Australian Broker Call

UBS rates BGA as Neutral (3) -

UBS last updated on Bega Cheese in February but has returned with a new analyst to reinstate coverage with a Neutral rating (previously Buy) and an $5.95 target ($6.80).

Following the Lion Dairy & Drinks acquisition, the broker is attracted to Bega’s significant revenue skew towards more resilient and higher value grocery end-markets, forecasting three year compound earnings growth of 29% from FY21.

Significant increases in supply chain/covid costs as well as the shift back towards out-of-home consumption will likely weigh on near-term sentiment nonetheless, hence the broker sees Bega is fairly valued at these levels.

Target price is $5.95 Current Price is $5.60 Difference: $0.35
If BGA meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.26, suggesting upside of 11.8% (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

Citi rates BSL as Buy (1) -

Citi sees a likely return to high Australian immigration rates following covid-19 which will underpin Australian Steel Products earnings  for BlueScope Steel.

The government is expected to target higher immigration rates and the analyst expects population growth to return to around 1.5% per year.

Also, Australian residential approvals are expected by the broker to return to trend rates from the current, below-historic-trend levels. The Buy rating and $25.50 target price are retained.

Target price is $25.50 Current Price is $21.91 Difference: $3.59
If BSL meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $26.51, suggesting upside of 24.6% (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 CSL as Equal-weight (3) -

Morgan Stanley sees some disruption risk to the immunoglobulin market (Ig) from FDA approval for the drug VYVGART, which is used for the generalized myasthenia gravis condition. 

While the condition accounts for around 6% of Ig use, the analyst sees CSL as being able to offset any associated loss in patient numbers via increased diagnosis rates of PID and SID patients. These acronyms relate to primary and secondary immuno-deficiencies.

The Equal-Weight rating and target price of $280.000 are retained. Industry view: In-Line.

Target price is $280.00 Current Price is $273.76 Difference: $6.24
If CSL meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $320.45, suggesting upside of 11.6% (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

UBS rates DRR as Neutral (3) -

UBS last updated on Deterra Royalties in March but has returned with a new analyst to reinstate coverage with a Neutral rating (previously Buy) and a $4.20 target ($5.05).

The collection of royalties from iron ore production in the Pilbara, the largest being BHP Group's ((BHP)) Mining Area C, leaves Deterra leveraged to both iron ore price and production volumes, the broker notes, thus providing a less volatile, higher value earnings stream.

Note that back in March, iron ore was trading at around twice the current price.

Target price is $4.20 Current Price is $4.20 Difference: $0
If DRR meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.53, suggesting upside of 4.4% (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

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

Morgans lifts its rating for Healius to Add from Hold on increased assumptions for covid testing, and after taking into account the acquisition of Agilex Biolabs for -$301.3m. The target company is a leading Australian bioanalytical laboratory.

The acquisition is expected to deliver low-single-digit EPS accretion in the first full year though the analyst cautions the price paid assumes future above-market growth. However, the near-term remains all about covid testing, points out Morgans.

Target rises to $5.79 from $4.71.

Target price is $5.79 Current Price is $5.29 Difference: $0.5
If HLS meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.42, suggesting upside of 0.8% (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

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

Morgan Stanley resumes coverage of Link Administration Holdings with an Equal-weight rating and sets its target price at $5.35 to match the current bid by the Carlyle consortium. Industry view: In-Line.

The analyst points out that, all things being equal, a 25 basis point increase in interest rates leads to an around 2.5% operating earnings (EBIT) uplift. There's considered to be some upside risk to guidance for FY22 operating earnings (to be broadly in-line with FY21). 

Target price is $5.35 Current Price is $4.71 Difference: $0.64
If LNK meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.51, suggesting upside of 14.9% (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

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

Macquarie assesses outflows are likely to persist and fee pressure likely to increase, following St James Place's terminated
mandate with Magellan Financial Group. The mandate is estimated to account for around 12% of annual revenues and 15% of profit.

The broker downgrades its rating to Neutral from Outperform and lowers its target price to $20 from $38 and sees limited scope for a re-rating. It's thought earnings uncertainty will result in the group trading below peers.

Target price is $20.00 Current Price is $19.70 Difference: $0.3
If MFG meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $24.94, suggesting upside of 21.3% (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

Morgan Stanley rates MFG as Underweight (5) -

In the wake of the loss of Magellan Financial Group's largest institutional client (St James's Place), Morgan Stanley sees only modest downside risk from here, though remains with its Underweight rating. The target price falls to $17.50 from $29.30. Industry view: In-line. 

The analyst points out the group's Global Fund is underperforming its benchmark across a range of timeframes, which could ultimately place pressure on its retail base fees. There are also considered to be risks around further institutional outflows.

Target price is $17.50 Current Price is $19.70 Difference: minus $2.2 (current price is over target).
If MFG meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.94, suggesting upside of 21.3% (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 MFG as Hold (3) -

Morgans suggests investors avoid shares in Magellan Financial Group until there is more certainty around the funds under management (FUM) base and earnings outlook. The broker's target price plunges to $24.15 from $42.85 and its Hold rating is unchanged.

This comes as the group announced the loss of St James Place (the group's largest institutional mandate), representing around 12% of revenue.

The analyst feels the group's relative investment performance in the Global Fund continues to pose a risk to net flows. There's considered potential for existing scrutiny over management fees at the retail level, to exacerbate retail outflows.

Target price is $24.15 Current Price is $19.70 Difference: $4.45
If MFG meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $24.94, suggesting upside of 21.3% (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 MFG as Sell (5) -

Magellan Financial Group has lost its largest client in St James Place, which accounted for 16% of funds under management and 13% of earnings. The fact the market responded by selling the stock down -33% suggests to UBS investors are "rightly" expecting more.

The broker forecasts some -$23bn of net outflows over the next 2-3 years, and the pressure for Magellan to reduce its high flagship fund
fees has increased with retail outflows likely to accelerate. It's the early stages of a downward spiral in the broker's view.

Sell retained, target falls to $17.00 from $29.50.

Target price is $17.00 Current Price is $19.70 Difference: minus $2.7 (current price is over target).
If MFG meets the UBS target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.94, suggesting upside of 21.3% (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

Citi rates MYX as Downgrade to Neutral from Buy (3) -

After a a slower-than-expected launch of Nextstellis, Citi lowers its FY22 and FY23 adjusted earnings (EBITDA) forecasts by -14% and -10% for Mayne Pharma Group. The target falls to $0.31 from $0.35.

The rating eases to Neutral (High Risk) from Buy (High Risk) to reflect what the broker describes as very real risks for the business over the next 12 months.

The analyst now assumes no sales for Nextstellis in the 1H of FY22 and a slower ramp-up in FY22 and FY23 though still expects forecast sales to peak at US$100m in FY24.

Target price is $0.31 Current Price is $0.29 Difference: $0.02
If MYX meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $0.30, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Macquarie rates NEC as Neutral (3) -

Nine Entertainment Co has signed an NRL agreement for 2023-27 for $130m per year, which is broadly in-line with Macquarie's and consensus expectations.

The analyst highlights the company appears to have transferred the majority of viewership decline cost to the NRL. The target price falls to $2.90 from $3 after the broker's valuation method was adjusted. The Neutral rating is unchanged.

Target price is $2.90 Current Price is $2.73 Difference: $0.17
If NEC meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.53, suggesting upside of 29.3% (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 NUF as Buy (1) -

According to Nufarm, continued tight supply conditions are driving ongoing early purchases by customers, and consistent with Citi's forecast, the company expects earnings will be weighted to the first half of 2022.

Management is seeing strong demand for its crop protection and seed products from ongoing favourable agricultural conditions across its key geographies. The Buy rating and $6 target price are retained.

Target price is $6.00 Current Price is $4.82 Difference: $1.18
If NUF meets the Citi target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $5.55, suggesting upside of 15.4% (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

UBS rates QUB as Neutral (3) -

UBS had not updated on Qube Holdings since February but has returned with a new analyst to reinstate coverage with an unchanged Neutral rating and a target increase to $3.30 from $3.05.

For the past decade, notes UBS, Qube's Ports & Logistics segment has been organically weak, supplemented by bolt-ons, while Ports & Bulk has been organically strong. The broker sees revenues growing for both divisions in the near term at better than GDP.

This is due to specific contracts and leverage to economic recovery, but longer term the broker expects a regression back to the norm.

Target price is $3.30 Current Price is $3.12 Difference: $0.18
If QUB meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.36, suggesting upside of 6.7% (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

Macquarie rates RIO as Outperform (1) -

Rio Tinto and Turquoise Hill have made an offer to the Government of Mongolia to forgive and write-off the US$2.3bn shareholder loan. Macquarie estimates this will bring forward dividend payments to the Government by 13 years.

The broker makes minimal changes to earnings forecasts and retains its Outperform rating and $133 target price. Iron ore price movements are considered the key risk to earnings forecasts.

Target price is $133.00 Current Price is $98.23 Difference: $34.77
If RIO meets the Macquarie target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $107.21, suggesting upside of 5.9% (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: 0.4

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

UBS rates SDR as Initiation of coverage with Buy (1) -

SiteMinder is a global leading open hotel commerce platform, offering a comprehensive range of solutions to streamline the distribution of hotel inventory across multiple channels. The industry is large and extremely fragmented, with a large portion still using manual processes.

UBS believes the company is well positioned to leverage its industry reputation to materially grow its customer base, while driving increased spend through the uptake of additional modules and transaction products.

The broker initiates coverage with a Buy rating and $7.45 target.

Target price is $7.45 Current Price is $6.29 Difference: $1.16
If SDR meets the UBS target it will return approximately 18% (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

UBS rates SFR as Buy (1) -

UBS last updated on Sandfire Resources in February but has returned with a new analyst to reinstate coverage with a Buy rating (previously Neutral) and an $8.00 target ($6.00).

Following the transformational purchase of MATSA, Sandfire now has a clear pathway to greater than 150ktpa copper production, the broker notes, despite DeGrussa only having twelve months left to run.

The stock is trading at a -30% discount to an $8.00 valuation and the broker expects this gap to close over 2022-23 as it de-risks this growth profile, making Sandfire one of the broker's preferred base metal exposures.

Target price is $8.00 Current Price is $6.11 Difference: $1.89
If SFR meets the UBS target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $6.83, suggesting upside of 6.6% (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

Morgans rates SHL as Add (1) -

Sonic Healthcare has acquired the US-based anatomical pathology Propath. Morgans sees the transaction as more strategic than material and notes transaction details were not disclosed. The deal is expected to be earnings accretive.

Mainly due to increased omicron-related testing assumptions, the broker increases FY22-24 estimates materially and raises its target price to $50.72 from $47.05. The Add rating is retained.

Target price is $50.72 Current Price is $44.42 Difference: $6.3
If SHL meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $45.75, suggesting upside of 0.6% (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

Macquarie rates VEA as Outperform (1) -

Viva Energy Group's FY21 earnings (EBITDA) guidance was a 4% beat compared to Macquarie's estimate as petrol margins have sharply improved so far in December.

The broker lifts FY21 and FY22 EPS forecasts by 8% and 5% though retains its $2.60 target price. The Outperform rating is unchanged as there's considered room for a re-rating on strong fundamentals, despite a projected acceleration in electric vehicle sales in 2022.

Target price is $2.60 Current Price is $2.23 Difference: $0.37
If VEA meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.55, suggesting upside of 14.3% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates VEA as Overweight (1) -

Viva Energy Group's underlying earnings (EBITDA) guidance of $470m-$490m is a beat compared to Morgan Stanley's estimate of $455m. It's believed this is due to improved retail fuel volumes and refining margins.

The analyst feels this guidance augers well for 2022. The Overweight rating and $2.50 target price are retained. Industry view: Attractive.

Target price is $2.50 Current Price is $2.23 Difference: $0.27
If VEA meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.55, suggesting upside of 14.3% (ex-dividends)

The company's fiscal year ends in December.

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