Australian Broker Call

Morgan Stanley rates ALQ as Overweight (1) -

Morgan Stanley notes while ALS Ltd has lagged its global peers over the last 1-2 years, there is upside potential should the Life Sciences business continue to expand.

The company's cyclical exposure to mining prompts the broker to increase its margin estimates for commodities to 27% in FY21. Both these factors offer the potential for a multiple re-rate, the broker assesses.

Overweight rating. Target is increased to $10 from $8.80. Industry view: In-line.

Target price is $10.00 Current Price is $8.92 Difference: $1.08
If ALQ meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.29, suggesting downside of -6.7% (ex-dividends)

The company's fiscal year ends in March.

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

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

Morgan Stanley reports a big backlog in elective surgery in the US, with delays in care (due to covid-19) seeing higher bleeding complications. This, suggests the broker, could explain the higher use of Kcentra.

Equal-weight rating with a target price of $282. Industry view: In-line.

Target price is $282.00 Current Price is $290.95 Difference: minus $8.95 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $309.68, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.3

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

Macquarie rates ECX as Outperform (1) -

Macquarie observes the company's simplification has now largely transpired. All non-core units have been divested. The operating expenses have now been reduced and the focus is on the fleet business.

Corporate leasing continues to be at 70-80% of average pre-pandemic levels, which Macquarie notes reflects some clients seeking lease extensions as a substitute for renewals or new business.

Novated volumes are tracking above 80% of average pre-pandemic levels. Macquarie retains an Outperform rating and raises the target to $1.70 from $1.52.

Target price is $1.70 Current Price is $1.49 Difference: $0.21
If ECX meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.68, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgan Stanley rates ECX as Overweight (1) -

Morgan Stanley notes investors were concerned about Eclipx Group's earnings, weak balance sheet and the disposal outcome for R2D.

The broker reports the company was able to execute on all major operational initiatives in the second half, including making the R2D sale and returning Eclipx to core operations. 

The broker's thesis remains unchanged, noting growth potential and a differentiated funding model replicated by peers.

Overweight rating and $1.70 target retained. Industry view: In-line.

Target price is $1.70 Current Price is $1.49 Difference: $0.21
If ECX meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.68, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates ECX as Buy (1) -

EclipX Group has provided a positive update, having reduced corporate debt to $170m as of August 31 while there has been positive momentum in end-of-lease car sales.

The company has also received credit approvals from all financiers to increase warehouse funding commitments across Australasia.

UBS assesses the company is executing ahead of plan and the stock remains a top pick within emerging companies. The broker retains a Buy rating and $2.05 target.

Target price is $2.05 Current Price is $1.49 Difference: $0.56
If ECX meets the UBS target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $1.68, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgans rates GDF as Add (1) -

The Garda Property Group's FY20 result was described as solid by Morgans, with no material impacts from the mandatory Code of Conduct.

The broker highlights any upside relates to leasing success and revaluations on industrial projects in the pipeline.

FY21 DPS guidance is for 7.2 cents, which the analyst calculates equates to a distribution yield of around 7%.

The Add rating is maintained and the target price is increased to $1.19 from $1.07.

Target price is $1.19 Current Price is $1.03 Difference: $0.16
If GDF meets the Morgans target it will return approximately 16% (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

Macquarie rates GNC as Outperform (1) -

Macquarie assesses ABARES' first east coast production estimates for winter 2020/21 at 21.5mt may be conservative.

Based on the broker's analysis Graincorp can earn an additional $24-50m on the final crop being 1.6-3.3mt ahead of the company's upper threshold crop production contract of 24mt.

The broker assesses the outlook continues to improve and there is potential for upgrades that make the stock attractive and one of the key picks in the agriculture space. Outperform rating maintained. Target is $4.79.

Target price is $4.79 Current Price is $4.51 Difference: $0.28
If GNC meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.60, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

UBS rates HLS as No Rating (-1) -

UBS quantifies the contribution of coronavirus testing to the company's pathology business. FY21 estimates are upgraded by 27% and the outer years by 3%.

The broker notes current testing rates in Australia remain well above levels experienced in early stages of the pandemic. The broker allows for a sequential decline in test rates and also incorporates a cut to fees to $50 from $90 from October 1 2020.

UBS is under research restriction on Healius.

Current Price is $3.42. Target price not assessed.

Current consensus price target is $3.48, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Macquarie rates JMS as Outperform (1) -

The distribution from Tshipi, in which Jupiter Mines has a 49.9% share, was softer than Macquarie expected in the first half as cash was retained for the expansion study.

The broker expects a more depressed dividend in FY21, with a yield of 9%. Still, Jupiter Mines' dividend yield remains attractive on forecasts, at 11-17% for FY22-24.

Outperform rating. Target is $0.35.

Target price is $0.35 Current Price is $0.27 Difference: $0.08
If JMS meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

The company's fiscal year ends in February.

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

Macquarie rates ORI as Outperform (1) -

Macquarie suggests delivery on the company's second half volume guidance should be well received. While the market may be focused on the coal exposure, Orica has meaningful gold exposure, the broker explains, at 19% of revenue.

Gold exposure stems from explosives and sodium cyanide which should be doing well in a strong gold price environment.

The company's expectations of a gradual re-start in pandemic-affected areas for its second half ammonium nitrate volumes appear broadly consistent with the broker's observations. Macquarie retains an Outperform rating and raises the target to $19.25 from $19.09.

Target price is $19.25 Current Price is $17.57 Difference: $1.68
If ORI meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $18.03, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Ord Minnett rates OZL as Downgrade to Lighten from Accumulate (4) -

Ord Minnett suggests investors take profits after a surge of 50% in the share price over the past three months.

The broker now considers the stock expensive and downgrades to Lighten from Accumulate. Target lifts to $14.50 from $10.50.

The next catalyst is expected from the Prominent Hill expansion scoping study in the fourth quarter.

Target price is $14.50 Current Price is $15.00 Difference: minus $0.5 (current price is over target).
If OZL meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.04, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Macquarie rates RMD as Underperform (5) -

Macquarie reviews the competitive bidding implications for 2021 in the US and believes there are risks in relation to durable medical equipment reimbursement and potential implications for average selling prices.

Combined with a modest near-term growth outlook, elevated multiples and an implied -18% shareholder return this supports the broker's investment view. Hence, an Underperform rating and $20 target are maintained.

Target price is $20.00 Current Price is $25.45 Difference: minus $5.45 (current price is over target).
If RMD meets the Macquarie target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.96, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: -0.1

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

Ord Minnett rates SGP as Downgrade to Lighten from Hold (4) -

Ord Minnett observes Stockland was the best performing A-REIT in August as the share price rose 24.1% compared with the index rising 7.9%. The broker assesses the good results and spike in residential sales in June are now priced into the stock.

Ord Minnett also believes there are further devaluations to come from the retail and retirement portfolios. The improving residential outlook is encouraging but diluted by the cycling of project profits worth $100m from FY20.

Thus, rating is downgraded to Lighten from Hold and the target lowered to $3.60 from $3.70.

Target price is $3.60 Current Price is $3.85 Difference: minus $0.25 (current price is over target).
If SGP meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.91, suggesting upside of 6.6% (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

Morgan Stanley rates SHL as Overweight (1) -

Morgan Stanley reports Sonic Healthcare, USA was awarded a contract to ramp up covid-19 testing to 166k tests per day across the company's US network.

This contract implies Sonic Healthcare could conduct up to almost 60m tests in 12 months, estimates Morgan Stanley, noting this will lead to US$3bn in revenue (utilisation is subject to demand).

With the material increase to the company's capacity, the broker sees upside risk to its current covid-19 test assumptions even if capacity is not fully utilised.

Target is $35. Overweight rating. Industry view: In-line.

Target price is $35.00 Current Price is $33.00 Difference: $2
If SHL meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $34.03, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

UBS rates SHL as Upgrade to Neutral from Sell (3) -

On calculating the contribution of coronavirus testing to the company's financial performance, UBS makes material upgrades over the short term.

Well aware that rates may fall and reimbursement rates may decline, the broker believes Sonic Healthcare will still be a beneficiary of above-normal free cash flow for 1-2 years.

This could be used to fund growth opportunities not previously accessible. UBS upgrades to Neutral from Sell and raises the target to $32.10 from $29.80.

Target price is $32.10 Current Price is $33.00 Difference: minus $0.9 (current price is over target).
If SHL meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.03, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

Credit Suisse rates SKC as Outperform (1) -

Operating earnings in FY20 were ahead of Credit Suisse estimates. The fourth quarter was supported by strong domestic gaming in Auckland and Hamilton.

The company intends to resume dividends with a final in FY21. Adelaide has reopened and is trading ahead of management's expectations. There is also strong momentum in online registrations.

Credit Suisse upgrades estimates for FY21-23 and raises the target to NZ$3.00 from NZ$2.85. Outperform retained.

Current Price is $2.48. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Macquarie rates SKC as Outperform (1) -

The company's FY20 normalised operating earnings were down -38% but within guidance. Macquarie assesses the earnings recovery is challenging to assess but there do not appear to be structural impediments from the pandemic on the NZ and Australian casinos.

Moreover, a recent capital raising has alleviated leverage concerns and cash flow should improve from FY22. The broker retains an Outperform rating and NZ$3.45 target.

Current Price is $2.48. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

UBS rates SKC as Neutral (3) -

UBS observes the share price has recovered quickly from its lows in late March amid successful control of the pandemic in New Zealand and Australia.

Still, the broker believes it is too early to incorporate operating earnings that are materially above pre-pandemic levels until the second half of FY22.

UBS retains a Neutral rating, albeit under review, but accepts there is potential upside risk from positive earnings momentum. Target is raised to NZ$3.05 from NZ$2.90.

Current Price is $2.48. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

UBS rates TCL as Upgrade to Buy from Neutral (1) -

As the stock has underperformed the market by -10-15% since late May and there is an end in sight to the lockdowns in Melbourne, UBS upgrades Transurban to Buy from Neutral. Target is raised to $15.50 from $14.70.

UBS assesses Transurban is highly leveraged to a recovery in the Melbourne network as it accounts for one third of group operating earnings. Moreover, the market is seeking growth in a structurally weaker environment.

The broker expects a dividend in FY21 of $0.46, to reflect underlying growth of 10%. Growth estimates in FY22-25 of 13% rely on the completion of WestConnex stage 3 in Sydney, WestGate Tunnel in Melbourne and a number of projects in Washington.

Target price is $15.50 Current Price is $14.31 Difference: $1.19
If TCL meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $14.31, suggesting upside of 1.2% (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