Australian Broker Call

Macquarie rates ACL as Initiation of coverage with Neutral (3) -

Macquarie initiates coverage on Australian Clinical Labs with a Neutral rating and $3.20 target. The broker expects a recovery in pathology over the medium to longer term although subdued GP volumes are constraint in the near term.

Data has shown improved trends recently yet volumes are still below trend. For FY24/25 Macquarie forecasts industry growth of 5%.

With less favourable industry dynamics compared with diagnostic imaging and multiples above average the broker awaits signs of a recovery in GP consultations before becoming more positive.

Target price is $3.00 Current Price is $3.00 Difference: $0
If ACL meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.37, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Morgans rates ATA as Add (1) -

Atturra will acquire Cirrus Networks ((CNW)), expected to be accretive in the high single digits. The latter's shareholders will have the choice to opt for cash or shares with the maximum cash consideration capped at 75% or $37m.

Morgans observes the acquisition reinforces the company's strategic trajectory, with a focus on high-growth initiatives and repeatable managed services.

At current prices, with or without this acquisition, the broker believes the stock is an attractive high-growth IT services investment with increasingly defensive characteristics and retains an Add rating with a $1 target.

Target price is $1.00 Current Price is $0.89 Difference: $0.115
If ATA meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Bell Potter rates BOE as Hold (3) -

Boss Energy has published further results from its Gouds Dam projects.

Should the result extend the mine life or suggest an increase to annual production, further opportunities await, says Bell Potter.

The broker observes spot uranium prices have broken resistance at US$60lb, and that Cameco downgraded 2024 production guidance, which translated to 2% of global production.

Speculative Hold rating retained. Target price rises to $3.90 from $3.72.

Target price is $3.90 Current Price is $4.03 Difference: minus $0.13 (current price is over target).
If BOE meets the Bell Potter target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.60, suggesting downside of -9.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Bell Potter rates DLI as Buy (1) -

Mineral Resources' managing director (MD) Chris Ellison has been appointed non-executive chairman of Delta Lithium following Mineral Resources' ((MIN)) purchase of a 17.4% stake in the company. Joshua Thurlow, Mineral Resources' CEO Lithium, was appointed non-executive director.

Delta Lithium's executive director David Flanagan has stepped down, meaning the company's other major shareholder, Idemitsu Australia is no longer obligated to vote with the board on change of control issues.

Non-executive director James Croser also steps down but will stay on as interim MD until an executive search is completed. 

Bell Potter speculates that improved integration with Mineral Resources could allow Delta to hasten spodumene concentration production at Mt Ida to early 2025; cut Yinnetharra capital costs; result in capital rationalisation at Mt Ida after eliminating the processing plant; access value-added downstream processing; and leverage Mineral Resources' bulk transport and shipping infrastructure.

The broker would not be surprised if a full takeover offer emerges in the event of share-price weakness.

Speculative Buy rating and $1.35 target price retained.

Target price is $1.35 Current Price is $0.74 Difference: $0.61
If DLI meets the Bell Potter target it will return approximately 82% (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

Bell Potter rates ERD as Upgrade to Buy from Hold (1) -

Bell Potter updates Eroad's forecasts to reflect the NZ$50m capital raising.

Net profit after tax estimates rise slightly to effect improved interest expense, but EPS forecasts fall into the red to reflect the dilution.

Bell Potter questions the wisdom of raising equity at such a heavy discount, particularly after rejecting a takeover offer at NZ$1.30 from Brillian APAC, but is at least satisfied the balance sheet has been sufficiently supported to avoid further raisings.

Rating is upgraded to Buy from Hold given the retreat in the share price. Target price falls to 90c from $1.25.

Target price is $1.25 Current Price is $0.70 Difference: $0.55
If ERD meets the Bell Potter target it will return approximately 79% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. 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 IPL as Downgrade to Sell from Neutral (5) -

Incitec Pivot has flagged lower margins in its fertiliser distribution business as well as the necessary maintenance at Phosphate Hill. Citi remains cautious about nitrogen pricing into 2024 and reduces estimates for both FY23 and FY24 earnings.

Waggaman is expected to achieve nameplate capacity in FY23 and at Moranbah production of 360-370,000t is anticipated. Yet earnings in the fertiliser distribution business are expected to be at the lower end of the usual $40-60m range.

Citi downgrades to Sell from Neutral and reduces the target to $2.90 from $3.00.

Target price is $2.90 Current Price is $3.10 Difference: minus $0.2 (current price is over target).
If IPL meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

Morgans rates IPL as Hold (3) -

The trading update from Incitec Pivot was weaker than Morgans expected, particularly for fertilisers. Explosives look to be largely in line, with Moranbah volumes better than anticipated.

Earnings are expected to decline materially in the second half compared with the first and, despite strong demand, fertiliser earnings will be significantly affected by low prices.

Waggaman is expected to produce at nameplate,, yet earnings will decline materially because of a lower ammonia price.

The company has indicated the sale process for its fertiliser business is progressing although discussions remain confidential. Morgans retains a Hold rating and reduces the target to $3.10 from $3.29.

Target price is $3.10 Current Price is $3.10 Difference: $0
If IPL meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.29, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

Ord Minnett rates PXA as Initiation of coverage with Accumulate (2) -

Ord Minnett initiates coverage on Pexa Group with a $15 target and Accumulate rating. The broker understands the market is currently attributing significant negative value to the expansion in the UK, which it considers is excessive.

The company is expected to eventually be successful in establishing itself in that market or, alternatively, make a strategic withdrawal "without spending too much of shareholder resources".

The broker forecasts revenue to grow at a 10-year compound rate of 12% driven by overseas expansion.

Ord Minnett considers the company a natural monopoly in Australia with the backing of Australia's largest banks and a legal mandate from state governments to move into e-conveyancing.

Target price is $15.00 Current Price is $11.46 Difference: $3.54
If PXA meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $14.85, suggesting upside of 29.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

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

Further to the news that Sims expects earnings to break even in the first quarter Morgan Stanley assesses, ultimately, as scrap market strength drives earnings, more evidence is required to show trends are improving.

Steel demand continues to be soft and scrap prices is not sufficient to stimulate robust supply. In waiting for evidence of stronger market dynamics the broker downgrades the target to $13.50 from $15.00. Equal-weight. Industry view is In-Line.

Target price is $13.50 Current Price is $13.62 Difference: minus $0.12 (current price is over target).
If SGM 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 $13.53, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

UBS rates SHV as Downgrade to Neutral from Buy (3) -

UBS reassesses its view on Select Harvests pushing out a recovery in the almond price and downgrading to Neutral from Buy.

The company has reduced its FY23 almond price estimate to $6.30-6.50/kg from $7.45/kg, although this is largely offset by better volumes and ends up driving a -6% reduction to the broker's EBIT estimates.

The broker now believes a return to the long-run almond price by FY24 is too optimistic based on recent industry feedback that signals the Californian industry oversupply may persist for longer. Target is reduced to $4.70 from $5.50.

Target price is $4.70 Current Price is $4.45 Difference: $0.25
If SHV meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Morgans rates SWP as Hold (3) -

Swoop Holdings delivered significant growth in FY23 with revenue of $78m that was up 51% and ahead of Morgans' estimates. Growth came predominantly from acquisitions.

The broker observes free cash flow was positive in the fourth quarter and likely to remain this way on an underlying basis.

On a reported/consolidated basis the broker now expects free cash flow will be marginally negative over the next few years because of rising expenditure on regional growth projects. Hold maintained. Target is reduced to $0.254 from $0.679.

Target price is $0.25 Current Price is $0.23 Difference: $0.024
If SWP meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Market Sentiment: 0.0

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

Bell Potter rates TLG as Buy (1) -

Appeals against Talga Group's Natura 2000 environmental permit granted by Swedish Land and Environmental Court were rejected, and appellants have until September 28 to challenge the decisions.

Bell Potter says the decision, if upheld, clears the main obstacle to its Nuasvaara South natural graphite mine development.

Graphite prices have been under pressure lately, observes the broker, due largely to lower power costs in China and growth in synthetic graphite manufacturing.

The broker observes the global easing in steel demand has also hurt demand for graphic electrodes, which are used in electric arc furnaces. 

Speculative Buy rating and $2.50 target price retained, the broker observing binding offtake agreements that meet debt funding; project funding of $860m; and theat construction is due to start this half with production set to kick off in the March quarter of 2025.

Target price is $2.50 Current Price is $1.37 Difference: $1.13
If TLG meets the Bell Potter target it will return approximately 82% (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