Australian Broker Call

Ord Minnett rates ALD as Accumulate (2) -

Caltex Australia, now known as Ampol, provides leverage to any recovery following the pandemic, Ord Minnett believes. A return, however, of Couche-Tard as a bidder is not altogether out of the picture.

The broker observes retail fuel margins have been strong in 2020, and the company is exploring self-help initiatives.

The planned IPO of the property portfolio, around 250 of the retail sites, is part of a broader program to release capital and return some of the $825m in franking credits.

Ord Minnett assesses the IPO would fund off-market buybacks to boost 2022 earnings by around 10%.

Accumulate rating maintained with target price at $30.

Target price is $30.00 Current Price is $26.10 Difference: $3.9
If ALD meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $28.39, suggesting upside of 8.8% (ex-dividends)

The company's fiscal year ends in December.

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 AZJ as Outperform (1) -

Macquarie notes continuous pressure on coal prices, suspecting this would impact miners’ willingness to spend.

Aurizon Holdings represents value from productivity initiatives that provide either protection in the form of contract renewals or growth in an otherwise flat coal environment, comments the broker. The broker also expects earnings/dividends growth in FY21 from share buybacks.

Macquarie had reduced haulage volumes forecast by -6mt and expects FY20 to be weaker than FY21.

Outperform rating reiterated with target price at $5.33.

Target price is $5.33 Current Price is $4.63 Difference: $0.7
If AZJ meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.54, suggesting upside of 19.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Credit Suisse rates BLD as Downgrade to Neutral from Outperform (3) -

Credit Suisse describes the drop in profitability in the latest update as "stunning", with margins down -7-10%, despite little apparent impact from the pandemic on revenue.

The broker assesses, in Australia, the margin decline was driven by operating leverage, disruptions to plants, pricing and mix. North America was affected by the working down of inventory and disruptions as well.

The broker downgrades to Neutral from Outperform, lacking confidence that this margin destruction will reverse any time soon. Target is reduced to $2.65 from $3.70.

Target price is $2.65 Current Price is $2.60 Difference: $0.05
If BLD meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates ELD as Downgrade to Hold from Add (3) -

First half results were stronger than Morgans expected. Trading in February and March was particularly strong, following improved seasonal conditions.

The company has indicated it is comfortable with consensus forecasts for FY20 earnings (EBIT) of $96.5-112.9m.Second half should benefit from improved winter cropping conditions and strong livestock prices.

However, Morgans assesses, after a strong appreciation in the share price, the stock is fairly valued and downgrades to Hold from Add. Target rises to $10.20 from $7.10.

Target price is $10.20 Current Price is $10.25 Difference: minus $0.05 (current price is over target).
If ELD meets the Morgans target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Citi rates EVN as Neutral (3) -

Citi upgrades valuations across the gold sector, given a more constructive long-term outlook for gold. The broker is convinced gold prices will outperform consensus expectations and drive earnings momentum.

In a rising price environment, valuation matters less as the share price is driven by the gold price, assure the analysts.

The broker retains a Neutral rating on Evolution Mining as the stock is the most expensive mid-cap in terms of multiples yet is touted as the lowest cost producer. Target is raised to $5.70 from $4.90.

Target price is $5.70 Current Price is $6.10 Difference: minus $0.4 (current price is over target).
If EVN meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -21.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

UBS rates GNC as Buy (1) -

First half results were ahead of expectations and show the benefits of recent cost reductions and improvement in operations.

UBS retains a Buy rating to reflect the leverage to a cyclical upswing, given the FY21 winter crop is likely to be above average after three drought-affected years, as well as the de-risking of the balance sheet.

While the stock trades on elevated price/earnings multiples the broker notes it offers a 10% free cash flow yield on FY21 estimates. Target is reduced to $4.50 from $9.40, post the de-merger of the malt division.

Target price is $4.50 Current Price is $4.00 Difference: $0.5
If GNC meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.17, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates JHX as Buy (1) -

Preliminary pulp price data for May by sector analyst Risi noted an increase in the average list price for pulp. Risi further reported strong demand for tissue in May but feared this may wane in June. This is in line with Ord Minnett’s projections, having already downgraded pulp price estimates by -6% for 2020-21.

Due to a lag in passing on costs, the broker expects James Hardie’s North American fibre cement division to benefit during the second and third quarter of FY21. The broker sees additional relief for those quarters from trucking rates with spot prices below May 2019 levels.

Buy rating maintained with target price at $25.

Target price is $25.00 Current Price is $23.91 Difference: $1.09
If JHX meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $28.47, suggesting upside of 19.1% (ex-dividends)

The company's fiscal year ends in March.

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

Macquarie rates LNK as Outperform (1) -

Link Administration Holdings has processed about -$4.5bn in Early Release Scheme (ERS) payments till date for circa 622,000 members with broker Macquarie estimating an annualised revenue headwind of approximately -$1.8m.

The company expects 1.5m members to access ERS by June-end and the broker notes the company is more susceptible to ERS payments due to a larger share of clients from retail and hospitality.

A strong balance sheet prompts the broker to leave earnings estimates unchanged.

Outperform retained with target price at $4.50.

Target price is $4.50 Current Price is $3.64 Difference: $0.86
If LNK meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 30.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgans rates MAI as Add (1) -

Mainstream Group has won a tender to provide unit registry services to Pendal Group ((PDL)). The deal involves the Australian funds, a total of $19bn in funds under management.

Morgans observes this enables Mainstream to bid for other Pendal work. Estimates are upgraded and an Add rating maintained, as the stock is considered "too cheap" for its long-term growth profile. Target is raised to $0.64 from $0.62.

Target price is $0.64 Current Price is $0.45 Difference: $0.19
If MAI meets the Morgans target it will return approximately 42% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Citi rates NCM as Buy (1) -

Citi upgrades valuations across the gold sector, given a more constructive long-term outlook for gold. The broker is convinced gold prices will outperform consensus expectations and drive earnings momentum.

Citi states in a rising price environment, valuation matters less as the share price is driven by the gold price. Buy rating maintained. Target rises to $35.00 from $30.40.

Target price is $35.00 Current Price is $31.96 Difference: $3.04
If NCM meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $29.23, suggesting downside of -8.5% (ex-dividends)

The company's fiscal year ends in June.

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: 0.1

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

Macquarie rates NIC as Initiation of coverage with Outperform (1) -

Nickel Mines has ramped up the Hengjaya and Ranger nickel pig iron (NPI) plants and expects production to exceed 26kt in 2020. The NPI producer can increase ownership in both plants to 80% from the current 60%, reports Macquarie.

The broker expects the company to exercise the option leading to a production boost of more than 35ktpa in 2021. Strong cash flows along with increase in production share prompt Macquarie to initiate coverage on the stock.

Coverage initiated on Nickel Mines with Outperform rating and target price of $.90.

Target price is $0.90 Current Price is $0.56 Difference: $0.34
If NIC meets the Macquarie target it will return approximately 61% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates NST as Neutral (3) -

Citi upgrades valuations across the gold sector, given a more constructive long-term outlook for gold. The broker is convinced gold prices will outperform consensus expectations and drive earnings momentum.

The broker states in a rising price environment, valuation matters less as the share price is driven by the gold price.

Northern Star appears appealing in a rising gold price environment, but the broker retains a Neutral rating. Softer productivity at Pogo is expected to weigh in terms of the turnaround at that project. Target is raised to $14.90 from $13.50.

Target price is $14.90 Current Price is $14.12 Difference: $0.78
If NST meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $12.89, suggesting downside of -8.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

Morgans rates NVX as Add (1) -

Novonix has filed a patent for a new manufacturing process to lift the yield of battery materials to 100%. The technology could significantly lower the cost of battery production.

The technique is applicable not just to graphite but also cathode material. Morgans has not yet assigned value to the potential licensing revenue of the technology but believes this could be a significant revenue stream when it is commercialised.

The broker retains a Speculative Buy rating and raises the target to $1.39 from $0.82.

Target price is $1.39 Current Price is $0.49 Difference: $0.9
If NVX meets the Morgans target it will return approximately 184% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates OGC as Neutral (3) -

OceanaGold Corp’s quarter ending March saw preliminary production data in-line with Macquarie’s estimate. The miner reported a loss of -US$26m driven by higher than expected D&A charges and hedge losses although offset somewhat by preselling 48koz meant for the second half.

The company has guided towards higher D&A charges for the year and Macquarie has cut earnings estimates for 2020 to a loss of -$0.07 per share from $0.06 per share profit earlier.

The broker expects a dip in the second quarter before recovering in the subsequent ones. The broker holds onto the Neutral rating with target price at $3.

Target price is $3.00 Current Price is $2.95 Difference: $0.05
If OGC meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.42, suggesting upside of 15.9% (ex-dividends)

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: 0.4

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

Citi rates PRU as Upgrade to Buy from Neutral (1) -

Citi upgrades valuations across the gold sector, given a more constructive long-term outlook for gold. The broker is convinced gold prices will outperform consensus expectations and drive earnings momentum.

In a rising price environment, valuation matters less as the share price is driven by the gold price, suggest the analysts. Citi upgrades Perseus Mining to Buy/High Risk from Neutral/High Risk.

Despite social distancing disruptions in the short term, going forward the broker believes the development of Yaoure should position the company as a sizeable producer. Target is raised to $1.40 from $1.30.

Target price is $1.40 Current Price is $1.14 Difference: $0.26
If PRU meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $1.23, suggesting upside of 7.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Citi rates SHL as Buy (1) -

Citi assesses the potential total value of the US market for pandemic testing at US$6bn for the six months ending December 2020.

Assuming Sonic Healthcare has a market share of 5%, this would increase first half revenue by up to 13% and operating earnings (EBITDA) by up to 31%.

Citi acknowledges there remain a number of caveats associated with the scenario, but believes this shows testing for coronavirus could provide a significant cushion against a drop in the base business. Buy rating and $32.50 target maintained.

Target price is $32.50 Current Price is $27.12 Difference: $5.38
If SHL meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $27.48, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates SLC as Add (1) -

The company has indicated trading in FY20 is tracking at the mid-point of guidance. Morgans notes earnings had gradually deteriorated over recent years but this update shows the growth trajectory has stabilised.

The broker notes, too, that most of FY20 operating earnings (EBITDA) are now recurring and cash flow is funding the business. Add rating and $1.30 target maintained.

Target price is $1.30 Current Price is $1.17 Difference: $0.13
If SLC meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.12, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

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 SLC as Accumulate (2) -

Superloop has reaffirmed FY20 guidance, highlighting strong fibre connectivity sales in the third quarter. Ord Minnett is encouraged by the business focus, particularly given the majority of the capital outlay for the network has been completed.

The broker maintains an Accumulate rating and raises the target to $1.30 from $1.00.

Target price is $1.30 Current Price is $1.17 Difference: $0.13
If SLC meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.12, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates VHT as Add (1) -

Volpara has completed a $37m capital raising to strengthen the balance sheet. Morgans updates forecasts to reflect the capital raising and non-cash adjustments to revenue and costs in FY20.

As a result, the target is reduced to $1.68 from $1.74. The broker retains a Speculative Buy rating and considers the stock a key pick for investors looking for a strategically-placed growth company.

Target price is $1.68 Current Price is $1.36 Difference: $0.32
If VHT meets the Morgans target it will return approximately 24% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

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

Morgans rates WPR as Add (1) -

The company formerly known as Viva Energy REIT plans to internalise management after the divestment of the Viva Energy ((VEA)) stake.

FY20 guidance has been reiterated and the company, now known as Waypoint REIT, has indicated the impact of the pandemic has been minimal.

The implementation of the internalisation is expected prior to October 31. Morgans retains an Add rating and $2.71 target, and assumes no further acquisitions in 2020.

Target price is $2.71 Current Price is $2.49 Difference: $0.22
If WPR meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.52, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Ord Minnett rates Z1P as Accumulate (2) -

Zip Co, a strong beneficiary of the shift to ecommerce, saw April growth rates well above Ord Minnett’s estimates with total transaction value (TTV) growing 86%.

Customers have grown to more than 2m, reports the broker, expecting the number to reach 2.15m by June end.

Ord Minnett is positive about the company given recent strategic changes, external credit checks on new customers and the company's app's anywhere-style capability, but leaves revenue forecasts unchanged for now.

Accumulate rating reiterated with target price increased to $3.40 from $3.30.

Target price is $3.40 Current Price is $3.08 Difference: $0.32
If Z1P meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.50, suggesting upside of 13.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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