Australian Broker Call

Ord Minnett rates A1M as Speculative Buy (1) -

AIC Mines has made a $36m scrip off-market bid for Demetallica ((DRM)), a move Ord Minnett has described as making strategic sense given synergistic potential.The offer represents a 68% premium to Demetallica's last closing price. 

Incorporating Demetallica's Jericho asset into the valuation for AIC Mines' Eloise project extends Ord Minnett's expected mine life to ten years, and peak production to 24,000 tonnes annually from a previous 12,500 tonnes. The broker's net asset value for Eloise would increase $30m, and a further $29m for each additional year of production.

AIC Mines' offer will close on November 7. The Speculative Buy rating and target price of $0.70 are retained.

Target price is $0.70 Current Price is $0.49 Difference: $0.21
If A1M meets the Ord Minnett target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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' FY22 financials revealed a "massive beat" on market consensus expectations, reports Citi in an initial response. Underlying profit grew by 159% on last year.

The main culprit seems to have been the property division where development profits and profit recognition of nearly completed projects made a gigantic difference.

Property sales equally surprised to the upside, as did stronger margins in Building products Australia.

While uncertainty is rising in the macro outlook, Citi notes management at Brickworks is confident of growth with the property business in FY23. Target $26. Buy.

Target price is $26.00 Current Price is $21.69 Difference: $4.31
If BKW meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $24.74, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Morgan Stanley rates CSL as Overweight (1) -

Morgan Stanley identifies a potential positive for CSL from media reports of a preliminary injunction issued by US judiciary. The aim is to prevent officials from enforcing the ban on paid plasma donations from Mexicans that enter the US on USB1/B2 non-immigrant visas.

The broker estimates there are 16 CSL collection centres near the US/Mexico border that account for around 10% of the company's total plasma collections.

The Overweight rating and $323 target are unchanged. Industry View: In-line.

Target price is $323.00 Current Price is $283.03 Difference: $39.97
If CSL meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $324.80, suggesting upside of 15.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Macquarie rates FMG as Underperform (5) -

Fortescue Metals has announced a US$6.2bn decarbonisation strategy, aiming to eliminate its fossil fuel use and achieve zero scope 1 and 2 emissions by 2030.

While the company suggested its decarbonisation efforts will be net present value positive, Macquarie highlights limited detail as to the operating costs of renewable energy sources. The broker expects operating costs during the ramp-up phase of renewable energy assets could be material.

Anticipating funding requirements for decarbonisation could compete with shareholder returns, Macquarie has lowered its medium-term payout ratio assumption to 60%. The Underperform rating is retained and the target price decreases to $14.30 from $14.50.

Target price is $14.30 Current Price is $17.30 Difference: minus $3 (current price is over target).
If FMG meets the Macquarie target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.55, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Morgan Stanley rates FMG as Underweight (5) -

Fortescue Metals has not specified funding will come from cash flow (effect on dividend) or debt for the additional -US$6.2bn spend by 2030 (announced yesterday) to achieve net zero Scope 1&2 emissions.

If the dividend is reduced by the spend, Morgan Stanley notes the effect on FY24-26 dividend forecasts is a reduction to US89/47/20cps from US105/80/59cps.

Also, the broker has concerns over the additional 2-3GW of renewable capacity that is required and Morgan Stanley's forecast for costs of -US$4.7-7.1bn compare with guidance for -$4.6bn.

Management expects operating cost savings of US$818pa from 2030.

The Underweight rating and $15.15 target are maintained. Industry View: Attractive.

Target price is $15.15 Current Price is $17.30 Difference: minus $2.15 (current price is over target).
If FMG meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.55, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Morgans rates FMG as Hold (3) -

Morgans adjusts its assumptions after first time guidance by Fortescue on its budget to decarbonise by 2030. However, a more material change to consensus estimates is anticipated, as they don't appear to have any decarb capex factored in.

Guidance for decarb capex of -US$6.2bn (real) sits above the analyst's estimate of -US$5.5bn (nominal), with larger opex savings expected of US$818m per year.

After also raising price realisation forecasts (after marking-to-market iron ore price forecasts), the broker raises its target to $17.30 from $17.20. 

Should Fortescue Metals successfully decarbonise it will unlock sustainable and material opex savings, and raise the company's ESG profile, suggests Morgans. On the other hand, it's felt the free cash profile will likely be materially restricted in the process. Hold 

Target price is $17.30 Current Price is $17.30 Difference: $0
If FMG meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $16.55, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Morgan Stanley rates IEL as Overweight (1) -

IDP Education has announced the -$83m acquisition of leading student placement agency Intake Education, which Morgan Stanley estimates will be EPS accretive.

The broker considers the transaction complementary to the company's existing student placement network and boosts exposure to the high-growth African market. 

Funding for the deal will come from a 50/50 combination of existing cash and debt facilities.

Overweight and $35 target retained. Industry View: In-Line.

Target price is $35.00 Current Price is $28.27 Difference: $6.73
If IEL meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $33.06, suggesting upside of 18.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

UBS rates IEL as Buy (1) -

The acquisition of Intake Education for around -$83m (while small) helps accelerate IDP Education's entry in Africa, suggests UBS. Intake is the largest agency in West Africa.

The broker raises its EPS forecast for FY23 by 1%, and by 2% for FY24 and beyond, and the target rises to $35.50 from $34.70. Buy.

Target price is $35.50 Current Price is $28.27 Difference: $7.23
If IEL meets the UBS target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $33.06, suggesting upside of 18.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Macquarie rates KMD as Neutral (3) -

KMD Brands earnings and margins came under pressure from the impacts of covid and a marketing reset in the last year, but 6.2% sales growth offset.

After a tough year, the company reported recovery in the fourth quarter and momentum into the new year. Macquarie expects KMD Brands will be able to regain the -$35m of earnings lost in the first half of FY22 over the coming year.

The Neutral rating is retained and the target price increases to $0.90 from $0.85.

Target price is $0.90 Current Price is $0.92 Difference: minus $0.02 (current price is over target).
If KMD meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.5

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

Ord Minnett rates LLC as Buy (1) -

Lendlease Group commenced a tour of its American projects with presentations in New York. During visits to the company's New York assets, Lendlease Group reiterated its adoption of a capital light model moving forward and a focus on growing work in progress.

Ord Minnett anticipates Lendlease Group's workbook increasing in the coming year, with the company demonstrating confidence in project wins in the next few months. The broker highlights the company will focus on growth in existing markets, rather than new market expansion.

The Buy rating and target price of $12.50 are retained.

Target price is $12.50 Current Price is $9.76 Difference: $2.74
If LLC meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $12.41, suggesting upside of 28.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.8

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

Morgans rates LVH as Add (1) -

Following FY22 results announced on August 31 and a recent capital raise, Morgans lowers FY23-25 earnings (EBITDA) estimates for LiveHire by -15-25% and decreases its target to $0.36 from $0.50.

Funds from the raising will be used to build out the US operations (headcount, IT-spend and marketing) as well as expand the Direct Sourcing offering into Europe.

The analyst becomes more conservative on forecasts for those Direct Sourcing costs, which is largely responsible for the earnings downgrade. The Add rating is maintained.

Target price is $0.36 Current Price is $0.24 Difference: $0.12
If LVH meets the Morgans target it will return approximately 50% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Credit Suisse rates NHC as Outperform (1) -

While FY22 results for New Hope revealed few surprises compared to the forecasts by Credit Suisse and consensus, total dividends of 56c exceeded the 54c expected. 

The total dividend payout was comprised of a fully franked final dividend of 31c and a fully franked special dividend of 25c, equating to a payout ratio of more than 45% of earnings (EBITDA).

The analyst had previously suggested a dividend payout ratio of 45% of earnings would serve as a possible catalyst for a re-rate. The company's share price appeared to rally in response yesterday.

In Credit Suisse's opinion, New Hope continues to present compelling value and the Outperform rating is retained. The target slips to $7.80 from $7.90 after FY22 results were incorporated.

Target price is $7.80 Current Price is $5.94 Difference: $1.86
If NHC meets the Credit Suisse target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $5.58, suggesting downside of -9.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Macquarie rates NHC as Outperform (1) -

New Hope's full year results were largely in line, with buoyant coal pricing supporting a material year-on-year financial and cash flow increase. Dividends beat Macquarie's expectations thanks to a special 25 cent per share payment on top of a final 31 cent per share dividend.

Accounting for the result, and the ongoing elevation of thermal coal pricing, Macquarie has lifted its earnings forecasts 11% in FY23 and 3-6% in FY24 and FY25.

The Outperform rating is retained and the target price increases to $6.00 from $5.00.

Target price is $6.00 Current Price is $5.94 Difference: $0.06
If NHC meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $5.58, suggesting downside of -9.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Ord Minnett rates NHF as Lighten (4) -

nib Holdings announced a further $45m in health insurance claims savings will be returned to its Australian Residents Health Insurance customers, but Ord Minnett feels the insurer continues to lag peers.

The broker highlights a lack of clarity as to whether refund will drag on profits. The additional $45m support package brings nib Holdings' total relief to 6.3% of annual premiums, compared to Medibank Private's ((MPL)) 10% return. 

The Lighten rating and target price of $7.50 are retained.

Target price is $7.50 Current Price is $7.77 Difference: minus $0.27 (current price is over target).
If NHF 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 $7.73, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Macquarie rates PLS as Outperform (1) -

Pilbara Minerals' Battery Material Exchange (BMX) platform completed its ninth auction sale, receiving 22 bids for the 5,000 dry metric tonnes of 5.5% lithium oxide. According to Macquarie, strong price realisation from the auction reflects current market tightness.

The company intends to accept the highest bid, setting a record benchmark equivalent price of US$7,708 per dry metric tonne, and reflecting a 10% increase to its last sale. Macquarie expects more frequent sales as Ngungaju ramps up production.

The Outperform rating and target price of $5.60 are retained.

Target price is $5.60 Current Price is $4.89 Difference: $0.71
If PLS meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.64, suggesting downside of -26.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

UBS rates PLS as Sell (5) -

The latest spodumene concentrate auction on Pilbara Minerals' digital Battery Material Exchange resulted in an around 10% price increase from the August 2 auction.

UBS retains its recently-upgraded long-term spodumene price forecasts and maintains its Sell rating for Pilbara Minerals, preferring IGO Ltd ((IGO)), Allkem ((AKE)) and Mineral Resources ((MIN)) in the space.

Target price is $2.60 Current Price is $4.89 Difference: minus $2.29 (current price is over target).
If PLS meets the UBS target it will return approximately minus 47% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.64, suggesting downside of -26.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Morgan Stanley rates TUA as Overweight (1) -

Following FY22 results for Tuas, Morgan Stanley increases its FY23 and FY24 earnings (EBITDA) forecasts by 11% and 14%, respectively, on higher estimates for subscribers and margins.

The broker now estimates growth plans can be self-funded (despite FY23 capex guidance exceeding forecasts), and free cash flow breakeven reached in FY24. The target price rises to $1.85 from $1.65. Overweight. Industry View: In-Line.

Target price is $1.85 Current Price is $1.55 Difference: $0.3
If TUA meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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