Australian Broker Call

Shaw and Partners rates ABG as Buy (1) -

Abacus Group's projected June 30, 2024 revaluation reduces its property investments by approximately -$136m, or a -6.7% drop in book value from December 31, 2023.

Because of the higher-for-longer interest rate backdrop, Shaw and Partners is not entirely surprised the cap rate loosened to 6.50% from 6.07%.

Buy rating retained. The broker's target is also unchanged at $1.20 as the inclusion of franking credits offsets a higher assumed risk-free rate.

Target price is $1.20 Current Price is $1.13 Difference: $0.07
If ABG meets the Shaw and Partners target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.27, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

Shaw and Partners rates ANG as Buy (1) -

Shaw and Partners raises its target for Austin Engineering to 75c from 60c after reducing the weighted average cost of capital (WACC) assumption to 10.5% from 11% and rolling forward the valuation model.

The broker highlights the "Gillette razor blade like features' of the business model whereby high equipment wear leads to recurring demand for wear products, as well as demand for repair and maintenance services.

Around 74% of Austin’s revenue is exposed to hard rock mining, explains the analyst, where high equipment wear is a feature.

The Buy rating is maintained.

Target price is $0.75 Current Price is $0.60 Difference: $0.155
If ANG meets the Shaw and Partners target it will return approximately 26% (excluding dividends, fees and charges).

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

Macquarie rates ANN as Outperform (1) -

After making minor adjustments to FY24 and FY25 forecasts, Macquarie sees valuation appeal for Ansell at current levels and maintains an Outperform rating and $28.15 target.

The broker's FY24 EPS forecast of US97cps sits towards the lower end of management's guided range of between US94-110cps. A normalisation of de-stocking in Life Sciences is expected as well as earnings accretion from the Kimberly Clark transaction.

Target price is $28.15 Current Price is $25.64 Difference: $2.51
If ANN meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $27.43, suggesting upside of 8.5% (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: 0.2

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

Citi rates ANZ as Sell (5) -

Citi explores the potential risks in the development of private credit on Australia's big four banks.

The broker notes the market is replicating what has been happening overseas as tighter regulatory restrictions and lower risk taking in the banking system are supporting the development of private credit, particularly in the commercial real estate sector.

Citi envisages the sector is a competitive threat to pockets of commercial lending for the banks.

Sell rating and $24.50 target unchanged.

Target price is $24.50 Current Price is $28.65 Difference: minus $4.15 (current price is over target).
If ANZ meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.59, suggesting downside of -4.2% (ex-dividends)

The company's fiscal year ends in September.

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 ASK as Buy (1) -

Recent share price weakness for Abacus Storage King presents an opportunity for investors seeking value, according to Shaw and Partners. Buy.

A preliminary property portfolio valuation for June 30 suggests to the analyst "solid" growth in income and exceptional asset quality. The cap rate tightened to 5.54% from 5.67% last December.

The target rises to $1.35 from $1.30.

Target price is $1.35 Current Price is $1.13 Difference: $0.22
If ASK meets the Shaw and Partners target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $1.37, suggesting upside of 20.9% (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

Bell Potter rates BOE as Buy (1) -

While Boss Energy has maintained first year production guidance of 850klbs from Honeymoon, the ramp-up is slower than both Bell Potter and management had anticipated.

The Buy rating is unchanged and the target falls to $5.90 from $6.35 after the broker slows the ramp-up forecast and raises cost (AISC) estimates for Honeymoon to $42.7/lb from $35.40/lb in light of recent inflationary increases across the sector.

Target price is $5.90 Current Price is $3.82 Difference: $2.08
If BOE meets the Bell Potter target it will return approximately 54% (excluding dividends, fees and charges).

Current consensus price target is $5.05, suggesting upside of 32.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Citi rates CBA as Sell (5) -

Citi explores the potential risks in the development of private credit on Australia's big four banks.

The broker notes the market is replicating what has been happening overseas as tighter regulatory restrictions and lower risk taking in the banking system are supporting the development of private credit, particularly in the commercial real estate sector.

Citi envisages the sector is a competitive threat to pockets of commercial lending for the banks.

Sell rating and $85 target price for CommBank.

Target price is $85.00 Current Price is $127.10 Difference: minus $42.1 (current price is over target).
If CBA meets the Citi target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $93.98, suggesting downside of -25.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

Macquarie rates CMM as Neutral (3) -

Preliminary fourth quarter production and cash flows for Capricorn Metals were in line with Macquarie's forecasts, but inaugural FY25 production guidance was a -5% miss.

The Neutral rating and $5.10 target are maintained. The analyst reminds investors the approvals timing for the Mt Gibson gold project in WA remains important.

Target price is $5.10 Current Price is $5.08 Difference: $0.02
If CMM meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $5.78, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Macquarie rates IAG as Outperform (1) -

Following Insurance Australia Group's new reinsurance arrangements, Macquarie argues the group should trade on a material
premium to Suncorp Group after boxing in catastrophes and long tail reserves.

Insurance Australia Group is now the broker's preferred exposure in the sector, trading at a more attractive multiple, with capital management likely in August, and margin stability due to the new reinsurance.

The Outperform rating is maintained and the target rises to $8.00 from $6.40.

Target price is $8.00 Current Price is $7.00 Difference: $1
If IAG meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $7.34, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Citi rates JLG as Buy (1) -

Citi assesses the FY24 earnings expectations for Johns Lyng highlighting a conservative approach by stripping out US contributions which results in 4% and 5% growth forecasts for revenue and EBITDA, respectively.

Nor do the broker's forecasts include the potential earnings "upside" from Iplex pipes in WA and AllState panel.

Johns Lyng is the preferred stock exposure in the contractors coverage for Citi and the analyst points to the importance of FY25 guidance for investors.

The target price is lifted to $7.85 from $7.50 and Buy rating unchanged.

Target price is $7.85 Current Price is $5.72 Difference: $2.13
If JLG meets the Citi target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $7.19, suggesting upside of 22.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Citi rates NAB as Sell (5) -

Citi explores the potential risks in the development of private credit on Australia's big four banks.

The broker notes the market is replicating what has been happening overseas as tighter regulatory restrictions and lower risk taking in the banking system are supporting the development of private credit, particularly in the commercial real estate sector.

Citi envisages the sector is a competitive threat to pockets of commercial lending for the banks.

Sell rating and $26.50 target price for National Australia Bank.

Target price is $26.50 Current Price is $35.33 Difference: minus $8.83 (current price is over target).
If NAB meets the Citi target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.57, suggesting downside of -13.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.5

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

Morgan Stanley rates NIC as Overweight (1) -

Morgan Stanley adjusts June quarter nickel production and cost forecasts across all of Nickel Industries' Indonesia Morowali Industrial Park (IMIP) sites (Hengjaya, Oracle and Ranger) following higher-than-average rain at the Hengjaya mine.

The broker's 95c target price is unchanged in the expectation impacts for the June quarter are not prolonged. Overweight. Industry View: Attractive. 

Target price is $0.95 Current Price is $0.82 Difference: $0.13
If NIC meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $1.16, suggesting upside of 43.0% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Bell Potter rates PDN as Buy (1) -

After Bell Potter refreshes forecasts for updated cost and production guidance by Paladin Energy, the broker's target price decreases by -2.5% to $15.70. The analyst's production forecasts rise but so too does the cost (AISC) estimate on an increase in C1 costs.

As the broker had noted previously, the Langer Heinrich ramp-up appears to be running ahead of the consensus expectation. Buy.

Target price is $15.70 Current Price is $13.01 Difference: $2.69
If PDN meets the Bell Potter target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $16.29, suggesting upside of 26.5% (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: 1.0

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

Bell Potter rates PER as Initiation of coverage with Speculative Buy (1) -

Bell Potter initiates coverage on biotechnology company Percheron Therapeutics with a Speculative Buy rating and 14c target.

Progress was slowed during the pandemic, notes the broker, but data from a phase 2b trial on ATL1102 in the second half of 2024 is expected to support further investment and a future partnering transaction.

The company is seeking to develop ATL1102 for the treatment of Duchenne Muscular Dystrophy (DMD).

DMD is a degenerative neuromuscular disorder caused by a mutation in the gene responsible for production of dystrophin (a protein essential to human life), explain the analysts.

Target price is $0.14 Current Price is $0.08 Difference: $0.056
If PER meets the Bell Potter target it will return approximately 67% (excluding dividends, fees and charges).

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 PMV as Buy (1) -

Citi states an upbeat take on the potential synergies from Myer Holdings' ((MYR)) acquisition of Premier Investments' apparel brands.

The analyst forecasts around a $25m earnings lift if there is a 5%-point increase in Myer's private label apparel gross margins.

Total synergies could be as much as some -$50m, the broker notes.

A Buy rating and $36 target are maintained with Citi highlighting Premier Investments is a "unique opportunity" for shareholders to be part of growth opportunities.

Target price is $36.00 Current Price is $29.64 Difference: $6.36
If PMV meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $32.20, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

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

After assuming a higher valuation multiple and raising earnings forecasts, Macquarie raises its target for REA Group to $212 from $196 and upgrades to Outperform from Neutral.

The broker is anticipating solid FY24 result due to the benefit of Premiere-plus (the top-tier depth product for property listings on realestate.com.au) penetration and geographic mix.

The analyst forecasts a buy yield of 21% compared to management's guidance of between 18-19%. The pathway to breakeven for REA India may also come earlier than expected by the market, suggests Macquarie.

Target price is $212.00 Current Price is $194.49 Difference: $17.51
If REA meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $204.71, suggesting upside of 6.2% (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

Citi rates SDR as Buy (1) -

Citi previews earnings for SiteMinder with a suite of forecast downgrades.

Forecast EBITDA for FY24 and FY26 is lowered by -14% to -22%, respectively by the broker, due to lower than expected transaction revenue growth, a higher Australian dollar, and increased new product launch costs.

The EPS estimates are changed by -3.2% for FY24 and -352% for FY25, as a result of the analyst's alterations to EBITDA forecasts.

The target price is lowered to $6.15 from $6.30 and the Buy rating unchanged as Citi anticipates revenue and earnings growth will increase with the new product launches.

Target price is $6.15 Current Price is $5.30 Difference: $0.85
If SDR meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $6.49, suggesting upside of 24.2% (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 SUN as Neutral (3) -

Post adjusting for the lower-than-expected reinsurance premium and higher than forecast 15% increase in the FY25 catastrophe allowance, Citi changes  EPS forecasts by 1.4% and -3.1% for respectively FY24 and FY25 for Suncorp Group.

The analyst's expectations of the $3.5bn capital return are delayed to the 1Q2025 with an increase in the buyback price and a special 25c dividend, alongside one more month of bank earnings in July 2024 in earnings forecasts.

Comparing Suncorp Group with Insurance Australia Group ((IAG)), Citi notes there is scope for greater earnings volatility for Suncorp Group due to the reinsurance covers.

The target price is adjusted to $17.50 from $16.60 and the Neutral rating is unchanged.

Target price is $17.50 Current Price is $16.80 Difference: $0.7
If SUN meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $18.00, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Macquarie rates SUN as Downgrade to Neutral from Outperform (3) -

Following Insurance Australia Group's new reinsurance arrangements, Macquarie argues the group should trade on a material
premium to Suncorp Group after boxing in catastrophes and long tail reserves.

Insurance Australia Group is now the broker's preferred exposure in the sector, trading at a more attractive multiple, with capital management likely in August, and margin stability due to the new reinsurance.

Macquarie's rating for Suncorp Group is downgraded to Neutral from Outperform given a lack of reinsurance cover versus peers and the prospect of La Nina this year. The target is reduced to $15.80 from $17.

Target price is $15.80 Current Price is $16.80 Difference: minus $1 (current price is over target).
If SUN meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.00, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Morgan Stanley rates SUN as Overweight (1) -

Suncorp Group has updated its FY25 reinsurance cover and come in below FY24 CAT cost budget, notes Morgan Stanley.

The broker has previously noted $1.54/share (or $2bn) of capital return optionality for the group via additional debt and quota share reinsurance, and now clarifies this return is likely to occur in 2025.

The $20.20 target and Overweight rating is unchanged. Industry View: In-Line.

Target price is $20.20 Current Price is $16.80 Difference: $3.4
If SUN meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $18.00, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Ord Minnett rates SUN as Hold (3) -

Ord Minnett highlights the 25% increase in the Suncorp Group share price this year which reflects, in the analyst's view, the company's strong financial state, including earnings and balance sheet.

On the back of the successful approval for the sale of the bank to ANZ Bank ((ANZ)), a special 20c dividend per shares and a share consolidation of $3.7bn are expected by the broker.

Ord Minnett also points to the earning risk compared to Insurance Australia Group ((IAG)) from the latter's recent reinsurance update and favours IAG at this point over Suncorp Group.

Hold rating and $18.20 target price.

Target price is $18.20 Current Price is $16.80 Difference: $1.4
If SUN meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $18.00, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Shaw and Partners rates SXE as Buy, High Risk (1) -

Shaw and Partners raises its target for Southern Cross Electrical Engineering to $2.00 from $1.80 upon news of another $50m contract (variation) with the Collie Battery Energy Storage System. The total value of work secured via this project is now $210m.

Management also flagged further battery contracts to come in WA and across Australia.

The Buy, High Risk rating is maintained.

Target price is $2.00 Current Price is $1.76 Difference: $0.245
If SXE meets the Shaw and Partners target it will return approximately 14% (excluding dividends, fees and charges).

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

Macquarie rates WAF as Outperform (1) -

Costs (AISC) within the Kiaka feasibility study were -14% worse than the 2022 study, which did not surprise Macquarie given sector wide inflation. The total was slightly below the broker's estimate.

The analyst highlights pre-production capex also worsened by -32% due to an owner-mining strategy rather than utilising a contractor.

West African Resources has also received firm commitments for a $150m equity placement at -14% discount to prior close to fund Kiaka's additional capex, explains the analyst.

Outperform rating unchanged. Target price slips to $1.90 from $2.

Target price is $1.90 Current Price is $1.45 Difference: $0.455
If WAF meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 WBC as Sell (5) -

Citi explores the potential risks in the development of private credit on Australia's big four banks.

The broker notes the market is replicating what has been happening overseas as tighter regulatory restrictions and lower risk taking in the banking system are supporting the development of private credit, particularly in the commercial real estate sector.

Citi envisages the sector is a competitive threat to pockets of commercial lending for the banks.

Sell rating and $24.75 target price for Westpac.

Target price is $24.75 Current Price is $27.20 Difference: minus $2.45 (current price is over target).
If WBC meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.40, suggesting downside of -6.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.7

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