Australian Broker Call

Macquarie rates AFG as Outperform (1) -

March-quarter lodgements held above $20bn for the fifth straight quarter, demonstrating a skew to Australian Finance Group's higher margin Home Loan product, reports Macquarie.

Australian Finance Group's Home Loan lodgements rose 20% to $2.2bn in the quarter.

Macquarie says the company is on track to meet the broker's forecast for its securitisation loan book of $4.7bn by June - up 17.5% on December 21.

Outperform rating, $2.94 target price and earnings forecasts are retained.

Target price is $2.94 Current Price is $2.04 Difference: $0.9
If AFG meets the Macquarie target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $2.88, suggesting upside of 38.5% (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

Citi rates AKE as Buy (1) -

Citi expects lithium prices to remain higher for longer and sees any global cyclical weakness as an unusual buying opportunity.

Lithium price expectations for 2022 are raised by around 11%, and the broker feels a return to a balanced market is now delayed until 2024.

Allkem is the analyst's preferred pure-play lithium exposure. The target rises to $16 from $15.50. Buy.

Target price is $16.00 Current Price is $13.26 Difference: $2.74
If AKE meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.9

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

Citi rates ALG as Buy (1) -

Citi weighs up Ardent Leisure's decision to sell its holding in Main Event to Dave & Busters. This comes as the broker's US restaurant analyst now expects lower impacts to restaurant sales from inflation. 

The analyst sees restaurants as a “semi-discretionary” category with consumers more likely to delay buying big-ticket items. It's felt one reason behind agreeing to sell Main Event now may have been the potential for weaker US consumer spending.

None of this commentary changes Citi's Buy rating and $1.96 target price.

Target price is $1.96 Current Price is $1.32 Difference: $0.64
If ALG meets the Citi target it will return approximately 48% (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

Citi rates BOQ as Buy (1) -

In contrast with today's punishment the shares are receiving post the release of interim financials, Citi's forecasts have been handsomely beaten by Bank of Queensland.

Relying on the broker's initial response, H1 cash earnings were no less than 13% above market consensus. Though the source of the upward surprise seems to have come from writing back $22m in prior loan provisions.

The negative surprise in total revenues stems from weak housing growth in the newly acquired ME franchise, points out Citi. The analysts felt that the bank's upbeat expectations for H2 would be well-received, but that has not been the case.

Buy. Target $10.25.

Target price is $10.25 Current Price is $8.53 Difference: $1.72
If BOQ meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $10.13, suggesting upside of 26.7% (ex-dividends)

The company's fiscal year ends in August.

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 DMP as Add (1) -

Morgans lowers its target price for Domino's Pizza Enterprises to $100 from $115 to allow for recent inflation pressure, and after moderating forecasts for near-term sales growth in Japan.

Russia and Ukraine make up 30% of the global export market for wheat. The recent conflict has raised prices in recent weeks not only for wheat but also vegetable oils and meat.

Store economics are impacted by this food inflation along with rising energy and labour costs, notes the analyst. Nonetheless, it's felt there is meaningful upside to the current share price over the next 12 months. Add retained.

Target price is $100.00 Current Price is $79.65 Difference: $20.35
If DMP meets the Morgans target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $98.97, suggesting upside of 22.1% (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

Citi rates DRR as Neutral (3) -

Citi strategists expect higher non-Chinese demand for iron ore, along with declines in exports from Russia and Ukraine exports, resulting in lower iron ore surpluses.

The broker raises its benchmark iron ore price forecasts for 2022/23 by 9% and 38% to US$149/t and US$110/t, respectively. As a result, the broker raises its target price for Deterra Royalties to $5.10 from $4.65 and stays Neutral-rated.

Target price is $5.10 Current Price is $4.77 Difference: $0.33
If DRR meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.99, suggesting upside of 2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgans rates GDG as Add (1) -

Following Generation Development's 3Q funds under management (FUM) update, Morgans assesses investment bond (IB) sales growth  was robust. Also, the net inflow number of $120m exceeded the analyst's forecast for $100m.

The broker estimates the recent FUM growth will start translating into higher leverage in FY23 and FY24. Upgrades to forecasts for the IB business were partially offset by lower estimates for the ramp-up in the annuity business.The target price rises to $1.88 from $1.81. Add.

Target price is $1.88 Current Price is $1.65 Difference: $0.23
If GDG meets the Morgans target it will return approximately 14% (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

Citi rates IGO as Buy (1) -

Citi expects lithium prices to remain higher for longer and sees any global cyclical weakness as an unusual buying opportunity.

Lithium price expectations for 2022 are raised by around 11%, and the broker feels a return to a balanced market is now delayed until 2024.

The analyst lifts the target price for IGO to $16.10 from $16.00. Buy.

Target price is $16.10 Current Price is $13.83 Difference: $2.27
If IGO meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $14.08, suggesting upside of 0.8% (ex-dividends)

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

Citi rates ILU as Downgrade to Sell from Neutral (5) -

Citi lowers its rating for Iluka Resources to Sell from Neutral, noting shares have risen 35% in six months at a time when China property statistics have deteriorated.

The broker points out there will be no rare earths revenue until the Eneabba rare earths refinery starts in 2025 and reduces EPS forecasts for 2022 and 2023 by -16% and -19%. Nonetheless, the $10.50 target price is retained.

Yesterday the company announced its intention to demerge Sierra Rutile. If it proceeds Sierra Rutile will be listed on the ASX.

Target price is $10.50 Current Price is $12.54 Difference: minus $2.04 (current price is over target).
If ILU meets the Citi target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.45, suggesting downside of -7.4% (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 ILU as Neutral (3) -

Iluka Resources has decided to demerge its Sierra Rutile Ltd business. Should various approvals be met, a new company should be listed on the ASX this year. Credit Suisse sees the demerger as a positive, allowing increased focus on core operations.

Iluka intends to provide US$45m for the entity's rehabilitation obligations and leave a cash balance as well. Excluding the rehabiliation support, the analyst estimates the company's net present value would drop by around -60cps post demerger.

The broker retains its Neutral rating and $13 target price.

Target price is $13.00 Current Price is $12.54 Difference: $0.46
If ILU meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.45, suggesting downside of -7.4% (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

Macquarie rates ILU as Outperform (1) -

Iluka Resources has announced the demerger of its Sierra Rutile by the end of 2022, spinning it off into a listed West African-focused mineral sands company.

Macquarie estimates Sierra Rutile is only worth about $41m but believes it has the potential to unlock shareholder value given peer multiples. The broker expects the new company will now be able to focus on securing a partner and extra capital to launch the Sembehun project.

The broker expects Iluka will focus on its Australian assets to take advantage of rising zircon, rutile and rare-earths prices. 

Outperform rating and $14 target price retained.

Target price is $14.00 Current Price is $12.54 Difference: $1.46
If ILU meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $11.45, suggesting downside of -7.4% (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

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

Later this year, shareholders in Iluka Resources should receive an allocation of shares in Sierra Rutile Holdings. This comes as Iluka Resources has decided to demerge the entity, which will subsequently be listed on the ASX.

The broker estimates Sierra Rutile comprises around 24% or $1.90 of its $7.90 base case valuation for Iluka Resources.

The company's capital allocation priorities will now be focused on Australian projects, with a key focus on diversification into rare earths, notes the analyst. The Equal-weight rating and $9.75 target are retained. Industry view: Attractive.

Target price is $9.75 Current Price is $12.54 Difference: minus $2.79 (current price is over target).
If ILU meets the Morgan Stanley target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.45, suggesting downside of -7.4% (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

Citi rates MIN as Buy (1) -

Citi expects lithium prices to remain higher for longer and sees any global cyclical weakness as an unusual buying opportunity.

Lithium price expectations for 2022 are raised by around 11%, and the broker feels a return to a balanced market is now delayed until 2024.

The analyst points out Mineral Resources benefits from both raised iron ore and spodumene price forecasts. The target jumps to $76 from $66. Buy.

Target price is $76.00 Current Price is $61.80 Difference: $14.2
If MIN meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $67.36, suggesting upside of 8.6% (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

Ord Minnett rates MPL as Upgrade to Accumulate from Lighten (2) -

Ord Minnett has upgraded Medibank Private to Accumulate from Lighten given the recent share price retreat, signs of a supportive claims environment (based on the UK experience), and rising bond yields.

The broker also places higher value on Medibank's near-term earnings certainty given it does not share the supply challenges faced by many other companies.

The broker is cautious heading into the election given the Australian Labor Party's push for higher wages in the health sector.

Target price rises to $3.50 from $3.

Target price is $3.50 Current Price is $3.15 Difference: $0.35
If MPL meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.45, suggesting upside of 9.8% (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

Citi rates NCM as Neutral (3) -

Attributable gold to Newcrest Mining from its 32% equity interest in Canadian-based Lundin gold (after March quarter results) was a beat versus Citi's expectation.

The broker retains its Neutral rating and $29 target price for Newcrest Mining.

Target price is $29.00 Current Price is $27.91 Difference: $1.09
If NCM meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $30.12, suggesting upside of 5.9% (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: 0.7

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

Citi rates PLS as Upgrade to Buy from Neutral (1) -

Citi expects lithium prices to remain higher for longer and sees any global cyclical weakness as an unusual buying opportunity.

Lithium price expectations for 2022 are raised by around 11%, and the broker feels a return to a balanced market is now delayed until 2024.

The analyst raises its rating for Pilbara Minerals to Buy from Neutral following a -17% share price fall in the last week, and further progress on the POSCO joint venture.The target rises to $3.60 from $3.50.

Target price is $3.60 Current Price is $2.96 Difference: $0.64
If PLS meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $3.94, suggesting upside of 33.0% (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 PSQ as Overweight (1) -

Morgan Stanley feels feel trading at Pacific Smiles is tracking to expectations, following patient fees of $21.4m announced for March.

The broker feels only a modest improvement is needed, and should occur, to meet its FY22 forecast of $236.1m for patient fees.

Management also reiterated it is on pace to open 15-20 new centres by 30 June.

The Overweight rating and $3 target price are unchanged. Industry view: In-Line.

Target price is $3.00 Current Price is $2.26 Difference: $0.74
If PSQ meets the Morgan Stanley target it will return approximately 33% (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 VEA as Outperform (1) -

The Board of Viva Energy has approved $300m of funding to upgrade its Geelong Refinery's processing capability to produce Ultra-Low Sulphur Gasoline. Credit Suisse notes the cost is around $50m higher than the prior company estimate.

The Federal government's contribution of $125m is unchanged.

In an acquisition complementary to the refining operations, the company also announced an agreement to acquire LyondellBasell Australia, a Geelong-based polymer manufacturer and distributor. 

The broker retains its Outperform rating and $2.57 target price.

Target price is $2.57 Current Price is $2.60 Difference: minus $0.03 (current price is over target).
If VEA meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.69, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in December.

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 WSA as Downgrade to Hold from Add (3) -

Western Areas has attracted an increased all-cash offer of $3.87/share from IGO ((IGO)), up from $3.36. Morgans believes the increase stems from the impact of recent nickel price volatility on near-term cash flow and asset values.

The broker feels the revised offer will likely be accepted and notes the current share price is trading at the new offer price. The Western Areas board unanimously recommends the the offer price, in the absence of another bid.

The analyst lowers the rating to Hold from Add, and while awaiting quarterly results due at the end of April, the $4.45 target price is maintained.

Target price is $4.45 Current Price is $3.84 Difference: $0.61
If WSA meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 1.0% (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