Australian Broker Call

Citi rates ALU as Neutral (3) -

Recent product pricing changes by Altium have prompted Citi to highlight potential upside to yield.

This upside is considered driven by price increases to perpetual licenses in Australia, Germany and UK and reduced discounting on time-based licenses. Finally, there has also been the addition of a new Pro subscription tier as part of Altium 365.

The broker warns this could be offset by larger than expected transition to time-based licenses over perpetual licenses, which could negatively impact near-term earnings from a revenue recognition perspective.

The Neutral rating and target price of $34.60 are unchanged.

Target price is $34.60 Current Price is $35.30 Difference: minus $0.7 (current price is over target).
If ALU 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 $35.35, suggesting downside of -2.9% (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: 0.2

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

Ord Minnett rates AMI as Buy (1) -

Ord Minnett considers the acquisition of the high-grade Dargues gold mine is fair value at $205m. There is an opportunity to boost mine life as well.

The broker believes the acquisition reinforces how undervalued the stock is, reiterating a Buy rating while trimming the target to $0.70 from $0.85.

Dagues is a recently-commissioned gold project east of Canberra and, while a relatively small 310,000tpa operation, is very high-grade, producing 50,000ozpa at a low-cost of $1300/oz.

This deal has propelled Aurelia Metals into the mid-tier gold producer sphere which should reinforce the discount at which it trades, in the broker's view.

Target price is $0.70 Current Price is $0.44 Difference: $0.26
If AMI meets the Ord Minnett target it will return approximately 59% (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 APT as Overweight (1) -

Afterpay has noted at its AGM that October was a record month for underlying sales globally and November is turning out to be even better.

Morgan Stanley finds this consistent with its own forecasts. Meanwhile, fashion and beauty sales have decreased to 42% of sales in FY20 from 72% in FY17, signalling retail verticals are diversifying.

Overweight rating. Target is $120. Industry view: In-line.

Target price is $120.00 Current Price is $95.93 Difference: $24.07
If APT meets the Morgan Stanley target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $93.22, suggesting downside of -1.1% (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 ASX as Underweight (5) -

It is Morgan Stanley's view that the technical glitch to trading recently has highlighted the risk of increased costs to ensure delivery of the CHESS distributed ledger replacement in April 2023.

Morgan Stanley envisages incremental upward pressure on expenditure to ensure stability of the trading systems. The broker calculates, if operating expenses rise 5%, this translates to a -3% headwind to FY21 earnings.

The broker also marks to market for lower interest rates and reduces earnings estimates by -4-5% in FY21-22. Underweight rating retained. Target is reduced to $67.90 from $70.00. Industry view: In-line.

Target price is $67.90 Current Price is $81.19 Difference: minus $13.29 (current price is over target).
If ASX meets the Morgan Stanley target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $72.43, suggesting downside of -10.9% (ex-dividends)

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 CAT as Add (1) -

Catapult Group International recently provided an update on trading conditions. This showed the net cash balance had improved by US$10.1m from 30 June.

A loan drawn at the beginning of the pandemic has been repaid, which shows increased confidence in the outlook, in the view of Morgans.

The broker expects considerable cross-sell and up-sell potential, along with new client additions will return the company to robust growth levels.

Morgans moves forecasts to a 31 March year-end and changes to US$ reporting. The Add rating is unchanged and the target is increased to A$2.45 (US$1.79) from $2.44.

Target price is $2.45 Current Price is $2.12 Difference: $0.33
If CAT meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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: 1.0

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

Citi rates CCX as Neutral (3) -

City Chic Collective is holding its AGM on November 20. Based on industry data, Citi expects a management update noting that comparable growth is positive.

The broker forecasts 8% growth in the first half, despite one-quarter of the store network being shut for four months in Victoria.

Following a de-rating in the share price flowing from the miss in acquiring Catherines, the analyst believes a new acquisition may require a higher multiple than previously required.

Improving gross margins in both City Chic and Avenue brands are the key swing factor for earnings in FY21, believes the broker.

The Neutral rating and target of $3.20 are unchanged.

Target price is $3.20 Current Price is $2.79 Difference: $0.41
If CCX meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 37.1% (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 CIA as Outperform (1) -

Champion Iron will acquire the Kami project for CAD33m. The acquisition includes 8mtpa of port capacity.

Macquarie notes the iron ore price is robust and supporting a strong earnings upgrade cycle for the company, with FY21 and FY22 earnings forecasts rising 10% and 75%, respectively, at spot prices.

Meanwhile, the project provides several options to unlock value and the broker retains an Outperform rating. Target is raised to $5.10 from $4.80.

Target price is $5.10 Current Price is $4.57 Difference: $0.53
If CIA meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

This company reports in CAD. 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 CIP as Neutral (3) -

The company has acquired three cold storage assets for $171.1m on a combined initial yield of 5.62%. The acquisition is to be funded with a $125m institutional placement at $3.06 per unit and $58.7m of debt.

The transaction does not make much difference from an earnings perspective and Credit Suisse expects Centuria Industrial will continue to trade at a premium to net tangible assets, given a forecast distribution yield of 5.6% and 100% exposure to the Australian industrial sector.

Earnings growth is considered modest over the forecast period and the broker retains a Neutral rating. Target is raised to $3.24 from $3.18.

Target price is $3.24 Current Price is $3.11 Difference: $0.13
If CIP meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.30, suggesting upside of 7.8% (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 CIP as Neutral (3) -

Centuria Industrial REIT has raised $125m at an issue price of $3.06 to fund the acquisition of three cold store assets for $171m. UBS notes the REIT's gearing on settlement is within its target range (30-40%) at 31% with the net tangible asset steady at $2.81.

The REIT has upgraded its FY21 funds from operations (FFO) guidance slightly by 0.1c to at least 17.5c and reaffirmed its dividend at 17c. 

UBS reaffirms its Neutral rating with a target price of $3.23.

Target price is $3.23 Current Price is $3.11 Difference: $0.12
If CIP meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.30, suggesting upside of 7.8% (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

Credit Suisse rates CWN as Outperform (1) -

Crown Resorts will permanently cease operations with junkets, subject to consultation with Australian states where it operates.

Credit Suisse further lowers VIP volume estimates to reflect gamblers will only be sourced outside of China or from reputable Chinese players or Asian players with dual Australian/Asian residency.

The broker believes Crown Resorts will no longer pay commission to junket operators and "complement" commission directly to players. Outperform rating and $10.35 target retained.

Target price is $10.35 Current Price is $9.70 Difference: $0.65
If CWN meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $9.98, suggesting upside of 3.5% (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

UBS rates IPL as Buy (1) -

The pandemic has severely hit Dyno Nobel Americas' ammonium nitrate volumes with the impact most pronounced in coal/metals markets.

Base and precious metals volumes were impacted by mine closures in Canada while iron ore production was cut due to reduced US steel demand. US coal markets were impacted by the significant drop in gas prices.

Incitec Pivot highlights base and precious metals volumes are recovering along with the recent increase in the US gas price hinting at a recovery in coal volumes.

The broker notes Incitec's earnings are sensitive to changes in global fertiliser prices. Prices have increased by 15%-20%. The company holds a positive outlook underpinned by better global agricultural conditions and trade flow redirection.

UBS retains its Buy rating with a target price of $2.40.

Target price is $2.40 Current Price is $2.23 Difference: $0.17
If IPL meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.49, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates NHC as Neutral (3) -

October quarter production was softer from Bengalla because of maintenance. The company provided no fresh update on New Acland at its AGM and has to re-enter negotiations with the new Queensland minister.

Credit Suisse does not reflect any value for stage 3 at New Acland in its valuation or target until there is greater visibility over approvals.

The broker considers, for those constructive on thermal coal, the stock remains an interesting option but finds too many unknowns to go beyond a Neutral rating. Target is reduced to $1.30 from $1.40.

Target price is $1.30 Current Price is $1.19 Difference: $0.11
If NHC meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.28, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in July.

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 NHC as Underperform (5) -

Production at Bengalla was in line with expectations. New Acland is ramping down and the company is restructuring with 75% of the corporate workforce being made redundant.

Macquarie has a cautious outlook for thermal coal amid the ongoing legal issues at New Acland and retains an Underperform rating. A reduction in corporate costs drives a 3% increase to earnings for FY22-25. Target is $1.

Target price is $1.00 Current Price is $1.19 Difference: minus $0.19 (current price is over target).
If NHC meets the Macquarie target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.28, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in July.

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

Citi rates OPT as Initiation of coverage with Buy (1) -

Opthea is a clinical stage biotech company, based in Melbourne. Citi initiates coverage with a Buy rating and target price of US$48.

The company is developing OPT-302, a first-in-class VEGF-C and VEGF-D inhibitor designed to drive improved visual acuity outcomes over the current standard of care (anti-VEGF-A) in wet age-related macular degeneration (wAMD).

VEGF stands for Vascular endothermal growth factor.

OPT-302 is set to enter two concurrent Phase3 trials in early 2021. If approved, the broker expects OPT-302 to gain meaningful share among wAMD patients who do not respond adequately to anti-VEGF-A therapy.

The company has also reported encouraging Phase 1b/2a data for OPT-302 in diabetic macular edema (DME). Along with this potential upside to valuation, Citi also notes the company intends to co-formulate OPT-302 with an anti-VEGF-A agent.

Current Price is $2.18. Target price not assessed.

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 REA as Overweight (1) -

Morgan Stanley asserts its positive investment thesis centres on the potential for a super cycle of earnings in 2021-22.

The proposal by the NSW government for a change to the traditional and large one-off stamp duty that is paid on real estate purchases could be a catalyst for higher property volumes.

Existing factors underpinning the broker's view view include a return to listings growth and additional volumes as Australians review work and living locations post the pandemic.

A larger than usual price increase from REA Group in July 1, 2021 is also incorporated along with margin expansion amid flat costs.

Overweight rating. Target is $150. Industry view: Attractive.

Target price is $150.00 Current Price is $139.41 Difference: $10.59
If REA meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $123.05, suggesting downside of -12.6% (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

Credit Suisse rates RHC as Neutral (3) -

Private health insurance hospital statistics signal benefits declined -2.9% in the September quarter. Credit Suisse estimates this was driven by a contraction of -5.6% in episodes, offset by positive price and mix.

Private health insurance hospital membership improved 30 basis points to 43.8% in September, the first time there has been an increase in coverage since 2015.

The broker also notes the proportion of private patients being treated in public hospitals has fallen, indicating greater utilisation of the private system.

Ramsay Health is benefiting from a greater surgical case mix relative to the industry, the broker ascertains, and the increase in private health insurance membership supports its view there will be a volume tailwind post the pandemic. Neutral rating and $69 target retained.

Target price is $69.00 Current Price is $66.03 Difference: $2.97
If RHC meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $68.59, suggesting upside of 4.1% (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

UBS rates RHC as Neutral (3) -

Despite the impact of infections on non-urgent elective work, UBS believes the private hospital operator volume outlook remains favourable.

The waitlist in the public healthcare system regarding elective surgery could mean work being outsourced to private providers like Ramsay Health.

The broker retains a Neutral rating and $71.20 target.

Target price is $71.20 Current Price is $66.03 Difference: $5.17
If RHC meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $68.59, suggesting upside of 4.1% (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

Morgan Stanley rates SGP as Overweight (1) -

New detached homes sales in October were up 34%, the Housing Industry Association reports. This makes this the third strongest number of sales since October 2016.

Morgan Stanley suspects this is a step up in demand reflecting the HomeBuilder stimulus announced in June and a softening in Western Australia offset by increased momentum in Victoria. These states make up around 52% of Stockland's active sales.

Victoria is expected to retain positive momentum for the rest of the year and potentially into 2021 if the state budget includes an assistance package for new homes.

Stockland collected 1799 net residential deposits in the September quarter and the broker's forecast assumes 5700 across FY21, up from 5244 in FY20.

Overweight rating. Target is $4.45. Industry view: In-line.

Target price is $4.45 Current Price is $4.48 Difference: minus $0.03 (current price is over target).
If SGP meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.96, suggesting downside of -11.5% (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 WOR as Buy (1) -

UBS notes a key area of investor interest is Worley's strategy of targeting energy transition projects including offshore wind, distributed energy systems, low carbon hydrogen energy and plastics recycling developments.

Worley expects its existing clients to play an important role in the transition. UBS believes Worley's strong client relationships combined with its enhanced offering post the ECR integration ensures the company is well placed to secure work in the space going forward. 

The broker considers the valuation attractive and retains its Buy rating with a target price of $12.32.

Target price is $12.32 Current Price is $11.86 Difference: $0.46
If WOR meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.65, suggesting downside of -0.5% (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