Australian Broker Call

Citi rates ALG as Buy (1) -

Citi believes Ardent Leisure is an attractive way to play the re-opening trade as its business should benefit from pent-up demand. Moreover, it does not face structural pressures compared with other small leisure stocks.

Balance sheet and liquidity concerns are being resolved and the valuation is underpinned by the theme parks asset value of at least $89m prior to rezoning. Buy rating and $0.82 target retained.

Target price is $0.82 Current Price is $0.92 Difference: minus $0.1 (current price is over target).
If ALG meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Market Sentiment: 0.5

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

Ord Minnett rates AMP as Hold (3) -

AMP's CEO Francesco de Ferrari will retire post-completion of AMP’s portfolio review which Ord Minnett understands to be the AMP Capital sale process. Ferrari will be replaced by Alexis George in the third quarter of the year.

The broker retains a Hold rating with the target falling to $1.59 from $1.80 in an indication of reduced confidence about the deal completion.

Target price is $1.59 Current Price is $1.33 Difference: $0.26
If AMP meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $1.54, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in December.

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 BLD as Overweight (1) -

Boral has completed the sale of its 50% share in USG Boral. Proceeds will be used to pay down debt and return capital to shareholders as well as reinvest in the business.

Morgan Stanley believes this is another step in the evolution of Boral and represents a significant transformation from a period when serious concerns were raised about the balance sheet.

As management is exploring a sale of US building products it appears to the broker that capital management may remain on the agenda for some time. Overweight rating reiterated. Target is raised to $6.30 from $6.10. Industry view is in-line.

Target price is $6.30 Current Price is $5.86 Difference: $0.44
If BLD meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.51, suggesting downside of -5.7% (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

Macquarie rates CDA as Outperform (1) -

Codan has acquired Zetron for US$45m. Macquarie considers the acquisition a good strategic move as it adds scale in a complementary segment with an attractive end market.

Meanwhile, GPX6000 has been launched and the broker notes Codan has previously entered a strong upgrade cycle post the launch of a major new gold detector.

The share price has run hard yet Macquarie is positive about the prospect of new products and potential for additional revenue synergies from acquisitions. Outperform retained. Target rises to $17.00 from $16.20.

Target price is $17.00 Current Price is $15.87 Difference: $1.13
If CDA meets the Macquarie target it will return approximately 7% (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 CMM as Neutral (3) -

Macquarie notes development of the Karlawinda gold project is nearing completion. The cost to completion is -$38m and the broker anticipates no further funding will be required.

Macquarie expects the ramp up over the second half of 2021 and into 2022 will be an important indicator of the longer-term potential. Neutral rating and $1.60 target retained.

Target price is $1.60 Current Price is $1.53 Difference: $0.07
If CMM meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

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 MQG as Accumulate (2) -

The Australian Prudential Regulation Authority is taking action against Macquarie Bank for material breaches of prudential and reporting standards related to intra-group funding arrangements and breaches of liquidity reporting standards between 2018 and 2020.

APRA will require the bank to add an operational capital overlay of $500m and a 15% add-on to the net cash outflow component of its liquidity coverage ratio calculation, among other requirements. 

While the impact on earnings is expected to be small, Ord Minnett believes the news is negative for sentiment given Macquarie Group is generally seen as being on top of its compliance obligations and the tone of the APRA announcement is quite forceful. 

Accumulate rating retained with a target of $158.

Target price is $158.00 Current Price is $152.12 Difference: $5.88
If MQG meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $149.22, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in March.

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

Ord Minnett rates RHP as Accumulate (2) -

Rhipe has acquired emt Distribution, a cybersecurity distribution specialist. Ord Minnett notes the acquisition will broaden Rhipe’s exposure to a growing cybersecurity market and is part of the company's broader strategy to diversify its cloud subscription offering.

Suggesting the deal will immediately be earnings-accretive in FY22, Ord Minnett also expects revenue synergies through cross-selling across Rhipe’s existing reseller footprint.

In Ord Minnett's view, the company remains well-positioned to benefit from cloud software adoption across the Asia-Pacific region.

Accumulate rating with the target rising to $2.45 from $2.35.

Target price is $2.45 Current Price is $1.72 Difference: $0.73
If RHP meets the Ord Minnett target it will return approximately 42% (excluding dividends, fees and charges).

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

UBS rates RIO as Neutral (3) -

UBS maintains its Neutral rating on Rio Tinto but slashes the target to $104 from $126.

While the stock has generated a total shareholder return of 76% over the last 12 months led mainly by the strong iron ore price, UBS suggests iron ore is now approaching an inflection point. Thus, prices are at the risk of falling sharply during 2021-22.

The broker expects the miner's free cash flow yield will fall to circa 7% at US$90/t and prefers South32 ((S32)) over Rio Tinto and BHP Group ((BHP)) due to its commodity mix and stock-specific catalysts. 

Target price is $104.00 Current Price is $112.00 Difference: minus $8 (current price is over target).
If RIO meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $125.57, suggesting upside of 11.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.6

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

Citi rates S32 as Buy (1) -

Citi was not surprised that South32 has sweetened the deal terms regarding the sale of its South Africa Energy Coal assets. The upfront purchase consideration is reduced and the profit share eases back.

Moreover, the company will provide US$200m in rehabilitation funding. If the deal completes before June 30, 2021, the business will be presented as a discontinued operation.

Citi retains a Buy rating and $3 target, emphasising earnings nearly double in FY23 on its commodity price forecasts.

Target price is $3.00 Current Price is $2.85 Difference: $0.15
If S32 meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.10, suggesting upside of 9.9% (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: 0.9

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

Macquarie rates S32 as Outperform (1) -

South32 has amended the sales agreement for South Africa Energy Coal. This includes removing the deferred payment mechanism and providing a -US$50m restructure facility as well as the -US$200m rehabilitation fund.

The final condition with electricity provider Eskom remains, which is approval of the transfer of the Duvha coal supply agreement.

Macquarie considers this sale will be a major catalyst for South32 once finalised, and notes earnings upgrade momentum has improved because of stronger silver, nickel and manganese prices. Outperform rating and $3.10 target retained.

Target price is $3.10 Current Price is $2.85 Difference: $0.25
If S32 meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.10, suggesting upside of 9.9% (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: 0.9

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

Morgan Stanley rates S32 as Overweight (1) -

South32 has reshaped its sale of South Africa Energy Coal, which remains conditional on approvals from Eskom and National Treasury.

Morgan Stanley notes the metrics of the sale are lower than the market expected but remain at a manageable cost from a group perspective, given the sale is designed to simplify the company's business.

Completion is likely to by the end of June. Morgan Stanley is acting as financial adviser in relation to the proposed sale.

Overweight rating. Target is $3.30. Industry view: Attractive.

Target price is $3.30 Current Price is $2.85 Difference: $0.45
If S32 meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.10, suggesting upside of 9.9% (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: 0.9

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

Ord Minnett rates S32 as Buy (1) -

According to the latest update on its South African Energy Coal (SAEC) transaction, South32 will need to pay -US$200m towards rehabilitation costs via ten annual instalments. Also, the miner will lend -US$50m to Seriti to fund loss-making mining areas.

The broker finds the update mixed since, on the positive side, there looks to be a high degree of certainty now around the transaction proceeding that would improve South32’s environmental, social, and corporate governance credentials.

On the flip side, the additional -US$250m contribution is slightly higher than expected. 

Buy rating retained with a target of $3.70.

Target price is $3.70 Current Price is $2.85 Difference: $0.85
If S32 meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.10, suggesting upside of 9.9% (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: 0.9

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

Macquarie rates SLK as Outperform (1) -

Macquarie reviews the NZ bus transport industry, given Sealink Travel Group has expressed interest in acquisitions in New Zealand. The market is around 20% the size of Australia's.

There are three main operators in an otherwise fragmented market. NZ operators typically own the buses and in some instances the depots and thus operations are more capital intensive. Higher margins relative to Australia account for the higher capital intensity.

In the wake of the analysis, Macquarie remains confident that Sealink can win new contracts and execute meaningfully on M&A. Target is raised to $10.30 from $9.50. Outperform retained.

Target price is $10.30 Current Price is $9.25 Difference: $1.05
If SLK meets the Macquarie target it will return approximately 11% (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

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

Webjet has announced a $250m convertible notes offering with a conversion price of $6.35, a 22.5% premium over the $5.18 reference share price and a -7% discount to the prior close.

Equal-weight retained. Target is $4.50. Industry view: In-Line.

Target price is $4.50 Current Price is $5.28 Difference: minus $0.78 (current price is over target).
If WEB meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.28, suggesting downside of -5.1% (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