Australian Broker Call

Ord Minnett rates AGL as Accumulate (2) -

Ord Minnett is of the view the decline in wholesale prices since the start of 2021 has "accelerated" the evolution of the electricity market.

AGL Energy is conducting a full strategic review to address the weak market conditions. While some may be expecting a significant asset restructure from the company, the broker expects the focus will be mostly on improving the profitability of its generation fleet.

Accumulate rating with a $14.05 target price.

Target price is $14.05 Current Price is $9.76 Difference: $4.29
If AGL meets the Ord Minnett target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $10.95, suggesting upside of 13.5% (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

Morgan Stanley rates APE as Overweight (1) -

Honda and Mercedes-Benz are moving to an agency distribution model in Australia. Morgan Stanley notes investors have expressed uncertainty about what this means for the Eagers Automotive dealership.

The broker concludes that profitability will be unchanged and does not anticipate the agency model will be widely adopted any time soon. Moreover, Eagers Automotive has a relatively small exposure to the two brands.

Overweight retained. Target is $17. Industry view: In-Line.

Target price is $17.00 Current Price is $14.75 Difference: $2.25
If APE meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $14.76, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates BEX as Initiation of coverage with Add (1) -

Morgans initiates coverage on the BikeExchange with a Speculative Buy and a target price of $0.34. 

The company operates an online marketplace connecting consumers with specialty retailers. This platform enables the retailers to provide a wide omni-channel experience for customers.

A change in business model to combine a traditional classifieds business with e-commerce enablement opens up a much larger total addressable market (TAM), according to Morgans.

The broker believes the company has been building toward a global platform for several years and is now poised for growth.

Target price is $0.34 Current Price is $0.26 Difference: $0.08
If BEX meets the Morgans target it will return approximately 31% (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

Ord Minnett rates CLV as Buy (1) -

Clover Corp's first-half result was largely in line with Ord Minnett's expectations.

The infant formula market experienced continued volatility, leading to a -21.7% decline in total revenue over last year with the covid impacted Daigou channel a key victim.

Even so, the company managed to control costs throughout the half and delivered operating income of $4.1m, slightly ahead of the broker's expected $4m.

Ord Minnett considers Clover Corp well-placed with its global network of infant formula customers that enables the company to meet demand wherever it may arise first. 

Buy rating with the target falling to $2.37 from $2.47.

Target price is $2.37 Current Price is $1.49 Difference: $0.88
If CLV meets the Ord Minnett target it will return approximately 59% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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

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

UBS upgrades Clover Corp to Buy from Neutral rating with the target price dropping to $2 from $2.10. 

The broker views the stock as a recovery play offering a best-of-breed product and a unique growth story despite a covid-hit weak result with revenues down -22% versus last year.

The company's FY21 revenue guidance also implies a -16-37% downgrade to UBS's second-half expectations. Even so, the broker expects a gradual recovery with FY20 revenues and net profit expected to return by FY23. 

Target price is $2.00 Current Price is $1.49 Difference: $0.51
If CLV meets the UBS target it will return approximately 34% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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

Citi rates DBI as Buy (1) -

Citi notes two near-term events which have the potential to be catalysts for Dalrymple Bay. The Queensland Competition Authority is due to hand down a decision on "light handed regulation". At current pricing the broker does not believe the market is ascribing any value to the regulation.

The second event is the inclusion in the ASX300 on March 22. There is no downside risk to the inclusion and Citi considers the lack of liquidity and publicity on the stock are key factors in its underperformance since listing. Buy rating and $2.51 target maintained.

Target price is $2.51 Current Price is $2.09 Difference: $0.42
If DBI meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.52, suggesting upside of 20.0% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates DXS as Sell (5) -

A Dexus fund has instigated a merger agreement with an AMP ((AMP)) fund. Citi envisages hurdles to completing the transaction as it is subject to unitholder approval by both funds.

Dexus Wholesale Property Fund has an agreement with AMP Capital Diversified Property fund, subject to unitholder approval with a 50% threshold for the former and 75% threshold for the latter.

If successful, the transaction could be around 2-3% accretive to annualised earnings, the broker calculates. Sell rating retained given the headwinds in the office sector. Target is $7.86.

Target price is $7.86 Current Price is $9.61 Difference: minus $1.75 (current price is over target).
If DXS meets the Citi target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.27, suggesting downside of -3.1% (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

UBS rates DXS as Buy (1) -

Dexus Diversified Wholesale Property Fund (DWPF) will engage with AMPC Diversified Property Fund (ADPF) unitholders for a six-month period over a potential merger, according to news reports.

UBS notes the agreement offers both sides the potential to vote on a combination of the funds, in turn providing scale efficiencies for unitholders.

The broker calculates the potential accretion to Dexus's funds management business to be $10-20m per annum. which is 17-34% of UBS's FY22 management operating income forecast. 

UBS retains its Buy rating with a target of $10.25.

Target price is $10.25 Current Price is $9.61 Difference: $0.64
If DXS meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $9.27, suggesting downside of -3.1% (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

Credit Suisse rates HLS as Outperform (1) -

The Australian government has announced an additional $1.1bn in funding for Australia's health response to covid-19 and will extend pathology testing for a further nine months to December 31 2021.

Credit Suisse now expects the $100 fee will persist until December, noting that, despite Australia's low rate of infection, testing rates remain robust at 40,000 per day.

The broker had assumed this fee would be reduced to $50 from April 1. Estimates for FY21 and FY22 are raised by 5% and 9%, respectively.

Outperform retained. Target is $4.25.

Target price is $4.25 Current Price is $4.02 Difference: $0.23
If HLS meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.26, suggesting upside of 4.8% (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 MPL as Neutral (3) -

Macquarie puts the spotlight on the deteriorating trend in risk equalisation which illustrates that older persons are capturing more of the value from private health insurance versus the younger/healthier cohorts.

The broker expects Medibank Private to continue as a contributor to the risk equalisation (RE) pool (started in the second half of FY20). 

The government is reviewing the RE framework, expected to complete by early 2022, that should reward insurers for improving the cost structure of the industry.

In the meantime, Macquarie prefers to stick to its Neutral rating with the target dropping to $2.80 from $2.85.

Target price is $2.80 Current Price is $2.96 Difference: minus $0.16 (current price is over target).
If MPL meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.08, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Citi rates MTS as Buy (1) -

The company's capital expenditure intentions over the next three years are twice as much as Citi anticipated, which rules out a capital return in the near term.

Given the strong position in trade hardware a return on expenditure in this division is anticipated, as the broker notes hardware is underpinning earnings growth of 4.5% in FY23.

Capital expenditure forecasts are upgraded to $170m over FY22-24. One third of this is driven by investment in joint-venture hardware stores.

Meanwhile, the broker notes underlying supermarket sales have improved over recent months, which signals independents are gaining share. Citi retains a Buy rating and $4.10 target.

Target price is $4.10 Current Price is $3.39 Difference: $0.71
If MTS meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in April.

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

Credit Suisse rates MTS as Outperform (1) -

Credit Suisse was pleased with the strategy update, which met or even exceeded expectations in some areas. The company performed strongly across all segments.

A simultaneous increase in the dividend pay-out ratio to 70% of underlying earnings also reflects confidence in returns, the broker suggests.

FY21 and FY22 forecasts are downgraded because of higher corporate costs while higher rates of reinvestment result in an upgrade to FY23 and beyond. Outperform rating and $4.08 target retained.

Target price is $4.08 Current Price is $3.39 Difference: $0.69
If MTS meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in April.

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

Macquarie rates MTS as Neutral (3) -

Metcash's latest update shows continued strong demand over the last four months, observes Macquarie, with supermarket sales up 14%, liquor sales rising by 20% and hardware sales growing by 19% over last year.

While expecting Metcash's strong near-term growth across key categories to persist, Macquarie believes the gains will likely normalise with the vaccine rollout underway.

Neutral rating and $3.60 target price.

Target price is $3.60 Current Price is $3.39 Difference: $0.21
If MTS meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in April.

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 MTS as Overweight (1) -

The strategy briefing revealed initiatives to retain market share gains and provided greater insight into the hardware opportunities, Morgan Stanley notes. Food sales growth accelerated to around 5% over December-February.

Further capital will be deployed in hardware, particularly Total Tools. The broker believes execution remains key to the strategy but also highlights an improved balance sheet and increased diversity.

Morgan Stanley considers the current discount to the market too cheap and retains an Overweight rating. Target is $4.20. industry view is Attractive.

Target price is $4.20 Current Price is $3.39 Difference: $0.81
If MTS meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in April.

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

Ord Minnett rates MTS as Accumulate (2) -

Metcash's management provided a very strong trading update with market share gains in the food and liquor divisions versus Coles Group ((COL)) and Woolworths ((WOW)). 

The company has guided to a higher than expected capital expenditure estimate for FY22-24. A return on funds employed (ROFE) of at least 15% is needed, notes the broker, with Metcash planning to invest to generate the cost savings. 

Ord Minnett maintains its Accumulate recommendation with the target falling to $3.75 from $3.85.

Target price is $3.75 Current Price is $3.39 Difference: $0.36
If MTS meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in April.

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

Macquarie rates NHF as Neutral (3) -

Macquarie puts the spotlight on the deteriorating trend in risk equalisation (RE) which illustrates that older persons are capturing more of the value from private health insurance versus the younger/healthier cohorts.

The government is reviewing the RE framework, expected to complete by early 2022, that should reward insurers for improving the cost structure of the industry.

The broker expects nib Holdings will be one of the largest contributors to the risk equalisation (RE) pool going ahead. 

Neutral retained with the target falling to $5.45 from $5.80.

Target price is $5.45 Current Price is $5.63 Difference: minus $0.18 (current price is over target).
If NHF meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.88, suggesting upside of 8.5% (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

Credit Suisse rates SHL as Outperform (1) -

The Australian government has announced an additional $1.1bn for the covid-19 health response and extended reimbursement for pathology testing items to December 31 2021.

Importantly, the current $100 covid-19 test fee remains. Credit Suisse had assumed this would be reduced to $50 from April 1.

The broker notes management is confident about acquisition and contract growth opportunities over numerous markets.

After delays in people seeking healthcare services, Credit Suisse expects above-historical growth rates in the second half and into FY22. Outperform rating and $40 target retained.

Target price is $40.00 Current Price is $32.36 Difference: $7.64
If SHL meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $37.36, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates SO4 as Outperform (1) -

Macquarie highlights Salt Lake Potash's Lake Way sulphate of potash (SOP) project development continues to advance and the company expects commissioning in the third quarter.

The broker expects first production in the fourth quarter with its base case assuming a ramp-up in line with the company's latest commentary on the staging of pond production sources.

Outperform rating with a target of $0.80. 

Target price is $0.80 Current Price is $0.50 Difference: $0.3
If SO4 meets the Macquarie target it will return approximately 60% (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

Ord Minnett rates TLS as Upgrade to Buy from Accumulate (1) -

With the national broadband network rollout affecting fixed margins, Ord Minnett notes the mobile retail sector is the most important earnings driver for Telstra Corp.

According to the broker's assessment of the market, Telstra will lose share of the prepaid market to mobile virtual network operators (MVNO). The postpaid market remains lucrative for Telstra with the company better placed given its head start in the rollout of 5G infrastructure.

Noting the company offers good subscriber growth, quality cellular service and an attractive valuation, Ord Minnett upgrades its rating to Buy from Accumulate with the target price rising to $4.05 from $3.75.

Target price is $4.05 Current Price is $3.12 Difference: $0.93
If TLS meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.59, suggesting upside of 12.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Ord Minnett rates TPG as Hold (3) -

With the national broadband network rollout affecting fixed margins, Ord Minnett notes the mobile retail sector is the most important earnings driver for TPG Telecom.

According to the broker's assessment of the market, TPG’s Vodafone has likely suffered the most from covid because of its international brand and the decline in travellers and offshore roaming.

While expecting this to unwind post-pandemic, the broker believes Vodafone will lose share of the mobile market to Telstra because of the lags on the 5G rollout. 

Hold rating with the target reduced to $7.40 from $7.60.

Target price is $7.40 Current Price is $7.01 Difference: $0.39
If TPG meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.00, suggesting upside of 14.3% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates WSP as Buy (1) -

Whispir completed a $45.3m placement and Ord Minnett notes the proceeds will be used to accelerate the company's product roadmap, drive new and existing customer growth in A&NZ and Asia and drive market expansion in North America.

The company is aiming for 25-30% of revenue from the US by the end of FY23. There will be a material step-up in R&D with an additional $20m to be spent between FY21-FY23. Ord Minnett views the strategy as sound given the size of the opportunity.

Buy rating with the target falling to $4.25 from $4.53.

Target price is $4.25 Current Price is $3.71 Difference: $0.54
If WSP meets the Ord Minnett target it will return approximately 15% (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