Australian Broker Call

Morgans rates ANZ as Add (1) -

Morgans retains its Overweight stance on the major banks given robust dividend yields and potential for further capital management. Medium-term cost efficiency is also on the up, and considered attractive.

The analyst expects a rising interest rate environment will support earnings, the only negative being intense mortgage competition. However, the aforementioned tailwinds should largely offset this.

The broker maintains an Add rating and $31 target price for ANZ Bank. Westpac Bank ((WBC)) is Morgans preferred exposure in the sector.

Target price is $31.00 Current Price is $27.03 Difference: $3.97
If ANZ meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $29.46, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates APX as Buy (1) -

At first glance, Citi says Amazon’s entry into the fully managed data-labeling service space appears negative for Appen in terms of additional required investment and overall competition.

However, Citi says Amazon's entry also indicates continuing demand for Appen's services, despite concerns about self-learning systems. 

While there may be more competition in the Enterprise space, competition with the company's major technology customers shouldn't be impacted, according to Citi. Buy rating and $17.10 target price are retained.

Target price is $17.10 Current Price is $9.75 Difference: $7.35
If APX meets the Citi target it will return approximately 75% (excluding dividends, fees and charges).

Current consensus price target is $12.78, suggesting upside of 38.3% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates BHP as Outperform (1) -

The collapse of BHP Group's dual listing looks set to progress, following a final decision from the company's board.

Macquarie notes the company will unify under the BHP Group Limited banner, increasing BHP Group's ASX200 weighting to about 9.5%. 

Macquarie maintains an Outperform rating. Target price decreases to $51.00 from $52.00.

Target price is $51.00 Current Price is $40.23 Difference: $10.77
If BHP meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $43.55, suggesting upside of 10.2% (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: 0.5

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

Morgan Stanley rates BHP as No Rating (-1) -

BHP's board has decided that BHP Limited shares will replace BHP PLC shares upon unification, pending UK court and National Treasury of South Africa approval.

Morgan Stanley expects the deal, combined with the potential petroleum demerger and sale of thermal coal operations, will boost BHP's ESG credentials and simplify its structure.

The company plans to publish a prospectus for new LTD shares for PLC shares most likely on December 8, along with a Petroleum proforma release.

General meetings will be held on January 20, and it is expected January 28 will be the last day of PLC share trading prior to unification on January 31.

Management expects the shift should increase BHP's weighting in the S&P/ASX200.

Morgan Stanley is unable to provide a rating or target price on BHP Group. Industry view: In-Line.

Current Price is $40.23. Target price not assessed.

Current consensus price target is $43.55, suggesting upside of 10.2% (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: 0.5

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

Ord Minnett rates BHP as No Rating (-1) -

Ord Minnett has made material reductions to its China steel production assumptions. As a result, the strategists have lowered iron ore price forecasts by -12% to US$92/t in 2022 and by -10% to US$90/t in FY23.

The broker is under rating restriction for BHP Group so offers no target price or rating.

Current Price is $40.23. Target price not assessed.

Current consensus price target is $43.55, suggesting upside of 10.2% (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: 0.5

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

Morgans rates CBA as Reduce (5) -

Morgans retains an Overweight stance on the major banks, citing robust dividend yields, potential for further capital management, and better medium-term cost efficiency.

The analyst expects a rising interest rate environment will support earnings, the only negative being intense mortgage competition, which should be largely offset by the aforementioned tailwinds.

The broker maintains its Reduce rating and $73 target price for Commonwealth Bank. Westpac Bank ((WBC)) is Morgans preferred exposure in the sector.

Target price is $73.00 Current Price is $96.61 Difference: minus $23.61 (current price is over target).
If CBA meets the Morgans target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $87.25, suggesting downside of -10.4% (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

Citi rates CSL as Neutral (3) -

While CSL neither confirmed nor denied recent press speculation about a potential bid for Switzerland-listed Vifor Pharma, Citi estimates any transaction would likely be EPS accretive given CSL's significantly higher multiple to Vifor.

Neutral rating and $325 target are maintained.

Target price is $325.00 Current Price is $297.67 Difference: $27.33
If CSL meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $311.23, suggesting upside of 5.5% (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: 0.3

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

Credit Suisse rates CSL as Neutral (3) -

The press is speculating CSL will take over Swiss pharma company Vifor. Neither company has commented, but Vifor shares jumped 21%.

Vifor Pharma is one of the largest Swiss pharmaceutical companies and a global leader in the treatment of iron deficiency. It has established a presence in the nephrology market and seeks to attain global leadership in the segment of cardiorenal therapies.

While Vifor is a market leader in IV iron therapy and focuses on rare diseases, iron deficiency, nephrology and cardio-renal are very different therapeutic areas from CSL's, the broker notes. If CSL were to pursue such an acquisition, it would be a significant shift from its core competency and core therapeutic areas.

Hence little room for synergies, making CSL's rationale unclear. Neutral and $315 target retained.

Target price is $315.00 Current Price is $297.67 Difference: $17.33
If CSL meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $311.23, suggesting upside of 5.5% (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: 0.3

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

Ord Minnett rates FMG as Downgrade to Hold from Buy (3) -

Ord Minnett has made material reductions to its China steel production assumptions. As a result, the strategists have lowered iron ore price forecasts by -12% to US$92/t in 2022 and by -10% to US$90/t in FY23.

The broker lowers its target price for Fortescue Metals Group to $20 from $22 and downgrades to Hold from Buy given the company is trading near the broker's net-present-value estimate.

Target price is $20.00 Current Price is $17.10 Difference: $2.9
If FMG meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $16.06, suggesting downside of -6.3% (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: -0.1

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

Morgan Stanley rates IAG as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley downgrades IAG to non-consensus Underweight and cuts the target price to $3.75 from $4.80, listing 10 contributing factors that should increase the company's capital costs and hurt the company's ESG prospects.

The broker cites IAG's skew to CAT-prone short-tail lines, NZ reform risks, higher catastrophe-cost volatility; higher reinsurance pricing and tighter access; quota share reinsurance renewal risks; regulatory risk on personal reinsurance pricing; capital regulatory risk; consumer data right concerns; CDR regulation; reserving risk; and a remuneration report strike.

But wait, there's more.

Morgan Stanley casts a nervous eye to margin headwinds and market share losses; and expects an extended $1.8bn capital buffer may be required to offset reduced capital flexibility - although the release of business interruption combined with the liberation of tax assets could be another option.

Target price is $3.75 Current Price is $4.47 Difference: minus $0.72 (current price is over target).
If IAG 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 $5.20, suggesting upside of 20.1% (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

Ord Minnett rates LGL as Initiation of coverage with Buy (1) -

Ord Minnett initiates coverage on Lynch Group with a Buy rating and $4.70 target price. The company is a floral supplier within Australia and to China.

The broker is more effusive about the China opportunity, citing a return on invested capital (ROIC) hurdle of more than 25% in a market that is 13 times the size of Australia. Geopolitical risk is thought lessened as 80% of China production is sold domestically.

Ord Minnett says the opportunity in China's highly-fragmented market lies in providing a service that removes various wholesale layers.

Meanwhile, the company is expected to continue gaining Australian retail share as supermarkets garner a greater proportion of sales.

Target price is $4.70 Current Price is $3.32 Difference: $1.38
If LGL meets the Ord Minnett target it will return approximately 42% (excluding dividends, fees and charges).

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: 1.0

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

Morgans rates MGH as Add (1) -

Following Maas Group's investor day, Morgans continues to see organic upside potential in the Residential Real Estate business over FY23/24. The Commercial Property pipeline is also expected to generate solid value.

While the analyst's forecasts are unchanged, the Commercial Property opportunity outweighs the effect of a reduction in peer multiples, and Citi raises its target price to $5.85 from $5.65. Add rating is retained.

Target price is $5.85 Current Price is $5.30 Difference: $0.55
If MGH meets the Morgans target it will return approximately 10% (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

Ord Minnett rates MIN as Hold (3) -

Ord Minnett has made material reductions to its China steel production assumptions. As a result, the strategists have lowered iron ore price forecasts by -12% to US$92/t in 2022 and by -10% to US$90/t in FY23.

The broker lowers its target price for Mineral Resources to $40 from $47. Hold rating retained despite the company being the most expensive iron ore stock under Ord Minnett's coverage.

Target price is $40.00 Current Price is $44.78 Difference: minus $4.78 (current price is over target).
If MIN meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $51.43, suggesting upside of 16.8% (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

Morgans rates NAB as Hold (3) -

Morgans retains its Overweight stance on the major banks, citing robust dividend yields, potential for further capital management, and better medium-term cost efficiency.

The analysts expect a rising interest rate environment will support earnings, the only negative being intense mortgage competition, which should be largely offset by the aforementioned tailwinds.

The broker maintains its Hold rating and $28.50 target price for National Australia Bank. Westpac Bank ((WBC)) is Morgans preferred exposure in the sector.

Target price is $28.50 Current Price is $27.96 Difference: $0.54
If NAB meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $29.47, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates NCK as Outperform (1) -

Macquarie notes Nick Scali has retained sales and margins in line with expectations in the September quarter despite lockdown-induced shipping delays, rising freight costs and sourcing challenges. 

Despite more than 55% of the total store network being affected by closures, the sales order bank is largely at the same level as last year given delays.

Incorporating the Plush acquisition, EPS forecasts rise 5%, 16% and 17% through to FY24.

Macquarie resumes coverage with an Outperform rating and a target price of $15.50.

Target price is $15.50 Current Price is $14.47 Difference: $1.03
If NCK meets the Macquarie target it will return approximately 7% (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

Macquarie rates OZL as Outperform (1) -

Development at the Oz Minerals' Carrapateena project continues, the company starting work on the Block Cave decline, which, when completed, will enable the project to move forward with first Block Cave production in 2026, says Macquarie. 

Block Cave is estimated to increase annual copper production at the site to more than 120,000 tonnes per annum by 2029, from a current approximate 80,000 tonnes per annum. 

Outperform rating and $32 target price retained.

Target price is $32.00 Current Price is $26.41 Difference: $5.59
If OZL meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $24.83, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates RIO as Downgrade to Hold from Buy (3) -

Ord Minnett has made material reductions to its China steel production assumptions. As a result, the strategists have lowered iron ore price forecasts by -12% to US$92/t in 2022 and by -10% to US$90/t in FY23.

The broker lowers its target price for Rio Tinto to $102 from $113.

Ord Minnett downgrades the rating to Hold from Buy, expecting continuing operational challenges may prompt marginal investors to prefer other stocks in the sector.

Target price is $102.00 Current Price is $95.52 Difference: $6.48
If RIO meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $105.71, suggesting upside of 12.5% (ex-dividends)

The company's fiscal year ends in December.

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: 0.3

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

Macquarie rates RMD as Upgrade to Outperform from Neutral (1) -

Although semiconductor shortages are creating near-term pressure on device supply for ResMed and peers, Macquarie notes industry commentary suggests a backlog of new patient diagnoses will be addressed by 2026. 

Macquarie expects an increase in industry device volume growth from 2023 leading to potential share gains for ResMed. The broker is forecasting earnings per share 18% and 12% ahead of consensus for FY23 and FY24. 

The rating is upgraded to Outperform from Neutral and the target price increases to $39.00 from $38.00.

Target price is $39.00 Current Price is $36.09 Difference: $2.91
If RMD meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $39.10, suggesting upside of 6.9% (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: 0.5

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

Macquarie rates RMS as Outperform (1) -

Ramelius Resources has bought a 91% stake in Apollo Consolidated ((AOP)), triggering compulsory acquisition of the remaining shares. Macquarie notes shareholders were offered $0.34 cash and 0.1778 Ramelius Resources share for each Apollo Consolidated share. 

Macquarie cuts long-term EPS estimates -6% to -8% EPS to account for the acquisition, citing a reduced closing cash balance and additional shares. However, the broker notes primary asset Lake Rebecca has the potential to address longer term production gaps. 

Outperform rating and $1.90 target price are retained. 

Target price is $1.90 Current Price is $1.45 Difference: $0.45
If RMS meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting upside of 35.9% (ex-dividends)

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 SHL as Neutral (3) -

Citi upgrades its forecasts in light of the omicron variant and after taking into account global vaccination/booster rates. Target price rises to $44 from $42.50 on ongoing elevated PCR testing. Neutral rating retained.

Should the omicron variant became the dominant global strain over the next six months but result in a significantly less severe illness, forecast earnings numbers may be in jeopardy, cautions the analyst.

Target price is $44.00 Current Price is $42.62 Difference: $1.38
If SHL meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $45.13, suggesting upside of 5.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Morgans rates TRP as Initiation of coverage with a Speculative Buy (1) -

Morgans initiates coverage on Tissue Repair with a Speculative Buy rating and $1.43 target price.

The newly listed drug development company is developing advanced wound-healing products for applications in the chronic wound and aftercare of cosmetic procedures.

The broker derives confidence from efficacy measures across numerous trials, and believes recent share-price weakness presents an opportunity. There's thought to be considerable upside should regulatory clearances be achieved.

Morgans says the company will launch its cosmetic product in 2022 in Australia, where a  significantly lower burden of proof is required.

Target price is $1.43 Current Price is $0.56 Difference: $0.87
If TRP meets the Morgans target it will return approximately 155% (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 TWE as Neutral (3) -

Credit Suisse has rejigged its Treasury Wine Estates model to account for key forecasts and trends under the company's new divisional model. This has led to no material change to forecasts or valuation.

For Treasury Premium brands the broker sees room for a -20% reduction in FY23 costs on lower local grape prices. For Treasury Americas, the company has identified 3,000 key accounts and is increasing its focus on bricks-and-mortar distribution.

For Penfolds, the broker applies a 20x earnings multiple in line with historical luxury goods companies.

Neutral rating and $12.45 target retained.

Target price is $12.45 Current Price is $11.79 Difference: $0.66
If TWE meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $13.45, suggesting upside of 15.9% (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

Morgans rates WBC as Add (1) -

Morgans retains an Overweight stance on the major banks citing robust dividend yields, potential for further capital management, and better medium-term cost efficiency.

The analyst expects a rising interest rate environment will support earnings, the only negative being intense mortgage competition, which should be largely offset by the aforementioned tailwinds.

Westpac Bank is Morgans preferred exposure in the sector. The analysts conclude that despite appearances, the bank's net interest margin (NIM) underperformance relative to National Australia Bank ((NAB)) in the 2H21 is addressable.

Target price is $30.50 Current Price is $20.70 Difference: $9.8
If WBC meets the Morgans target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $26.33, suggesting upside of 27.0% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates WOW as Sell (5) -

UBS feels there may be greater ACCC risk for Woolworths Group than for Wesfarmers ((WES)) in their competing bids for Australian Pharmaceutical Industries ((API)).

Woolworths has offered a cash consideration of $1.75/share, 13% higher than the Wesfarmers bid.

Management has allowed Woolworths Group to undertake confirmatory due diligence.

Target price is $37.00 Current Price is $39.59 Difference: minus $2.59 (current price is over target).
If WOW 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 $38.17, suggesting downside of -6.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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