Australian Broker Call

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

Morgan Stanley raises its AGL Energy earnings estimates, mainly in FY26, for the rise in pool prices and pool volatility, and is incrementally positive on the business. As a result, the broker's target rises to $10.00 from $9.50.

Forward pool prices are up by around $15/MWh month-on-month, which the analysts attribute to NSW volatility.

Equal-weight target retained. Industry view: Cautious.

Target price is $10.00 Current Price is $10.21 Difference: minus $0.21 (current price is over target).
If AGL 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 $10.90, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Shaw and Partners rates ASK as Buy (1) -

Recent investments by competitors like National Storage ((NSR)) and StorHub from Singapore highlight the growing attractiveness of the Australian self-storage market, Shaw and Partners. 

The broker views these recent tranactions as supporting valuations in the sector and highlights the Abacus Storage King development pipeline for FY24-FY26 is expected to add over 20 sites and $50m in revenue.

Shaw and Partners stresses the brand remains the most recognised and searched in Australia, with its extensive national footprint supporting customer acquisition and revenue optimisation.

Buy and $1.30 target retained.

Target price is $1.30 Current Price is $1.22 Difference: $0.08
If ASK meets the Shaw and Partners target it will return approximately 7% (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

Morgan Stanley rates ASX as Upgrade to Equal-weight from Underweight (3) -

After a further appraisal of last week's investor forum held by the ASX, Morgan Stanley feels risks for the business are now more balanced and operating leverage remains strong.

The broker also sees potential upside earnings risk from better capital markets, in particular improved futures trading and listings activity.

While regulatory concerns remain and cost growth remains elevated, management is taking actions to bring down opex and one-off compliance costs are reducing, observe the analysts.

The rating is upgraded to Equal-weight from Underweight and the target increased to $54.65 from $53.50. Industry view: In-Line.

Target price is $54.65 Current Price is $56.45 Difference: minus $1.8 (current price is over target).
If ASX 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 $61.34, suggesting upside of 6.1% (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

Morgans rates ASX as Hold (3) -

ASX reported a higher expense trajectory at the Investor Day Briefing with management pointing to the top end of the 12%-15% guidance range.

Morgans expects capital expenditure will come in $10m higher than forecast which suggests a greater 2H24 spend.

Despite the resilient cash flow generation and almost monopoly position of the ASX, ongoing issues with the CHESS replacement have led to the broker revising EPS estimates with FY24 down -2% and FY26 down -4%.

Hold rating maintained and the target lowered to $61 from $62.70.

Target price is $61.00 Current Price is $56.45 Difference: $4.55
If ASX meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $61.34, suggesting upside of 6.1% (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

Morgans rates BAP as Add (1) -

Morgans points to  the indicative takeover bid from Bain Capital at $5.40 per share for Bapcor, though the Board is yet to assess it.

Bain's proposal is conditional on satisfactory due diligence, board recommendation, and various approvals.

The broker highlights recent management turmoil and earnings pressure create a challenging investment case in the short term, despite long-term potential in core divisions like Burson.

Hold rating and $4.95 target unchanged.

Target price is $4.95 Current Price is $5.00 Difference: minus $0.05 (current price is over target).
If BAP meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.83, suggesting downside of -1.0% (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

UBS rates CHN as Downgrade to Neutral from Buy (3) -

UBS lifts the outlook for  Chalice Mining's Gonneville, post the project's updates, including an around a -30% lower average head grade and a less dilutional equity raising of $600m in FY24.

The updated 59Mt resource was slightly disappointing, leading to a lower production estimate of  some 345kozpa palladium equivalent  over the 10-year mine life, notes the broker.

Palladium prices have declined circa -70% through the cycle, however as the analyst emphasises, the UBS strategy team has not yet become more upbeat on the outlook.

The stock is downgraded to Neutral from Buy. Target adjusted to $1.50 from $1.45.

Target price is $1.50 Current Price is $1.34 Difference: $0.16
If CHN meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.83, suggesting upside of 123.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Bell Potter rates CMM as Buy (1) -

Capricorn Metals  has bought back 52koz of gold hedging for -$69.6m, financed from its cash and bullion holdings of $177.8m, reducing the hedge book by approximately half, the analyst at Bell Potter highlights.

The hedging restructuring is in line with the 2023 strategy which the broker notes was successful and produced $13m in relative cash additions in FY24.

The buyback increases finance costs for FY24, leading to a -48% reduction in Bell Potter's forecast EPS, but FY25 and FY26 benefit from higher revenues with EPS estimate increases of 32% and 6%, respectively.

Buy rating unchanged, Target price is lifted to $6.53 from $6.50.

Target price is $6.53 Current Price is $4.46 Difference: $2.07
If CMM meets the Bell Potter target it will return approximately 46% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Citi rates DRR as Neutral (3) -

After paying out 100% of FY24 NPAT as dividends, Deterra Royalties will target a payout ratio of 50%, explains Citi, after announcing an all-cash offer for Trident Royalties plc for -$276m, in an agreed deal.

It’s too early for the analysts to form a view as to the value accretion/dilution of this transaction.

Apart from disappointment over the payout ratio, the broker notes investors may also be concerned Trident’s principal exposure is to lithium.

Neutral rating and $5.20 target retained.

Target price is $5.20 Current Price is $4.15 Difference: $1.05
If DRR meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.90, suggesting upside of 21.0% (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

Morgan Stanley rates DRR as Overweight (1) -

Morgan Stanley maintains a cautious stance on Deterra Royalties' offer for Trident Royalties PLC given the limited consensus estimates available and the change in strategy involved.

Assuming the deal with Trident completes, Morgan Stanley points out Deterra Royalties would become a fully fledged royalty company with a portfolio of assets. The capital policy would halve the dividend payout to 50%, note the analysts.

As consensus estimates for Trident's net profit are negative-to-modest for FY24/FY25 (given development assets), Deterra's yield would simplistically halve in the near-term, assesses the broker.

The target for Deterra Royalties remains at $5.60. Overweight. Industry view is Attractive.

Target price is $5.60 Current Price is $4.15 Difference: $1.45
If DRR meets the Morgan Stanley target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $4.90, suggesting upside of 21.0% (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

Ord Minnett rates DRR as Hold (3) -

Ord Minnett feels Deterra Royalties' offer to buy London-based Trident Royalties for around -$276m (only around 14% of Deterra's enterprise value) will succeed as Trident directors intend to recommend the transaction to shareholders.

Trident owns 21 royalties, or royalty-like assets with nine gold offtakes currently generating cash flow. The analyst believes gold-related assets will be sold by Deterra Royalties as the commodity does not align with management's strategy.

Trident owns a 60% interest in a 1.75% gross revenue royalty on Thacker Pass, a lithium carbonate equivalent asset that will start production in 2027, becoming one of the largest lithium resources globally, highlights Ord Minnett.

The broker assumes the acquisition neither creates nor destroys value and maintains a Hold rating and $4.20 target.

Subsequent to paying the FY24 final dividend, management intends to lower its targeted payout ratio to a minimum of 50% from the current 100%.

This approach resonates with the analyst as debt will need to be repaid to fund the transaction.

Target price is $4.20 Current Price is $4.15 Difference: $0.05
If DRR meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.90, suggesting upside of 21.0% (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

Shaw and Partners rates EV1 as Buy (1) -

Evolution Energy Minerals raised $4m at 40cps for the Chilalo Graphite Project, Shaw and Partners notes.

The broker highlights management's partnership with BTR New Material Group, the leading battery anode producer, validates the quality of the Chilalo project and its graphite's performance in battery anodes.

Looking ahead, the analyst points to project optimisations, strategic partnerships, securing financing, and the downstream scoping study outcome in the US with BTR.

Earnings forecasts are tweaked for the equity issue. Buy rating unchanged. Target price lowered to 24c from 40c due to the dilution from the equity issue. High risk.

Target price is $0.24 Current Price is $0.04 Difference: $0.202
If EV1 meets the Shaw and Partners target it will return approximately 532% (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

Bell Potter rates IMM as Speculative Buy (1) -

Bell Potter confirms a Phase 3 trial in first-line non-small cell lung cancer, targeting all patients regardless of PD-L1 expression for Immutep at the end of 2024.

The clinical trial is in collaboration with Merck & Co, with Merck supplying pembrolizumab at no cost, notes the broker.

The $100m capital raising will provide sufficient funds until the end of 2026, covering the Phase 3 trial costs.

Bell Potter has updated earnings forecasts reflecting the new Phase 3 population and extended cash runway.

Bell Potter retains a Speculative Buy rating and an 80c target price.

Target price is $0.80 Current Price is $0.41 Difference: $0.39
If IMM meets the Bell Potter target it will return approximately 95% (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 LNW as Initiation of coverage with Add (1) -

Morgans initiates coverage on Light & Wonder with an Add rating and a $172 price target.

The analyst views the company as a leading supplier of land-based slot content, and it is experiencing strong growth in the US market, with revenue projected to rise to US$3.68bn in FY26 from US$3.23bn in FY24.

Morgans believes management has a good turnaround strategy in place, which should increase share market, and a solid balance sheet offering a robust footing for expansion.

Add rating. $172 target price.

Target price is $172.00 Current Price is $141.49 Difference: $30.51
If LNW meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $166.00, suggesting upside of 18.2% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates MYS as Buy (1) -

Mystate is Ord Minnett's preferred small bank exposure due to the combination of an attractive fully franked dividend yield and prospects for an earnings recovery in FY25 and FY26.

The broker was reiterating this view after noting the announcement of a review of small/mid banks by the Australian Council of Financial Regulators may positively impact Mystate, but any effects are still years away.

The review would be positive, in Ord Minnett's view, should it lead to material changes in the current disadvantages faced by the smaller banks such as scale, funding and capital.

The Buy rating and $3.98 target are unchanged.

Target price is $3.98 Current Price is $3.73 Difference: $0.25
If MYS meets the Ord Minnett target it will return approximately 7% (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

Morgan Stanley rates NIC as Overweight (1) -

Nickel Industries has confirmed the Indonesian government is only making an evaluation on permits for rotary kiln electric furnace (RKEF) projects in construction or feasibility stage.

Formerly, Morgan Stanley could see potential risks to existing permits, which includes Nickel Industries' RKEF plants.

The government is focused on the development of high-pressure acid leach (HPAL) smelters and smelters that produce nickel matte.

The 95c target is unchanged. Overweight. Industry View: Attractive. 

Target price is $0.95 Current Price is $0.84 Difference: $0.11
If NIC meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting upside of 40.2% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Citi rates NSR as Buy (1) -

National Storage REIT and GIC will have 25%:75% ownership in a new Venture Fund joint venture with total capital investment of $270m, of which $120m will initially be spent on 10 existing National Storage REIT development portfolio assets.

The transaction demonstrates investor confidence in self-storage assets in Australia, suggests Citi, and enhances the REIT's return on equity profile over the medium-term.

National Storage REIT will continue to earn management and development fees for joint venture assets. 

The Buy rating and target price of $2.60 are retained.

Target price is $2.60 Current Price is $2.31 Difference: $0.29
If NSR meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.37, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Citi rates ORA as Buy (1) -

Noting potential for cognac tariffs in China, Citi assesses Orora's direct China imported cognac exposure may be around 1-2% of group profit via the Saverglass operations.

Tariffs may be imposed in retaliation for provisional tariffs by the European Commission on Chinese electric vehicles, explains the broker.

The Buy rating and $2.86 target are unchanged.

Target price is $2.86 Current Price is $1.96 Difference: $0.905
If ORA meets the Citi target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $2.65, suggesting upside of 35.8% (ex-dividends)

The company's fiscal year ends in June.

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

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

Morgan Stanley raises its Origin Energy earnings estimates, mainly in FY26, for the rise in pool prices and pool volatility, and is incrementally positive on the business. As a result, the broker's target rises to $10.00 from $9.50.

Forward pool prices are up by around $15/MWh month-on-month, which the analysts attribute to NSW volatility.

Equal-weight target retained. Industry view: Cautious.

Target price is $10.00 Current Price is $10.08 Difference: minus $0.08 (current price is over target).
If ORG meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.02, suggesting downside of -0.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

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

While the merger between Red 5 and Silver Lake Resources ((SLR)) has few operational synergies, Macquarie notes the latter brings balance sheet firepower and strong cash generation.

The new entity now has a secured future and growth potential, highlights the broker, when these Silver Lake positives are combined with Red 5's King of the Hills mine.

Macquarie begins coverage with an Outperform rating and 50c target.

Target price is $0.50 Current Price is $0.45 Difference: $0.055
If RED meets the Macquarie target it will return approximately 12% (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

Ord Minnett rates RPL as Buy (1) -

Ord Minnett forecasts circa 10% EPS accretion for Regal Partners after paying -$235m for credit fund manager Merricks Capital, which will add scale and diversification to the overall group.

The broker's earnings forecasts are upgraded by 11-23% due to the acquisition (effective August 1) and increased performance fee expectations.

Separately, the broker highlights how PM Capital’s Global Companies fund is maintaining its outstanding investment performance. It's felt this fund provides the largest area of flow potential for Regal Partners over the medium-term.

Target rises to $4.20 from $3.70, Buy retained.

Target price is $4.20 Current Price is $3.62 Difference: $0.58
If RPL meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.55, suggesting upside of 25.7% (ex-dividends)

The company's fiscal year ends in December.

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

Shaw and Partners rates SIG as Sell (5) -

Shaw and Partners points to ACCC concerns over the intended merger between Sigma Healthcare and Chemist Warehouse with the preliminary view indicating the deal might lessen competition in the pharmacy retail sector.

Concerns include access to commercially sensitive data and reduced competition in wholesale supply, banner, and franchise arrangements from three to two, the analysts highlight.

The broker notes management acknowledges the ACCC's concerns and plans to address them, with a final decision expected by 5 September 2024.

Sell rating with $1 target price unchanged, with the broker believing the merger in its current form will not be approved.

Target price is $1.00 Current Price is $1.16 Difference: minus $0.16 (current price is over target).
If SIG meets the Shaw and Partners target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.06, suggesting downside of -12.7% (ex-dividends)

The company's fiscal year ends in January.

Forecast for FY25:

Forecast for FY26:

Market Sentiment: -0.3

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

Shaw and Partners rates SXG as Buy (1) -

Southern Cross Gold announced drilling reports at the Rising Sun prospect, at the 100% owned Sunday Creek project. Shaw and Partners finds the results are better than expected.

The deepest hole drilled at Sunday Creek came in at over -1,000m below the surface, with plans for further exploration drilling and additional drill rigs in June.

Unchanged Buy rating and $3.26 target. High risk.

Target price is $3.26 Current Price is $2.41 Difference: $0.85
If SXG meets the Shaw and Partners target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Ord Minnett rates VUK as Hold (3) -

As the takeover of Virgin Money UK by Nationwide Building Society appears likely to be completed, Virgin's in-line 1H results are of little consequence, notes Ord Minnett.

On May 22, shareholders voted in favour of the acquisition and the broker expects completion by the end of the year.

Hold and $4.25 target retained.

Target price is $4.25 Current Price is $4.10 Difference: $0.15
If VUK meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting upside of 3.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

This company reports in GBP. 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