Australian Broker Call

Credit Suisse rates ALD as Neutral (3) -

Relative to current expectations, Credit Suisse suggests a decision on Lytton would be incrementally positive, whether this be closure, sale or a continuation.

Continued operation would likely require material government support and a vote confidence in the outlook for refineries. A sale on the other hand would result in more stable earnings and flexibility for the balance sheet.

The broker found enough positives in the update to maintain a Neutral rating, given this is a mature business. Target is raised to $29.37 from $24.59.

Target price is $29.37 Current Price is $29.75 Difference: minus $0.38 (current price is over target).
If ALD meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $31.84, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates ALD as Outperform (1) -

Ampol's strategy day revealed -$40m in additional cost-outs and improving retruns in Convenience and International which exceed the broker's forecast. The company has announed a $300m buyback, implying strong deleveraging after its property sell-off.

Operational improvement, more stable oil prices and the release of franking credits may again make Ampol a takeover target, the broker suggests. Outperform retained, target rises to $35.15 from $31.90.

Target price is $35.15 Current Price is $29.75 Difference: $5.4
If ALD meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $31.84, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in December.

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 ALD as Downgrade to Equal-weight from Overweight (3) -

Ampol has announced a $300m off-market buy-back and a further -$40m cost-out.

Despite factoring in some solid growth next year in the higher-value parts of the business, Morgan Stanley reduces the rating to Equal-Weight from Overweight (given the stock has rallied nearly 25% in the quarter).

The broker forecasts an uplift from shop margin over the coming halves and expects FY21 shop margin to grow around 20% versus FY20.

The target price is unchanged at $31. Industry view is Cautious.

Target price is $31.00 Current Price is $29.75 Difference: $1.25
If ALD meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $31.84, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates ALD as Downgrade to Hold from Accumulate (3) -

Ampol has announced a $300m off-market buyback and finalised a property transaction with $635m in post-tax proceeds. The company intends to optimise its network during 2021 and acquire further cost savings.

Ord Minnett notes the share price performance has been robust because of the leverage Ampol enjoys from a broader recovery in mobility.

There is less valuation support now and the outlook for Lytton is uncertain so the broker downgrades to Hold from Accumulate. Target is raised to $30 from $28.

Target price is $30.00 Current Price is $29.75 Difference: $0.25
If ALD meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $31.84, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates ALD as Upgrade to Buy from Neutral (1) -

UBS upgrades to Buy from Neutral to reflect upgrades to earnings estimates and a $300m off-market buyback. The broker observes catalysts for the short term from earnings momentum and the possibility of further capital management over the next 12 months.

Ampol has reaffirmed a focus on lifting returns from the existing asset base and lowering expenditure for retail store fit-outs.

There was no update on the Lytton review but the company has indicated the Kurnell storage facility can support the federal government's focus on improved domestic fuel security. Target is raised to $33.70 from $26.00.

Target price is $33.70 Current Price is $29.75 Difference: $3.95
If ALD meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $31.84, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in December.

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 APE as Overweight (1) -

The investor day reinforced Morgan Stanley's conviction in the company's ability to disrupt the used car market.

The key message for the broker was the ability of Eagers Automotive to build a superior customer experience. The company is also considered uniquely differentiated to scale inventory.

The analyst makes no changes to forecasts, but sees scope for upside.

The Overweight rating and target of $16 are maintained. Industry view: In-Line.

Target price is $16.00 Current Price is $13.46 Difference: $2.54
If APE meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $12.80, suggesting downside of -6.2% (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

Morgans rates APE as Add (1) -

Eagers Automotive is working on a used car strategy (EasyAuto123), with a "no haggle, 7-day money back guarantee" offering.

The concept utilises a business model that has been successful in the US and Morgans believes offers a compelling shot at materially increasing share of the Australian used car market (at much higher margins).

While the strategy offers another layer of growth optionality (likely FY22/23), the broker makes no changes to forecasts at this stage.

The Add rating and target of $13.89 are unchanged.

Target price is $13.89 Current Price is $13.46 Difference: $0.43
If APE meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $12.80, suggesting downside of -6.2% (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 APE as Buy (1) -

The company has outlined an ambition to be the category leader in Australia's fixed-price used car market. To this end, AP Eagers is investing in a new proprietary website and analytics capabilities as well as integrating Taurus Finance.

UBS suspects inventory sourcing will be the driver of success and the company has clear advantages, being Australia's largest dealership network. Buy rating and $13 target retained.

Target price is $13.00 Current Price is $13.46 Difference: minus $0.46 (current price is over target).
If APE meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.80, suggesting downside of -6.2% (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

Credit Suisse rates ARF as Neutral (3) -

Credit Suisse is attracted to the low gearing and favourable industry structure, noting the child care sector is reliant on government support and it would be a brave government that would cut funding.

At the individual asset level the broker warns that operators, and landlords for that matter, are not immune to the risks of falling participation rates or competition.

In sum, the scale of the portfolio and diversity of the tenant mix mitigates risks for Arena REIT. Neutral rating retained. Target is raised to $2.84 from $2.43.

The broker highlights the market is rewarding earnings certainty and an attractive forecast distribution yield, possibly pricing in acquisitions.

Target price is $2.84 Current Price is $2.78 Difference: $0.06
If ARF meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.79, suggesting downside of -0.2% (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

Macquarie rates ASG as Outperform (1) -

Autosports Group has upgraded first half profit guidance to $20m, of which $10m is JobKeeper. While JobKeeper will not be repeated in the second half, a return to profitablility from loss in Victoria should broadly offset, the broker suggests.

Tight supply has led to solid new and used car margins in the half to date. The broker believes this will coniune with the northern hemisphere in lockdown. Favourable budget measures and a lack of international travel are also supportive.

Outperform retained, target rises to $1.75 from $1.65.

Target price is $1.75 Current Price is $1.48 Difference: $0.27
If ASG meets the Macquarie target it will return approximately 18% (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

UBS rates ASG as Buy (1) -

Autosports Group provided a strong trading update at the AGM, UBS assesses. Management now expects a first half pre-tax profit of $20m.

The business has been supported by strong new & used car margins as well as new luxury vehicle volumes.

The broker believes, if the company can also sustain improved momentum in the servicing and parts business, there is scope for outperformance. Buy rating retained. Target rises to $1.64 from $1.50.

Target price is $1.64 Current Price is $1.48 Difference: $0.16
If ASG meets the UBS target it will return approximately 11% (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

Morgans rates AST as Upgrade to Hold from Reduce (3) -

A share price decline for AusNet Services in the wake of the company's first half results prompts Morgans to increase the rating to Hold from Reduce.

At current prices the broker estimates a 12-month potential total shareholder return of around 4%, including a 5.1% cash yield. The analyst warns of uncertainty on dividend franking.

The target price is increased to $1.86 from $1.80.

Target price is $1.86 Current Price is $1.87 Difference: minus $0.01 (current price is over target).
If AST meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.89, suggesting downside of -0.3% (ex-dividends)

The company's fiscal year ends in March.

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

Citi rates BSL as Neutral (3) -

Citi notes speculation for private equity is looking at BlueScope Steel. While such funds are able to access cheap US dollars the broker suspects managing currency exposure and the risk of buying near the cyclical high in steel pricing/margins makes it a less likely event.

Moreover, BlueScope Steel is a well-run company with little fat to trim. The shares are up 68% in six months, so it's hard to argue these are undervalued, Citi adds.

The broker retains a Neutral rating and $18.50 target. With rationalisation of Australian blast furnace capacity the company has less exposure to the variations in export steel pricing.

Target price is $18.50 Current Price is $16.94 Difference: $1.56
If BSL meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $18.93, suggesting upside of 10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Credit Suisse rates CQR as Outperform (1) -

Given the weighting to non-discretionary retail, Credit Suisse expects the business will be well supported by the market. The recent market update highlighted positive trends in rent collection and retail sales.

Credit Suisse retains an Outperform rating and raises the target to $4.03 from $3.48.

While the share price is trading at a premium to net tangible assets, the broker cannot rule out further equity raisings to fund acquisitions although does not incorporate this scenario in its estimates.

Target price is $4.03 Current Price is $3.92 Difference: $0.11
If CQR meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting downside of -8.1% (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

Morgan Stanley rates IAG as Downgrade to Equal-weight from Overweight (3) -

As a result of higher-than-expected business interruption (BI) claims, Morgan Stanley reduces the rating for Insurance Australia Group to Equal-Weight from Overweight and the target price to $4.80 from $6.50.

The broker considers earnings uncertainty has increased due to the higher provisions and a higher probablity of a challenging quota share renewal with reinsurers.

While the company still has the potential to cut costs, the analyst believes a cost-out programme is likely delayed to focus on settling BI claims.

Industry view: In-line.

Target price is $4.80 Current Price is $5.13 Difference: minus $0.33 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.46, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Morgans rates IAG as Hold (3) -

While the size ($750m) of the raising after the adverse ruling in the Business Interruption (BI) case surprised Morgans, the post-tax provision of -$865m appears conservative to the broker. 

The company’s underlying earnings trajectory at October remains largely as the analyst expected, and the capital position is considered very robust.

Morgans lowers FY21 cash EPS by over -100% on the adverse finding, while future year earnings are reduced by around -9% on dilution from the raising and minor forecast changes.

The Hold rating is unchanged and the target price is decreased to $5.25 from $5.39.

Target price is $5.25 Current Price is $5.13 Difference: $0.12
If IAG meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.46, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Macquarie rates ILU as Neutral (3) -

The broker is back from research restriction having been involved in the Deterra Royalties ((DRR)) spin-off.

The broker notes Iluka Resources has dealt with weak demand in recent years by reducing production, such that a demand recovery will lead to increased volumes but lower prices.

With this in mind the broker returns with a Neutral rating and $5.50 target for Iluka, having adjusted for the Deterra divestment.

Target price is $5.50 Current Price is $5.25 Difference: $0.25
If ILU meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.58, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in December.

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 MYD as Initiation of coverage with Add (1) -

Morgans initiates coverage on MyDeal.com.au with an Add rating and $1.70 target price.

The company is an Australian e-commerce group that has successfully established an Australian online retail marketplace specialising in household goods such as furniture and homewares.

The broker explains the business model has the attractive attributes of being capital light with minimal inventory held. It’s considered the long-term game lies in scaling up.

As at the first quarter FY21, annualised gross transaction value (GTV) was $227m, 5m different items were available and the company had around 700k customers (50% repeat).

The company’s founder and CEO owns 49% of the stock.

Target price is $1.70 Current Price is $1.20 Difference: $0.5
If MYD meets the Morgans target it will return approximately 42% (excluding dividends, fees and charges).

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

UBS rates NEC as Downgrade to Neutral from Buy (3) -

UBS observes Nine Entertainment has had a stellar run up in the share price, amid a sustained improvement in advertising markets.

Nevertheless, the broker suspects the recent improvement is merely the pulling forward of a cyclical recovery, which in large part is being driven from lower multiple areas of the business.

The broker assumes FY21 free-to-air TV revenue is up 5% but still lower than FY19 levels. UBS downgrades to Neutral from Buy and raises the target to $2.50 from $2.05.

Target price is $2.50 Current Price is $2.37 Difference: $0.13
If NEC meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.71, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Citi rates ORI as Buy (1) -

Citi believes Orica is able to deliver medium-term earnings growth, supported by a recovery in global mining activity and the ramp up at Burrup.

Nevertheless, there are some risks, including the exposure to thermal coal and the willingness to take price in future contract negotiations.

Orica is targeting a range of strategic initiatives in FY21 and earnings should also benefit from the annualisation of the contributions from acquisitions.

The broker expects FY22 will be a "better" year, forecasting EBIT of $699m. Buy rating maintained. Target is reduced to $19.45 from $19.50.

Target price is $19.45 Current Price is $16.46 Difference: $2.99
If ORI meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $18.17, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

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

Morgan Stanley expressed disappointment yesterday (see FNArena note dated 23/11/2020) regarding Orica's first half FY21 earnings (EBIT) growth.

To reflect the result, he broker reduces earnings forecasts for FY21, FY22 and FY23 by -14%, -9% and -10%, respectively. 

Accordingly, the target price is decreased to $18 from $19.

Equal-weight maintained. Industry view is Cautious.

Target price is $18.00 Current Price is $16.46 Difference: $1.54
If ORI meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $18.17, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

UBS rates PME as Downgrade to Neutral from Buy (3) -

UBS finds Pro Medicus a high-quality growth prospect, noting its addressable market and market power. Nevertheless, post the FY20 results the stock has performed strongly and the risk/reward is now more balanced.

Rating is downgraded to Neutral from Buy and the target raised to $32.00 from $29.65.

The high valuation is supported by favourable economics and structural tailwinds, which the broker assesses is underpinned by a transition to enterprise imaging and the adoption of artificial intelligence in medical imaging.

Target price is $32.00 Current Price is $31.46 Difference: $0.54
If PME meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

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 SYD as Downgrade to Neutral from Outperform (3) -

Macquarie notes the outlook has improved for Sydney Airport, with state borders opening up, hope for international down the track on vaccine success, REX taking on the Melbourne route to offset a smaller Virgin Airways, and a slot review pending.

The share price has risen accordingly. The broker increases its target to $7.09 from $6.66 and pulls back to Neutral from Outperform, warning of downside risk from rising bond yields.

Target price is $7.09 Current Price is $6.89 Difference: $0.2
If SYD meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting downside of -11.3% (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

Morgans rates Z1P as Add (1) -

After a trading update, Morgans concludes Z1P Co continues to execute well and sees longer-term upside if the company can achieve its vision of becoming a global payments player.

October saw a record month for group transaction volume ($401m), with YTD growth of 104%.

The US business (Quadpay) also saw momentum further accelerate in October, notes the broker.

The analyst makes relatively minor earnings changes and raises the target to $9.80 from $9.77, while leaving the Add rating unchanged.

Target price is $9.80 Current Price is $6.20 Difference: $3.6
If Z1P meets the Morgans target it will return approximately 58% (excluding dividends, fees and charges).

Current consensus price target is $6.70, suggesting upside of 7.0% (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