Australian Broker Call

Citi rates A2M as Sell (5) -

a2 Milk is facing some supply challenges which Citi considers to be transient in nature. However, the broker also sees the risk these challenges will last longer than expected given suboptimal customer acquisition while the daigou channel is disrupted.

The daigou channel may remain under pressure for longer, cautions the broker, with Chinese students and tourists largely unable to enter Australia.

The broker feels the company's operating income guidance for FY21 at 31% may be conservative since it implies operating costs increasing by 11-17%, considered unlikely by the broker. Nevertheless, Citi has cut its net profit forecast for FY21-23 to account for the lower than expected guidance.

Looking at the structural headwinds facing the company, Citi retains its Sell rating with the target price reducing to $14.20 from $17.20.

Target price is $14.20 Current Price is $14.59 Difference: minus $0.39 (current price is over target).
If A2M meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.12, suggesting upside of 15.1% (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: 0.1

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

UBS rates A2M as Buy (1) -

The impact of covid-19 on a2 Milk's ANZ infant formula sales will lead to a material earnings hit in FY21, asserts UBS. FY22 is expected to see a substantive recovery with pandemic related restrictions easing and channel profitability normalising.

According to UBS's analysis, ANZ retail and corporate daigou demand will fall by -$195m in the first half FY21 led by covid-19 restriction and some cannibalisation by the direct cross border e-commerce channel sales.

The broker continues to believe the company is capable of lifting its China infant formula market share to 7% from the current 5% over the next 5 years. This is still below the broker's previous target of 8% due to structurally lower retail daigou sales.

UBS reiterates a Buy rating with the target price reducing to NZ$22.50 from NZ$22.70.

Current Price is $14.59. Target price not assessed.

Current consensus price target is $16.12, suggesting upside of 15.1% (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: 0.1

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

Macquarie rates ALQ as Outperform (1) -

Commentary in the minerals industry continues to be positive for ALS, Macquarie observes. This is particularly so in Canada where the broker's latest data show a 106% lift in all capital raisings in minerals over the six months to September.

Miners are preparing for an increase in drilling activity. The broker believes the company can trade closer to its global peers given a superior exposure to the minerals recovery and maintains an Outperform rating. Target is raised to $10.30 from $9.00.

Target price is $10.30 Current Price is $9.44 Difference: $0.86
If ALQ meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $8.90, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

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

France has allocated EUR30bn for ecological improvement, including toll roads. The opportunities for APRR include expansion of the recharge network for electric cars and development of the hydrogen refilling network.

Macquarie observes Atlas Arteria has an attractive yield and is benefiting from an early recovery in France. Some slowdown because of a second wave of coronavirus is observed but this is not considered material.

Meanwhile, economic policy in France is likely to generate material benefits through concession extensions as APRR can better use its latent debt capacity. Rating is upgraded to Outperform from Neutral and the target is raised to $6.99 from $6.81.

Target price is $6.99 Current Price is $6.20 Difference: $0.79
If ALX meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $7.03, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates BOQ as Buy (1) -

Bank of Queensland has announced an FY20 loan impairment of -$175m, with the difference relative to the first half stemming from increased covid-19 provisions. Citi notes this reflects increased conservatism and the more severe scenarios.

The broker downgrades FY20 cash earnings by -14% and upgrades FY21/22 by 4-5% on the expected pulling forward of bad debts. The broker retains a Buy rating. Target is $7.

Target price is $7.00 Current Price is $5.89 Difference: $1.11
If BOQ meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Credit Suisse rates BOQ as Neutral (3) -

Impairment charges of -$175m will be brought in FY20 and Bank of Queensland has also increased provisions as a result of more conservative economic forecasts. The charges result in a -39 basis points reduction in the CET1 ratio.

Credit Suisse had suspected impairment guidance previously was light and expects no dividend in FY20. Neutral maintained. Target is $5.50.

Target price is $5.50 Current Price is $5.89 Difference: minus $0.39 (current price is over target).
If BOQ meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Macquarie rates BOQ as Neutral (3) -

Bank of Queensland expects impairment charges of -$175m in FY20 but considers the capital impact is broadly offset by organic capital generation.

Macquarie agrees the bank is well-placed to buffer future impairments stemming from the pandemic because of its strong capital position.

Dividend expectations are reduced in FY20 by -3c and estimates for earnings per share cut by -8.1%. FY21 estimates are raised by 1c and 5.7%, respectively.

Neutral retained. Target is $5.50.

Target price is $5.50 Current Price is $5.89 Difference: minus $0.39 (current price is over target).
If BOQ meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

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

Morgan Stanley anticipates a combination of flat revenue, higher expenses and a -$123m overlay for the pandemic will reduce earnings per share to just 7c in FY20. The final dividend is likely to be deferred as well. The broker forecasts a CET1 ratio of 9.8%.

Excluding the -$11m provision resulting from the employee pay and entitlements review, Morgan Stanley forecasts expenses to be up 3% in the second half and around 8.5% over the full year

 FY21 guidance is likely to be retained but there could be changes to the timing and quantity of investment expenditure, in the broker's view.

Equal-weight rating retained. Target is reduced to $5.70 from $5.90. Industry view: In-line.

Target price is $5.70 Current Price is $5.89 Difference: minus $0.19 (current price is over target).
If BOQ 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 $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Morgans rates BOQ as Hold (3) -

Bank of Queensland will be adding to its covid-19 related collective provision and will incur an expense of -$11m pre-tax on account of historical employee pay and entitlement underpayments.

Morgans notes the credit impairment charge for FY20 is $45m higher than expected. The broker was expecting the provision top-up to eventuate in FY21 and has now reduced its charges forecast for FY21.

In light of this announcement, the broker feels the bank's share price will continue to be under pressure.

Hold recommendation retained with a target price of $5.50.

Target price is $5.50 Current Price is $5.89 Difference: minus $0.39 (current price is over target).
If BOQ meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Ord Minnett rates BOQ as Hold (3) -

Bank of Queensland will be topping-up its covid-19 provisioning, to be taken in the second half of FY20.

While Ord Minnett was expecting this, the quantum of the top-up is larger than expected. Also, the bank will be taking an expense amounting to -$11m in the second half related to irregularities identified in an employee entitlements review.

The broker regards Bank of Queensland as a work in progress and maintains its Hold recommendation. Target price drops slightly to $6 from $6.10.

Target price is $6.00 Current Price is $5.89 Difference: $0.11
If BOQ meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

UBS rates BOQ as Neutral (3) -

Bank of Queensland, having completed its collective provision modelling for FY20, will be taking a -$147m credit impairment charge with its second half result due on October 14.

UBS notes these charges to be slightly more conservative than its own expectations of -$121m. This has also prompted the broker to slightly reduce its forecast credit losses in FY21.

There is a potential upside to the broker's forecasts if the economy picks up faster than anticipated. UBS retains its Neutral rating with a target price of $6.

Target price is $6.00 Current Price is $5.89 Difference: $0.11
If BOQ meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Macquarie rates CSL as Neutral (3) -

Macquarie notes foot traffic for around 100 of the US-based collection centres has eased in recent weeks and an increase in new coronavirus cases has been noted over the same period. Current foot traffic sits around -17% below average.

The broker believes a continuation of the recent trends into the December quarter presents downside risk to FY22 forecasts. There are also several catalysts for competitor products expected over the rest of 2020 and into 2021. Neutral retained. Target is $295.

Target price is $295.00 Current Price is $295.54 Difference: minus $0.54 (current price is over target).
If CSL meets the Macquarie target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $310.39, suggesting upside of 8.2% (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: 0.4

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

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

Corporate Travel will acquire Travel & Transport for $275m, undertaking a $375m equity raising in the process. Macquarie considers this a strategically sound acquisition which materially increases the company's scale in the US.

The broker believes the industry is "right for consolidation" and, moreover, the balance sheet capacity is there.

While forecasting a recovery in corporate travel is difficult, the broker believes creating significant value for the medium term could cement Corporate Travel's position globally.

Rating is upgraded to Outperform from Neutral and the target raised to $16.40 from $14.40.

Target price is $16.40 Current Price is $16.16 Difference: $0.24
If CTD meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $15.64, suggesting downside of -9.0% (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

UBS rates CTD as Buy (1) -

UBS considers Corporate Travel Management one of the best-performing travel-related stocks globally throughout the pandemic.

The broker elaborates on this statement by pointing out the company was able to minimise its cash burn and was able to avoid raising equity due to covid-19. Instead, Corporate Travel raised equity for an acquisition, deemed "business-changing" by the broker.

UBS highlights the increased scale, apart from generating cost synergies, will also help win more business in North America and provide a potential for longer-term scale benefits.

UBS reaffirms its Buy rating with the target price rising to $18.70 from $18.

Target price is $18.70 Current Price is $16.16 Difference: $2.54
If CTD meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $15.64, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Ord Minnett rates CWN as Hold (3) -

Independent Liquor and Gaming Authority's (ILGA) investigation into whether Crown Resorts is a suitable candidate for holding a casino licence in NSW will report its findings formally by 1 February 2021. Ord Minnett reminds the inquiry was launched after allegations of money laundering, organised crime links and the company’s lack of corporate governance.

Ord Minnett does not expect anything beyond a temporary suspension, given the company's reassurance of undertaking a review of processes and creating a head of compliance and financial crimes role.

The broker also thinks it is very unlikely the casino will lose its NSW licence although short-term financial ramifications can be expected.

With the ongoing inquiry, the broker is cautious and maintains its Hold recommendation with a target price of $8.60.

Target price is $8.60 Current Price is $8.91 Difference: minus $0.31 (current price is over target).
If CWN meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.29, suggesting upside of 17.1% (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

UBS rates DOW as Upgrade to Buy from Neutral (1) -

UBS sees Downer EDI as a restructuring story that will position the company to deliver free cash flow of at least $300m.

The broker's scenario analysis envisages a plan that is consistent with Downer's plan to divest its capital-intensive mining and laundries operations and wind down its problematic construction operations.

The broker notes after the restructure, Downer will be focussed on its core urban services businesses, with its business model less cyclical and providing more predictable revenue. 

UBS thinks the divestment of mining and laundries operations will be a key catalyst. The broker upgrades its rating to Buy from Neutral. Target is raised to $5 from $4.50.

Target price is $5.00 Current Price is $4.47 Difference: $0.53
If DOW meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 12.9% (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

Morgans rates MME as Add (1) -

MoneyMe will be setting up a new warehouse funding facility that will have its senior funding provided by Westpac. Mezzanine funding will be provided by the Australian Office of Financial Management.

Morgans notes the cost of the new facility will materially reduce MoneyMe's overall cost of funding and allow the company to offer more competitive pricing across its lending book.

Earnings forecasts have been upgraded for FY21-23 due to reduced funding costs expected from the new facility.

Morgans retains its Add rating with the target price rising to $2.01 from $1.90.

Target price is $2.01 Current Price is $1.54 Difference: $0.47
If MME meets the Morgans target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Ord Minnett rates MME as Buy (1) -

MoneyMe has announced a $167m warehouse funding facility, supported by both Westpac and the Australian Office of Financial Management (AOFM).

Ord Minnett is pleased and notes the upsized terms will remove a major growth constraint and support MoneyMe's credit growth forecasts through FY21-22.

The broker expects MoneyMe's cost of funds to reduce during the second half of FY21 and expects the company to re-invest the improvement into growing its market share in the existing and new loan verticals.

With the announcement further validating MoneyMe's progress, the broker retains its Buy rating. The target price is $1.92.

Target price is $1.92 Current Price is $1.54 Difference: $0.38
If MME meets the Ord Minnett target it will return approximately 25% (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

Ord Minnett rates ORI as Hold (3) -

Ord Minnett estimates a reduction in Orica's FY20 earnings before interest and tax, attributable to continued volume weakness in emerging markets. The broker notes demand in key developed markets has continued largely unabated despite the pandemic.

Orica has outlined certain drivers of earnings growth which include synergies from its Exsa acquisition, enterprise resource planning (ERP) benefits, improvements at the Burrup ammonium nitrate plant, and recovery from a pandemic-affected second half.

The broker believes these factors have already been factored into consensus expectations and maintain its Hold recommendation. Target price is raised to $16.80 from $16.75.

Target price is $16.80 Current Price is $15.98 Difference: $0.82
If ORI meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $18.03, suggesting upside of 16.9% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates SCG as Outperform (1) -

Credit Suisse includes the estimated impact of a $4.1bn hybrid issue. With an average coupon of around 4.94% this represents an estimated spread of around 400 basis points over the bank debt being repaid.

The broker believes this is a better alternative than a dilutive equity raising and down the track, if conditions improve, equity can be issued or interests in some of the assets can be sold.

Credit Suisse lowers estimates for 2020-2022 and reduces the target to $2.73 from $2.81. The stock is trading at a deep discount to net tangible assets and the Outperform rating is based on the broker's view that the stock is undervalued.

Target price is $2.73 Current Price is $2.28 Difference: $0.45
If SCG meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.37, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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