Australian Broker Call

Morgan Stanley rates 360 as Overweight (1) -

In a trading update, one day after Morgan Stanley initiated coverage on Life360, the company announced annualised monthly revenue is tracking to the upper end of the US$110-120m guidance range. This is in-part due to stronger social media engagement.

At least eight celebrities will take an ownership stake in Life360, form a Family safety council and be involved with marketing initiatives, explains the broker.

Additionally, the Jiobit acquisition is expected to close in the next 30 days and management reiterated an intent to pursue a dual listing in the US. Overweight rating and $8.60 target. Industry view is In-Line.

Target price is $8.60 Current Price is $6.25 Difference: $2.35
If 360 meets the Morgan Stanley target it will return approximately 38% (excluding dividends, fees and charges).

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: 1.0

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

Morgan Stanley rates AGL as Underweight (5) -

AGL is to provide an imminent update on its proposed structural separation. Assuming a simple demerger, Morgan Stanley would like to see which assets and businesses will sit with each entity and who will lead them.

Among other questions, the broker would like to know if there's an opportunity for further cost reductions with this restructure. Also, will there be a shared services agreement for enterprise resource planning or can systems be split from the start?

The analyst sees the potential for benefits deriving from ESG factors and operational clarity. Underweight rating. Target is $9.28. Industry view: Cautious.

Target price is $9.28 Current Price is $9.11 Difference: $0.17
If AGL meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.88, suggesting upside of 7.9% (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

Citi rates ALG as Buy (1) -

While another holiday lockdown means short term headwinds increase for Dreamworld, Citi believes the medium-term outlook remains promising for Ardent Leisure Group. It's felt any share weakness represents a better buying opportunity.

In the medium term, the broker considers the theme park outlook is encouraging. Attendance should benefit from the opening of a
new Steel Taipan rollercoaster before summer, and pent-up demand as the vaccination program gains momentum.

The analyst also remains positive on Main Event’s recovery in the US, noting Dave & Buster’s recent positive quarterly result. The Buy rating and $1.30 target are maintained.

Target price is $1.30 Current Price is $0.99 Difference: $0.31
If ALG meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

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

Morgan Stanley rates CHC as Overweight (1) -

Morgan Stanley believes the office bears who have been waiting for asset values to decline should reassess their positioning. Based on evidence and industry feedback to date, asset values are considered unlikely to face material downward pressure.

The broker assesses values are unlikely to change, unless there is a material decline in capital flows, a major uplift in interest rates or a significant societal shift in how we live our lives. It's noted Sydney valuations have been sustained, despite -15%-20% rent declines.

A $17.45 target and Overweight rating are retained for Charter Hall Group. Industry view is In-Line.

Target price is $17.45 Current Price is $15.71 Difference: $1.74
If CHC meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $16.88, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

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

After Collins Foods' FY21 result, Morgans' revenue/earnings forecasts are broadly unchanged, while higher D&A guidance leads to -2-3% EPS downgrades. It's felt FY22 growth for KFC Australia will be more modest after effectively delivering two years of growth in FY21.

The company reported 13% earnings (EBIT) growth and 18% profit growth in FY21, with KFC providing all the uplift, points out the analyst.

The broker highlights softening KFC growth in the result, as the base to cycle becomes elevated, with the opposite in Europe. With the stock now trading within 10% of the target (lowered to $12.82 from $13.38), Morgans lowers its rating to Hold from Add.

Target price is $12.82 Current Price is $11.98 Difference: $0.84
If CKF meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in May.

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

UBS rates CKF as No Rating (-1) -

Collins Foods FY21 underlying pre-tax profit beat UBS estimates as optimal conditions continued in Australia, partially offset by tougher conditions in Europe.

The company provided no specific guidance although expects 9-12 new stores for KFC Australia, 9-12 for Taco Bell and 2-4 for KFC Netherlands.

UBS places its $11.65 target and Buy rating under review.

Current Price is $11.98. Target price not assessed.

The company's fiscal year ends in May.

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

Morgan Stanley rates COF as Underweight (5) -

Morgan Stanley believes the office bears who have been waiting for asset values to decline should reassess their positioning. Based on evidence and industry feedback to date, asset values are considered unlikely to face material downward pressure.

The broker assesses values are unlikely to change, unless there is a material decline in capital flows, a major uplift in interest rates, or a significant societal shift in how we live our lives. It's noted Sydney valuations have been sustained, despite -15%-20% rent declines.

The Underweight rating and $2.05 target are retained for Centuria Office REIT. Industry view: In-line. 

Target price is $2.05 Current Price is $2.36 Difference: minus $0.31 (current price is over target).
If COF meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.17, suggesting downside of -7.7% (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

Morgan Stanley rates DXS as Overweight (1) -

Morgan Stanley believes the office bears who have been waiting for asset values to decline should reassess their positioning. Based on evidence and industry feedback to-date, asset values are considered unlikely to face material downward pressure.

The broker assesses values are unlikely to change, unless there is a material decline in capital flows, a major uplift in interest rates, or a significant societal shift in how we live our lives. It's noted Sydney valuations have been sustained, despite -15%-20% rent declines.

Overweight rating for Dexus, with a target of $11.75. Industry View: In-line.

Target price is $11.75 Current Price is $10.68 Difference: $1.07
If DXS meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $10.43, suggesting downside of -3.5% (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

Macquarie rates ECX as Outperform (1) -

Used car prices are elevated and Macquarie upgrades FY22 cash earnings forecasts by 13%. The broker also notes the company is benefiting from an additional cash flow boost from the instant asset write-off.

The broker does not expect the company will pay cash tax for as long as 4-5 years with the timing benefit accelerating the de-gearing. Outperform maintained. Target is raised to $2.54 from $2.49.

Target price is $2.54 Current Price is $2.22 Difference: $0.32
If ECX meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.55, suggesting upside of 12.7% (ex-dividends)

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 ING as Downgrade to Neutral from Outperform (3) -

While Inghams Group is a defensive stock Macquarie finds better options are available in times of greater volatility. The broker believes the growth cycle in markets has peaked and downgrades to Neutral from Outperform.

Some uncertainty is created by a major retail contract that is up for renewal in the first half of FY22 and Macquarie suspects the customer could represent 37% of group revenue.

A large proportion of volume is unlikely to be at risk, the broker asserts, but there remains some risk of either volume loss or margin pressure. Target is raised to $4.03 from $3.98.

Target price is $4.03 Current Price is $3.99 Difference: $0.04
If ING meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.08, suggesting upside of 2.5% (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

Macquarie rates KMD as Neutral (3) -

Macquarie notes the Kathmandu brand was trading broadly in line with pre-pandemic levels prior to the recent lockdowns amid strong momentum for Rip Curl and Oboz.

Yet forecasts are capturing this and the lockdowns, being at a critical time for winter holiday consumption, will adversely affect the Australasian outdoor industry.

In Rip Curl the broker assumes there will be sufficient inventory to meet demand offshore as US sales are exceeding pre-pandemic and wholesale orders received for FY22 continue to exhibit double-digit growth versus FY19.

Neutral maintained. Target is raised to $1.35 from $1.30.

Target price is $1.35 Current Price is $1.42 Difference: minus $0.07 (current price is over target).
If KMD meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in July.

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: 0.5

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

Citi rates LNK as Buy (1) -

Citi notes Link Administration has marginally increased its stake in PEXA ahead of the 1 July float, but it will still receive $180m from cash on PEXA’s balance sheet and debt restructure. There's considered a strong possibility of an on-market share buyback of up to $100m.

The broker retains the Buy call and $5.70 target price, nudging up earnings forecasts by 2-3% for FY21-FY23.

Target price is $5.70 Current Price is $5.01 Difference: $0.69
If LNK meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.61, suggesting upside of 10.8% (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

UBS rates MGR as Buy (1) -

UBS reviews development submissions for the Willoughby and Harbourside projects to better understand the pre-sales potential of new Sydney apartments.

This results in a de-risked and elevated earnings profile out to FY26. Willoughby's end value has risen 29% on the back of local market strength while the broker has questions regarding Harbourside around funding and retail options.

UBS retains a Buy rating and raises its target to $3.15 from $2.84.

Target price is $3.15 Current Price is $2.92 Difference: $0.23
If MGR meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.85, suggesting downside of -3.4% (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

Ord Minnett rates MPL as Hold (3) -

Medibank Private will assess if any more savings need to be returned, after announcing it will return -$105m in estimated permanent net covid claims savings to customers in FY22. This will be achieved by providing premium relief for those who held a policy in FY21.

Ord Minnett points out this is roughly equivalent to 1.5% of a year's premium versus the deferred claims liability at December 31 of $310m. It's felt the return is both a retention initiative and designed to be fair to existing customers.

The Hold rating and $3 target price are unchanged.

Target price is $3.00 Current Price is $3.16 Difference: minus $0.16 (current price is over target).
If MPL meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.13, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

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 NTO as Overweight (1) -

Nitro Software has announced the acquisition of PDFpen, a document productivity product for Apple's ecosystem. While the hurdle to achieve a return on the US$6m acquisition cost is considered modest, the average revenue per user (ARR) is immaterial for FY21.

The deal enables Nitro's solution to address users of Mac/iOS devices, explains the broker. Currently, 5-10% of addressable enterprise users use these devices, and this is expected to increase towards 20% over time.

Morgan Stanley retains an Overweight rating. Target is $3.70. Industry view: In-line.

Target price is $3.70 Current Price is $3.25 Difference: $0.45
If NTO meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

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: 1.0

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

Credit Suisse rates ORA as Neutral (3) -

In general commentary, Credit Suisse predicts Australia is likely to advance to around 60% from 45% recycled glass content. Glass currently accounts for about 25% of Orora's earnings (EBIT).

The company's glass revenue/earnings is expected to be flat to down in FY21 leading into FY22. The $3.40 target and Neutral rating are maintained.

Target price is $3.40 Current Price is $3.27 Difference: $0.13
If ORA meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting downside of -7.1% (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

Citi rates QUB as Buy (1) -

Citi notes all key exposures in Qube Holdings' diversified portfolio have tailwinds that are likely to remain through FY22. Thus, earnings forecasts for FY22 are upgraded by 4% though there's some caution, given recent lockdowns and ongoing MUA negotiations.

Overall, the broker sees potential upside risk over the medium term and lifts the target price to $3.61 from $3.57. The Buy rating is maintained. There are considered strong lead indicators for mining, agricultural and forestry products.

Target price is $3.61 Current Price is $3.08 Difference: $0.53
If QUB meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.11, suggesting downside of -1.6% (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 REH as Downgrade to Underperform from Neutral (5) -

Macquarie reviews its investment thesis and downgrades to Underperform from Neutral on valuation grounds.

The broker suggests the stock has had a strong run and while the fundamentals are supportive the valuation more than fully discounts any earnings upside.

The main risk to this view is if the trading environment stays stronger for longer. Macquarie expects the FY21 result will feature strong trading, given positive market commentary from Australian and US peers. Target is steady at $19.40.

Target price is $19.40 Current Price is $23.59 Difference: minus $4.19 (current price is over target).
If REH meets the Macquarie target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.60, suggesting downside of -34.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.8

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

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

While Macquarie believes the trading environment is supportive the valuation upside is now more limited. Comparables will firm as FY22 progresses so any impetus to growth should be derived from well-executed M&A, in the broker's opinion.

Macquarie considers the current valuation more than adequately balances the risk/reward. Rating is downgraded to Neutral from Outperform. Target is raised to $5.50 from $5.30.

Target price is $5.50 Current Price is $5.28 Difference: $0.22
If RWC meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.24, suggesting downside of -0.4% (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

Macquarie rates TLS as No Rating (-1) -

In an initial assessment, Macquarie notes the sale of the 49% stake of the InfraCo Towers business to a consortium for net proceeds of $2.8bn is running ahead of schedule. Completion is expected by first quarter FY22 versus management's prior end-of-2022 timeline. 

The transaction values InfraCo Towers at $5.9bn enterprise value (EV). This represents a pro-forma EV/earnings, after leases, of 28x versus the broker's forecast range of 25-30x.

Management indicated it expects to return around 50% of the net proceeds (approximately 11.7cps) to shareholders while also referencing a potential share buy-back. The company highlighted the remainder of the proceeds will be used for debt reduction. 

Telstra has entered into a 15-year agreement with options to extend with InfraCo Towers. The broker is involved in the sale and hence is on research restriction.

Current Price is $3.60. Target price not assessed.

Current consensus price target is $3.80, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Morgans rates WOW as Hold (3) -

In the wake of the Endeavour Group ((EDV)) demerger, Morgans explains Woolworths' business has become simplified, with management able to focus on food and everyday needs. Target falls to $36.60 from $39.70, as FY22 earnings (EBIT) forecasts fall -23% on demerger

The broker points out the company will have a very strong balance sheet with pro forma net cash of $75m (pre-leases). Management have indicated their intention to return $1.6-2bn to shareholders. The Hold rating is maintained.

Target price is $36.60 Current Price is $38.00 Difference: minus $1.4 (current price is over target).
If WOW meets the Morgans target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $40.15, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in June.

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