Australian Broker Call

Morgans rates ADH as Add (1) -

The trading update was strong, with like-for-like sales in the second half to date up 27.4%. FY20 revenue guidance is ahead of previous forecasts and implies 16% growth in the second half.

Morgans is increasingly confident in the resilience of the company's omni-channel approach and ability to navigate the uncertain environment. Add rating maintained. Target rises to $2.62 from $2.17.

Target price is $2.62 Current Price is $2.31 Difference: $0.31
If ADH meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates ADH as Buy (1) -

FY20 sales guidance of $385-390m is ahead of UBS estimates and both online and in-store have grown strongly. UBS upgrades estimates by 10-19%.

Still, the broker remains cautious about the consumer outlook. Buy rating maintained. Target rises to $2.55 from $2.15.

Target price is $2.55 Current Price is $2.31 Difference: $0.24
If ADH meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates AFG as Outperform (1) -

The broker has reviewed the potential earnings contribution for Australian Finance Group assuming the merger with Connective goes ahead.

The Court still needs to resolve a dispute between Connective shareholders, but the broker estimates 17.6% earnings accretion fom the merger pre revenue synergies in FY22.

Outperform retained and target rises to $2.34 from $1.93, despite the broker not yet incorporating the merger into its earnings forecasts, pending the legal outcome.

Target price is $2.34 Current Price is $1.96 Difference: $0.38
If AFG meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Morgans rates ANZ as Upgrade to Add from Hold (1) -

Morgans has a positive view on the major banks at current share prices, with the exception of Commonwealth Bank ((CBA)).

While system credit growth is subdued, the major banks are expected to regain home lending market share amid funding stress for the non-bank lenders.

Low interest rates are expected to continue being a headwind to net interest margins.

ANZ Bank is upgraded to Add from Hold. A final dividend is expected to be declared in November. Target is steady at $17.

Target price is $17.00 Current Price is $18.75 Difference: minus $1.75 (current price is over target).
If ANZ meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.59, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates BSL as Accumulate (2) -

Australian steel product and North Star spreads continue to edge higher, although the recent strength in the Australian dollar is acting as a headwind.

Ord Minnett assesses volumes are reasonable for BlueScope Steel but there is some way to go before the earnings recovery plays out. Accumulate rating and $14.90 target maintained.

Target price is $14.90 Current Price is $12.00 Difference: $2.9
If BSL meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $12.80, suggesting upside of 7.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Morgans rates CBA as Hold (3) -

Morgans has a positive view on the major banks at current share prices, with the exception of Commonwealth Bank.

While system credit growth is subdued, the major banks are expected to regain home lending market share amid funding stress for the non-bank lenders.

Low interest rates are expected to continue being a headwind to net interest margins.

The broker suspects Commonwealth Bank's final dividend is likely to be paid on a deferred basis, compared with the interim dividends of ANZ Bank ((ANZ)) and Westpac ((WBC)), because of the different reporting cycle.

Hold rating maintained. Target rises to $67.50 from $61.00.

Target price is $67.50 Current Price is $68.68 Difference: minus $1.18 (current price is over target).
If CBA meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $64.94, suggesting downside of -6.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Morgan Stanley rates CHC as Overweight (1) -

Morgan Stanley notes, in recent weeks, Charter Hall has made around $1bn in acquisitions and there are more likely to be in the pipeline.

The broker considers the expansion of funds management margins under appreciated, having increased to 70% in FY19 from 40% in FY15. Morgan Stanley assesses the expansion is sustainable and reflects the benefits of scale.

Overweight rating reiterated. Target is raised to $11.60 from $9.05. In-Line industry view maintained.

Target price is $11.60 Current Price is $10.10 Difference: $1.5
If CHC meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $10.41, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

UBS rates EBO as Buy (1) -

Based on a number of assumptions, UBS estimates a combined earnings benefit of $12m from 2021 after the full implementation of the changes announced in the seventh Community Pharmacy Agreement.

However, the broker also points out the incremental funding will need to offset price reductions in the PBS and a potentially higher cost of distribution as the pandemic affects the market.

The diversified business model and superior execution means UBS expects outperformance versus peers. Buy rating reiterated. Target is NZ$27.20.

Current Price is $21.00. Target price not assessed.

Current consensus price target is $24.04, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Morgan Stanley rates ECX as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley looks for names in the sector that exhibit differentiated growth and resilience in their business model along with re-rating catalysts.

The broker's top pick is EclipX Group as it has the strongest growth potential and a unique funding model that peers are replicating.

The valuation remains attractive and the broker upgrades to Overweight from Equal-weight. Target is raised to $1.70 from $1.10. Industry view is In-Line.

Target price is $1.70 Current Price is $1.33 Difference: $0.37
If ECX meets the Morgan Stanley target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $1.32, suggesting downside of -2.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Citi rates EVN as Neutral (3) -

A review of Mount Carlton is expected to lead to a post-tax impairment in the range of -$75-100m. The mine's production outlook is now smaller, around 50,000 ounces per annum, and more costly in Citi's view as the valuation is now halved.

The main catalyst for a potential change in view is a feasibility study for the underground at Cowal, due in the second half. Neutral maintained. Target reduced to $5.20 from $5.50.

Target price is $5.20 Current Price is $5.25 Difference: minus $0.05 (current price is over target).
If EVN meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Credit Suisse rates EVN as Outperform (1) -

Evolution Mining has reduced FY20 group production guidance to 715,000 ounces and announced an after-tax impairment of -$75-100m for Mount Carlton.

The main issue is a narrowing of gold-bearing veins at depth to a greater extent than originally indicated. Credit Suisse considers this downgrade modest in the context of the portfolio.

The broker trims the target to $5.45 from $5.65 and retains an Outperform rating.

Target price is $5.45 Current Price is $5.25 Difference: $0.2
If EVN meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Macquarie rates EVN as Downgrade to Neutral from Outperform (3) -

The results of grade control drilling at Evolution Mining's Mt Carlton project have led to a -75koz reduction in the earlier gold production life-of-mine plan, and a subsequent -$75-100m impairment of the project's carrying value.

Macquarie is not overly surprised, but downgrades to Neutral from Outperform and drops its target to $5.40 from $5.60.

The Cowal underground study will be a key catalyst later this year, the broker notes, while the divestment of Cracow will reduce group costs.

Target price is $5.40 Current Price is $5.25 Difference: $0.15
If EVN meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

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

Morgan Stanley values Mount Carlton at $177m and notes about half of this has been impaired on the back of lower production forecasts, which is also likely to shorten the mine life.

FY20 gold production at the mine has been downgraded to around 60,000 ounces while guidance for FY21 has been reduced to 50,000 ounces.

Overweight rating. Target is $4.70. Industry view: In-Line.

Target price is $4.70 Current Price is $5.25 Difference: minus $0.55 (current price is over target).
If EVN meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Ord Minnett rates EVN as Sell (5) -

Evolution Mining has lowered earnings guidance by -12% for FY21 and -10% for FY22. Mount Carlton, the inaugural asset, is a reminder of the wasting nature of the assets and the need for continual recycling, Ord Minnett suggests.

FY20 production guidance has been reduced again, to 60,000 ounces, and FY21 to 50,000 ounces. The broker retains a Sell rating and reduces the target to $3.80 from $3.90.

Target price is $3.80 Current Price is $5.25 Difference: minus $1.45 (current price is over target).
If EVN meets the Ord Minnett target it will return approximately minus 28% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

UBS rates EVN as Sell (5) -

Evolution Mining has downgraded production guidance for FY20-21 at Mount Carlton and guided to a -$75-100m write down, post tax. UBS believes the news highlights the premium embedded in the share price relative to peers.

The broker does not believe this premium is justified because of the short life of the three assets. However, the longer-life Red Lake could be the lever that, in time, could justify the valuation.

Sell maintained. Target is reduced to $4.90 from $5.30.

Target price is $4.90 Current Price is $5.25 Difference: minus $0.35 (current price is over target).
If EVN meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Citi rates FMG as Sell (5) -

Citi finds it hard to envisage how iron ore prices will not move lower over time. Steel production is forecast to peak and demand for iron ore to decline. Plus there is expanding iron ore supply.

Current exploration work is also unlikely to produce a meaningful project for development for some years.

The biggest risk to the broker's view is that iron ore prices hold up longer than anticipated.

Still, the stock appears to be pricing in a long-term iron ore price of US$75/t and Citi is confident this is too high. Sell maintained. Target is $11.70.

Target price is $11.70 Current Price is $13.79 Difference: minus $2.09 (current price is over target).
If FMG meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.62, suggesting downside of -8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.1

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

Credit Suisse rates HLS as Outperform (1) -

Credit Suisse analyses the opportunity for profitability to improve in pathology as the company sells its medical centre businesses.

Healius is less profitable relative to Sonic Healthcare ((SHL)) because of a larger collection centre footprint, higher rents and a less complex test mix.

Hence, reducing rental costs is a key area to improve profitability.

The broker expects the pathology earnings (EBIT) margin will expand to 11.6% in FY22 from 9.8% in FY19. Outperform rating and $3.25 target maintained.

Target price is $3.25 Current Price is $3.03 Difference: $0.22
If HLS meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $3.28, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgan Stanley rates MMS as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley observes McMillan Shakespeare is trading below historical averages and a macro rebound remains the key catalyst.

An alternative revenue stream from PlanPartners helps offset novated headwinds.

Rating is upgraded to Overweight from Equal-weight. Target is lowered to $11.50 from $14.00. In-Line sector view.

Target price is $11.50 Current Price is $9.21 Difference: $2.29
If MMS meets the Morgan Stanley target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $9.77, suggesting upside of 6.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgans rates NAB as Add (1) -

Morgans has a positive view on the major banks at current share prices, with the exception of Commonwealth Bank ((CBA)).

While system credit growth is subdued, the major banks are expected to regain home lending market share amid funding stress for the non-bank lenders.

Low interest rates are expected to continue being a headwind to net interest margins.

Morgans expects a final dividend will be declared in November. Add maintained. Target rises to $20.00 from $16.50.

Target price is $20.00 Current Price is $18.67 Difference: $1.33
If NAB meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $20.32, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Citi rates NCK as Buy (1) -

Citi retains a Buy rating, expecting profit will grow in FY21 because of the strong order book and improved margins.

Risks from the end of JobKeeper may be relatively lower compared with other retailers as many of the company's customers belong to the middle-upper income demographic, and these are less likely to lose their jobs compared with younger consumers in the leisure, retail and travel sectors.

Citi expects first half sales to increase by 12%, given first quarter sales growth guidance of 30%. Target is raised to $8.20 from $5.90.

Target price is $8.20 Current Price is $6.88 Difference: $1.32
If NCK meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates ORA as Neutral (3) -

Orora will now trade ex-capital return and special dividend totalling 49.7c but will conduct a 0.8 for one share consolidation to adjust for the return, implying no change to share price ceteris paribus. Trading will resume tomorrow.

That said, the broker has reduced its target to $2.44 from $2.75 to reflect a change of valuation model and fx movements.

The broker has switched to an average of sum-of-the-parts and discounted cash flow valuation from a prior SoP only to better reflect longer term recovery prospects. Neutral retained.

Target price is $2.44 Current Price is $2.31 Difference: $0.13
If ORA meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.69, suggesting upside of 21.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Macquarie rates PNI as Outperform (1) -

Pinnacle Investment Management has reported a 3.8% increase in funds under management in May from April, reflecting a rising market but little in the way of net funds flows, the broker notes.

The broker has marked to market, leading to a target increase to $4.48 from $4.35. The fund manager provides a high quality, high beta exposure to markets, the broker suggests. Outperform retained.

Target price is $4.48 Current Price is $4.13 Difference: $0.35
If PNI meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting upside of 21.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

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

SG Fleet has the opportunity to better monetise its base via additional products and services. Still, Morgan Stanley has difficulty reconciling longevity and materiality and suspects competitors may close the product gap.

Equal-weight rating maintained. Target is reduced to $2.00 from $2.45. Industry view: In Line.

Target price is $2.00 Current Price is $1.70 Difference: $0.3
If SGF meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

UBS rates SIG as Upgrade to Neutral from Sell (3) -

UBS estimates a combined earnings benefit of $8m for Sigma Healthcare from 2021 on the basis of the pharmacy wholesale funding in the seventh Community Pharmacy Agreement.

Earnings forecasts are updated accordingly, resulting in upgrades of 11-12% over the forecast period.

Any benefit, nevertheless, will be required to offset PBS price reductions and higher logistics/freight costs.

Rating is upgraded to Neutral from Sell as the stock is now considered fair value. Target is raised to $0.61 from $0.53.

Target price is $0.61 Current Price is $0.62 Difference: minus $0.01 (current price is over target).
If SIG meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.61, suggesting upside of 0.0% (ex-dividends)

The company's fiscal year ends in January.

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

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

Smartgroup maintains a premium to its listed peers but Morgan Stanley finds it hard to envisage a further re-rating as it is most exposed to novated commission headwinds.

The broker retains Equal-weight rating. Target falls to $6.70 from $8.00. Industry view: In Line.

Target price is $6.70 Current Price is $6.55 Difference: $0.15
If SIQ meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.01, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates SYD as Downgrade to Lighten from Hold (4) -

Passenger numbers fell -97% in May. On the positive side, Ord Minnett notes Standard and Poor's retained its credit rating of BBB-plus with a negative outlook, given the range of measures undertaken by the company.

Ord Minnett reduces international traffic forecasts for 2020, given a reduced likelihood of broader international travel until 2021.

The stock is trading ahead of the target, which has been reduced to $5.10 from $5.60, and the rating is downgraded to Lighten from Hold.

Target price is $5.10 Current Price is $6.05 Difference: minus $0.95 (current price is over target).
If SYD meets the Ord Minnett target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.32, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Morgans rates WBC as Add (1) -

Morgans has a positive view on the major banks at current share prices, with the exception of Commonwealth Bank ((CBA)).

While system credit growth is subdued, the major banks are expected to regain home lending market share amid funding stress for the non-bank lenders.

Low interest rates are expected to continue being a headwind to net interest margins.

Westpac remains the broker's preferred major bank and a final dividend is expected to be declared in November. Add rating maintained. Target rises to $22.50 from $19.00.

Target price is $22.50 Current Price is $18.17 Difference: $4.33
If WBC meets the Morgans target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $20.34, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Macquarie rates WGN as Underperform (5) -

The Queensland court has deemed Boral’s (BLD)) October pricing notice to be valid, which confirms a lower price base has been established.

The broker estimates the potential for a -15% or more price reduction. Lower prices represent ongoing market risk which is exacerbated for Wagners given existing pricing pressures.

With the court issue now out of the way, the broker increases its target to $1.05 from 80c, but market risk, along with balance sheet questions, keeps the broker on Underperform.

Target price is $1.05 Current Price is $1.15 Difference: minus $0.1 (current price is over target).
If WGN meets the Macquarie target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.08, suggesting downside of -8.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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