Australian Broker Call

Credit Suisse rates ALD as Neutral (3) -

Stronger industry margins benefited the company's retail segment in the September quarter while international was volatile. Lytton did not operate during the quarter.

Credit Suisse observes investors are balancing persistent low refining margins and a surprising underperformance in fuels & infrastructure with a likely improvement in domestic retail volumes.

Hence, the broker retains a Neutral rating and reduces the target to $24.59 from $25.27.

Target price is $24.59 Current Price is $25.42 Difference: minus $0.83 (current price is over target).
If ALD meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.30, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates ALD as Overweight (1) -

Ampol's third-quarter non-audited results were less than what Morgan Stanley expected. Operating income from fuels and Infrastructure (ex-Lytton) was $63m versus the broker's estimation of $92m. Convenience retail was $87m, higher than the broker's $52m. 

The stronger convenience retail result supports Morgan Stanley's expectation 2021 will be driven by better industry conditions in this segment along with the view Australian retail fuel volumes will increase as lock-down restrictions ease in Victoria.

Morgan Stanley retains its Overweight rating with a $31 target. Industry view is Cautious.

Target price is $31.00 Current Price is $25.42 Difference: $5.58
If ALD meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $28.30, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates ALD as Accumulate (2) -

Ampol's third-quarter operating earnings were $58m, down from $154m last year, due to losses from the Lytton refinery and lower operating income in the fuels and infrastructure (ex-Lytton) business. 

Convenience retail operating income was strong, observes the broker, but not enough to offset the fall in the other divisions. The broker notes improved convenience retail is indicative of improved shop performance and supportive fuel margins.

Ord Minnett has reduced its earnings forecasts for 2020-21 due to lower earnings expected from fuels and infrastructure (ex-Lytton)  despite a better convenience retail performance.

Accumulate recommendation is reaffirmed with a target price of $28.

Target price is $28.00 Current Price is $25.42 Difference: $2.58
If ALD meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $28.30, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates ALD as Neutral (3) -

UBS increases its target price to $26 from $25.6. Neutral rating is maintained.

UBS believes there are smaller headwinds facing Ampol's convenience retail division as fuel margins continue to remain strong and shop sales were up versus last year.

The broker expects shop sales growth to continue through the December quarter but anticipates the growth rate to decline as travel restrictions ease. Also, the broker thinks convenience and local shopping will decline gradually as consumers gradually revert to supermarkets for pantry goods.

Target price is $26.00 Current Price is $25.42 Difference: $0.58
If ALD meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $28.30, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates AMI as Outperform (1) -

Better grades pushed production up 43% in the September quarter for Aurelia Metals while costs were lower than Macquarie estimated. FY21 guidance has been maintained at 80-90,000 ounces.

The next catalyst is confirmation and extension of gold zones at Federation. The broker maintains an Outperform rating and $0.65 target.

Target price is $0.65 Current Price is $0.54 Difference: $0.11
If AMI meets the Macquarie target it will return approximately 20% (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 ANN as Neutral (3) -

Citi interprets the company's new medium-term financial targets as centred on FY20-23. Forecasts for growth in earnings per share of 6-12% in constant currency are higher than the broker had previously estimated and higher than the target of 5-10% set in 2017.

The broker suspects the difference is because the company expects demand for medical gloves, as a result of the pandemic, to remain elevated for longer.

Ansell is still targeting organic and constant currency sales growth of 3-5%, which the broker suspects may be conservative. Buy rating and $41 target retained.

Target price is $41.00 Current Price is $40.86 Difference: $0.14
If ANN meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $39.77, suggesting downside of -3.5% (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: 0.2

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

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

Boral's future strategic direction under the new MD (Zlatko Todorcevski) is the next key catalyst and Morgan Stanley awaits results of a strategic review, to be unveiled in late October.

Morgan Stanley expects Boral to try and reduce its leverage and with the MD stating raising equity may not be the only way to strengthen the balance sheet, the broker expects asset sales may be the focus.

The company would do well to simplify its operating structure, believes the broker, and divest its non-core assets. Moreover, the company needs to reduce its general and administrative costs to be in-line with the industry to unlock any meaningful cost savings.

Equal-weight rating reaffirmed. Target is raised to $4.80 from $4.40. Industry view is Cautious.

Target price is $4.80 Current Price is $4.85 Difference: minus $0.05 (current price is over target).
If BLD meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.53, suggesting downside of -4.6% (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 CIM as No Rating (-1) -

CIMIC Group has a sales agreement with Elliott Advisers concerning the acquisition of a 50% equity interest in Thiess.

Macquarie calculates the price represents an enterprise value of $4.3bn based on 100% of Thiess, subject to some adjustments.

The transaction includes future share transfer options including a potential IPO or sale to a third party and an option for Elliott Advisers to sell its interest back to CIMIC 3-6 years from completion.

Macquarie is unable to provide a rating or target at present.

Current Price is $22.59. Target price not assessed.

Current consensus price target is $28.50, suggesting upside of 26.5% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CIM as Neutral (3) -

CIMIC Group will be divesting its 50% interest in Thiess (contract miner) to Elliott Advisors. The group expects to generate proceeds of between $1.7-$1.9bn. 

UBS notes the group currently has a net debt of $1.7bn (ex-factoring of $1.8bn and leases worth $0.8bn) and proceeds from this transaction will effectively eliminate CIMIC Group's net debt.

The broker expects cash flow conversion to improve given its reduced exposure to capital intensive contract mining earnings. In UBS's view, the stronger balance sheet will leave the group in a better position to manage its project risk and pursue M&A activities.

UBS maintains its Neutral rating with a target price of $23.

Target price is $23.00 Current Price is $22.59 Difference: $0.41
If CIM meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $28.50, suggesting upside of 26.5% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CSL as Buy (1) -

UBS observes 139m flu vaccine doses have been distributed for the US flu season till October 9, up 9% versus last year. CSL also increased its supply of flu vaccine into the US to circa 60m doses for the 20-21 season, a 20% increase from last year.

The broker anticipates a prolonged flu season and expects flu vaccine penetration rate in the US to rise with higher demand due to risks related to covid-19. Seqirus looks well placed to benefit from this and UBS expects its revenues to increase by 17% in FY21.

UBS makes no changes to the Buy rating or $346 price target.

Target price is $346.00 Current Price is $304.13 Difference: $41.87
If CSL meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $311.11, suggesting upside of 3.5% (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

Citi rates CWN as Neutral (3) -

Citi notes the regulatory focus on Crown Resorts has stepped up as AUSTRAC commences a formal enforcement investigation.

While this is currently centred on the Melbourne VIP business, the broker expects the broader company may come under scrutiny as well.

The financial penalties are hard to predict but the broker expects this will drive volatility.

While a financial penalty is likely to be set aside by the market, there are three probable impacts, Citi suggests, being structurally lower VIP & premium mass turnover, additional operating costs and management disruption. Neutral rating and $9.90 target retained.

Target price is $9.90 Current Price is $8.25 Difference: $1.65
If CWN meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $10.29, suggesting upside of 23.0% (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 EVN as Sell (5) -

Ord Minnett is cautious on gold sector production with the US election outcome adding to the sector risk. The broker believes some stocks could see earnings downgrades.

Newcrest Mining ((NCM)), Gold Road Resources ((GOR)), St Barbara ((SBM)) and OceanaGold ((OGC)) remain the broker's key picks. 

The broker retains its Sell rating for Evolution Mining and raises the target to $4.50 from $4.40.

Target price is $4.50 Current Price is $6.02 Difference: minus $1.52 (current price is over target).
If EVN meets the Ord Minnett target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.43, suggesting downside of -7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.5

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

Macquarie rates NIC as Outperform (1) -

Nickel Mines will acquire a 70% interest in a new facility for nickel pig iron production at Weda Bay, Indonesia, for US$490m. This is expected to boost production by 25,000t.

Incorporating the transaction into estimates means Macquarie upgrades forecasts by 50-70% and lifts the target to $1.20 from $0.80.

While this is only an MOU, the broker remains confident it will be completed given the transaction involves the company's current operator of its nickel pig iron plants. Outperform maintained.

Target price is $1.20 Current Price is $0.92 Difference: $0.28
If NIC meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

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: 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) -

Orica expects its FY20 operating earnings to be slightly above $600m, leading Ord Minnett to upgrade its operating income estimate to $604m.

The company also expects to record a pre-tax significant item of about -$170m which includes -$105m non-cash and -$65m cash costs.

The broker has lifted its earnings estimates by an average 1% over the FY20–22 period, reflecting a slight improvement in the North America division.

Ord Minnett maintains its Hold recommendation. Target price is raised to $17 from $16.80.

Target price is $17.00 Current Price is $16.79 Difference: $0.21
If ORI meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $18.21, suggesting upside of 10.3% (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

Morgan Stanley rates PSQ as Overweight (1) -

Pacific Smiles Group's year to date comps have accelerated to 10.5% (as on October 13) from 10% at September-end. Excluding Victoria, comps saw a moderation to 20.7% from 21.7% over the same period.

As a result, FY21 guidance has been upgraded with the group expecting fee growth of 20%, up from 15% and expected operating income up 25% from 15%. New centres have been upgraded to at least 12 from 10.

More updates to follow at the group's AGM on November 18. 

Target price remains unchanged at $2.40. Overweight rating. Industry view: In-line.

Target price is $2.40 Current Price is $1.90 Difference: $0.5
If PSQ meets the Morgan Stanley target it will return approximately 26% (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 RMD as Underperform (5) -

Macquarie considers the current reimbursement environment more favourable relative to previous years, although the latest competitive bidding presents risks in relation to reimbursement for durable medical equipment suppliers.

There are also implications for ResMed's average selling price/gross margin. Moreover, the timing of implementation remains uncertain.

Hence, Macquarie retains an Underperform rating. Target is $20.

Target price is $20.00 Current Price is $25.74 Difference: minus $5.74 (current price is over target).
If RMD meets the Macquarie target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.96, suggesting downside of -2.1% (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

Citi rates S32 as Buy (1) -

The company achieved record hydrate production at Worsley in the September quarter and is on track to increase alumina production to nameplate in FY21, Citi notes. Metallurgical coal production increased by 22%.

The buyback is being reinstated and there was no change to production guidance for the full year. Citi raises earnings estimates for FY21 and FY22 by 6% and 2%, respectively, marking to market commodity prices. Buy rating and $2.60 target unchanged.

Target price is $2.60 Current Price is $2.20 Difference: $0.4
If S32 meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Credit Suisse rates S32 as Outperform (1) -

The company has retained FY21 guidance and Credit Suisse notes a "solid" set of September quarter figures. The buyback has also been reinstated, earlier than anticipated.

The broker found net cash was reasonable, up US$70m to US$368m, albeit excluding the final dividend payment.

After adjusting for the quarterly, the broker lifts estimates by 1-3% and raises the target to $2.70 from $2.60. Outperform maintained.

Target price is $2.70 Current Price is $2.20 Difference: $0.5
If S32 meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Macquarie rates S32 as Underperform (5) -

Production in the first quarter was largely in line with Macquarie's forecasts although Cannington volumes underperformed. Cash was stronger than expected, enabling a re-start of the buyback.

The broker assesses the commodity outlook means downside risk in a spot price scenario and maintains an Underperform rating. Target is increased to $1.90.

Target price is $1.90 Current Price is $2.20 Difference: minus $0.3 (current price is over target).
If S32 meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Morgan Stanley rates S32 as Overweight (1) -

All of South32's portfolio performed well during the September quarter, observes Morgan Stanley, with many including Illawarra, SA Manganese, Cerro Matoso and SAEC materially outperforming the broker's estimates.

The miner has reinstated its buyback program which has circa US$121m left and is expected to be completed by September 2021. The company also indicated it expects to come to an agreement for a resolution of the future of its South African coal business (SAEC) by "no later than 31 December 2020".

Overweight rating retained and the target remains unchanged at $2.75. Industry view: Attractive.

Target price is $2.75 Current Price is $2.20 Difference: $0.55
If S32 meets the Morgan Stanley target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Morgans rates S32 as Add (1) -

South32 delivered a solid September quarter result, according to Morgans, with mettalurgical coal and manganese ore outperforming market expectations.

The broker sees the potential for an upscaled Hermosa project. It's considered worth waiting for a delayed update (post the Taylor deposit pre-feasability study [PFS] and Clark deposit integration), given the value upside this could deliver to the stock.

The company is making progress through the conditions precedent to finalise the divestment of its South African Energy Coal (SAEC) business. South32 still expects deal completion by calendar year end. The analyst anticipates this outcome is a critical factor for the stock.

Morgans expects the share price to close the discount with the broker's target price over the next 12 months as commodity prices recover.

The Add rating is unchanged and the target price is decreased to $2.65 from $2.66.

Target price is $2.65 Current Price is $2.20 Difference: $0.45
If S32 meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Ord Minnett rates S32 as Buy (1) -

South32's September-quarter net cash was US$368m and beat broker Ord Minnett's estimate. The strong net cash position prompted management to restart its share buyback and is likely to be completed in 2020, in the broker's view.

Quarterly volumes were broadly in line with the broker's forecast and FY21 guidance remains unchanged. Also, the Hermosa pre-feasibility study is now considering the integration of the Clark deposit with Taylor. Details will be released in the first half of 2021 rather than the second half of 2020 as expected.

On the South Africa Energy Coal (SAEC) disposal, South32 expects a resolution by 31 December 2020.

Ord Minnett maintains its Buy recommendation with a $3 target price.

Target price is $3.00 Current Price is $2.20 Difference: $0.8
If S32 meets the Ord Minnett target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

UBS rates S32 as Buy (1) -

South32's September quarter production ranged between in-line and ahead of UBS's expectation except for the less than expected production at Cannington due to planned maintenance.

UBS observes production was ahead of sales but expects the excessive inventory to unwind through the December quarter. FY21 production guidance was maintained except for South African Energy Coal (SAEC) where the miner has guided to the lower end of 10.5-12.5mt for the first half of FY21.

The broker notes sales of the South African Energy Coal business remains on track for 2020-end.

Target price is unchanged at $3. Buy rating retained.

Target price is $3.00 Current Price is $2.20 Difference: $0.8
If S32 meets the UBS target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside of 21.3% (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: 0.7

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

Ord Minnett rates SBM as Accumulate (2) -

Ord Minnett is cautious on gold sector production with the US election outcome adding to the sector risk. The broker believes some stocks could see earnings downgrades.

St Barbara, Newcrest Mining ((NCM)), Gold Road Resources ((GOR)) and OceanaGold ((OGC)) remain the broker's key picks. 

Accumulate rating retained for St Barbara with the target price decreasing to $3.70 from $3.80.

Target price is $3.70 Current Price is $2.99 Difference: $0.71
If SBM meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $3.74, suggesting upside of 27.2% (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