Australian Broker Call

Morgan Stanley rates ALL as Overweight (1) -

In valuing Aristocrat Leisure Morgan Stanley believes the digital business holds the key. In August downloads for Big Fish were weak but revenue was stronger because of the release of a new game, Evermerge in May.

Plarium continued to experience benefits from RAID: Shadow of Legends. Over FY20 so far, social casino revenue is up 27% and social casual up 33%.

Morgan Stanley retains its Overweight rating with a target price of $30. Industry view: Cautious.

Target price is $30.00 Current Price is $29.34 Difference: $0.66
If ALL meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $30.24, suggesting upside of 5.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Macquarie rates CGF as Outperform (1) -

After reviewing capital concerns, Macquarie concludes that Challenger is in a materially stronger capital position, compared with peers during the GFC, amid the now tighter regulatory oversight.

The broker continues to like the long-term growth theme as the population ages and does not believe global trends are representative of the Australian market conditions. Outperform rating and $4.50 target retained.

Target price is $4.50 Current Price is $4.04 Difference: $0.46
If CGF meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.35, suggesting upside of 13.4% (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

Macquarie rates CHN as Initiation of coverage with Outperform (1) -

Macquarie assesses Chalice Gold Mines' Julimar project in Western Australia is one of the most significant discoveries in recent years.

Drilling has already defined a deposit that could support a 270,000ozpa platinum group operation with around 20,000tpa of nickel-copper-cobalt byproducts.

The broker initiates coverage of the stock with an Outperform rating and $1.80 target. The company also owns a large portfolio of gold tenements north of Bendigo in Victoria.

Target price is $1.80 Current Price is $1.35 Difference: $0.45
If CHN meets the Macquarie target it will return approximately 33% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 CSL as Buy (1) -

To reach the top end of the company's revenue guidance, UBS assesses it requires an uplift of US$114m in immunoglobulin volume and, while management has signalled a -5% decline in FY20 plasma collections, there are multiple levers that can be pulled to achieve volume growth.

In terms of Seqirus, CSL has increased supply of flu vaccine to the US for 2020-21. The broker's scenario analysis includes revenue growth rates of 20-30%. Buy rating and $346 target retained.

Target price is $346.00 Current Price is $288.18 Difference: $57.82
If CSL meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $309.68, suggesting upside of 10.2% (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

Morgan Stanley rates CWN as Overweight (1) -

Morgan Stanley believes the market is giving too much weight to short-term headwinds. The broker is focused on the ability of Crown Resorts to take market share in Sydney when its new casino opens in December.

This is the broker's preferred casino stock and an Overweight rating is maintained. Target is reduced to $10.50 from $12.00. Industry view: Cautious.

Target price is $10.50 Current Price is $9.40 Difference: $1.1
If CWN meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $10.31, suggesting upside of 12.0% (ex-dividends)

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 GNC as Outperform (1) -

The ABARES 2020-21 winter crop forecast for the east coast has been revised up 13% to 24.4mt. At these volumes Macquarie notes significant operating leverage for Graincorp.

The large exportable surplus potential, relative to virtually no exports in FY19 and FY20, is considered significant, given the higher margins earned on exports. Macquarie retains an Outperform rating and raises the target to $4.84 from $4.79.

Target price is $4.84 Current Price is $4.40 Difference: $0.44
If GNC meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 14.2% (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

Morgans rates GNC as Hold (3) -

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has upgraded its 2020/21 winter crop forecast and is forecasting a well above average east coast grain crop.

However, if the forecast proves correct, under the crop production contract, Graincorp would need to pay the insurer $76m, Morgans explains. The contract means the company’s earnings are somewhat financially engineered, and caps some of the earnings upside in good seasons.

Last year, Graincorp entered into a 10 year agreement to manage the volatility of east coast winter grain production. The pre-tax annual cost of the contract to the company is A$6m. The counterparty is White Rock Insurance, a subsidiary of Aon plc (a US listed professional services company). 

The broker notes FY21 will also be impacted by the need to replenish the domestic market following three years of drought. This will hold back high margin export tonnes.

The Hold rating is unchanged and the price target is decreased to $4.18 from $4.25.

Target price is $4.18 Current Price is $4.40 Difference: minus $0.22 (current price is over target).
If GNC meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 14.2% (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 GNC as Buy (1) -

Official agricultural forecaster, ABARES, has upgraded the winter crop outlook for Australia's east coast to 24.4mt. UBS highlights the earnings leverage that exists for crop that is over 24mt, given Graincorp's derivative payment is maximised at around 24mt.

A strong FY21 crop is also likely to support earnings growth into FY22. UBS also asserts the grain derivative should reduce the volatility of earnings through the cycle.

No earnings revisions have been made, with the next catalyst being the FY20 results in November. Buy rating and $4.50 target retained.

Target price is $4.50 Current Price is $4.40 Difference: $0.1
If GNC meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 14.2% (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

Ord Minnett rates MYR as Hold (3) -

Myer Holdings will be reporting its FY20 result on September 10. Ord Minnett forecasts a net profit of $8m, down -75.9% versus FY19. Net cash is expected to be in line with guidance. No final dividend is expected.

Noting a difficult environment, Ord Minnett maintains its Hold rating with a target price of $0.20.

Target price is $0.20 Current Price is $0.26 Difference: minus $0.06 (current price is over target).
If MYR meets the Ord Minnett target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.29, suggesting upside of 12.8% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgans rates OPC as Hold (3) -

OptiComm has received a non-binding offer from First State Super. Morgans suggests investors Hold and states there is upside risk relating to the possibility of a higher bid eventuating.

The OptiComm board will postpone the vote on Uniti Group's (UWL) takeover offer, to allow First State Super time to undertake due diligence. This will allow a short period for First State Super to present a binding offer or walk away. In the latter case, Uniti Group becomes the new owner.

The offer is $5.85 all cash, non-binding and subject to several terms and conditions. It compares to the Uniti Group's unconditional bid of $5.10 plus a 10cps dividend.

The Hold rating and target price of $5.10 are unchanged.

Target price is $5.10 Current Price is $5.63 Difference: minus $0.53 (current price is over target).
If OPC meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Ord Minnett rates OPC as Hold (3) -

First State Superannuation has submitted an indicative, competing offer for OptiComm at $5.85 per share which, reports Ord Minnett, translates to a 12.5% premium to the cash option of Uniti Group's ((UWL)) existing scheme of arrangement.

FSS has until September 18 to formalise its indicative bid into an unconditional bid. The broker notes interest from both the parties is due to the value of OptiComm's private fibre assets and long-term pipeline.

The broker notes FSS holds a cost of capital advantage while Uniti holds an operational advantage which may provide OptiComm shareholders with the opportunity to participate in the future synergies captured.

Ord Minnett maintains its Hold rating with a target price of $5.42.

Target price is $5.42 Current Price is $5.63 Difference: minus $0.21 (current price is over target).
If OPC meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Citi rates OZL as Neutral (3) -

Citi notes Oz Minerals' share price has outperformed its copper and global peers driven by the company's unique growth options and investors being bullish on copper. According to the broker, the market appears to be pricing in the execution of Oz Minerals' growth pipeline. 

The broker's bull case for copper is US$8,000/t in the second quarter of 2021, adding 10-20% to its 2020-21 operating income forecasts.

Citi reiterates its Neutral rating with a target price of $14.20.

Target price is $14.20 Current Price is $14.64 Difference: minus $0.44 (current price is over target).
If OZL meets the Citi 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 -3.2% (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

Ord Minnett rates SCG as Hold (3) -

Ord Minnett considers forecasting Scentre Group's retail net property income a very challenging task given the various requirements for rent assistance across different states and assets.

The broker notes June's net property income for the group's five major retail landlords was -42% lower than in the previous half with a combined -$580m in rent waivers and provisions.

The broker notes the situation is improving and expects collections to be 76% of gross rental billings for the December half, improving to 83% from 2021.

Ord Minnett maintains its Hold recommendation with a $2.20 target price.

Target price is $2.20 Current Price is $2.27 Difference: minus $0.07 (current price is over target).
If SCG 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 $2.34, suggesting upside of 6.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Macquarie rates SGM as Outperform (1) -

Macquarie reiterates an Outperform rating, raising the target to $11.00 from $9.50.

Recovering steel demand is supporting a continued rebound in scrap prices and, in turn, rising prices should stimulate intake volumes and drive margin improvements, the broker assesses.

Meanwhile, Sims continues to enjoy a strong balance sheet and the valuation is considered attractive on a recovering earnings base.

Target price is $11.00 Current Price is $8.48 Difference: $2.52
If SGM meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $9.48, suggesting upside of 15.7% (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 SGR as Outperform (1) -

While there remains earnings uncertainty for the short term, Macquarie does not foresee any structural impacts resulting from the pandemic.

Permanent cost reductions support higher profitability and de-leveraging could be accelerated with asset recycling, in the broker's assessment.

The broker understands the impact from new competition in Sydney is unknown but envisages market expansion will be a counterweight. Macquarie considers the valuation attractive and retains an Outperform rating, raising the target to $3.90 from $3.70.

Target price is $3.90 Current Price is $3.15 Difference: $0.75
If SGR meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $3.59, suggesting upside of 18.2% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates SHL as Hold (3) -

Sonic Healthcare will be lifting its US testing capacity four-fold with Ord Minnett estimating revenue generation of about $20m per day or $7bn per annum.

If test volumes rise with the post-summer return to school and work, the broker sees potential upside to its above-consensus estimates. However, Ord Minnett expects covid-19 testing to have only modest medium-term financial consequences.

The Hold rating is maintained. The target price is increased to $34 from $33.50.

Target price is $34.00 Current Price is $31.81 Difference: $2.19
If SHL meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $34.11, suggesting upside of 7.7% (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

Morgan Stanley rates SKC as Underweight (5) -

Morgan Stanley expects Sky City Entertainment will underperform the Australian gambling segment. While recapitalisation improves the risk on the balance sheet, net debt is yet to peak and returns on Adelaide are challenging for the short term.

As the valuation upside is limited, the broker retains an Underweight rating. Target is raised to NZ$2.90 from NZ$2.40. Industry view is Cautious.

Current Price is $2.71. Target price not assessed.

Current consensus price target is N/A

Forecast for FY21:

Forecast for FY22:

This company reports in NZD. 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

Ord Minnett rates UWL as Buy (1) -

First State Superannuation has submitted an indicative, competing offer for OptiComm ((OPC)) at $5.85 per share which, reports Ord Minnett, translates to a 12.5% premium to the cash option of Uniti Group's existing scheme of arrangement.

FSS has until September 18 to formalise its indicative bid into an unconditional bid.

Ord Minnett notes Uniti Group has the balance sheet capacity to raise its cash and scrip offer to at least $5.85-$6.05 per share without needing fresh equity. The broker estimates a theoretical bid price of $6.00 per OptiComm share will still generate earnings accretion of 16%.

Ord Minnett retains its Buy rating with a $2.03 target.

Target price is $2.03 Current Price is $1.30 Difference: $0.73
If UWL meets the Ord Minnett target it will return approximately 56% (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