Australian Broker Call

Morgans rates AIM as No Rating (-1) -

Morgans initiates coverage of Access Innovation Holdings with an Add recommendation and $1.35 price target.

The company provides high accuracy, near real-time, voice transcription and translation. The company turns speech to text in three to four seconds with 99% accuracy. According to the broker, the product is best in breed, and many of the mega-cap technology companies use it for critical situations.

The company is not yet a profitable business, warns Morgans, so valuations are highly subjective (expect share price volatility).

Key risks relate to the company’s capacity to continue to embrace technology and stay at the forefront of the voice-to-text curve, explains the analyst. Key rewards are considered the continuation of double digit organic revenue growth and the potential for acquisitions.

Target price is $1.35 Current Price is $1.08 Difference: $0.27
If AIM meets the Morgans target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Citi rates BLX as Buy (1) -

Beyond the current strength, Citi believes Beacon Lighting can benefit from growth in trade and, in the longer term, consolidation opportunities.

The stock is considered good value, trading at a -19% discount to the average Australian discretionary retail peer. Like-for-like sales in the first quarter grew 27%, despite the closure of Melbourne stores.

Citi reiterates a Buy rating and raises the target to $1.80 from $1.50.

Target price is $1.80 Current Price is $1.59 Difference: $0.21
If BLX meets the Citi target it will return approximately 13% (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

Morgans rates BLX as Add (1) -

According to Morgans, the Beacon Lighting first quarter trading update showed very strong top line growth.

This converted to circa 280% profit (NPAT) growth in the quarter as lower promotional activity assisted the gross margin, notes the broker. Also, contained operating costs were considered to contribute toward material operating expense leverage.

Online sales increased by 156% while international sales increased by 42%. Morgans thinks sales and therefore earnings momentum will remain strong in the second quarter FY21 as Victorian restrictions ease and in-home spending remains buoyant.

The broker lifts EPS forecasts by 15% in FY21, but negligibly thereafter on the assumption trading conditions moderate and the group will cycle strong comparisons from FY22.

The Add rating is unchanged and the target price is increased to $1.73 from $1.51.

Target price is $1.73 Current Price is $1.59 Difference: $0.14
If BLX meets the Morgans target it will return approximately 9% (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

Morgans rates CWY as Hold (3) -

At the recent AGM, Cleanaway Waste Management said trading conditions continue to be mixed throughout the country, with covid-19 most impacting Victoria. It expects FY21 earnings (EBITDA) to be “moderately” higher.

Since the FY20 result in August, the company has underperformed the broader market by approximately -7%, calculates Morgans. This is considered mainly owing to public criticisms of the CEO.

At current prices, the broker believes the stock offers circa 2% potential total shareholder returns (TSR). Thus the Hold rating is unchanged and the target price is increased to $2.33 from $2.24.

Target price is $2.33 Current Price is $2.29 Difference: $0.04
If CWY meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.52, suggesting upside of 10.8% (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

Citi rates MHJ as Neutral (3) -

Favourable retail conditions have allowed for a strong first quarter trading update. However, Citi expects sales will slow as stimulus is reduced and the company enters the critical second quarter where, historically, it makes 70% of its profit.

Citi finds little in the way of long-term growth strategies and, therefore, maintains a Neutral rating. First quarter gross margins improved by 100 basis points and the broker forecasts the first half retail gross margin to increase to 60.6%. Target is raised to $0.50 from $0.33.

Target price is $0.50 Current Price is $0.51 Difference: minus $0.01 (current price is over target).
If MHJ meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.63, suggesting upside of 11.6% (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 QAN as Outperform (1) -

Macquarie suspects Qantas could experience a faster recovery domestically as borders continue to re-open and pent-up demand for movement around the country occurs.

An international recovery, while more predicated on a vaccine/treatment for the coronavirus, could pull forecasts forward if travel bubbles proliferate.

Macquarie revises FY21 estimates up by 7% while lowering FY22 by -17%, the latter largely because of lower average seat kilometre assumptions.

The broker retains an Outperform rating and raises the target to $4.95 from $4.25.

Target price is $4.95 Current Price is $4.21 Difference: $0.74
If QAN meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.33, suggesting upside of 0.1% (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

Citi rates RIO as Buy (1) -

Shipments of iron ore from the Pilbara were slightly lower in the September quarter, although Citi notes rosters are back to pre-pandemic settings. Mined copper was down -18% because of lower grades at Kennecott.

Production guidance is unchanged with the exception of titanium dioxide, which is now expected at around 1.2mt. Citi retains a Buy rating and $115 target.

Target price is $115.00 Current Price is $95.45 Difference: $19.55
If RIO meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Credit Suisse rates RIO as Neutral (3) -

September quarter numbers were generally in line with Credit Suisse's expectations. Iron ore shipments of 82.1mt imply around 87mt is required to hit the middle of guidance for 2020.

The broker expects free cash flow generation should remain strong, given where the iron ore price is. However, capital management in February is expected to be relatively modest. Neutral rating retained. Target is steady at $95.

Target price is $95.00 Current Price is $95.45 Difference: minus $0.45 (current price is over target).
If RIO meets the Credit Suisse target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Macquarie rates RIO as Outperform (1) -

Production in the September quarter was stronger for iron ore and mined copper while aluminium and titanium dioxide were weaker.

2020 production guidance is unchanged. Macquarie assesses Rio Tinto is well-positioned to achieve its iron ore shipment guidance following a build up in inventory.

The broker retains an Outperform rating and reduces the target to $111 from $112. Adjusting cost assumptions and incorporating the quarterly result means a -2% decline in estimates for earnings per share in 2020.

Target price is $111.00 Current Price is $95.45 Difference: $15.55
If RIO meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

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

Iron ore production in the September quarter in Western Australia was ahead of Morgan Stanley's estimates. Shipments were in line with expectations and all up this places the company in a position to achieve the top end of guidance, the broker asserts.

Guidance is unchanged across all assets, although Rio Tinto has flagged titanium dioxide production will now be at the bottom of the forecast range because of weaker demand.

Equal-weight rating. Target is $100.50. Industry view: Attractive.

Target price is $100.50 Current Price is $95.45 Difference: $5.05
If RIO meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Morgans rates RIO as Hold (3) -

According to Morgans, Rio Tinto posted a mixed third quarter result, with iron ore shipments trailing estimates, while mined copper was ahead of expectations. This was partly considered due to another strong performance from Escondida, with high throughput continuing to effectively offset grade decline, and Oyu Tolgoi open pit, which is still mining out a high grade zone.

The broker points out the quarterly result included significant commentary and analysis on ESG factors affecting the company's business. This suggests the big miner was making positive changes, comments the analyst.

2020 capex and production guidance was unchanged, outside of a small cut to Titanium dioxide (TiO2), reports Morgans.

The broker continues to see material political risk for the important copper asset OTUG, located in Mongolia, with the government declining an updated feasibility study.

The Hold rating is unchanged and the target price is decreased to $103 from $107.

Target price is $103.00 Current Price is $95.45 Difference: $7.55
If RIO meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Ord Minnett rates RIO as Buy (1) -

Ord Minnett takes a more conservative view on iron ore shipments and reduces forecast by -5% for 2020 and -3% for 2021. Iron ore shipments in the September quarter were softer than expected because of port maintenance.

This will continue into the fourth quarter, although guidance for 324-334mt in 2020 is unchanged.

The broker considers the stock attractive although acknowledges the cultural heritage issue could have consequences. Buy rating retained. Target is reduced to $121 from $122.

Target price is $121.00 Current Price is $95.45 Difference: $25.55
If RIO meets the Ord Minnett target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

UBS rates RIO as Neutral (3) -

Third quarter iron ore shipments for Rio Tinto were in-line with the estimates of UBS. Iron ore production was considered strong, but shipments were impacted by port maintenance. Other commodities were also in-line, while mined copper was ahead of the broker's expectations.

The company has flagged that the recovery in most economies is starting to slow, based on high frequency data, as pent up demand dissipates and the rise of new lock downs re-emerges. The analyst doesn't expect hard lock downs again, but consumer demand could take a hit and it remains the biggest risk to the broker's fourth quarter view.

The Neutral rating and target price of $104.5 are unchanged.

Target price is $104.50 Current Price is $95.45 Difference: $9.05
If RIO meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $107.14, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Ord Minnett rates SHL as Hold (3) -

A further adjustment to coronavirus test reimbursement in the US is expected to have a positive effect on earnings.

Ord Minnett assesses the new US funding will boost Sonic Healthcare's earnings by around 3.5% in FY21 and 2.5% in FY22.

The broker maintains a Hold rating and lifts the target to $36.50 from $36.00.

Target price is $36.50 Current Price is $36.40 Difference: $0.1
If SHL meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $35.27, suggesting downside of -4.5% (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 Neutral (3) -

The Centres for Medicare and Medicaid Services (CMS) announced that starting 1 January Medicare will pay US$100 to laboratories that complete high throughput covid-19 diagnostic tests within two calendar days of the specimen being collected. For those that take longer Medicare will pay a new base rate of US$75.

UBS assumes commercial insurers will follow Medicare in their pricing strategies. However, the broker understands from industry checks that Sonic Healthcare and other large pathology operators likely have turnaround times for US PCR tests less than 48 hours.

At this stage the broker makes no changes to earnings forecasts.

More generally, UBS notes the company appears well placed to deliver operating leverage and margin expansion.

The Neutral rating and $34.75 target price are unchanged.

Target price is $34.75 Current Price is $36.40 Difference: minus $1.65 (current price is over target).
If SHL meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.27, suggesting downside of -4.5% (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

Macquarie rates TYR as Underperform (5) -

The company has announced a 10-year alliance with Bendigo and Adelaide Bank ((BEN)) to provide 26,000 terminals to the bank's merchant acquiring customers.

Macquarie estimates the deal adds up to $0.25 per share of value, with the main variable being the duration of the contract and whether it will be extended into perpetuity. The partnership raises the prospect of whether a similar deal could be struck with another bank, such as Suncorp ((SUN)).

Macquarie recognises the strategic appeal in the alliance but believes the recent re-rating has begun to factor in the near-term upside. The broker is also cautious around the risk of elevated churn rates over coming months. Target rises to $3.25 from $2.70. Underperform retained.

Target price is $3.25 Current Price is $4.15 Difference: minus $0.9 (current price is over target).
If TYR meets the Macquarie target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.20, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Morgan Stanley rates TYR as Overweight (1) -

The acquisition of the Bendigo and Adelaide Bank portfolio of merchant acquirer customers supports Morgan Stanley's positive view on Tyro Payments.

The broker envisages the deal will lift total transaction value in FY22 by 20%. The main issue the broker envisages is what will happen to revenue growth rates post the pandemic. Will this return to the prior 20-30% growth range? In any case this deal should help.

This is also a new sales channel for the company and could help the business win further share from banks.

Overweight rating. Target price is $4.35. Industry view is Attractive.

Target price is $4.35 Current Price is $4.15 Difference: $0.2
If TYR meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Ord Minnett rates TYR as Accumulate (2) -

The company has an alliance with Bendigo and Adelaide Bank to provide merchant acquiring services for current and referred customers of the bank.

Ord Minnett assesses the transaction will allow the company to grow quickly and benefit from favourable unit economics in payment processing.

The ability to partner rather than acquire the books of merchants is also favourable, in Ord Minnett's view, given the minimal capital outlay required to add scale. Accumulate retained. Target rises to $5 from $4.

Target price is $5.00 Current Price is $4.15 Difference: $0.85
If TYR meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

UBS rates WOW as Buy (1) -

UBS believes the market is not fully appreciating near-term earnings upside and long-term earnings optionality at Woolworths. This is based on the broker's calculation that the current shares price is trading at an unwarranted discount.

The analyst upgrades like-for-like sales, which is the key driver of EPS forecast increases.

UBS sees the company will exit covid-19 stronger, with higher share, richer data and an opportunity to expand share of customer wallets long term. This coupled with recent investments (for example Marley Spoon) accelerates the shift to 'Supermarket 2', with the potential for (incremental) alternative profit streams accounting for around 25% of Food earnings (EBIT).

The Buy rating is unchanged and the target price is increased to $44 from $43.50.

Target price is $44.00 Current Price is $39.20 Difference: $4.8
If WOW meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $41.62, suggesting upside of 5.3% (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

Credit Suisse rates WPL as Outperform (1) -

Credit Suisse observes Woodside Petroleum has been sold off because of a perceived lack of short-term catalysts. The broker also considers a potential equity raising to fund growth and the imminent decline in the North West Shelf are weighing on sentiment.

The broker suggests a large equity raising by the end of 2021 is becoming the consensus view, anticipating around -US$2bn may be required to fund a final investment decision on Scarborough.

However, this is not the only scenario and where such is avoided this leaves potential upside. Credit Suisse considers the risks are well priced in and maintains an Outperform rating. Target is lowered to $24.70 from $25.20.

Target price is $24.70 Current Price is $18.42 Difference: $6.28
If WPL meets the Credit Suisse target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $22.90, suggesting upside of 23.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.7

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

Citi rates Z1P as Sell (5) -

Citi expects strong growth in the short term from increasing investment in the US and UK as well as greater adoption by merchants and consumers of BNPL. Nevertheless, downside risks to medium-term growth forecasts and margins are anticipated from increased competition.

The trading update highlighted improving trends for Quadpay but total transaction value missed Citi's forecasts. The broker maintains a Sell/High Risk rating and reduces the target to $6.55 from $6.70.

Target price is $6.55 Current Price is $7.02 Difference: minus $0.47 (current price is over target).
If Z1P meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.69, suggesting downside of -6.6% (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