Australian Broker Call

Credit Suisse rates A2M as Underperform (5) -

After increasing infant formula demand assumptions for China, UBS upgrades EPS forecasts for FY22 and FY23 by 2% and 4%, and raises the target price to $5.50 from $5. The Underperform rating is unchanged.

The broker's earnings forecasts are below consensus, in recognition the daigou trade has been structurally reduced to a near zero sales contribution and the company's English Label is no longer sufficiently differentiated.

Target price is $5.50 Current Price is $6.52 Difference: minus $1.02 (current price is over target).
If A2M meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.40, suggesting downside of -4.8% (ex-dividends)

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: -0.3

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

UBS rates AMA as Downgrade to Neutral from Buy (3) -

While the long-term opportunity remains appealing, UBS believes there are a number of near-term uncertainties including the potential impact of current lockdowns and the ability and time required to successfully renegotiate pricing increases.

Additionally, there are labour and parts inflation pressures as well as recent staff turnover within senior management, explains the broker. The rating is downgraded to Neutral from Buy and the target price falls to $0.56 from $0.70. 

The analyst considers the risk-return balance has shifted, at least until there's more visibility on the above-mentioned concerns.

Target price is $0.56 Current Price is $0.56 Difference: $0
If AMA meets the UBS target it will return approximately 0% (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

Macquarie rates AZJ as Outperform (1) -

The company's strategy relies on growing bulk haulage to dilute the revenue from thermal coal to less than than 20% by 2030 and thereby reducing the ESG penalty on the cost of capital.

Macquarie notes the strategy had to be broadened as the rail haulage market is otherwise too narrow and assesses several changes will need to be made to reduce earnings reliance from thermal coal, although bulks on OneRail is a potential first step.

Estimates are upgraded for FY22 and FY23 to account for additional volume from the Anglo contract. Outperform maintained. Target is reduced to $4.32 from $4.41.

Target price is $4.32 Current Price is $3.76 Difference: $0.56
If AZJ meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 20.4% (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

Macquarie rates CHN as Outperform (1) -

Drilling at Julimar continues to confirm the high-grade G11 zone and extensions have also been confirmed for G3, G5 and G10.

Macquarie is impressed with the outcomes, noting that the G11 zone accounts for around 11% of mining inventory assumptions for Julimar.

The near-term catalyst is securing access to the state forest to drill test the Hartog prospect. Target is reduced to $9.50 from $9.70 because of a slight drop in contained metal in inventory. Outperform retained.

Target price is $9.50 Current Price is $7.11 Difference: $2.39
If CHN meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 HLS as Outperform (1) -

Healius has completed around 50% of a $200m buyback program and Macquarie increases assumptions for the second half in line with the current run rate.

Meanwhile, coronavirus testing volumes have increased substantially over June yet this is being offset by lower base pathology revenue assumptions.

Macquarie makes minor downward revisions to estimates for FY21 but envisages the medium-longer term will show scope for margin improvement. Outperform retained. Target rises to $4.85 from $4.70.

Target price is $4.85 Current Price is $4.63 Difference: $0.22
If HLS meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.40, suggesting downside of -5.2% (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 IAP as Resume Coverage with Neutral (3) -

Macquarie resumes coverage with a Neutral rating and $1.39 target following the $50m equity raising to partially fund the $70m acquisition of a Canberra office asset.

Macquarie notes the transaction is marginally dilutive, although capacity on the balance sheet remains. The broker assesses the FY22 distribution yield is attractive, at 5.9%, but remains cautious about underlying growth.

Target price is $1.39 Current Price is $1.47 Difference: minus $0.08 (current price is over target).
If IAP 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 March.

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 IEL as Outperform (1) -

The company has acquired British Council's Indian IELTS business for GBP130m. Macquarie considers this acquisition highly attractive as there are strategic opportunities from combined distribution as well as long-term growth drivers.

The broker expects a rapid rebound in volumes as restrictions ease and tests are rebooked.

The timing of a full recovery in student volumes to Australia is difficult to predict yet Macquarie believes investors will focus on lead indicators of student demand and the recovery profile in the UK/Canada.

Outperform maintained. Target is raised to $32.60 from $30.80.

Target price is $32.60 Current Price is $29.44 Difference: $3.16
If IEL meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $31.00, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

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 IEL as Overweight (1) -

Morgan Stanley feels the acquisition of British Council's Indian IELTS operations is a long-awaited first step towards a global optimisation opportunity. The asset is considered to deepen the company's position and mindshare in its largest market globally.

The broker highlights $6-8m in synergies do not include longer-term footprint optimisation, dynamic pricing and shared best practice. The deal is considered to contain few surprises and offers compelling financial and strategic value.

The analyst's concerns include the India lockdown and the Australian reopening. The Overweight rating is retained and the target lifts to $33 fom $30. Industry view: In-line.

Target price is $33.00 Current Price is $29.44 Difference: $3.56
If IEL meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $31.00, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates IFL as Buy (1) -

The share price has rallied but Citi analysts still think IOOF Holdings remains too cheap to ignore. In the same breath, they point there are currently a large number of moving parts and uncertainties and the business carries substantial execution risk.

Taking a positive view, Citi believes the road ahead looks bumpy but if management pulls this off, it'll generate huge rewards for shareholders who remain on board.

Buy. Target $4.95.

Target price is $4.95 Current Price is $4.36 Difference: $0.59
If IFL meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.78, suggesting upside of 10.7% (ex-dividends)

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

Ord Minnett rates INR as Buy (1) -

Ioneer has obtained its first lithium offtake agreement. Ord Minnett was surprised by the size of the deal, which is a binding offtake for 7000tpa of lithium carbonate over three years with a large Korean conglomerate, EcoPro.

Volume is for an initial 2000tpa and there is an option for an additional 5000tpa by mutual agreement no later than the first quarter of 2022.

This marks a significant de-risking event for the stock, enabling project financing and strategic partnerships to proceed and Ord Minnett reiterates a Speculative Buy rating. Target is $0.55.

Target price is $0.55 Current Price is $0.35 Difference: $0.2
If INR meets the Ord Minnett target it will return approximately 57% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates LLC as Buy (1) -

Further incorporating the latest profit warning, leading to reduced short-term forecasts, has pulled back the price target to $15.97 from $16.77 prior.

Citi analysts retain a positive view in anticipation that management will successfully change the business model, which should translate into a multi-year re-rating for the shares.

Buy rating thus retained.

Target price is $15.97 Current Price is $11.07 Difference: $4.9
If LLC meets the Citi target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $13.23, suggesting upside of 19.9% (ex-dividends)

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 LLC as Neutral (3) -

After the business update, Macquarie suggests value is emerging although negative earnings momentum needs to be dealt with and visibility needs to improve.

The broker suspects there could be more negative news before the market can focus on the medium-term growth outlook.

FY21 guidance for underlying earnings is below forecasts, at $392m. Macquarie also suspects there is potential for further weakness although the absence of write-downs in FY22 should be a positive starting point. Target is reduced to $11.47 from $12.99.

Target price is $11.47 Current Price is $11.07 Difference: $0.4
If LLC meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.23, suggesting upside of 19.9% (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

Morgan Stanley rates MFG as Underweight (5) -

Morgan Stanley thinks downside risk on flows in the June quarter, and into FY22, are not incorporated into the current share price. It's felt the group is one of the most expensive traditional asset managers in the world.

Consensus estimates of around $1bn of inflows for the June quarter are seen as too high by the broker. Performance is also considered to remains soft. Underweight rating and $39.60 target. Industry view: In-line. 

Target price is $39.60 Current Price is $55.90 Difference: minus $16.3 (current price is over target).
If MFG meets the Morgan Stanley target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $50.91, suggesting downside of -6.7% (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 NEC as Downgrade to Neutral from Outperform (3) -

Macquarie refines its outlook ahead of the FY21 result, noting incremental positive updates have had limited benefit on the share price.

The broker suggests this is a quality cyclical business with a positive trajectory from 9Now, Stan and FTA business but headwinds are likely to loom in the short term from the Olympics.

Valuation support is moderating so Macquarie strategists have shifted to a defensive portfolio position. As a result, the rating is downgraded to Neutral from Outperform. The target is reduced to $3.00 from $3.60.

Target price is $3.00 Current Price is $2.88 Difference: $0.12
If NEC meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.33, suggesting upside of 21.1% (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

Morgans rates NHC as Add (1) -

Far stronger-than-expected thermal coal pricing drives Morgans forecast earnings (EBITDA) for FY21-22 up by 27% and 43%. The target price also increases to $2.08 from $1.70 and the Add rating is unchanged.

The broker believes recent coal trading activity points to further upside risk into the September quarter. Management has flagged potential acquistions in coal, other resources and potentially in other sectors.  

The size and timing of the recent $200m convertible note issue suggests to the analyst the company may be a credible potential bidder for BHP Group’s ((BHP)) Mount Arthur and/or BMC assets.

Target price is $2.08 Current Price is $1.81 Difference: $0.27
If NHC meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.01, suggesting upside of 7.9% (ex-dividends)

The company's fiscal year ends in July.

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 SRL as Outperform (1) -

Sunrise Energy has successfully completed the de-merger of its water business, with the listing of Clean TeQ Water ((CNQ)). Drilling of the Phoenix platinum zone has also commenced with three diamond drill holes planned.

The main focus is now securing a development partner for Sunrise. The company has indicated timing for completion of the finance agreement is uncertain and this presents the main risk to Macquarie's base case forecast. Outperform rating and $2.50 target are unchanged. 

Target price is $2.50 Current Price is $1.81 Difference: $0.69
If SRL meets the Macquarie target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 SUN as Equal-weight (3) -

While not currently incorporated into forecasts, Morgan Stanley believes a return of capital is increasingly likely after news Suncorp Group is selling its 50% stake in the RACT Insurance joint venture. This will unlock $50m of capital.

The broker explains the sale allows the group to use the AAMI brand more assertively in Tasmania, to drive national synergies. Equal-weight rating. Target is $11. Industry view: In-line.

Target price is $11.00 Current Price is $11.11 Difference: minus $0.11 (current price is over target).
If SUN meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.81, suggesting upside of 5.5% (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

Macquarie rates SYD as Neutral (3) -

Sydney Airport has received a conditional, non-binding proposal from a consortium of institutional investors, IFM, QSuper, and GIP, for a full take-over at $8.25 per share.

Macquarie notes one of the conditions is that major shareholder Unisuper (15%) accepts the offer.

The broker suggests shareholders should not hold high hopes for a competing bid, but also finds the current offer is not generous.

Macquarie's own valuation stands at $6.04 based on a risk free rate of 2.5%. The broker explains lowering the risk free rate to spot would increase the target price to $7.94, while valuing franking at 100% will take the valuation to $8.54.

Target price is $6.04 Current Price is $5.81 Difference: $0.23
If SYD meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.19, suggesting downside of -20.3% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates TPG as Neutral (3) -

Credit Suisse reduces the target price to $6.40 from $7.05. The broker sees near-term headwinds given Vodafone’s reluctance to increase mobile prices until recently, and international border closures putting pressure on mobile subscriptions.

Additionally, the broker doesn't believe the underlying infrastructure value justifies upside from current trading levels. Despite this, it's acknowledged that FY21 likely represents the trough for TPG Telecom's earnings. The Neutral rating is unchanged.

Target price is $6.40 Current Price is $6.22 Difference: $0.18
If TPG meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 24.5% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates WBC as Buy (1) -

Buy rating and target price of $29.50 are both retained as Citi analysts view Westpac's announcement of a potential fraud relating to a rogue principal/agency agreement as an unfortunate, but likely rare event.

Additional negative news flow cannot be excluded, but Citi takes the view that, overall, operational implications are limited. FY21 forecast earnings have been reduced by -3%.

Westpac remains the broker's top pick in the sector.

Target price is $29.50 Current Price is $25.64 Difference: $3.86
If WBC meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $28.49, suggesting upside of 11.6% (ex-dividends)

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 WBC as Overweight (1) -

Westpac has commenced legal proceedings, following the discovery of a "potential significant fraud" relating to a portfolio of equipment leases with Westpac customers, arranged by Forum Finance. The bank estimates a potential exposure of around -$200m after tax.

The potential loss would lower the broker's FY21 earnings estimates by circa -3%. The target price and Overweight rating are unchanged. Industry view: In-line.

Target price is $29.20 Current Price is $25.64 Difference: $3.56
If WBC meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $28.49, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in September.

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 WBC as Hold (3) -

Westpac has commenced proceedings in the Federal Court against Forum Finance following discovery of a significant potential fraud. The fraud appears to involve transactions in which Westpac purchased lease receivables.

The bank has indicated a potential exposure of -$200m. At face value, Ord Minnett suggests this reflects poorly on Westpac's internal risk controls and comes at a time when the bank is already having to fix its systems.

Hold rating and $27.50 target retained.

Target price is $27.50 Current Price is $25.64 Difference: $1.86
If WBC meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $28.49, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates WHC as Add (1) -

With thermal coal prices far stronger than expected, Morgans upgrades forecast FY21-22 forecast earnings (EBITDA) by 8% and 33%, and lifts the target price to $2.30 from $2.05. The Add rating is unchanged.

The broker points out coal markets are looking strong through the September quarter and sees further upside risk to the revised target price. It's felt slower than expected production at Narrabri will pass as mining moves back to shallower conditions in late 2022.

Target price is $2.30 Current Price is $1.99 Difference: $0.31
If WHC meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.44, suggesting upside of 18.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

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

Morgan Stanley downgrades the rating for Woolworths Group to Equal-weight from Overweight, after shares rallied 7% in the three months leading into the Endeavour Group ((EDV)) demerger. Since then, the shares have rallied a further 4% in the past week.

With the removal of Endeavour Group from forecasts, the broker's price target declines to $36.50 from $44. Industry view: Attractive. The analyst anticipates an off-market buyback after management has flagged capital management totaling $1.6-2bn.

Given the anticipated balance sheet position, Morgan Stanley expects capital management to come in towards the top end of the range.

Target price is $36.50 Current Price is $37.59 Difference: minus $1.09 (current price is over target).
If WOW meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.11, suggesting downside of -4.0% (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