Australian Broker Call

Ord Minnett rates AQR as Accumulate (2) -

APN Convenience Retail REIT will acquire six service stations in Queensland for $59m. Also, Dexus ((DXS)) has proposed to acquire all shares in the company's parent entity - APN Property Group ((APD)) - which is the REIT's responsible entity and investment manager.

Dexus wants to maintain APN Property's co-investment in the REIT. Ord Minnett believes both these announcements are positive for the REIT. The broker also believes the acquisition highlights the strong demand for service stations and the tight yields that are being paid for the asset class.

Accumulate rating with the target rising to $3.91 from $3.90.

Target price is $3.91 Current Price is $3.64 Difference: $0.27
If AQR meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

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 BLD as Buy (1) -

While an earnings uplift will remain highly dependent on project wins, Citi notes more federal funding from the Federal Budget is positive for demand.

While Boral has noted projects have been slow to start, budgetary measures bode well for the demand outlook over the next 6-12 months, believes the broker. The Buy rating and $5.80 target are unchanged.

Target price is $5.80 Current Price is $6.72 Difference: minus $0.92 (current price is over target).
If BLD meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.51, suggesting downside of -19.0% (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 CAR as Neutral (3) -

Carsales has informed the market with a better-than-anticipated trading update, reports Macquarie, followed by the new Carsales wants to acquire a 49% stake in Trader Interactive, a US-based digital marketplace business, for US$624m or A$797m.

This transaction will be partly funded by a circa $600m accelerated renounceable entitlement offer.

Macquarie likes the strategic rationale behind the move and suggests the deal seems priced fairly. The company has indicated the transaction to be circa 3% accretive to 2020 EPS in isolation.

Net debt/EBITDA increases to 2.3x but is to decline to 2.1x within 12 months post acquisition, according to company management. Macquarie retains the Neutral rating. Price target $23.

Target price is $23.00 Current Price is $19.51 Difference: $3.49
If CAR meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $22.12, suggesting upside of 13.4% (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

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

CSL's competitor Takeda's quarter four results show immunoglobulin sales were up 21.9% while albumin sales fell by -20%. Takeda’s plasma collections declined by -11% in FY20 with growth of 30% expected in FY21.

From CSL's first-half update, Morgan Stanley estimates CSL’s collections were down circa -32% for the 12-months to March 2021 and remain well below pre-pandemic levels.

As a result, the broker expects CSL's immunoglobulin growth to be well below that of Takeda in FY21. Equal-weight rating with a target of $275. Industry view: In-Line.

Target price is $275.00 Current Price is $274.34 Difference: $0.66
If CSL meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $299.04, suggesting upside of 9.0% (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 DCN as Upgrade to Neutral from Underperform (3) -

Dacian Gold's updated mineral resource for the Greater Westralia Mining Area (GWMA) at Mt Morgans now totals 6.8mt at 4.3g/t for 935koz of gold. Macquarie notes the deposits most recently mined from underground form the bulk of the new resource.

Macquarie's outlook on gold is lukewarm and hence the broker remains cautious on Dacian Gold. Even so, looking at the recent positive run in gold prices, the broker notes a considerable improvement in the stock's spot price valuation.

Rating on Dacian Gold is upgraded to Neutral from Underperform with the target rising to $0.35 from $0.33.  

Target price is $0.35 Current Price is $0.35 Difference: $0
If DCN meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.0

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

Citi rates DXS as Sell (5) -

Given the support of the board and chairman, Citi believes the binding Scheme Implementation Deed to acquire fund manager APN Property Group ((APD)) will go ahead. As of December 2020, the target had $2.9bn of funds under management (FUM).

Despite an estimated 2% annualised accretion (assuming no incremental cost savings), the broker retains a Sell rating. The REIT has greater than 70% office exposure, where there's considered downside to rents from cyclical headwinds and working from home.

The target price is increased to $8.34 from $7.86.

Target price is $8.34 Current Price is $10.43 Difference: minus $2.09 (current price is over target).
If DXS meets the Citi target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.21, suggesting upside of 0.7% (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

Morgan Stanley rates DXS as Overweight (1) -

Dexus has entered into a scheme to buy APN Property Group ((APD)), a property fund manager, for $308m. This translates to a circa 26x P/E or 10.6% of assets under management (AUM), Morgan Stanley estimates.

Further, the deal will add $2.9bn to Dexus's AUM and widen capital sources, currently skewed more towards institutional money. What the broker is not pleased about is the quality of AUM since APN Property's portfolio is less prime than that on Dexus's existing platform.

Overweight rating with a target of $11.70. Industry View: In-line.

Target price is $11.70 Current Price is $10.43 Difference: $1.27
If DXS meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $10.21, suggesting upside of 0.7% (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

UBS rates DXS as Buy (1) -

Dexus has entered into a scheme implementation deed to acquire APN Property Group ((APD)), a real estate investment manager with $2.9b in assets under management (AUM) and $134m of fund co-investments.

UBS believes the primary strategic rationale behind the move was to increase the AUM and the listed logistics/business parks fund. Even so, the broker has questions about the price and Dexus's motive to diversify away from office.

Looking at some of Dexus's recent moves, the broker suggests Dexus wants to minimize dilution from asset sales and be considered as more than an office REIT given the lower return outlook.

Buy rating with a target of $11.

Target price is $11.00 Current Price is $10.43 Difference: $0.57
If DXS meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $10.21, suggesting upside of 0.7% (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 IAP as Downgrade to Neutral from Outperform (3) -

Irongate Group's FY21 results showed funds from operations of 9.26c, about -2% below Macquarie's expectations of 9.48c.

FY22's dividend growth guidance has increased by 2-3% over last year. In the absence of any covid rental relief, the broker believes underlying growth prospects will be relatively limited at 0.8%.

After recently completing the internalisation of management, Macquarie notes the group can now deploy excess capital to grow earnings and expects Irongate has about $120m in deployment capacity.

While the stock presents M&A appeal and can grow earnings via deploying its balance sheet, Macquarie feels earnings growth prospects in FY22 are limited and downgrades to Neutral from Outperform. The target price is $1.37.

Target price is $1.37 Current Price is $1.49 Difference: minus $0.12 (current price is over target).
If IAP meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

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

luka Resources has received a letter from the Australian government with respect to developing its fully integrated Eneabba rare earths refinery. The miner is in discussions with Export Finance Australia (EFA) regarding financial support for the project.

Morgan Stanley has questions pertaining to the type of financing and project economics.

Equal weight with a target price of $6. Industry view: Attractive.

Target price is $6.00 Current Price is $8.78 Difference: minus $2.78 (current price is over target).
If ILU meets the Morgan Stanley target it will return approximately minus 32% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.10, suggesting downside of -18.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.0

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

Morgans rates MTO as Add (1) -

Motorcycle Holdings has issued FY21 pre-AASB16 earnings (EBITDA) guidance of $42-45m. Management notes demand for new and used motorcycles remains “consistent and strong and is showing no signs of slowing down”.

The group will return to paying ordinary dividends and the prior payout range of 50-70% was reaffirmed. Morgans forecasts a second half dividend of 10cps, taking the full-year forecast to 20cps.

The Add rating is maintained though the analyst cautions the current earnings run-rate is likely to be unsustainable long-term. The target of $3.18 is unchanged.

Target price is $3.18 Current Price is $2.66 Difference: $0.52
If MTO meets the Morgans 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

Morgan Stanley rates PDL as Overweight (1) -

Morgan Stanley notes acquiring Thompson, Siegel & Walmsley (TSW) adds global value equities that Pendal Group has been seeking as well as a larger US platform, a broader product set and circa 15% earnings accretion.

Under the group's ownership, the broker thinks Thompson, Siegel & Walmsley will likely benefit from an expanded distribution network in the US and globally, the opportunity to build a direct retail brand and more corporate support.

Pendal Group also delivered a solid first half, observes Morgan Stanly, led by good cost control and an uplift in investment performance.

Overweight rating with a target price of $8.50. Industry view: In-line.

Target price is $8.50 Current Price is $7.42 Difference: $1.08
If PDL meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $8.35, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates PLS as Sell (5) -

The key takeaway for Citi from an investor day was that Pilbara Minerals is very focused on delivering on value through volume growth, product upgrades and addressing ESG issues.

The broker highlights the announcement of a strategic partnership with Calix ((CXL)) to produce a mid-stream product, greater than 35% Li2O, on-site versus current spodumene concentrate.

Management outlined an expansion strategy for the upstream business with 580ktpa capacity available over the short-term, and an additional circa 400ktpa through expansion of the Pilgan plant. The Sell rating and $1.10 target are retained.

Target price is $1.10 Current Price is $1.26 Difference: minus $0.16 (current price is over target).
If PLS meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.09, suggesting downside of -9.4% (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

Macquarie rates PLS as Outperform (1) -

Pilbara Minerals has announced a joint venture with Calix ((CXL)) to assess the potential to construct a facility that will process spodumene into a mid-stream lithium product. 

Also, the company will make a final investment decision on when to restart the Ngungaju plant or the Altura project in the June quarter (FY21). Assuming approval is granted, the broker believes the plant could be up and running by late 2021. 

Outperform rating with a target of $1.50.

Target price is $1.50 Current Price is $1.26 Difference: $0.24
If PLS meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $1.09, suggesting downside of -9.4% (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

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

Suncorp has provided more details and insights to the local investment community and Citi reports it was all largely in-line with expectations.

The broker has downgraded its rating to Neutral from Buy but has bumped up the price target to $11.80 (from $11.40).

The analysts see a positive in the bankinsurer further confirming confidence in the medium-term growth profile, but the share price has moved higher too.

Target price is $11.80 Current Price is $10.98 Difference: $0.82
If SUN meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 11.9% (ex-dividends)

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 SUN as Outperform (1) -

According to the Australian federal budget, a cyclone reinsurance pool for Northern Australia will come into effect from July 2022 although no specifics were provided on aspects like funding.

While in the right direction, the broker believes these new schemes will not materially impact the earnings profile of the Australian listed General Insurers.

Further, Macquarie expects Suncorp Group's insurance trading ratio (ITR) margins to remain flat in FY22 versus FY21, implying all business improvement is back-ended to FY23.

Macquarie retains an Outperform rating with the target dropping slightly to $12.90 from $13.

Target price is $12.90 Current Price is $10.98 Difference: $1.92
If SUN meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 11.9% (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 SUN as Downgrade to Hold from Add (3) -

After holding a general insurance forum, Suncorp Group arrived at unchanged overall key group targets for FY23. While the margin targets appear sound to Morgans, earnings upside seems limited in FY22.

Also, the group noted the bulk of any planned underlying insurance trading ratio (UITR) uplift will occur in FY23. The broker lowers the rating to Hold from Add after recent share price strength and the target falls to $11.39 from $11.80. 

Management confirmed that business momentum has broadly continued as expected in the third quarter.

Target price is $11.39 Current Price is $10.98 Difference: $0.41
If SUN meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 11.9% (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

Ord Minnett rates SUN as Hold (3) -

Suncorp management expects an uplift in the general insurance sector. Margins may improve from current levels due to pricing although Ord Minnett feels "aspirational" targets aiming for a combined volume and margin improvement appear to be taking it a tad too far.

The broker expects the impact from any pricing uplift in home insurance to benefit margins in FY22 and also notes there could be some positives from targeted reductions in benefits. 

On the flip side, Ord Minnett is concerned New Zealand margins will reduce from mix shifts to lower-margin motor insurance with some of the procurement and pricing benefits looking very uncertain.

The broker maintains the Hold recommendation with a target price of $11.00.

Target price is $11.00 Current Price is $10.98 Difference: $0.02
If SUN meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 11.9% (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

UBS rates SUN as Buy (1) -

Suncorp Group provided a three-year general insurance plan that includes the key blocks of achieving a margin target of 10-12% by FY23. The details around the specific claims and expense initiatives provide some confidence to UBS about the projects delivering the expected benefits.

In the near term, higher project costs will lead to flat margins in FY22 versus FY21, suggests UBS, meaning a back-ended FY23 recovery. Even so, the stock looks cheap to UBS and the broker retains its Buy rating. Target rises to $12 from $11.15.

Target price is $12.00 Current Price is $10.98 Difference: $1.02
If SUN meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 11.9% (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 VUK as Upgrade to Hold from Reduce (3) -

Last week Virgin Money UK reported a first half underlying profit better than Morgans expected, due largely to a lower-than-expected credit impairment charge and a lower effective tax rate. 

As a result, the target price is increased to $3.45 from $2.36 though the analyst warns the probability of further waves of covid-19 in the UK is greater than that for Australia. 

The rating moves to Hold from Reduce, as the uncertainty associated with the UK macroeconomic outlook has reduced. However, company returns will wane should negative interest rates eventuate, cautions the broker.

Target price is $3.45 Current Price is $3.63 Difference: minus $0.18 (current price is over target).
If VUK meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.73, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.0

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