Australian Broker Call

Morgans rates ALX as Downgrade to Hold from Add (3) -

Morgans downgrades the rating for Atlas Arteria to Hold from Add, given recent share price strength. The target price rises to $6.35 from $6.31.

The broker forecasts DPS of 33 cents over the next 12 months, implying a 5.2% cash yield on the current share price. With DPS growth, this yield lifts to greater than 8% by 2025-26. It's felt  this will appeal to income investors and to those looking for a covid-recovery trade. 

Target price is $6.35 Current Price is $6.40 Difference: minus $0.05 (current price is over target).
If ALX meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.29, suggesting upside of 0.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Macquarie rates CNU as Neutral (3) -

Macquarie reviews the regulatory landscape and trajectory for dividends. The dividend trajectory offers potential upside from current levels yet regulatory uncertainty, a three-year dividend transition period and potential for higher interest rates currently detract from this view.

The broker also assesses there are questions over sustainability of free cash flow in future regulatory periods. Neutral maintained. Target is reduced to NZ$6.91 from NZ$8.01.

Current Price is $6.07. Target price not assessed.

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.0

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

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

Macquarie reviews its outlook for Coles Group ahead of the strategy briefing on June 17. The broker envisages upside from normalising consumer behaviour with comparable sales narrowing.

The stock screens attractively on valuation and the broker switches its preference to staples, upgrading to Outperform from Neutral.

Coles is expected to be a beneficiary from the unwinding of the "local shopping" trend. Coles supermarkets are over-indexed to shopping centres and the CBD, areas most affected by the pandemic. Target is raised to $18.20 from $17.30.

Target price is $18.20 Current Price is $16.67 Difference: $1.53
If COL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $18.16, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Credit Suisse rates DMP as Underperform (5) -

Domino's Pizza Enterprises will acquire the Taiwan Domino's business for $79m. Management envisages an opportunity to significantly expand the number of stores.

Network sales per store and relative earnings are materially lower relative to Domino's Japan and therefore there is potential for material upside, Credit Suisse observes.

Completion is expected in the first half of FY22 and subject to local approvals. The company estimates the acquisition will be 2% accretive to earnings per share on an FY20 proforma basis. Credit Suisse maintains an Underperform rating and $70.71 target.

Target price is $70.71 Current Price is $115.30 Difference: minus $44.59 (current price is over target).
If DMP meets the Credit Suisse target it will return approximately minus 39% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $97.92, suggesting downside of -17.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Macquarie rates DMP as Neutral (3) -

Domino's Pizza Enterprises will acquire Domino's Taiwan for $79m and as a result Asian store count targets are upgraded by around 27%.

Macquarie observes Domino's Pizza is a high-quality business with a diversified earnings mix across multiple geographies. Nevertheless, the benefits from this particular acquisition will take time to be realised.

As the stock is trading slightly ahead of target, Macquarie retains a Neutral rating with a $108.50 target.

Target price is $108.50 Current Price is $115.30 Difference: minus $6.8 (current price is over target).
If DMP 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 $97.92, suggesting downside of -17.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

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

Ord Minnett suggests labour costs and availability are turning into a key focal point for the industry, and possibly trigger a number of profit warnings.

Based upon in-house research, the situation is most acute in Western Australia.

Downer EDI is the most labour-intensive business under the broker's coverage, and with the lowest margins. Ord Minnett has decided to downgrade to Lighten from Hold, with the target price falling to $5.30 from $5.90.

Target price is $5.30 Current Price is $5.94 Difference: minus $0.64 (current price is over target).
If DOW 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 $6.09, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

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

Morgan Stanley hails the achievement of a "clean energy" transition, noting this business is still in a strong cash position. Nevertheless, the high implied value for the lithium business leaves a significant valuation gap, at around -15%.

Hence, the broker downgrades to Underweight from Equal-weight.

Morgan Stanley suspects IGO Ltd could chase additional opportunities or increase dividend payments and anticipates dividend yields could reach 6% in FY24.  Target is raised to $6.35 from $5.65. Industry view: Attractive.

Target price is $6.35 Current Price is $7.60 Difference: minus $1.25 (current price is over target).
If IGO 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 $6.97, suggesting downside of -5.9% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates IRE as Hold (3) -

Morgans estimates a sale price of around $230m, after Iress announced the intention to divest the UK Mortgage business, with the intention to “distribute” surplus capital.

Management reaffirmed guidance for 7-10% segment profit growth. As the first quarter segment profit (constant currency) was flat, it implies to the analyst that growth is expected to be second-half weighted.

The analyst makes no changes to forecasts. The target price lifts to $11.37 from $10.95 after a valuation roll forward.

Target price is $11.37 Current Price is $12.57 Difference: minus $1.2 (current price is over target).
If IRE meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.04, suggesting downside of -14.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Morgan Stanley rates MGR as Overweight (1) -

Morgan Stanley believes the market is under appreciating the quality and scale of the office portfolio. The broker asserts it is important to remember that 48% of earnings come from the office business and this provides reasons to own the stock.

The portfolio is located mainly in Sydney which Morgan Stanley believes is a "good" bias, given the Sydney CBD is recovering more strongly than Melbourne.

The company has also a large buffer to mark up the value of its office portfolio having been less aggressive with the book valuations of the large landlords.

Overweight maintained. Target rises to $3.30 from $3.15. Industry view is In-Line.

Target price is $3.30 Current Price is $2.97 Difference: $0.33
If MGR meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.80, suggesting downside of -5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Citi rates PMV as Neutral (3) -

The analysts conclude Premier Investments continues to navigate the volatile retail environment very well as once again proven by management's latest guidance which is some 10% above Citi's forecast for FY21, as well as market consensus.

Lower rents, stronger margins and strong sales momentum are all part of the revised profit guidance, point out the analysts. It pleases them sales growth is being achieved with less discounting.

Nevertheless, Citi analysts believe at the current price, the shares require additional upgrades to the outlook for earnings growth to justify further upside.

Citi sticks with a Neutral rating, while the price target lifts to $27.40 from $26 on higher estimates.

Target price is $27.40 Current Price is $27.44 Difference: minus $0.04 (current price is over target).
If PMV meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.22, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates PMV as Neutral (3) -

Credit Suisse was impressed with the trading update, as guidance for FY21 retail earnings (EBIT) of $340-360m exceeded expectations.

In the second half the company cycled significant disruptions from the pandemic and there remain restrictions in Asia that are affecting trading.

Hence, uncertainty with respect to the short-term performance supports the broker's decision to retain a Neutral rating.

Total global sales for the first 18 weeks of the second half were up 70% and up 15.8% compared with the comparable 18 weeks in the second half of FY19. Target is raised to $26.70 from $25.05.

Target price is $26.70 Current Price is $27.44 Difference: minus $0.74 (current price is over target).
If PMV meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.22, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in July.

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 PMV as Outperform (1) -

Retail EBIT is expected in the range of $340-360m in FY21, ahead of Macquarie's prior estimates. Australasia continues to drive the performance.

Macquarie remains confident in the company's ability to deliver margins from FY22 that are in excess of those pre-pandemic, as a result of long-term re-basing of rents, the higher margin online channel and brand competitiveness.

Outperform rating and $31 target maintained.

Target price is $31.00 Current Price is $27.44 Difference: $3.56
If PMV meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $27.22, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in July.

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

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

With reference to M&A generally and multiples relating to the Japara Healthcare ((JHC)) takeover offer in particular, Morgans lifts the rating for Regis Healthcare to Add from Hold. The target price increases to $2.23 from $2.03.

The broker believes the increased level of M&A activity in the sector is likely to increase further, and a successful conclusion to the Japara Healthcare bid will likely attract more investor attention.

Target price is $2.23 Current Price is $2.06 Difference: $0.17
If REG meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 13.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Morgan Stanley rates RRL as Overweight (1) -

Morgan Stanley updates estimates following the completion of the Tropicana acquisition. This lifts FY21-22 estimates for earnings per share while FY23 estimates are reduced because of the delay now built into McPhillamys production estimates.

The broker retains an Overweight rating but reduces the target to $3.55 from $3.80, because of an estimated overpayment for the Tropicana assets. Industry view: Attractive.

Target price is $3.55 Current Price is $2.67 Difference: $0.88
If RRL meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 37.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

Citi rates SHV as Buy (1) -

Buy rating and target price of $6.80 remain in place as Citi analysts suggest the risk for almond crop prices remains to the upside as Californian drought conditions continue to worsen.

The analysts highlight 33% of the state is now in exceptional drought -the highest level- compared with 26% in late May and none this time last year.

Target price is $6.80 Current Price is $6.14 Difference: $0.66
If SHV meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

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

Macquarie observes the share price has had a strong run ahead of the upcoming de-merger of Endeavour Group. The broker likes the medium-term growth outlook while the increased focus on core business should drive efficiencies.

Yet, the rating is downgraded to Neutral from Outperform and the broker's preference is switched to Coles Group ((COL)). Macquarie believes the de-merger is priced into the stock and the valuation is now full. Target is steady at $44.50.

Target price is $44.50 Current Price is $42.91 Difference: $1.59
If WOW meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $42.53, suggesting downside of -2.2% (ex-dividends)

The company's fiscal year ends in June.

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