Australian Broker Call

Citi rates AKE as Buy (1) -

Citi has made material upgrades across its lithium coverage to be more in line with consensus earnings forecasts. The broker feels lithium prices have peaked as electric vehicle demand from China begins to slow, but finds near-term downside to contract pricing limited. 

For Allkem, the Buy rating is retained and the target price increases to $17.80 from $16.50.

Target price is $17.80 Current Price is $13.11 Difference: $4.69
If AKE meets the Citi target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $16.87, suggesting upside of 36.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.4

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

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

While the sale price from the trade sale of East Coast Rail (thermal coal rail haulage) was below expectations, Morgans considers the outcome positive as it avoids a potentially unloved spinoff and reduces debt.

Aurizon Holdings expects to receive around $425m in cash, of which $125m will be deferred for 12 months.

The broker's forecasts had assumed a trade sale, but the lower-than-expected proceeds results in higher forecast interest costs and marginally lower forecast earnings. The target falls to $4.00 from $4.20.

Morgans rating falls to Hold from Add on lower potential returns.

Target price is $4.00 Current Price is $3.69 Difference: $0.31
If AZJ meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.93, suggesting upside of 1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

UBS rates AZJ as Neutral (3) -

UBS likes the agreement by Aurizon Holdings to sell East Coast Rail for around $425m even though management may have hoped for a higher price. It's thought the transaction will reduce the chance of an equity raise and help restore the dividend payout to close to 100%.

In addition, the broker points out there may have been limited investor interest in the alternative: a demerger of a separately-listed high thermal coal exposure. It's felt the market will react positively as it was mostly pricing in a demerger scenario.

The target rises to $3.90 from $3.75 to reflect a better value than previously incorporated into the broker's forecasts for East Coast Rail and time value, partly offset by lower NSW coal volumes in the 1H from inclement weather. Neutral.

Target price is $3.90 Current Price is $3.69 Difference: $0.21
If AZJ meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.93, suggesting upside of 1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Macquarie rates CCX as Neutral (3) -

Macquarie lowers its valuation for City Chic Collective following continued subdued trading across the retailer's portfolio through November.

The decline is led by a -13.2% year-to-date decline in website traffic for Avenue, which is in line with the broker's anticipated -30% decline over the first half, alongside subdued traffic for City Chic Australia's website and physical stores. 

The Neutral rating is retained and the target price decreases to $0.72 from $1.00, with the broker seeing increased downside risk. 

Target price is $0.72 Current Price is $0.67 Difference: $0.05
If CCX meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.03, suggesting upside of 65.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

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

Drilling activity has seen Core Lithium extend mineralisation at Finniss targets Far West, Hang Gong and Bilatos. Given the company has only defined resource for Hang Gong, Macquarie feels drilling results likely offer upside to the resource base. 

The broker expects potential of the project to be further recognised once spodumene production commences in the coming year.

The rating is upgraded to Outperform from Neutral and the target price of $1.30 is retained. Macquarie highlights the share price has declined -43% in the last month, outpacing declines in China lithium pricing significantly. 

Target price is $1.30 Current Price is $1.17 Difference: $0.135
If CXO meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Citi rates EVT as Buy (1) -

Citi reviewed EVT Ltd's rental agreements, finding leases advantageous to the company in the current inflationary environment given a majority of leases are linked to Consumer Price Index movements and typical fixed annual increases of only 3%. 

The broker also expects EVT Ltd to be attractive to landlords given its strong balance sheet and ability to drive foot traffic to shopping centres. 

EVT Ltd remains the broker's top small cap leisure pick. The Buy rating and target price of $17.85 are retained. 

Target price is $17.85 Current Price is $12.84 Difference: $5.01
If EVT meets the Citi target it will return approximately 39% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Macquarie rates FBU as Outperform (1) -

Fletcher Building provided an update on its NZICC project, with fire remediation costs expected to exceed insurance caps by a further $150m given more complex remediation than expected, equating to a pre-tax loss provision of 19 cents per share.

Macquarie highlights volumes have been in line with guidance year-to-date despite residential sales tracking below forecast, and warns of a softening of civil works in the first half. Macquarie finds Fletcher Building a structurally improved business, and sees an inflection point in household formation and affordability ahead. 

The Outperform rating is retained and the target price decreases to NZ$8.00 from NZ$8.12.

Current Price is $4.60. Target price not assessed.

Current consensus price target is $6.45, suggesting upside of 40.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

This company reports in NZD. 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 FBU as Overweight (1) -

Fletcher Building has reconfirmed prior FY23 earnings (EBIT) guidance of NZ$855m (ex construction provision) and group leverage to be near the lower end of the 1-2x target range.

Management noted NZ product sales volumes are in-line with expectations, while Australian business is improving.

Morgan Stanley also highlights the announcement of a further NZ$150m provision for costs to complete the NZ International Convention Centre project. The company cited higher inflationary costs and project complexity. 

The Overweight rating and $5.90 target are kept. Industry view is In-Line.

Target price is $5.90 Current Price is $4.60 Difference: $1.3
If FBU meets the Morgan Stanley target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $6.45, suggesting upside of 40.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

This company reports in NZD. 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

Macquarie rates GL1 as Outperform (1) -

Global Lithium Resources has started the scoping study for its Manna project, with MinSol Engineering appointed to define process and non-process infrastructure requirements. Macquarie anticipates results in the first quarter of 2023, alongside commencement of a feasibility study.

The broker finds commencement of the scoping study to further de-risk the project. Macquarie expects the environmental approval timeline to be of particular interest to the market, given the process typically presents headwinds to any projects in WA. 

The Outperform rating and target price of $4.20 are retained.

Target price is $4.20 Current Price is $1.90 Difference: $2.3
If GL1 meets the Macquarie target it will return approximately 121% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Citi rates IGO as Upgrade to Buy from Neutral (1) -

Citi has made material upgrades across its lithium coverage to be more in line with consensus earnings forecasts. The broker feels lithium prices have peaked as electric vehicle demand from China begins to slow, but finds near-term downside to contract pricing limited. 

IGO benefits from 24% and 16% increases to Citi's nickel price assumptions in FY23 and FY24 respectively, and from the broker's long-term spodumene price upgrades. 

The rating is upgraded to Buy from Neutral and the target price increases to $17.20 from $15.20.

Target price is $17.20 Current Price is $13.92 Difference: $3.28
If IGO meets the Citi target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $15.44, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Macquarie rates KMD as Neutral (3) -

Macquarie's consumer data suggests spending in outdoor categories has remained strong in the December half, and underpins the forecast updates from the broker on KMD Brands. 

Given the result, Macquarie anticipates low single digit earnings growth over the full year, having previously anticipated earnings would be flat. According to the broker, KMD Brands will need to defend tough comparables over the remainder of the year. 

The Neutral rating and target price of $0.90 are retained.

Target price is $0.90 Current Price is $1.00 Difference: minus $0.1 (current price is over target).
If KMD meets the Macquarie target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

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

Macquarie rates LM8 as Outperform (1) -

Lunnon Metals reports positive drilling results from its Foster Central Warren deposit. Given mineralisation was reported outside of current resource boundaries, Macquarie feels results indicate resource upside. 

Macquarie feels Baker remains Lunnon Metals' main focus, with the mineral resource increasing 95% over six months and the asset slated for an accelerated final investment decision in the coming year. 

The Outperform rating and target price of $1.30 are retained.

Target price is $1.30 Current Price is $0.95 Difference: $0.35
If LM8 meets the Macquarie target it will return approximately 37% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Macquarie rates LOV as Outperform (1) -

Lovisa Holdings remains Macquarie's preferred stock across its small cap apparel coverage, following a review of recent retail trends, with the ongoing reopening of markets continuing to support sales performance. 

Macquarie anticipates the bulk of sales in FY23 to be driven by new store roll outs, as stores added in FY22 annualise in the current fiscal year. 

The Outperform rating and target price of $27.00 are retained. 

Target price is $27.00 Current Price is $23.08 Difference: $3.92
If LOV meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $26.35, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

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

UBS initiates coverage of growing financial services business MA Financial with a Buy rating and $6.50 target price.

The company has three main divisions: Asset Management, which focuses on alternative asset classes; Lending; Corporate Advisory & Equities.

The growth in recurring fee revenue from Asset Management is a key attraction for the analyst as it improves revenue quality and is therefore a valuation tailwind.

While shares have fallen around -55% since January (alongside global peers), the broker feels the market has already priced in a material change to the Significant Investor Visa program.

UBS also feels the company is now largely shielded from asset revaluation/redemption concerns.

Target price is $6.50 Current Price is $4.65 Difference: $1.85
If MAF meets the UBS target it will return approximately 40% (excluding dividends, fees and charges).

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

Citi rates MIN as Buy (1) -

Mineral Resources has made a bid for Norwest Energy ((NWE)) in an off market takeover, with the purchase providing access to Lockyer Deep, one of the largest global onshore gas discoveries of the last decade. 

Citi highlights the acquisition has potential to add $625m to Mineral Resources' medium term earnings, while leverage could result in reduced group expenditure and ESG benefits. 

The offer of one Mineral Resources share for every 1,376 Norwest Energy shares reflects a 33% premium to the latter's previous closing price. The Buy rating and target price of $86.00 are retained.

Target price is $86.00 Current Price is $81.22 Difference: $4.78
If MIN meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $90.94, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Macquarie rates MIN as Outperform (1) -

Mineral Resources has launched an all scrip takeover offer of Norwest Energy ((NWE)) equating to a valuation of $400m. The offer will see Norwest Energy shareholders receive one Mineral Resources share for every 1,367 shares held. 

Macquarie highlights Norwest Energy's core asset is its 20% stake in Lockyer Deep. Mineral Resources plans to accelerate appraisal and development studies for the asset, and plans to commence drilling of six wells in the Perth Basin from early 2023. 

The Outperform rating and target price of $127.00 are retained.

Target price is $127.00 Current Price is $81.22 Difference: $45.78
If MIN meets the Macquarie target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $90.94, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

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

Given a pre-existing holding of 19.9% and management's expectation of success, Morgan Stanley believes it is sensible by Mineral Resources to launch an off-market takeover for the remainder of Norwest Energy ((NWE)) shares.

The offer price is one Mineral Resources share for every 1,367 shares of Norwest, implying 6cps for Norwest, a 33.33% premium to the previous closing price.

The Equal-weight rating and $83.40 target are unchanged.

Target price is $83.40 Current Price is $81.22 Difference: $2.18
If MIN meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $90.94, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Morgan Stanley rates MQG as Overweight (1) -

Morgan Stanley believes Macquarie Group's 2H guidance (provided at 1H results) on both commodities and gains on sale could prove conservative. It's felt market conditions will need to improve before the market attributes any credit.

The analyst considers key catalyst will be a recovery in M&A activity and lower or more stable rates, which are mid-2023 options.

The Overweight rating and $215 target are retained. Industry View: Attractive.

Target price is $215.00 Current Price is $169.90 Difference: $45.1
If MQG meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $189.88, suggesting upside of 12.5% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Morgans rates NSR as Hold (3) -

Morgans refreshes its financial model for National Storage REIT. After factoring in the brokers higher risk free rate of 3.6%, up from 3.0%, the target price falls to $2.15 from $2.30.

The REIT will go ex-distribution on December 29 and an interim payout of 5.5cpu has been declared versus 4.6cpu in the previous corresponding period.

FY23 guidance remains unchanged. The Hold rating is unchanged.

Target price is $2.15 Current Price is $2.39 Difference: minus $0.24 (current price is over target).
If NSR meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.28, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.5

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

Citi rates PLS as Neutral (3) -

Citi has made material upgrades across its lithium coverage to be more in line with consensus earnings forecasts. The broker feels lithium prices have peaked as electric vehicle demand from China begins to slow, but finds near-term downside to contract pricing limited. 

For Pilbara Minerals, the Neutral rating is retained Neutral rating is retained and the target price increases to $4.70 from $4.60.

Target price is $4.70 Current Price is $4.10 Difference: $0.6
If PLS meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.63, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

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

Morgan Stanley regards the outlook for Sims as balanced between attractive longer-term thematics and challenging short-term conditions. Management has noted headwinds from slower economic activity, hoarding of scrap and lower auto sales, meaning less obsolete vehicles.

For the medium-to longer term, the analyst likes the company's leverage to a greener global steel industry

While the broker has lowered its 2H expectations the Equal-weight rating and $13.00 target are maintained. Industry view: In-Line.

Target price is $13.00 Current Price is $13.67 Difference: minus $0.67 (current price is over target).
If SGM meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.67, suggesting downside of -3.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.3

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

Morgans rates STM as Initiation of coverage with Speculative Buy (1) -

Morgans initiates coverage on junior exploration company Sunstone Metals with a Speculative Buy rating and 12cps target price.

The company is evaluating gold-copper porphyry targets in Ecuador and has reported a maiden resource (156Mt at 0.35g/t gold and  0.11% copper) at Brama-Alba, which is the most advanced of six prospects on the Bramaderos tenement in southern Ecuador.

The company also has two wholly-owned tenements in northern Ecuador.

The broker believes the reported resource within the conceptual pit should support an open pit mining operation with conventional processing.

Target price is $0.12 Current Price is $0.04 Difference: $0.082
If STM meets the Morgans target it will return approximately 216% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Macquarie rates SUL as Neutral (3) -

Macquarie's consumer data suggests spending in outdoor categories has remained strong in the December half, and underpins the forecast updates from the broker on Super Retail. 

The broker does remain conservative on Super Retail's outlook, with foot traffic and auto spend subdued over November. Macquarie finds near and medium-term upside risk limited.

The Neutral rating is retained and the target price increases to $10.46 from $10.17.

Target price is $10.46 Current Price is $10.86 Difference: minus $0.4 (current price is over target).
If SUL meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.37, suggesting upside of 15.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Citi rates TWE as Neutral (3) -

According to Citi, Treasury Wine Estates' US off premise performance is holding up, while recovery of higher margin on premise channels has been likely impacted by cost of living concerns. US retail sales lifted 1% year-on-year in November, helped by a 5% pricing increase. 

This is in line with commentary from surveys conducted by Citi's US restaurant analyst, which found 42% of consumers intend on drinking less wine over the holiday period given inflation, while 82% will seek deals or discounts on wine at retail outlets. 

The broker reiterates Treasury Wine Estates is a fundamentally improved business from pre-covid. The Neutral rating and target price of $13.50 are retained. 

Target price is $13.50 Current Price is $13.60 Difference: minus $0.1 (current price is over target).
If TWE meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.22, suggesting upside of 6.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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