Australian Broker Call

Credit Suisse rates A2M as Neutral (3) -

Credit Suisse has already allowed for a slowing of 1H23 shipments in forecasts, confirmed by a2 Milk Co, due to the English Label transition. The new formulation is selling at an around 5% higher price, observes the analyst.

The broker expects share price gains to continue in a declining market with reformulations of the formula and further increases in market share.

Neutral maintained. Target is steady at $5.15.

Target price is $5.15 Current Price is $5.83 Difference: minus $0.68 (current price is over target).
If A2M meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.96, suggesting downside of -13.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: -0.5

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

Credit Suisse rates AIA as Outperform (1) -

Credit Suisse reiterates its Outperform rating for Auckland International Airport to reflect the potential for a strong post pandemic recovery and attractive share price upside.

In addition, the broker feels the perceived higher risk profile for airports in general is offset by the potential for higher pricing in the current regulatory period.

At the start of the current five year regulatory period, the analyst suggests the company has a high level of autonomy in setting the pricing levels for aeronautical services.

The $7.50 target price is unchanged.

Target price is $7.50 Current Price is $6.83 Difference: $0.67
If AIA meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.50, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.5

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

Ord Minnett rates AKE as Buy (1) -

Ord Minnett has reviewed the lithium sector and lowers demand forecasts for electric vehicle sales due to supply-chain challenges and a likely recession.

But the broker notes penetration rates are rising thanks to government incentives and has slightly increased its total lithium demand (lithium carbonate equivalent) forecast to 3.1Mt from 2.9Mt.

On the plus side, the broker doubts China lepidolite supply will flood the market in the near future.

Allkem is the broker's preferred sector pick, due to its maxed-out pipeline and exposure to all three lithium chemicals. Buy rating and $16.50 target price retained.

Target price is $16.50 Current Price is $13.20 Difference: $3.3
If AKE meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $15.76, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Morgans rates AND as Add (1) -

Following in-line FY22 results for Ansarada Group, Morgans retains its Add rating and raises its target price to $1.90 from $1.85.

The broker was impressed by a year-on-year 31% increase in customers (including freemium), while paying subscribers increased by 11%. In FY23, management will increase its focus on improving conversion from freemium to paying customers.

The company's largest driver is deals/M&A, according to the analyst, and management noted this activity has rapidly softened, and is expecting negative cashflow in the 1H of FY23, before a return to positive in the 2H.

Target price is $1.90 Current Price is $1.60 Difference: $0.3
If AND meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

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

In further justification of an Equal-weight stance on Charter Hall, Morgan Stanley believes assets under management (AUM) and developments will continue to grow, though asset revaluations and transaction opportunities should slow.

The group has consistently noted it is a long-term property investor and is not perturbed by higher interest rates, points out the analyst. This attitude provides backing for the above-mentioned positive view for AUM and developments.

The broker extracted further confidence from FY22 results that showed net fund inflows (excluding listed REITs) actually increased mildly in the 2H.

Morgan Stanley retains its $14.40 target price. Industry view: In-Line.

Target price is $14.40 Current Price is $12.83 Difference: $1.57
If CHC meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $15.00, suggesting upside of 16.7% (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

Ord Minnett rates CQR as Accumulate (2) -

Charter Hall Retail REIT's FY22 result and FY23 guidance pleased Ord Minnett.

Management expects operational EPS to rise 0.7% in FY23; the dividend to rise 4.9%; and has raised its hedging to 83%.

Ord Minnett expects the long-weighted-average-lease-expiry (WALE) assets should support earnings in FY23, notes rent collections have stabilised at roughly 97%; and forecasts FY23 like-for-like rental growth will exceed 5.3%.

The broker observes the REIT has successfully diversified its convenience retail portfolio and continues to do so, having expanded its exposure to WALE service-station assets; and notes roughly 55% of Charter Hall Retail's income is linked to inflation.

Accumulate rating retained. Target price rises 4% to $4.30 from $4.14.

Target price is $4.30 Current Price is $4.12 Difference: $0.18
If CQR meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.19, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.1

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

Ord Minnett rates DXS as Buy (1) -

Dexus' acquisition target Collimate Capital has suffered its third mandate loss after investors in the AMP Capital Retail Trust voted to shift management from Collimate possibly (yet to be confirmed) to the GPT Group ((GTP)), observes Ord Minnett.

The broker says this means assets under management will fall to $17.5bn, which will lead to a reduction in the acquisition price to $275m.

The broker believes the market is underestimating Dexus, given the company is now trading at a -31% discount to net tangible assets.

Buy rating and $10.50 target price retained. 

Target price is $10.50 Current Price is $8.50 Difference: $2
If DXS meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $10.51, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Macquarie rates GPT as Upgrade to Outperform from Neutral (1) -

After an investment thesis review of GPT Group, following the August reporting season, Macquarie upgrades its rating to Outperform from Neutral. It's felt headwinds from interest rates are factored into the share price and conditions are in place for some upside.

These conditions include a recovery in retail and development execution in the near term, explains the broker, and upside via M&A and management in the longer term.

As revealed at 1H results, the group is now 71% hedged over the next 2.5 years at an average rate of 2.8%, which largely alleviated concerns the analyst had around debt costs.

No changes are made to Macquarie's earnings forecasts and the $4.68 target price is unchanged.

In a separate update, it is noted AMP Capital Retail Trust (ACRT) has transferred management of the trust from AMP ((AMP))/ Dexus ((DXS)) to GPT Group, including management of Pacific fair.

At first glance, Macquarie expects the mandate could deliver GPT $9.5m in revenue or $7.2m of earnings (EBIT) on a margin of 75%, which should translate to $5m in profit after tax and 0.8% accretion to funds from operations.

UniSuper, co-owner of ACRT transferred a separate $2.8bn mandate from AMP Capital (which has a 7.7% stake in ACRT) to GPT earlier in 2022, and Macquarie is uncertain of whether GPT will buy the co-investment (which would be 0.3% accretive by the broker's estimates).

Target price is $4.68 Current Price is $4.23 Difference: $0.45
If GPT meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.72, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Credit Suisse rates IPL as Outperform (1) -

While amonia prices have softened in the current quarter, European gas shortages will likely result in increased prices, explains Credit Suisse, as seasonal 4Q demand kicks in.

The analyst adjusts forecasts for Incitec Pivot after a mark-to-market of 2H commodity price assumptions, and allowance is made for a $80m insurance recovery in the 2H. 

The broker awaits the September 6 investor day for further updates on the fertiliser demerger, which is thought to undermine the near-term case for capital management.

The Outperform rating is retained and the target price slips to $4.03 from $4.05.

Target price is $4.03 Current Price is $3.81 Difference: $0.22
If IPL 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 11.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Ord Minnett rates LTR as Hold (3) -

Ord Minnett has reviewed the lithium sector and lowers demand forecasts for electric vehicle sales due to supply-chain challenges and a likely recession.

But the broker notes penetration rates are rising thanks to government incentives and has slightly increased its total lithium demand (lithium carbonate equivalent) forecast to 3.1Mt from 2.9Mt.

On the plus side, the broker doubts China lepidolite supply will flood the market in the near future.

The broker retains a Hold rating and $1.10 target price for Liontown Resources.

Target price is $1.10 Current Price is $1.62 Difference: minus $0.52 (current price is over target).
If LTR meets the Ord Minnett target it will return approximately minus 32% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Ord Minnett rates MME as Buy (1) -

MoneyMe's FY22 result missed Ord Minnett's forecasts but the broker still considers it a very strong result (up 3x) with net underlying revenue (up 137%) proving a 9% beat thanks to sharper than expected growth in the loan book and higher interest rate charges.

All up, the company reports a statutory loss of -$50.4m due to the accounting treatment of impairments as the loan book grows, says the broker.

Ord Minnett expects the recent capital raising will fund further growth in the loan book (up 24%), albeit at a more conservative pace in previous years given the macro environment.

Hold rating retained. Target price slumps to 83c from $2.21.

Target price is $0.83 Current Price is $0.47 Difference: $0.36
If MME meets the Ord Minnett target it will return approximately 77% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Morgan Stanley rates NXT as Overweight (1) -

After reviewing potential earnings and valuation risk for NextDC from rising energy prices, Morgan Stanley concludes the costs are manageable and retains its Overweight rating and $14.00 target. Industry View: Attractive.

The review is highly relevant, explains the analyst, as the running of data centres is an energy-intensive undertaking.

Thankfully, around 80-90% of the forecast energy cost increase (a 100% rise from FY22) can be passed through to customers, points out the broker. 

Should energy prices rise a further 100% in FY23 and FY24, the risk to NextDC's earnings (EBITDA) is -2-3%, and the impact to Morgan Stanley valuation is around -15cps.

Target price is $14.00 Current Price is $10.23 Difference: $3.77
If NXT meets the Morgan Stanley target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $12.76, suggesting upside of 29.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.9

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

Ord Minnett rates PLS as Upgrade to Buy from Hold (1) -

Ord Minnett has reviewed the lithium sector and lowers demand forecasts for electric vehicle sales due to supply-chain challenges and a likely recession.

But the broker notes penetration rates are rising thanks to government incentives and has slightly increased its total lithium demand (lithium carbonate equivalent) forecast to 3.1Mt from 2.9Mt.

On the plus side, the broker doubts China lepidolite supply will flood the market in the near future.

Ord Minnett upgrades Pilbara Minerals' rating to Buy from Hold, the broker preferring producers over developers, but notes Allkem ((AKE)) is its top pick and that it is on research restriction for Mineral Resources ((MIN)).

Target price rises to $4.10 from $3.50.

Target price is $4.10 Current Price is $3.55 Difference: $0.55
If PLS meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.64, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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