Australian Broker Call

Morgan Stanley rates ARB as Overweight (1) -

After an initial 8% rise in ARB Corp's shares following a 20% 1H earnings beat, Morgan Stanley notes the shares have since lost -16% and now represent a buying opportunity. It's felt structural growth will trump any cycle headwinds.

On fears of margin normalisation (contraction), the analyst feels that unless revenue falls, which is not anticipated, margins are unlikely to return to pre-covid levels, even with higher reinvestment.

The Overweight rating and $56 target price are retained. Industry View: In-line.

Target price is $56.00 Current Price is $38.55 Difference: $17.45
If ARB meets the Morgan Stanley target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $48.99, suggesting upside of 22.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Credit Suisse rates AZJ as No Rating (-1) -

In good news for Aurizon Holdings, Credit Suisse notes there has been no impact or interruption to the company-owned Central Queensland Coal Network from rain events in Queensland in recent weeks.

This news was gleaned from companies, infrastructure operators, and market sources.

Millions of tonnes of coal exports from mines in the Bowen Basin are transported each week.

The broker is currently restricted on research and offers no target price or rating. 

Current Price is $3.61. Target price not assessed.

Current consensus price target is $3.64, suggesting upside of 1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Macquarie rates BKL as Neutral (3) -

Macquarie had not updated on Blackmores for some time, leading FNArena to assume at the beginning of this year the broker had ceased coverage. Yesterday Macquarie issued a report on Blackmores' first half result, which was released three weeks ago.

The broker highlights solid earnings growth of 21.2%, as distribution expansion and product innovation offset volatile operating conditions. But the second half is set to be more subdued, on a slow recovery in A&NZ and lagging sales in China.

The broker "retains" Neutral, dropping its target to $83.00 from $93.50.

Target price is $83.00 Current Price is $76.39 Difference: $6.61
If BKL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $82.93, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Macquarie rates CMM as Neutral (3) -

Capricorn Metals' first half result was stronger than Macquarie expected, with Karlawinda being commercial for the entire half when the broker had assumed capitalisation in the first quarter. Free cah flow was broadly in line.

Looking ahead, the drill-out and resource/study work at Mt Gibson is a key catalyst in 2022, the broker suggests.

But the market is getting ahead of itself in Macquarie's view. Underperform and $3.70 target retained.

Target price is $3.70 Current Price is $3.86 Difference: minus $0.16 (current price is over target).
If CMM meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Ord Minnett rates HSN as Buy (1) -

Hansen Technologies has announced a contract with Exelon Corp in the US and Ord Minnett concludes it looks like the company's organic growth profile is improving.

The broker explains the contract is worth US$24.6m over seven years, equating to circa $4.9m annually, or about 1.7% of FY22 forecast revenue of $295m.

Hansen remains on the look-out for M&A targets, and Ord Minnett suspects this could well be the next catalyst for the share price.

Buy rating retained. Target unchanged at $6.50.

Target price is $6.50 Current Price is $5.09 Difference: $1.41
If HSN meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Citi rates IPL as Neutral (3) -

Citi has raised its ammonia and urea price forecasts aggressively as the Russia-Ukraine conflict looks to weigh on the market, but leverage to ammonia spreads should benefit Incitec Pivot as the fertilser market tightens and prices increase. 

While high pricing typically slows fertiliser demand, citi notes rapid grain price rises should encourage persisting sales. The broker has increased Incitec Pivot's earnings forecasts 71% and 146% in FY22 and FY23, equating to $1.73bn and $1.86bn respectively. 

Despite a strong pricing environment, Citi does warn the stock price has already increased sharply to $3.70 from $3.05 and the broker is reluctant to chase shares at current levels. 

The Neutral rating is retained and the target price increases to $3.85 from $3.45.

Target price is $3.85 Current Price is $3.69 Difference: $0.16
If IPL meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.95, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates IPL as Overweight (1) -

Morgan Stanley sees significant capacity for Incitec Pivot to arbitrage low gas input costs and high global ammonia prices. The target price rises to $4.70 from $4.60. Overweight. Industry view is In-Line. 

The broker points out European gas futures prices have escalated, and analysis implies ammonia prices of more than US$1,000/t through 2022.

Target price is $4.70 Current Price is $3.69 Difference: $1.01
If IPL meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $3.95, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates ORI as Overweight (1) -

Morgan Stanley expects Orica to benefit from improved pricing on ammonium nitrate, with its Kooragang Island gas contract fixed until the end of 2022.

However, the target falls to $17.10 from $18.50 after the broker incorporates the sale of the Minova segment, which completed on February 28. The Overweight rating is unchanged. Industry view: In-Line.

Target price is $17.10 Current Price is $14.97 Difference: $2.13
If ORI meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $15.68, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Citi rates PRU as Downgrade to Neutral from Buy (3) -

Citi remains of the view that gold prices will peak in the near-term amid impending US rate hikes, and notes that Perseus Mining is highly leveraged to gold prices. 

The company announced the acquisition of Orca Gold in February, and its Yaoure mine has exceeded production expectations as gold pricing has ramped up.

With the stock price rising 30% in the past month compared to the gold price increasing by 8%, Citi has downgraded the stock to Neutral from Buy and the target price of $2.00 is retained.

Target price is $2.00 Current Price is $1.86 Difference: $0.14
If PRU meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.00, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Morgans rates RIO as Hold (3) -

Rio Tinto's all cash -US$2.7bn offer for the remaining 49% of Turquoise Hill Resources implies an Oyu Tolgoi valuation that sits -2% below Morgans estimate. The transaction would increase Rio Tinto's interest in Oyu Tolgoi from 34% indirect ownership to a majority 66% stake.

In separate news, the military junta now ruling Guinea has reportedly ordered a halt to all activities at the company's part-owned iron ore deposit at Simandou.

On one hand the Simandou news is bad for the company, explains the analyst, though it may aide higher iron ore prices more generally.

Target price is $107.00 Current Price is $106.75 Difference: $0.25
If RIO meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $116.93, suggesting upside of 9.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: 0.3

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

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

In reviewing  both temporary and permanent impacts of covid upon Scentre Group, Morgan Stanley feels its current Equal-weight rating and $3.18 target reflect any earnings normalisation.

This comes as investors have recently focused upon increased foot traffic and mask removal and question why the share price remains -20-25% below 2017-2019 levels.

The broker concludes that multiples are broadly in-line with pre-pandemic, and earnings are likely to remain -8-10% below 2020 levels, even by 2023. Industry View: In-Line.

Target price is $3.18 Current Price is $3.04 Difference: $0.14
If SCG meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.08, suggesting upside of 0.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

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

UBS initiates on Tyro Payments, Australia's fifth largest payments terminal provider. The broker likes Tyro Payments' broader payments ecosystem compared to competitors and forecasts a group transaction value compound annual growth rate of 15%  over the next five years. 

Key to achieving this growth target will be larger and enterprise merchants, according to UBS. The broker estimates the company currently holds 16% market share in its key verticals of retail, hospitality and health.

The broker sees an attractive entry point given the de-rating that has seen the valuation reduce to a 4x premium from a peak 12x premium.  

The broker initiates with a Buy rating and a target price of $2.30. 

Target price is $2.30 Current Price is $1.68 Difference: $0.62
If TYR meets the UBS target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $2.97, suggesting upside of 77.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Ord Minnett rates UWL as Downgrade to Hold from Buy (3) -

Ord Minnett notes Morrison & Co has submitted a conditional, non-binding and indicative proposal to acquire 100% of Uniti Group for $4.50 per share, to be paid all in cash.

Both parties have entered a period of exclusive due diligence for 4 weeks beginning March 15th, 2022.

Ord Minnett won't rule out there might be interest from other potential suitors and has jacked up its valuation to $4.05 (was $3.88).

While the due diligence is playing out, the broker has pulled back its rating to Hold from Buy.

Target price is $4.05 Current Price is $4.01 Difference: $0.04
If UWL meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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