Australian Broker Call

Morgans rates ACF as Add (1) -

Morgans believes the focus of Acrow Formwork and Construction Services on the civil infrastructure market is the right strategy that provides opportunities for solid growth over the longer term.

The broker approves of a strategy that has seen the revenue mix shift from the more commoditised and price-sensitive residential and commercial scaffold sectors to the higher-value and engineered formwork market linked to growing demand for civil infrastructure investment.

The broker also sees infrastructure investment as a key driver of Australia’s economic recovery with the potential for extra funding in the upcoming federal budget in October.

The Add rating is unchanged and the target price is increased to $0.40 from $0.38.

Target price is $0.40 Current Price is $0.36 Difference: $0.04
If ACF meets the Morgans target it will return approximately 11% (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 AUB as Outperform (1) -

AUB Group has guided to a net profit of $58.5-$61m for FY21. The group also expects double-digit profit growth in the medium term led by a firming premium rate cycle, cost reduction opportunities and enhanced insurer agreements.

Macquarie estimates AUB's net organic growth in FY21 will largely be similar to that of its listed competitor Steadfast Group ((SDF)) when adjusted for acquisitions along with AUB Group's s cost-out and Steadfast's technology growth. The broker believes AUB Group's growth will continue to be supported by acquisitions.

Macquarie retains its Outperform rating and raises the target to $17.53 from $16.80.

Target price is $17.53 Current Price is $16.24 Difference: $1.29
If AUB meets the Macquarie target it will return approximately 8% (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 BKW as Buy (1) -

Brickworks' FY20 operating income (EBIT) declined by -31% in the second half, better than the -37% decline in the first half. Citi considers the result resilient given the disruption during the period.

While remaining cautious about the housing construction outlook, the broker believes the pull forward from home builder could present near-term upside.

The outlook for industrial rental income for Brickwork’s Property Trusts is considered robust given its shift towards e-commerce.

We maintain a Buy rating with the target price increasing to $20.95 from $19.

Target price is $20.95 Current Price is $18.68 Difference: $2.27
If BKW meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $19.40, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in July.

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 BKW as Outperform (1) -

Spurred on by its solid cost management, Brickworks' FY20 net profit beat Macquarie's estimated $125.4m. However, the broker did not like a large amount of cost was taken below the line that included -$41m in restructuring and a -$10m impact from covid-related expenses.

Macquarie points out the company has had a good run but while detached activity is supportive in Australia, prospects in the other parts of the portfolio are mixed. FY21-23 earnings forecasts have been revised downwards.

Macquarie retains its Outperform rating with the target price rising to $18.80 from $17.80.

Target price is $18.80 Current Price is $18.68 Difference: $0.12
If BKW meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $19.40, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in July.

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

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

The FY20 result for Brickworks was better than feared by Morgans, with building products Australia (BPA) delivering a materially higher second half performance and the Property division also beating the broker's forecast.

The analyst points out while risks remain to activity in NSW and VIC, outlook comments in regard to BPA were cautiously optimistic. Property is expected to remain resilient and building products North America (BP NA) should benefit from rationalisation efforts and recent acquisitions, according to the broker.

The analyst expects the Industrial Property Trust tailwinds, asset heavy balance sheet and dividend yield will provide investors ongoing valuation support until a cyclical recovery in the operational business occurs. Valuation upside is considered likely from a further compression in cap rates and stronger than expected recovery in BPA and BPNA over FY21-23.

Morgans upgrades BPA forecasts (from a low base) and increases Property estimates over FY21-23. This has been largely offset by material downgrades to Investment earnings.

The rating is upgraded to Add from Hold and the target price is increased to $19.98 from $18.24.

Target price is $19.98 Current Price is $18.68 Difference: $1.3
If BKW meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $19.40, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in July.

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 CPU as Sell (5) -

Citi continues to expect FY21 will be a challenging year for Computershare with a number of largely unavoidable headwinds crystallising and the guidance, skewed towards the second half, implying some risk to it.

The broker believes significant benefits are unlikely until FY22 at the least. Looking at the near term headwinds, Citi retains its Sell rating with a target price of $12.

Target price is $12.00 Current Price is $12.21 Difference: minus $0.21 (current price is over target).
If CPU meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.19, suggesting upside of 7.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.1

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

Morgan Stanley rates DXS as Underweight (5) -

Morgan Stanley undertakes an analysis of the likelihood of a buyback of stock by Dexus Property Group.

The broker calculates the stock is currently trading at an implied cap rate of 5.7-6.2% versus its book cap rate of 5.05%. With office and industrial assets transacting at book value in the physical market, the analyst says there is a potential opportunity to sell assets and buy back its stock.

The broker explains the company has a strong track record in identifying and executing accretive projects and doesn't think the company's share price is at a low enough point for there to be a large scale buy-back program.

The broker reaffirms its Underweight rating. The target price remains unchanged at $8.15. Industry View: In-line.

Target price is $8.15 Current Price is $8.83 Difference: minus $0.68 (current price is over target).
If DXS meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.35, suggesting upside of 3.2% (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

Morgans rates GNX as Add (1) -

Genex Power announced it isn’t expecting to reach financial close by September 30 on the Kidston Hydro project (K2-H), as further discussion is required with Powerlink.

Morgans understands further discussions are required to finalise the operating cost contribution that the project joint venture will be required to make.

The broker still believes it is most likely the project will proceed, although the coming Queensland election does add more uncertainty.

The company also announced that the Northern Australia Infrastructure Facility (NAIF) has agreed to extend its conditional approval for funding to 31 January 2021, and the analyst thinks J-Power will likely extend as well.

The Speculative Buy rating and target price of $0.36 are unchanged.

Target price is $0.36 Current Price is $0.21 Difference: $0.15
If GNX meets the Morgans target it will return approximately 71% (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 IAG as Overweight (1) -

Morgan Stanley thinks the market is pricing in business interruption (BI) losses in the range of -$1-2bn for Insurance Australia Group.

However, the broker calculates, the company would have between -$300 to -1.2bn of gross claims. So even if the company incurs an unlikely -$2bn of gross claims, it would still have a prescribed capital amount (PCA) of 2.1 times, according to the analyst.

In Morgan Stanley's base case, the company could even be in a position to return capital to shareholders.

The Overweight rating is unchanged and the target price is decreased to $6.50 from $6.65. Industry view: In-line.

Target price is $6.50 Current Price is $4.50 Difference: $2
If IAG meets the Morgan Stanley target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $5.87, suggesting upside of 27.6% (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 JMS as Outperform (1) -

Jupiter Mines' second-quarter Tshipi production and shipments were stronger than expected with operations ramping-up faster than expected after the covid-19 lockdown. An interim dividend of 0.8c is expected for the first half.

Macquarie, after incorporating the strong second-quarter result and increasing its FY21 production forecast, has revised its earnings upwards for FY21. The broker expects further operational strengthening over the remainder of FY21.

Outperform rating. The target is $0.35.

Target price is $0.35 Current Price is $0.28 Difference: $0.07
If JMS meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in February.

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 NST as Equal-weight (3) -

The Northern Star Resources strategy update was in-line with guidance given in the August strategy outlook, according to Morgan Stanley.

Most material updates came from early-stage brownfield exploration, relates the broker, with confidence shown in a long Pogo life, and details on Jundee's expansion to 400koz per annum.

Equal-weight rating. Target is $12.65. Industry view: Attractive.

Target price is $12.65 Current Price is $13.20 Difference: minus $0.55 (current price is over target).
If NST 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 $14.52, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in July.

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 OGC as Outperform (1) -

Oceanagold Corp's update on the life of mine (LOM) plan for the Haile gold mine shows production to be broadly in line with Macquarie's expectation, albeit with materially higher capital costs.

Despite the higher capital outlay, the broker expects Haile to become a major contributor to the group. The broker maintains its expectations of improved cash flow in 2021, which incorporates a production contribution from the Didipio mine.

The Outperform rating is maintained with the price target decreasing to $2.80 from $3.90.

Target price is $2.80 Current Price is $2.40 Difference: $0.4
If OGC meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.70, suggesting upside of 53.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

Citi rates PMV as Neutral (3) -

In an initial response to today's FY20 release, Citi analysts confirm the financial performance in se looks slight above expectations, both at Citi and as reflected in market consensus.

But Premier investments has also announced Smiggle store closures in the UK, Asia and Australia and this might weigh upon growth, which would have disappointed, comment the analysts.

Another negative, according to Citi, is margin pressure. Irrespectively, Citi anticpates small upgrades to consensus forecasts post the release. Neutral rating and $19.30 price target retained.

Target price is $19.30 Current Price is $19.13 Difference: $0.17
If PMV meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $19.25, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Ord Minnett rates QBE as Accumulate (2) -

Ord Minnett notes QBE Insurance Group is expecting recoveries worth about US$100m from its reinsurance contracts in the UK. With some reinsurers taking a harder stand on the payment of excess-of-loss catastrophe treaties relating to business interruption, the broker considers this a very manageable loss even if reinsurers successfully deny coverage.

According to Ord Minnett, the main risk posed by reinsurers successfully denying coverage would be if Australian courts were to rule the payment of business interruption claims fell on the primary insurer. 

Also, the broker notes this risk would need several rulings to go against QBE, the chances of which are remote for it than for other insurers.

Ord Minnett retains its Accumulate recommendation with a $12.00 target price.

Target price is $12.00 Current Price is $8.71 Difference: $3.29
If QBE meets the Ord Minnett target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $11.45, suggesting upside of 32.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

Ord Minnett rates QUB as Upgrade to Buy from Accumulate (1) -

Ord Minnett has upgraded its recommendation on Qube Holdings to Buy from Accumulate with a target price of $3.03.

The broker considers Qube to be a likely beneficiary from a bumper soft commodity harvest forecast for the East Coast in FY21. The Moorebank monetising process is expected to deliver a return to Qube by the end of 2020.

Qube has acquired Agrigrain, a logistics and storage operation in NSW which services 800 growers in regional NSW. The broker believes Agrigrain is likely to integrate with Qube’s broader Agri footprint in NSW.

Target price is $3.03 Current Price is $2.56 Difference: $0.47
If QUB meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.01, suggesting upside of 17.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Macquarie rates SYD as Outperform (1) -

Macquarie is of the view as a long-duration asset, the key to Sydney Airport Holdings' valuation is not the exact timing of re-opening in the next 12 months but stabilising passenger traffic.

Any medium-term recovery will be impacted by fleet downsizings by the airlines, the broker believes, along with pauses on new aircraft deliveries. Looking at global airports, the broker suggests passenger traffic may not reach 2019 levels until 2024-26.

Having said that, Macquarie thinks Sydney Airport still offers value and sees upside around pricing.

Macquarie reiterates its Outperform rating with the target price rising to $6.66 from $6.06.

Target price is $6.66 Current Price is $5.74 Difference: $0.92
If SYD meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.83, suggesting upside of 1.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates UMG as Initiation of coverage with Neutral (3) -

Credit Suisse initiates coverage with a Neutral rating and a target price of $4.02.

The broker highlights United Malt Group is the only major listed commercial malting company globally and faces competition from large companies which may negatively impact the return on capital in the future.

The group has guided to geographic expansion which, the broker thinks, may bring earnings above the cost of invested capital. Despite expecting operating income growth post the pandemic led disruption, Credit Suisse notes the group's valuation is constrained by significant capital expenditure in the past with only modest returns to show for it.

In the near term, the group's earnings are highly dependent on the re-opening of on-premise brew-houses and pubs. A return to pre-covid-19 volumes is expected by the end of FY21.

Target price is $4.02 Current Price is $4.09 Difference: minus $0.07 (current price is over target).
If UMG meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.46, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Citi rates WBC as Buy (1) -

Westpac Bank has agreed to resolve its anti-money laundering civil proceedings with the Australian Transaction Reports and Analysis Centre (AUSTRAC). The bank has agreed to a Statement of Facts and Admissions along with a fine of -$1.3bn.

With -$900m already provided in the first half, the bank needs to provide another circa -$400m. After incorporating the incremental amount into its second half forecasts, Citi adjusts Westpac's FY20 cash earnings by circa -11% with the second half dividend estimate dropping to 25c.

Westpac Bank remains Citi's preferred pick in the sector and the broker expects the bank's accelerated resolution of its main issues will lead to its outperformance in FY21 and beyond.

Buy rating maintained. The target price is $23.50.

Target price is $23.50 Current Price is $16.37 Difference: $7.13
If WBC meets the Citi target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $20.03, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Macquarie rates WBC as Neutral (3) -

Westpac Bank has agreed to pay a civil penalty of circa -$1.3bn with respect to the anti-money laundering and counter-terrorism financing contraventions identified in the civil proceedings against it.

Macquarie is disappointed with the quantum of the settlement but notes it to be broadly consistent with the market’s expectations. Since the broker had already incorporated circa -$1.3bn fine in its forecasts, there is no change to its earnings forecast. 

The broker notes the settlement will hit Westpac's capital position by circa -9bps but believes there will be no capital raising unless conditions deteriorate materially.

Macquarie retains its Neutral rating with the target unchanged at $17.50.

Target price is $17.50 Current Price is $16.37 Difference: $1.13
If WBC meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $20.03, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

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

Westpac has announced it has reached an agreement with AUSTRAC to resolve civil proceedings. Parties have agreed to a Statement of Facts and Admissions and will seek Federal Court approval for a civil penalty of -$1.3bn.

Morgan Stanley views the agreement as removing one source of uncertainty, while the circa nine basis points impact on capital of an additional provision of -$404m made by the bank is considered immaterial.

However, the second half provision may affect the bank's final dividend in the broker's view. This is because APRA's current capital management guidance is that banks should "retain at least half their earnings" .

All else being equal, Morgan Stanley calculates this could reduce the potential dividend by -6cps. The Equal-Weight rating and target price of $17.40 are unchanged. Industry view: In-line.

Target price is $17.40 Current Price is $16.37 Difference: $1.03
If WBC meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $20.03, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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 reached a settlement with the Australian Transaction Reports and Analysis Centre (AUSTRAC) with respect to its anti-money laundering and counter-terrorism financing breaches, agreeing to pay a -$1.3bn civil penalty.

This implies Westpac will recognise -$404m in provisions in the second half (having already set aside -$900m in provision in the first half of FY20).

The settlement is above Ord Minnett’s -$1.2bn estimate, leading to a 2% increase in its second-half expenses and a -5% impact on its earnings forecast. The broker keeps its dividend forecast intact.

Ord Minnett holds onto its Hold recommendation with a target price of $18.20.

Target price is $18.20 Current Price is $16.37 Difference: $1.83
If WBC meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $20.03, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

UBS rates WBC as Buy (1) -

Westpac reached an agreement to settle the civil proceedings against it with the Australian Transaction Reports and Analysis Centre (AUSTRAC). This includes a penalty of -$1.3bn and brings to an end a disappointing chapter for the bank, observes UBS.

On the bright side, the settlement is lower than the broker feared (-$1.5bn). With -$900m already provided for in the first-half result, Westpac will be providing for a further -$404m in the second half. 

UBS believes Westpac's balance Sheet is well provisioned but it is the capital position that remains an overhang. Moreover, the bank needs substantial investment in technology to achieve the necessary efficiency gains that will help offset its weak revenue outlook, suggests the broker.

Buy and $20.50 target retained.

Target price is $20.50 Current Price is $16.37 Difference: $4.13
If WBC meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $20.03, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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