Australian Broker Call

Bell Potter rates AIS as Buy (1) -

Aeris Resources is undertaking a $30m equity raising, comprising a $13.9m institutional placement and a $16.1m entitlement offer, resulting in the issue of 273m new shares.

Raised funds are to be used for general capital and to maintain financial flexibility to progress key growth projects.

Bell Potter has adjusted its updates accordingly, predominantly reducing the company's working capital balance which the broker expects to decreases by -$80m by end of December, compared to end of June.

The Buy rating is retained and the target price decreases to 23 cents from 30 cents.

Target price is $0.23 Current Price is $0.11 Difference: $0.12
If AIS meets the Bell Potter target it will return approximately 109% (excluding dividends, fees and charges).

Current consensus price target is $0.17, suggesting upside of 54.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Morgan Stanley rates BOQ as Underweight (5) -

Morgan Stanley notes cautious commentary (broadly in line with prior comments) at Bank of Queensland's AGM with management expecting "lower returns" in FY24 due to ongoing revenue and margin pressure.

The bank is also expecting low-single-digit growth in the underlying cost base, and anticipates "returning to profitability growth in FY25 and FY26 when the cycle turns".

During this period, management is targeting payment of dividends at the lower-end of the bank's payout ratio, implying to Morgan Stanley an increasing likelihood of a dividend cut.

Underweight rating. Target $5.30. Industry view: In-line.

Target price is $5.30 Current Price is $5.54 Difference: minus $0.24 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.57, suggesting upside of 0.0% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Citi rates CSL as Buy (1) -

In a sign of a positive outlook for Immunoglobulin (Ig) demand, suggests Citi, CSL's competitor Takeda plans to expand manufacturing capacity by 50% over the next five years.

At Takeda's investor day, management also stated it is expecting mid-to-high single-digit volume growth for Ig over the medium-term, in line with the broker's forecast for CSL.

The broker also highlights Takeda mentioned the impact of anti-FcRn should be limited to less than -10% of the total Ig market.

The Buy rating and target price of $325 target are retained.

Target price is $325.00 Current Price is $267.47 Difference: $57.53
If CSL meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $329.70, suggesting upside of 23.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.9

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

Morgan Stanley rates EDV as Underweight (5) -

While long-dated in nature, Morgan Stanley believes an updated strategy by Endeavour Group for the Hotels division should be well received by the market. Targets exclude FY24/25 given uncertainty around the rising cost environment, notes the broker.

Management intends to focus on returns and first-time hotel EBIT growth/financial targets, with less focus on inorganic growth, explain the analysts.

The company expects $150m in Hotels EBIT upside by FY28, with half driven by operational growth and the other half due to
renewals along with acquisitions and divestments to optimise portfolio composition.

The broker's Underweight rating is maintained on strucural challenges. The $5.60 target is also retained. Industry view: In-Line.

Target price is $5.60 Current Price is $5.20 Difference: $0.4
If EDV meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.69, suggesting upside of 10.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

UBS rates EDV as Buy (1) -

Endeavour Group's recent investor day has reaffirmed UBS's confidence in the company's outlook, and particulalry in its capital allocation discipline.

As per UBS, Endeavour Group has had a varied financial performance since demerging from Woolworths Group ((WOW)) amid a volatile trading environment. The company has now issued through the cycle targets from FY26, including revenue growth at or above market.

The broker lowers near-term earnings per share expectations, but increases long-term expectations on higher hotel earnings. The Buy rating and target price of $6.00 are retained.

Target price is $6.00 Current Price is $5.20 Difference: $0.8
If EDV meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.69, suggesting upside of 10.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Shaw and Partners rates ELD as Buy (1) -

While Elders has delivered impressive results over the last nine years, Shaw and Partners notes conditions are currently challenging in many parts of the agriculture sector, and this challenge is reflected in the broker's forecasts.

Following record high crops, the Agricultural Bureau is anticipating 2023-2024 winter crop productions will drop below ten-year averages to 46.1m tonnes.

Shaw and Partners notes spring crop prospects have been mixed, but the Bureau is predicting a summer crop above the ten-year average. The Buy rating and target price of $9.00 are retained.

Target price is $9.00 Current Price is $7.35 Difference: $1.65
If ELD meets the Shaw and Partners target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $7.73, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Citi rates IGO as Neutral High Risk (3) -

Citi finds it difficult to envisage IGO outperforming ASX-listed peers, though (for the bulls) also highlights it is the only lithium exposure to generate free cash flow (FCF) at the current spot prices.

The broker lowers its target to $9.50 from $13 after allowing for lower lithium price forecasts and raising opex assumptions at Cosmos. Also, the ESG premium for Kwinana is removed given new Foreign Entity of Concern (FEoC) guidelines may be an overhang if enacted.

A further overhang, according to Citi, is the potential for a cut in production at Greenbushes in 2024.

The Neutral, High Risk rating is unchanged.

Target price is $9.50 Current Price is $7.82 Difference: $1.68
If IGO meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $10.80, suggesting upside of 35.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Shaw and Partners rates LAU as Buy (1) -

Following a series of investor site visits hosted by Lindsay Australia, Shaw and Partners has determined that the size and quality of the company's offering in the refrigerated logistics space would be difficult and expensive to replicate.

According to the broker, Lindsay Australia's scale is the kind that appeals to large food producers, also finding the company's 'Fruit Loop' strategy a key competitive advantage.

The Buy rating and target price of $1.60 are retained.

Target price is $1.60 Current Price is $1.16 Difference: $0.445
If LAU meets the Shaw and Partners target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $1.54, suggesting upside of 34.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Citi rates MFG as Neutral (3) -

Citi remains cautious on near-term funds under management (FUM) growth for Magellan Financial following an initial look at yesterday's release of flow details for November. FUM rose by $0.9bn, as -$1bn in outflows were trumped by a $1.9bn increase from Markets/Other.

Compared to October, there was a slight reduction in the general level of underperformance from funds, observe the analysts, yet relative performance remains weak across time frames of three to five years.

FUM for Global Equities continues to decline, points out the broker, and is now below Infrastructure FUM for the first time.

Neutral. Target price of $7.00.

Target price is $7.00 Current Price is $7.83 Difference: minus $0.83 (current price is over target).
If MFG meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.27, suggesting upside of 1.2% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.1

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

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

While Macquarie Group's commodities and global markets business has been an outsized contributor for the company in recent years,  contributing 48% to profits as of the first half of FY24,  UBS is anticipating the super cycle could be at an end based on peer analysis.

Given implied commodity forecasts, UBS has lowered its expected commodity revenues -7%, -16% and -19% through to FY26. This sees group earnings per share forecasts decrease -1.5% over the same period.

The rating is downgraded to Neutral from Buy and the target price decreases to $180.00 from $185.00.

Target price is $180.00 Current Price is $170.83 Difference: $9.17
If MQG meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $180.16, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Bell Potter rates NEU as Downgrade to Hold from Buy (3) -

The first of Neuren Pharmaceuticals' four Phase 2 trials for NNZ-2591 is expected to read out over the next two to three weeks, with readout for the remaining three expected over the coming twelve months. 

This is a key milestone, points out Bell Potter, being the first time there have been clinical data for patients using NNZ-2591. The broker believes it is likely the safety and pharmacokinetics (PK) endpoints will be successful.

The rating is downgraded to Hold from Buy and the target price of $17.50 is retained.

Target price is $17.50 Current Price is $16.05 Difference: $1.45
If NEU meets the Bell Potter target it will return approximately 9% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Citi rates PPT as Neutral (3) -

Citi raises its target for Perpetual to $25.65 from $22.10 after WH Soul Pattinson ((SOL)) submitted a non-binding, indicative offer to acquire all Perpetual shares it currently does not own via a Scheme of Arrangement.

The broker is not surprised Perpetual has rejected the bid (on undervaluation) and feels there is potential for other bidders to emerge.

The proposal would see WH Soul Pattinson retaining Perpetual Corporate Trust (PCT) and Wealth Management (WM) explain the analysts. Perpetual Asset Management (PAM) would be de-merged and distributed in specie to Perpetual shareholders.

WH Soul Pattinson would assume all group net debt, leaving PAM largely debt free, explains Citi.

The Neutral rating is unchanged.

Target price is $25.65 Current Price is $23.76 Difference: $1.89
If PPT meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $26.54, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Morgan Stanley rates PPT as Overweight (1) -

Just prior to WH Soul Pattinson ((SOL)) lobbing its indicative offer to acquire all of Perpetual's shares, Morgan Stanley generated a research note on Perpetual's strategic review.

The review was of the Corporate Trust and Private Wealth divisions, which implied to the broker the Asset Management business could be separated from these divisions.

While the analysts believed a de-merger would be more simple from a gains on sale tax perspective, it was felt the review could unlock upside.

Overweight. Target $28. Industry view: In-Line.

Target price is $28.00 Current Price is $23.76 Difference: $4.24
If PPT meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $26.54, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Ord Minnett rates PRU as Initiation of coverage with Hold (3) -

Morningstar (whitelabeled by Ord Minnett) has initiated coverage on three Australian gold miners, starting off on Perseus Mining with a Hold rating and a fair value estimate of $2.

Fair value estimates for Northern Star Resources ((NST)) and Evolution Mining ((EVN)) have been set at $11.30 and $3 respectively, supporting the conclusion both shares are substantially overvalued.

The research is based on an average gold price forecast of US$1870/oz from 2023-25. Also, given short mine lives for all three, a High Uncertainty rating applies as well.

The average copper price assumption is US$3.70/pound from 2023-25.

Target price is $2.00 Current Price is $1.91 Difference: $0.095
If PRU meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.17, suggesting upside of 16.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Morgan Stanley rates RIO as Overweight (1) -

Apart from pre-flagged volume guidance for iron ore, Rio Tinto provided volume guidance for all other commodities at its investor day.

Guidance for copper missed forecasts by consensus and Morgan Stanley on a conservative Escondida outlook, while aluminium guidance beat the broker's estimate.

No FY24 unit cost items were provided, though the spending profile is broadly aligned with prior indications, explains Morgan Stanley.

While the analysts see low-single-digit downside risks to forecast FY24 earnings (EBITDA), the Overweight rating and $134.50 target price are retained. Industry view: Attractive.

Details for the Simandou project were also released including a total attributable budget of -US$6.2bn for 60mtpa.

Target price is $134.50 Current Price is $126.45 Difference: $8.05
If RIO meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $119.75, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

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 RIO as Neutral (3) -

According to UBS, Rio Tinto has made progress in reshaping its portfolio for the future. At its recent investor day, the company outlined ongoing cultural changes, as well as technology and exploration upside, and decarbonisation and growth plans. 

The company remains confident in cutting scope 1 and 2 emissions by -50% by 2030. It has trimmed its decarbonisation capital expenditure to 2023 by -US$5-6bn, with major fleet electrification now expected after 2030.

In a closer look at its Simandou asset, Rio Tinto confirmed first production from blocks 3 and 4 in 2025, ahead of a 30-month ramp up to 60m tonnes per annum capacity.

The Neutral rating and target price of $115.00 are retained.

Target price is $115.00 Current Price is $126.45 Difference: minus $11.45 (current price is over target).
If RIO meets the UBS target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $119.75, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

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

Citi rates XRO as Buy (1) -

Pointing to overall confidence in the value proposition, according to Citi, Xero has increased pricing for the Xero Partner Edition. This move suggests to the broker potential upside to the consensus average revenue per user (ARPU) growth forecast of 6% in FY25.

The analyst also notes the 1H FY25 stands to benefit from the Business Edition price increase that was put through in late 2023. Another Business Edition price increase is expected next year.

The Buy rating and target price of $129.40 are retained.

Target price is $129.40 Current Price is $103.74 Difference: $25.66
If XRO meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $110.62, suggesting upside of 7.3% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.2

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

Citi rates ZIP as Neutral High Risk (3) -

Citi's key takeaway from recent Zip Co trading updates is the acceleration in US revenue growth while loss-rates have also been kept low.

To reflect these outcomes, the broker upgrades its earnings (EBITDA) forecasts materially and suggests the consensus forecast may need to follow.

Zip Co's US total transaction value (TTV) grew by 29% year-on-year in Q1, accelerating from 14% growth in Q4 of FY23, highlights the analyst. Cash flow is expected to be positive in H2 of FY24.

The target rises to 51c from 46c. Neutral/High Risk.

Target price is $0.51 Current Price is $0.42 Difference: $0.09
If ZIP meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $0.79, suggesting upside of 49.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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