Australian Broker Call

Credit Suisse rates BSL as No Rating (-1) -

Responding to BlueScope Steel's second half guidance upgrade, with the company now anticipating earnings of $1.375-1.475bn from a previous $1.20-1.35bn, and integrating the Coil Coatings acquisition, Credit Suisse upgrades FY23 earnings 2% to $1.629m.

The broker expects Coil Coatings to provide a US$44m earnings contribution in the coming year, but anticipates the forward curve to drive North Star's spread down to US$377 per tonne in the first half. Credit Suisse remains -18% below consensus.

Due to research restrictions Credit Suisse is currently not rated.

Current Price is $18.16. Target price not assessed.

Current consensus price target is $24.53, suggesting upside of 34.5% (ex-dividends)

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 CDA as Outperform (1) -

Codan expects second half profit to match first half, taking FY22 to a record $100m, in line with Macquarie's forecasts. Management also noted the integration of both DTC and Zetron are tracking ahead of schedule, and their opportunity pipelines are expanding.

Key growth drivers for Minelab include further penetration of new geographic markets and new product releases that will drive market share gains.

The DTC and Zetron FY22 results could provide the market with more confidence around future M&A optionality, the broker suggests, given Codan’s strong cash generation. Valuation remains undemanding. Outperform and $11.60 target retained.

Target price is $11.60 Current Price is $7.73 Difference: $3.87
If CDA meets the Macquarie target it will return approximately 50% (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 DXI as Downgrade to Neutral from Outperform (3) -

Dexus Industria REIT has divested of a Sydney property at 17% above book value, with proceeds to be used to fund the development pipeline. Macquarie estimates the divestment is -0.6% dilutive to FY23 earnings.

The broker has nevertheless taken the opportunity to update its model for rising rates and low hedging. FY23-24 forecast earnings fall by -9%-plus.

Despite being attracted to the REIT’s development pipeline, Macquarie warns higher construction and interest costs could impact returns. Downgrade to Neutral from Outperform. Target falls to $3.25 from $3.59.

Target price is $3.25 Current Price is $3.18 Difference: $0.07
If DXI meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

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

Macquarie rates ELD as Outperform (1) -

Elders reported a first half profit of $91m compared to Macquarie's $65m forecast. FY22 earnings growth guidance has been upgraded to 30-40% above FY21, but the broker suggests this looks conservative.

The result was driven by a combination of market and seasonal factors, acquisitive growth and organic growth. Rural and Wholesale products were the standout with growth driven by strong demand for fertiliser and crop protection products following a favourable season.

At 15x FY22 forecast earnings, the broker believes valuation still looks attractive in the context. Outperform retained, target rises to $16.54 from $15.15.

Target price is $16.54 Current Price is $14.92 Difference: $1.62
If ELD meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $15.10, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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 ELD as Hold (3) -

Following forecast upgrades by Morgans after Elders' 1H result, the target price rises to $14.75 from $13.60. The Hold rating is retained on elevated multiples, the likelihood of slowing earnings growth from FY23 and the potential for cattle prices to fall from record levels.

Underlying earnings (EBIT) rose 80% for the half, a 9.5% beat versus the broker's forecast and 36% compared to the consensus estimate. Management upgraded FY22 earnings guidance and declared a partially franked interim dividend of 28cps. 

Target price is $14.75 Current Price is $14.92 Difference: minus $0.17 (current price is over target).
If ELD 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 $15.10, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in September.

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

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

UBS retains its US$1,500/oz long-term gold price forecast and expects supply chain pressures and opex/capex inflation to persist, along with the shortage of skilled labour.

For the producers, the broker retains a preference for new(er) mines benefiting from new infrastructure, highest grades and limited or brownfield capex.

While Evolution Mining is not the broker's preferred play at current prices, much risk is already priced-in and the rating is upgraded to Neutral from Sell. The target price slips to $4.05 from $4.13.

Target price is $4.05 Current Price is $3.72 Difference: $0.33
If EVN meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.32, 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

UBS rates GOR as Buy (1) -

UBS retains its US$1,500/oz long-term gold price forecast and expects supply chain pressures and opex/capex inflation to persist, along with the shortage of skilled labour.

For the producers, the broker retains a preference for new(er) mines benefiting from new infrastructure, highest grades and limited or brownfield capex.

UBS retains its Buy rating for Gold Road Resources and lowers its target price to $1.95 from $2.00.

Target price is $1.95 Current Price is $1.36 Difference: $0.59
If GOR meets the UBS target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $1.78, suggesting upside of 35.1% (ex-dividends)

The company's fiscal year ends in December.

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

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

The durabilty of PCR testing is the swing factor for further valuation upside for Healius, according to Morgan Stanley. While it's felt the base business is supported by the current valuation, an Equal-weight rating is retained and Sonic Healtcare ((SHL)) is preferred in the sector.

The broker lowers earnings forecasts over concerns including a slower recovery in the base pathology business (industry-wide) and lower-than-expected industry volumes for diagnostic imaging.

The target price falls to $4.40 from $4.75. Industry view: In line.

Target price is $4.40 Current Price is $4.30 Difference: $0.1
If HLS meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.82, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgans rates HLS as Add (1) -

Following a strategy day and trading update by Healius, Morgans notes nothing too significant eventuated from the former and sees indications of slowly improving revenue (though ongoing elevated opex) from the latter.

The broker notes the sustainable improvement program (phase two) is on track and is expected to deliver 300bp operating margin improvement exiting FY23.

The Add rating is unchanged and the target price slips to $5.15 from $5.26.

Target price is $5.15 Current Price is $4.30 Difference: $0.85
If HLS meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $4.82, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgan Stanley rates IAG as Underweight (5) -

Morgan Stanley expects domestics insurers will be exposed to more CAT risk volatility in their own earnings, and will have to pay more for reinsurance cover. 

The broker believes the current period represents just a normalisation for CAT costs after a subdued 2013 to 2018.

The Underweight rating and $4.05 target are maintained for Insurance Australia Group. Industry view: Attractive.

Target price is $4.05 Current Price is $4.60 Difference: minus $0.55 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.05, suggesting upside of 11.4% (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

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

Medicare benefits data highlighted weaker trends for Jan-Feb 2022 with modest recovery in March, Macquarie notes. For the March quarter, combined benefits in key states for Integral Diagnostics fell -9% quarter on quarter and -6% year on year.

Commentary from peers has highlighted operational challenges and elevated costs associated with covid in early 2022, and in addition, the broker sees supply chain constraints as presenting potential upside risk for consumables/equipment expenses in the near-term.

Downgrade to Neutral from Outperform, target falls to $4.15 from $4.30.

Target price is $4.15 Current Price is $3.86 Difference: $0.29
If IDX meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.43, suggesting upside of 23.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Citi rates IPL as Neutral (3) -

A first half earnings miss from Incitec Pivot, $568m compared to Citi's expected $705m, was largely overshadowed by the company's proposed demerger. The broker notes at this stage it is unclear if a division of fertilisers and explosives would generate value above separation costs.

Subject to shareholder vote, the demerger would be implemented in early 2023, with Incitec Pivot guiding to estimated costs of -$80-105m, largely impacting on FY23, as well as ongoing costs of -$25-35m annually.

The Neutral rating is retained and the target price decreases to $3.70 from $3.85.

Target price is $3.70 Current Price is $3.60 Difference: $0.1
If IPL meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates IPL as Outperform (1) -

Following a solid first half result from Incitec Pivot, Credit Suisse notes a demerger of Incitec Pivot Fertilisers from Dyno Nobel is on the table and the broker expects this will be perceived positively.

Prior to public company costs of -$25-35m, the broker anticipates Incitec Pivot Fertilisers to achieve earnings of $180-190m, but earnings are largely dependent on Phosphate Hill's cost position which remains tied to fixed price gas contracts through to 2028. 

The Outperform rating is retained and the target price decreases to $4.05 from $4.28.

Target price is $4.05 Current Price is $3.60 Difference: $0.45
If IPL meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates IPL as No Rating (-1) -

Incitec Pivot's first half result beat Macquarie on revenue but missed on earnings. Cash flow was weaker seasonally ahead of key Australian winter planting period in second half and a working capital unwind should lead to strong cash flow generation in the period.

Pending a comprehensive review, Incitec plans to split its Fertiliser and Dyno Nobel (explosives) businesses into two separate listed companies.

Macquarie is on research restriction.

Current Price is $3.60. Target price not assessed.

Current consensus price target is $4.04, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates IPL as Downgrade to Equal-weight from Overweight (3) -

First half earnings (EBIT) were in-line with Morgan Stanley's estimate but -8% below the consensus forecast. An increased Henry Hub gas price forecast is the main reason for a -5% cut to the broker's FY22 earnings forecast.

The broker downgrades its rating to Equal-weight from Overweight and sees a more challenging backdrop for short-
term performance. While fertiliser prices appear to have peaked they are expected to remain supportive.

Orica ((ORI)) is preferred in the sector. The target price falls to $4.05 from $4.70. Industry view: In-Line.

The analyst expects a period of share price range-trading while demerger discussion rages following the decision to separately list the Fertilisers and Dyno Nobel businesses. It's considered a moot point whether strategic benefits outweigh one-off and ongoing costs.

Target price is $4.05 Current Price is $3.60 Difference: $0.45
If IPL meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates IPL as Add (1) -

Morgans feels the announced demerger by Incitec Pivot somewhat overshadowed a record 1H earnings result. The record was attained via materially higher fertiliser prices, a lower Australian dollar, strong explosives volumes and a solid manufacturing performance.

The company intends to create two separately ASX-listed companies by demerging the Fertiliser (Incitec Pivot Fertilisers) and Explosives (Dyno Nobel) businesses.

The broker expects the Explosives company will be materially larger, trading on a higher multiple due to relatively more stable earnings.

Overall, Morgans still sees potential for further earnings upgrades if European gas prices remain high. The Add rating is retained, while the target falls to $4.45 from $4.56.

Target price is $4.45 Current Price is $3.60 Difference: $0.85
If IPL meets the Morgans target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates KAR as Add (1) -

Morgans believes Karoon Energy has displayed discipline by ceasing its due diligence and negotiations with Brazilian oil and gas producer Enauta on the Atlanta oil field. It's thought buoyant oil markets had created a divide for negotiations.

Nonetheless, the analyst sees potential for talks to continue informally. The Add rating and $2.70 target price are maintained.

Target price is $2.70 Current Price is $1.96 Difference: $0.74
If KAR meets the Morgans target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $2.50, suggesting upside of 25.6% (ex-dividends)

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 KLS as Outperform (1) -

Having missed out on the tender for Darwin's bus service expansion, Kelsian Group has not renewed its existing Darwin contract. Macquarie notes the impact is immaterial group-wide.

The broker did not expect Kelsian to win, given its focus on Singapore, the UK and Sydney. Short and medium term transport contract opportunities abound globally.

Outperform and $8.70 target retained.

Target price is $8.70 Current Price is $7.61 Difference: $1.09
If KLS meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $9.03, suggesting upside of 20.2% (ex-dividends)

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

UBS rates NCM as Neutral (3) -

UBS retains its US$1,500/oz long-term gold price forecast and expects supply chain pressures and opex/capex inflation to persist, along with the shortage of skilled labour.

For the producers, the broker retains a preference for new(er) mines benefiting from new infrastructure, highest grades and limited or brownfield capex.

The broker sees downside risk to upcoming production results for Newcrest Mining and lowers its target price to $26.20 from $26.50.

Target price is $26.20 Current Price is $25.45 Difference: $0.75
If NCM meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $29.63, suggesting upside of 18.3% (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: 0.7

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

UBS rates NST as Buy (1) -

UBS retains its US$1,500/oz long-term gold price forecast and expects supply chain pressures and opex/capex inflation to persist, along with the shortage of skilled labour.

For the producers, the broker retains a preference for new(er) mines benefiting from new infrastructure, highest grades and limited or brownfield capex.

The broker sees downside risk to upcoming production results for Northern Star Resources and lowers its target price to $11.70 from $11.80.

Target price is $11.70 Current Price is $9.05 Difference: $2.65
If NST meets the UBS target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $12.51, suggesting upside of 41.0% (ex-dividends)

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 PRU as Outperform (1) -

Following Perseus Mining's recent completion of the Orca Gold acquisition, Macquarie incorporates a notional development scenario for the 70%-owned Block 14 for the first time.

The broker assumes the mine produces at an average production rate of 170kozpa over a 14-year mine life and extends Perseus' 500kozpa-plus run-rate by one year.

Sudan’s mining industry is young, but the broker believes the miner’s track record, balance sheet and diversified asset base position it well to be a first mover. Outperform retained, target rises to $2.10 from $2.00.

Target price is $2.10 Current Price is $1.82 Difference: $0.28
If PRU meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.13, suggesting upside of 12.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

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

Morgan Stanley expects domestics insurers will be exposed to more CAT risk volatility in their own earnings, and will have to pay more for reinsurance cover. In particular, Suncorp Group is thought to face a difficult reinsurance renewal in July.

The broker believes the current period represents just a normalisation for CAT costs after a subdued 2013 to 2018.

The Equal-weight rating and $12.50 target are unchanged. Industry view: In-Line.

Target price is $12.50 Current Price is $12.15 Difference: $0.35
If SUN meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $13.81, suggesting upside of 14.0% (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

Credit Suisse rates TAH as Outperform (1) -

Ahead of Tabcorp's demerger, Credit Suisse notes it values the company's lottery division, the soon to be LotteryCo, at $10.3bn, or $4.60 per share, and its wagering division at $2.8bn, or $1.25 per share.

The broker expects LotteryCo to be highly cash generative and able to deliver $1.7bn in capital returns to shareholders over the next three years. 

Tabcorp's outlook relies on a number of developments, including the Victoria wagering license expiry in 2024 and the WA wagering business tender. 

The Outperform rating is retained and the target price decreases to $5.85 from $6.20.

Target price is $5.85 Current Price is $5.34 Difference: $0.51
If TAH meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $5.72, suggesting upside of 466.1% (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

UBS rates WES as Upgrade to Buy from Neutral (1) -

UBS upgrades its rating for Wesfarmers in recognition that non-retail divisions were the source of upside in the 1H, and are becoming a larger share of earnings.

The broker estimates the Chemicals Energy & Fertilisers (WesCEF) business along with an exposure to lithium upside can counter the mixed outlook for retail. The target price rises to $56 from $54.

Target price is $56.00 Current Price is $46.18 Difference: $9.82
If WES meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $53.10, suggesting upside of 14.5% (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

UBS rates WOW as Sell (5) -

UBS doesn't see a material impact in the near-to-medium-term from Woolworths Group's proposal to acquire 80% of Mydeal.com.au ((MYD)). The company is an online marketplace focused on furniture, homewares and everyday needs.

The Sell rating and $36 target price are maintained.

Target price is $36.00 Current Price is $34.67 Difference: $1.33
If WOW meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $38.12, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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