Australian Broker Call

Macquarie rates AFG as Outperform (1) -

Macquarie notes Australian Finance Group has successfully priced a $500m residential mortgage-backed securities issue. The margin is 80-85 basis points over one-month BBSW.

The funding benefit will help offset the impact of price competition on the front book. It will also help release capital that can be recycled into the lending program. Outperform rating and $3.18 target maintained.

Target price is $3.18 Current Price is $2.70 Difference: $0.48
If AFG meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.39, suggesting upside of 25.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates ALD as Neutral (3) -

Ampol will proceed with its NZ$3.78 per share takeover offer for NZ-based Z Energy ((ZEL)), subject to shareholder and regulatory approval. Credit Suisse estimates the price paid is in-line with Ampol's pre-transaction multiple.

While the broker makes no changes to its Neutral rating and $28.72 target price, merit can be seen in potential sourcing synergies of NZ$60-80m. The transaction is to be funded by committed debt facilities.

Target price is $28.72 Current Price is $30.00 Difference: minus $1.28 (current price is over target).
If ALD meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $31.12, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates ALD as Overweight (1) -

Morgan Stanley estimates EPS accretion of 7% in FY22 and 12% in FY23, following agreement on the takeover by Ampol for New Zealand's Z Energy ((ZEL)). The mid-point of the guidance range for synergies of NZ$60-80m was assumed for the estimate.

The broker remains Overweight Ampol and expects a positive market reaction to lower equity requirements than those set out by management a few weeks ago. Double-digit EPS accretion is expected in FY23. The target price of $35 remains unchanged.  

Ampol will acquire all the shares of Z Energy for NZ$3.78 per share and Z Energy shareholders will receive NZ$0.05cps in lieu of the interim FY22 dividend.

Target price is $35.00 Current Price is $30.00 Difference: $5
If ALD meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $31.12, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates ALD as Buy (1) -

Ampol will acquire New Zealand's Z Energy for NZ$3.78 a share. The transaction will be funded from debt and include a new $600m hybrid debt issue. UBS observes this should substantially reduce the risk that the company will need to raise equity to fund the transaction.

The broker likes the rationale as the acquisition will increase the company's short fuel position and it can better utilise infrastructure in Australia.

There remains some risk regarding regulatory approvals, which could take longer than expected because of Ampol's commitment to divest Gull NZ. Buy rating and $34.50 target maintained.

Target price is $34.50 Current Price is $30.00 Difference: $4.5
If ALD meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $31.12, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

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 ALU as Buy (1) -

Citi assesses upside risk to its first half forecasts for Octopart if current trends are sustained. The broker notes Altium has not engaged in discounting licences but will offer a free upgrade for six months to Pro subscriptions.

Citi believes this recent move is positive and retains a Buy rating and $35.40.

Target price is $35.40 Current Price is $33.51 Difference: $1.89
If ALU meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $31.50, suggesting downside of -5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: 0.0

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

Macquarie rates ANN as Downgrade to Underperform from Neutral (5) -

Macquarie notes a benefit from price increases that were over and above the amount required to pass through costs, primarily related to examination and single-use gloves, represented around 60% of the increase to gross profit in FY21.

Hence, based on recent trends, the broker envisages downside risk to consensus expectations.

Given the risk, and with revised earnings forecasts that sit well below consensus, Macquarie downgrades to Underperform from Neutral. Target is lowered to $32.00 from $39.00.

Target price is $32.00 Current Price is $33.84 Difference: minus $1.84 (current price is over target).
If ANN 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 $42.92, suggesting upside of 33.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Citi rates API as Neutral (3) -

The company has upgraded FY21 underlying earnings (EBIT) guidance to $70m largely because of the benefit from increased volumes in its pharmacy distribution and as a result of temporary disruptions faced by Sigma Healthcare ((SIG)).

The broker believes a merger between Australian Pharmaceutical and Sigma is the more natural fit because of operating synergies, yet the risk around ACCC approval is much higher compared with the Wesfarmers ((WES)) offer.

The company has also confirmed that a class action has been filed in Victoria's Supreme Court by Priceline franchisees and will defend against the claim.

Citi retains a Neutral rating and raises the target to $1.53 from $1.38.

Target price is $1.53 Current Price is $1.52 Difference: $0.01
If API meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.49, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in August.

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 API as Neutral (3) -

After recent lockdowns, Credit Suisse is very surprised the company is reporting a stronger performance than prior guidance. It's believed this was attributable to a better cost performance and taking market share in pharmaceutical wholesale distribution.

Management now expects FY21 underlying earnings (EBIT) of approximately $70m versus July guidance for $66-68m. The analyst thinks market share has been taken from Sigma Healthcare ((SIG)). The Neutral rating and $1.55 target price are unchanged.

Target price is $1.55 Current Price is $1.52 Difference: $0.03
If API meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.49, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in August.

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

Macquarie rates API as No Rating (-1) -

Australian Pharmaceutical Industries has upgraded FY21 profit guidance by 3-6% with underlying EBIT expected to be $70m. The upgrade is underpinned by strength in Priceline pharmacies, online trading and distribution volumes.

Macquarie also notes a class action has been filed in Victoria by Priceline franchisees alleging unacceptable fees and the company has indicated it will "vigourously defend" the action.

The date of the FY21 result has now been moved to October 28. More clarity on the bids that are underway is expected at the results.

Due to research restrictions, Macquarie cannot advise on either rating or target price.

Current Price is $1.52. Target price not assessed.

Current consensus price target is $1.49, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in August.

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

Morgans rates BOQ as Add (1) -

In a preview of Bank of Queensland's FY21 results on October 13, Morgans forecasts a cash profit of $406m, excluding the contribution from ME Bank over July and August. A fully franked final dividend of 27cps is estimated. The Add rating and $10.80 target are unchanged.

The analyst expects the bank's guidance for a flat net interest margin (NIM), when comparing the first half versus the second, to be met. The potential for improvement in cost efficiency is considered key to an improving return on tangible equity (ROTE) path.

Target price is $10.80 Current Price is $9.73 Difference: $1.07
If BOQ meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $10.38, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

Macquarie rates CMM as Upgrade to Neutral from Underperform (3) -

September quarter production was -8% below Macquarie's estimates. The company has guided to FY22 production of 110-120,000 ounces.

The expectation for long-term production rates has been reiterated at 110-125,000 ounces per annum, largely in line with expectations.

Key to Macquarie's near term outlook is the increase in throughput to 4.5mtpa run rate. Following recent share price weakness, the broker upgrades to Neutral from Underperform. Target is steady at $2.40.

Target price is $2.40 Current Price is $2.34 Difference: $0.06
If CMM meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Ord Minnett rates CWN as Buy (1) -

Ord Minnett is not surrendering a positive view on the outlook for Crown Resorts, even though more bad news is likely to ensue.

While the industry is aware of increased regulatory and oversight costs, the moves in the share price mean the stock is now trading more in line with expectations from a valuation perspective. Buy rating and $15 target maintained.

Target price is $15.00 Current Price is $8.91 Difference: $6.09
If CWN meets the Ord Minnett target it will return approximately 68% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 35.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

UBS rates DMP as Resume Coverage with Neutral (3) -

UBS resumed coverage of Domino's Pizza with a Neutral rating and $150 target. The broker assesses the pandemic has accelerated the delivery channel and this has become a successful route to market for quick service restaurants.

Growth in the store network is a driver of same-store sales growth as proximity amplifies the carry-out and delivery variables. The broker notes the performance in the share price has been significant and the valuation is already elevated yet considers this justified.

Target price is $150.00 Current Price is $143.28 Difference: $6.72
If DMP meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $130.07, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Morgan Stanley rates DOW as Overweight (1) -

In-line with Morgan Stanley's forecast, Downer EDI has announced the sale of its Open Cut Mining East business for around $150m. It's thought there's room for another $500m of on-market share buy-backs (estimated to be 10% EPS acretive) over the next 12-24 months.

M&A is another alternative, notes the analyst. Given there is now no mining exposure, more cash generation is forecast as capex is reduced by circa -60%. The Overweight rating and $6.50 target price are maintained. Industry view: In-line. 

Target price is $6.50 Current Price is $6.60 Difference: minus $0.1 (current price is over target).
If DOW 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 $6.32, suggesting downside of -4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgans rates GNX as Add (1) -

In a potentially significant earnings driver, the Bouldercombe Battery Project (BBP) is aiming to take advantage of energy price arbitrage, explains Morgans. This comes as the National Electricity Market (NEM) has recently moved to five minute settlement.

The analyst points out an investment decision on BBP is expected later this quarter or early next quarter. Tesla has been selected as supplier for the project. The broker maintains its Add rating and $0.33 target price.  

Target price is $0.33 Current Price is $0.22 Difference: $0.11
If GNX meets the Morgans target it will return approximately 50% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates HUB as Outperform (1) -

Credit Suisse estimates that by FY30 Hub24 could capture around 15% of the platform market and forecasts the platform industry to grow to circa $1.8trn by FY30, versus $1trn currently.

On these figures, the broker estimates Hub24's funds under administration (FUM) would be around $270bn by FY30.

The analyst raises the company's net flow forecasts to arrive at circa 8% market share of the platform market by FY25, and lifts the target price to $34 from $31. The Outperform rating is unchanged.

Target price is $34.00 Current Price is $27.41 Difference: $6.59
If HUB meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $30.83, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates NUF as Add (1) -

In a preview of Nufarm's FY21 result on 17 November, Morgans estimates 51% earnings (EBITDA) growth. It's thought this will stem from improved conditions for the European, A&NZ and Seed Technologies businesses.

The lowering of the cost base, thanks to the Performance Improvement Program (PIP), is also expected to be evident, notes the analyst. It's estimated there will be further growth in FY22. The Add rating is unchanged and the target price falls to $6.32 from $6.50.

Target price is $6.32 Current Price is $4.50 Difference: $1.82
If NUF meets the Morgans target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $5.67, suggesting upside of 22.6% (ex-dividends)

The company's fiscal year ends in July.

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 NWL as Outperform (1) -

Credit Suisse estimates that by FY30 Hub24 could capture around 14% of the platform market and forecasts the platform industry to grow to circa $1.8trn by FY30, versus $1trn currently.

On these figures, the broker estimates Netwealth Group's funds under administration (FUM) would be around $250bn by FY30. 

The analyst raises the company's net flow forecasts to arrive at circa 8% market share of the platform market by FY25, and lifts the target price to $17 from $15.8. The Outperform rating is unchanged.

Target price is $17.00 Current Price is $13.67 Difference: $3.33
If NWL meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $16.77, suggesting upside of 19.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Ord Minnett rates PTM as Hold (3) -

September funds under management totalled $22.8bn, up 6.3% on last year but down -1.8% on the prior months. The board has announced an extension to the current share buyback for 12 months although the program is yet to repurchase any shares, Ord Minnett observes.

Ord Minnett is cautious as the majority of funds are underperforming their respective benchmarks, and notes the underweight position in the US has been a significant headwind for some time. The broker retains a Hold rating and lowers the target to $3.60 from $4.15.

Target price is $3.60 Current Price is $3.20 Difference: $0.4
If PTM meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.55, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.8

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) -

Morgan Stanley retains its Equal-weight rating and $110 target price after media reports surfaced regarding Mongolia’s Justice Minister
sending a letter to Rio Tinto regarding Oyu Tolgoi.

The letter stated "neither the government of Mongolia nor its people should bear any consequences of the cost overruns and schedule delays and failures of Rio Tinto to deliver the project it promised" and the company's "social licence to operate in Mongolia is being questioned".

Morgan Stanley made no comment, other than to outline the company has a stake in Oyu Tolgoi through its 51% interest in Turquoise Hill, and has a 34% economic interest in Oyu Tolgoi. Industry view is In-Line. 

Target price is $110.00 Current Price is $102.26 Difference: $7.74
If RIO meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $124.43, suggesting upside of 21.3% (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: 0.4

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

Ord Minnett rates SGR as Accumulate (2) -

Ord Minnett is not surrendering a positive view on the outlook for Star Entertainment, even though more bad news is likely to ensue.

While the industry is aware of increased regulatory and oversight costs, the moves in the share price mean the stock is now trading more in line with expectations from a valuation perspective.

The broker retains an Accumulate rating with a $4.40 target.

Target price is $4.40 Current Price is $3.30 Difference: $1.1
If SGR meets the Ord Minnett target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 30.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Macquarie rates STX as Outperform (1) -

Reserves and resources at West Erregulla have been certified at 300PJ of 2P and the ultimate resource potential now appears in the 700-900PJ range, which Macquarie notes is -28-44% below management's prior guidance

 The broker is disappointed in the assessment which now implies a significantly lower volume compared with the assessment back in 2019.

Yet the sell-off in the stock of more than -20% accounts for the reduction and Macquarie sticks with an Outperform rating. Target is reduced to $0.50 from $0.60.

Target price is $0.50 Current Price is $0.23 Difference: $0.27
If STX meets the Macquarie target it will return approximately 117% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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