Australian Broker Call

Macquarie rates BHP as Neutral (3) -

Following a 1Q production preview for bulk miners, Macquarie continues to prefer South32 for its upcoming total expected shareholder return compared to the iron ore bulk plays. For the latter, Rio Tinto is preferred over BHP Group and Fortescue.

The broker's analysis suggests potential 1Q EPS misses for BHP, Fortescue and South32 compared to consensus forecasts driven by weaker commodities prices and lower production.

The $42 target and Neutral rating for BHP Group are maintained.

Target price is $42.00 Current Price is $44.86 Difference: minus $2.86 (current price is over target).
If BHP meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $45.27, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.3

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

Macquarie rates COE as Outperform (1) -

Macquarie suggests Cooper Energy has turned the corner with the Basker Manta Gummy (BMG) subsea oil decommisioning nearing completion, along with improving production at the Orbost gas plant.

Orbost is delivering structurally rising production rates and management has reduced the anticipated cost of a third absorber by -$10m, explains the analyst.

The broker also highlights the company's Otway (Athena) plant is one of the few options for locally sourced gas in Victoria as it is cheaper, more certain and generates lower emissions compared to LNG imports.

The Outperform rating is retained and the target price increases by 35% to 27c largely because of the broker's increased valuation for Otway.

Target price is $0.27 Current Price is $0.22 Difference: $0.055
If COE meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $0.25, suggesting upside of 8.7% (ex-dividends)

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

Macquarie rates CPU as Outperform (1) -

Macquarie raises its target for Computershare to $29 from $28 after marking-to-markets for interest rates.

Since mid-February, all forward interest rate curves have increased, and the broker is now forecasting FY24 Margin Income of $797m.

The analyst explains each 25bps of non-hedged Margin Income yield equates to an around 0.7% impact on group EPS.

The Outperform rating is maintained.

Target price is $29.00 Current Price is $26.42 Difference: $2.58
If CPU meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $28.83, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.8

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

Bell Potter rates EOS as Buy (1) -

Electro Optic Systems has successfully completed a $35m placement, with the proceeds intended to fund future growth through the procurement of long lead time critical supplies, specifically remote weapon system cannons.

Bell Potter has updated its financial model for the placement and the yet to be completed SPP, for which the broker assumes 100% up-take from retail shareholders in line with the healthy demand from institutional investors.

Bell Potter views the equity raise and investment in long lead-time critical supplies as a prudent decision from management, reflective of its strengthened financial position and improved visibility over near-term sales opportunities.

Buy retained, target falls to $2.20 from $2.30 on dilution.

Target price is $2.20 Current Price is $1.58 Difference: $0.62
If EOS meets the Bell Potter target it will return approximately 39% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Citi rates EVN as Buy (1) -

Citi has updated its gold price forecasts, now calling for US$2300-2400/oz in 3Q. Supportive factors have been identified as a weaker US dollar following on from the Fed pivot by June, plus Citi is still calling for a US recession by the middle of this year.

For Evolution Mining, production forecasts have been scaled back due to excessive rainfall. Estimates have lifted.

Buy rating and target price of $3.90. Copper exposure and de-leveraging make Evolution Mining Citi's preferred exposure in the sector.

Target price is $3.90 Current Price is $3.77 Difference: $0.13
If EVN meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.73, suggesting downside of -2.1% (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

Macquarie rates FMG as Underperform (5) -

Following a 1Q production preview for bulk miners, Macquarie continues to prefer South32 for its upcoming total expected shareholder return compared to the iron ore bulk plays. For the latter, Rio Tinto is preferred over BHP Group and Fortescue.

The broker's analysis suggests potential 1Q EPS misses for BHP, Fortescue and South32 compared to consensus forecasts driven by weaker commodities prices and lower production.

The analyst continues to see downside risk for Fortescue due to high operational leverage and low-quality hematite iron ore production facing competition from West African supply.

The Underperform rating and $14 target are unchanged.

Target price is $14.00 Current Price is $25.19 Difference: minus $11.19 (current price is over target).
If FMG meets the Macquarie target it will return approximately minus 44% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.79, suggesting downside of -16.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Macquarie rates MIN as Outperform (1) -

Following a 1Q production preview for bulk miners, Macquarie continues to prefer South32 for its upcoming total expected shareholder return compared to the iron ore bulk plays. For the latter, Rio Tinto is preferred over BHP Group and Fortescue.

The broker's analysis suggests potential 1Q EPS misses for BHP, Fortescue and South32 compared to consensus forecasts driven by weaker commodities prices and lower production.

For Mineral Resources, the analyst expects the iron-ore division to deliver marginally lower shipments in the March quarter with decreased output from both Utah Point and Yilgarn Hub. Outperform. Target $79.

Target price is $79.00 Current Price is $70.37 Difference: $8.63
If MIN meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $70.73, suggesting downside of -0.7% (ex-dividends)

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

Morgan Stanley rates MTS as Initiation of coverage with Equal-weight (3) -

Morgan Stanley initiates coverage of Metcash with an Equal-weight rating due to structural headwinds in Food driven by investments from competitors in supply chain, convenience and e-commerce. Industry View: In-line.

According to the analysts, the Hardware exposure will be a source of growth, given the underlying growth profile of Total Tools and further consolidation opportunities. However, there are also headwinds from slowing sales trends.

Within staples, Morgan Stanley prefers Endeavour Group ((EDV)) and Metcash over Coles Group ((COL)) and Woolworths Group ((WOW)).

A $4.15 target is set for Metcash.

Target price is $4.15 Current Price is $3.88 Difference: $0.27
If MTS meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.14, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

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

Citi has initiated coverage of the ASX-listed Newmont Corp CDI with a Buy rating and $69 price target, which is a direct translation of the US$45 target for the shares listed in homeland USA.

Newmont Corp is nowadays the owner of former ASX-listed Newcrest Mining.

The positive rating is supported by a positive view on the direction of the price of gold bullion, expected to hit US$2300/oz in the second half of 2024.

The key question, Citi acknowledges, is whether management at the gold producer will be able to deliver on its strategies and promises.

To outperform gold, Newmont needs to both meet guidance and grow free cash flow per share. The broker is more confident about the latter.

Target price is $69.00 Current Price is $56.60 Difference: $12.4
If NEM meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.8

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

Citi rates NST as Neutral (3) -

Citi has updated its gold price forecasts, now calling for US$2300-2400/oz in 3Q. Supportive factors have been identified as a weaker US dollar following on from the Fed pivot by June, plus Citi is still calling for a US recession by the middle of this year.

For Northern Star Resources, production forecasts have been scaled back due to excessive rainfall.

Target lifts to $14.50 from $13 on higher forecasts. Neutral.

Target price is $14.50 Current Price is $14.67 Difference: minus $0.17 (current price is over target).
If NST 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 $14.41, suggesting downside of -2.6% (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 OML as Initiation of coverage with Buy (1) -

UBS initiates coverage on "quality" outdoor media business oOh!media with a Buy rating, noting an around 39% market share in A&NZ, with leverage to out-of-home's (OOH) growing share of the advertising market. A $2.05 target is set.

The broker expects the high fixed cost base within oOh!media will generate strong operating leverage, with the Australian advertising market set to recover in the 2H of this year.

The company is trading at an "excessive" -34% discount (at this stage of the advertising cycle) to the Small Industrials one-year forward price earnings ratio, in the analyst's view.

Target price is $2.05 Current Price is $1.68 Difference: $0.37
If OML meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $1.89, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in December.

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

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

Following the recent share price rally, Macquarie downgrades its rating for QBE Insurance to Neutral from Outperform but raises the target to $18 from $17.10 largely due to updated currency forecasts.

The company is currently trading at a 10.4% premium to weighted international peers on a two-year forward PE multiple compared with the three-year historical average premium of circa 0.5%, explains the analyst.

The broker anticipates the FY24 combined operating ratio (COR) will be 93.8% which compares with management's guidance for 93.5%.

Target price is $18.00 Current Price is $18.20 Difference: minus $0.2 (current price is over target).
If QBE meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.96, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

This company reports in USD. 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

Macquarie rates RIO as Neutral (3) -

Following a 1Q production preview for bulk miners, Macquarie continues to prefer South32 for its upcoming total expected shareholder return compared to the iron ore bulk plays. For the latter, Rio Tinto is preferred over BHP Group and Fortescue.

The broker's analysis suggests potential 1Q EPS misses for BHP, Fortescue and South32 compared to consensus forecasts driven by weaker commodities prices and lower production.

Compared to consensus forecasts, Macquarie expects Rio Tinto to miss Pilbara sales by -3%, mined copper to miss by -11% while volumes for aluminium and bauxite should be broadly in line.

The Neutral rating is unchanged for Rio Tinto. Target $121.

Target price is $121.00 Current Price is $123.06 Difference: minus $2.06 (current price is over target).
If RIO meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $128.17, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.3

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

Macquarie rates RMS as Neutral (3) -

Preliminary 3Q results for Ramelius Resources show production and free cash flow (FCF) beats of 20% and $44m, respectively, when compared to Macquarie's forecasts. Both Edna May and Mt Magnet had stronger-than-expected production.

Management alluded to a FY24 guidance upgrade and the broker now anticipates production and costs (AISC) will be better than current guidance ranges.

The Neutral rating is maintained and the broker's target price rises to $1.90 from $1.70 on an upgrade to earnings forecasts and a valuation roll-forward.

Target price is $1.90 Current Price is $1.91 Difference: minus $0.005 (current price is over target).
If RMS meets the Macquarie target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.07, suggesting upside of 5.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Citi rates RRL as Sell (5) -

McPhillamys has become a relatively expensive option for Regis Resources, comments Citi, as management has lifted capex guidance for the greenfield project to -$1bn-1.06bn, including pre-production capex spent/forecast.

On the broker's calculations, gold needs to be priced above A$2500/oz for McPhillamys to equal the cost of capital. Irrespective of difficult economics, the broker does believe the project will get the go-ahead, also because production at both Duketon and Tropicana is poised for decline.

Citi sees two factors overhanging the share price: FID and funding. Sell rating retained. Target lifts to $1.30 from $1.25 on materially upgraded forecasts.

Target price is $1.30 Current Price is $1.94 Difference: minus $0.635 (current price is over target).
If RRL meets the Citi target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.14, suggesting upside of 7.7% (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

Macquarie rates RRL as Outperform (1) -

Regis Resources now estimates a McPhillamys' pre-production capital cost of -$960-1,055m, materially higher than Macquarie's prior estimate of -$650m and higher than the consensus range of between -$550-650m. 

As the broker now forecasts the project could have a negative net present value (NPV), McPhillamys is removed from the analyst's base case valuation for Regis. This move has little impact on the Regis valuation as the prior valuation for the project was small.

There is now a hurdle for the project's near-term development, in the broker's view, and management's focus will likely return to the existing operations.

The Outperform rating is maintained and the target slips to $2.60 from $2.70.

Target price is $2.60 Current Price is $1.94 Difference: $0.665
If RRL meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 7.7% (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

Morgan Stanley rates RRL as Overweight (1) -

Substantial progress has been made towards completion of the definitive feasibility study (DFS) for the McPhillamys Gold project, according to management at Regis Resources.

Management expects construction and pre-production capex of -$960-1055m compared to the broker's original -$508m forecast.

Assuming construction begins in the 1H of FY25 and the build cost is around -$1bn, Morgan Stanley believes additional borrowing costs for Regis across FY25-26 will be -$135m.

Management expects the DFS will be completed by the end of FY24, a delay from the previous expected date in the 3Q of FY24.

The Overweight rating and $2.45 target are unchanged. Industry view is Attractive.

Target price is $2.45 Current Price is $1.94 Difference: $0.515
If RRL meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 7.7% (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

Macquarie rates S32 as Outperform (1) -

Following a 1Q production preview for bulk miners, Macquarie continues to prefer South32 for its upcoming total expected shareholder return compared to the iron ore bulk plays. For the latter, Rio Tinto is preferred over BHP Group and Fortescue.

The broker's analysis suggests potential 1Q EPS misses for BHP, Fortescue and South32 compared to consensus forecasts driven by weaker commodities prices and lower production.

The Outperform rating and $3.80 target are maintained for South32.

Target price is $3.80 Current Price is $3.03 Difference: $0.77
If S32 meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $3.71, suggesting upside of 17.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.8

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

Shaw and Partners rates SMP as Buy (1) -

The RBA has stated that it’s “time to review the surcharging framework and consider whether it is still fit for purpose” and that “it may be time for debit card payments to be surcharge free”.

While it is still early days, Shaw and Partners believes the worst-case impact of surcharge free debit card payments would be minor, if any, for SmartPay.

Surcharge-free debit card payments would be extremely challenging to implement, and Shaw disputes the notion that the cost of debit card acceptance is equal to the cost of accepting cash.

No change to forecasts, which do not yet include the NZ rollout. Buy and $2.20 target retained.

Target price is $2.20 Current Price is $1.35 Difference: $0.85
If SMP meets the Shaw and Partners target it will return approximately 63% (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

UBS rates SUN as Buy (1) -

Suncorp Group has announced the sale of its NZ Life business to Resolution Life for NZ$410m and UBS, in a quick response, considers it an attractive deal in both strategic and financial terms.

Management at the slimming down insurer can now concentrate on its attractive general insurance operations, the broker surmises.

If the divestment of the banking business is concluded later this year, Suncorp Group will be simply a general insurer on both sides of the Tasman, and UBS likes that idea.

UBS sees no reason for the current valuation discount to persist. Buy. Target $16.80.

Target price is $16.80 Current Price is $16.35 Difference: $0.45
If SUN meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $16.31, suggesting downside of -0.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Macquarie rates WGX as Outperform (1) -

Preliminary 3Q metrics for Westgold Resources were "soft", according to Macquarie, with production and fee cash flow (FCF) missing the broker's forecasts by -12% and -$10m, respectively.

Management downgraded FY24 production guidance by -12% and cost (AISC) guidance proved -16% worse than prior guidance. While the 3Q closing balance for cash, bullion and liquid assets balance improved by $9m, it still fell -$10m short of Macquarie's expectation.

While all the above is disappointing, the broker still expects organic production growth towards 300kozpa driven by development of Great Fingall and the expansion at Bluebird.

The target falls by -7% to $2.70. Outperform.

Target price is $2.70 Current Price is $2.36 Difference: $0.34
If WGX meets the Macquarie target it will return approximately 14% (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