meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.46, suggesting upside of 12.1% (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

Morgan Stanley rates CSL as Overweight (1) -

Morgan Stanley's proprietary Plasma Collection Centre Data for November show US and EU centres rollouts for the industry increased by 4.9% year-on-year, with CSL's rollout increasing by 2%.

Also, August data from the Plasma Protein Therapeutics Association (PPTA) show plasma volumes continue to grow.

The Overweight rating and $334 target for CSL are unchanged. Industry View: In-Line.

Target price is $334.00 Current Price is $263.12 Difference: $70.88
If CSL meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $329.70, suggesting upside of 22.9% (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: 0.9

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

Bell Potter rates CYC as Speculative Buy (1) -

Tier 1 academic hospital in the US, Duke, has become the first US client for Cyclopharm, highlights Bell Potter, having signed a contract to use Technegas. Formerly, Duke had participated in the company’s clinical trial.

Management had previously logged 420 individual expressions of interest for Technegas, and is currently working through contract negotiations, notes the broker. It's expected most contracts (including Duke) will be for multiple Technegas generators.

The $4.25 target and Speculative Buy rating are unchanged.

Target price is $4.25 Current Price is $1.96 Difference: $2.295
If CYC meets the Bell Potter target it will return approximately 117% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Morgan Stanley rates DXS as Underweight (5) -

Property-related stocks exposed to the Office sub-sector have underperformed the Australian Property Index in the past 12 months, points out Morgan Stanley, and are trading at deep -35-40% discounts to net tangible assets (NTA).

Should multiples rebound (and rates peak), the broker feels cash flow pressure could still result in relative underperformance. Office remains Morgan Stanley's least preferred sub-sector.

The Underweight rating is kept for Dexus and the target falls to $7.65 from $8.10. Industry View: In-Line.

Target price is $7.65 Current Price is $7.02 Difference: $0.63
If DXS meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $8.55, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.1

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

Morgan Stanley rates EVN as Overweight (1) -

While acknowledging a fair valuation, Morgan Stanley sees some risks associated with Evolution Mining's decision to enter a binding agreement to acquire an 80% interest in the Northparkes copper/gold mine.

The key risks relate to the age of the mine and future growth from the orebody, in the broker's opinion.

Evolution will initially pay -$608m in cash funded by a $525m placement at $3.80/share and a $200m debt facility with a five-year tenor. Contingent consideration of up to -US$75m is dependent on copper price thresholds.

The Overweight rating and $4.25 target are maintained. Industry view: Attractive.

Target price is $4.25 Current Price is $4.04 Difference: $0.21
If EVN meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.75, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Bell Potter rates GNC as Buy (1) -

The September ABARES forecast of 20.8mt for the 2023-24 winter crop forecast has been increased to 21.7mt. This forecast is the basis for the WRI grains contract, explains Bell Potter.

The broker's Buy rating for GrainCorp is retained on an undemanding valuation and the $9.55 target is also unchanged.

Target price is $9.55 Current Price is $7.48 Difference: $2.07
If GNC meets the Bell Potter target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $8.75, suggesting upside of 16.8% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates GNC as Outperform (1) -

The Agricultural Bureau's December crop report was a positive surprise for Macquarie, and sees the broker lift its full year earnings forecast for GrainCorp by 2%. 

The report outlined good growing conditions in both Victoria and southern New South Wales, more than offsetting less favourable conditions and crop yields from both Queensland and northern New South Wales.

In particular, Victoria saw a 12% increase to estimated crops, but the total east coast crop estimate was lifted 4% to sit 14% above the 20-year average.

The Outperform rating and target price of $9.70 are retained.

Target price is $9.70 Current Price is $7.48 Difference: $2.22
If GNC meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $8.75, suggesting upside of 16.8% (ex-dividends)

The company's fiscal year ends in September.

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

Bell Potter rates HHR as Speculative Buy (1) -

The core asset for Hartshead Resources is its 40% interest in a UK southern gas basin licence, where a staged development is planned.

Management now has the option to divest -20% of the UK Southern Gas Basin Licence P2607, explains Bell Potter, having announced an agreement with joint venture partner RockRose Energy.

While Hartshead Resources will evaluate alternative debt funding to support the retention of its 40% interest, the analysts point out the agreement provides funding security for the project.

The Speculative Buy rating is unchanged and the target rises to 9c from 7c.

Target price is $0.09 Current Price is $0.03 Difference: $0.064
If HHR meets the Bell Potter target it will return approximately 246% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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's H1 result has led to minor changes to Citi's forecasts. Neutral rating and $4 price target have been retained. Earlier the broker had responded as follows to the financial release:

Upon initial analysis of today's 1H results by Metcash, Citi notes earnings (EBIT) - including associates - of $247m were in-line with forecasts by the broker and consensus of $248m and $245m, respectively.

Food earnings were above the broker's forecast on margin management, while Hardware disappointed on higher-than-anticipated costs, with the earnings margin in that division declining by -50bps. Overall sales were in line with Citi's forecast.

As expected by the analysts, sales growth remains weak into the 2H, only rising by 0.8% in the first four weeks of trading largely due to ongoing weak Food sales.

Despite the in-line result, Citi questions the sustainability of Food earnings given ongoing market share loss and falling food inflation.

Neutral rating. Target $4.

Target price is $4.00 Current Price is $3.52 Difference: $0.48
If MTS meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.00, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in April.

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

Ord Minnett rates MTS as Hold (3) -

Metcash's full year earnings are coming under significant pressure says Metcash, as a weaker consumer deals with the impact of the ongoing cost of living crisis, alongside the company's own material operating expense increases and intensifying competition.

Despite this, Ord Minnett sees shares as undervalued and expects consumer demand for essentials - food and liquor - to remain robust in the second half. Hardware sales, meanwhile, are underpinned by incremental acquisitions.

The Hold rating and target price of $4.00 are retained.

Target price is $4.00 Current Price is $3.52 Difference: $0.48
If MTS meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.00, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in April.

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

UBS rates QAN as Buy (1) -

In a closer look at the pathway to decarbonising air travel, UBS expects sourcing sustainable aviation fuel (SAF) in Australia will prove the biggest lever on Qantas Airways' path to net zero by 2050.

The airline is targeting a 60% SAF mix by 2050, with 67% of its refuelling done in Australia. UBS points out there is little detail around the cost evolution for SAF, but does anticipate carbon abatement costs (that is, SAF and offsets) rising to 21% of fuel costs by 2050.

The broker does, however, expect growing industry alignment on decarbonisation to drive high rates of cost pass-through, similar to current conventional fuel costs. The Buy rating is retained and the target price decreases to $7.70 from $8.00.

Target price is $7.70 Current Price is $5.46 Difference: $2.24
If QAN meets the UBS target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $7.18, suggesting upside of 30.4% (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 SCG as Overweight (1) -

Following the repurchasing of $411m of hybrid notes, Scentre Group has now introduced a Distribution Reinvestment Plan (DRP) for the 2H of 2023.

The total distribution payable for the period is around -$430m, based on Morgan Stanley's forecast DPS of 8.3c.

Overweight. Target $3.10. Industry view: In-Line.

Target price is $3.10 Current Price is $2.70 Difference: $0.4
If SCG meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.92, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.1

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