Australian Broker Call

Macquarie rates ALX as Neutral (3) -

The French government's Council of State view on toll road taxes is "on balance" a net positive for Atlas Arteria, Macquarie asserts.

The view suggests only a broad concession tax may work and, even if this is disproportionately impacting toll roads, the broker points out there will be a potential point of appeal.

The quantum of the tax impact remains unclear. The other headwind for the company are interest rates, with Macquarie noting French and US discount rates have increased by 25 basis points and 60 basis points, respectively, which lowers the valuation by -$0.40.

Neutral rating retained. Target is reduced to $6.15 from $6.55.

Target price is $6.15 Current Price is $5.97 Difference: $0.18
If ALX meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.39, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Morgan Stanley rates ASX as Underweight (5) -

Morgan Stanley tracks September 2023 interest rate futures, a seasonally high month, and notes volumes are down -4.5% year-on-year.

Assuming similar growth in all futures, volumes appear to be tracking 8% ahead in FY24 to date, which is slightly ahead of the broker's 7% forecast for the year.

SPI200 index futures volumes are materially lower in September, down -60%. Morgan Stanley retains an Underweight rating for ASX with a $53.50 target. Industry view: In-Line.

Target price is $53.50 Current Price is $56.59 Difference: minus $3.09 (current price is over target).
If ASX meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $62.88, suggesting upside of 11.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.1

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

Bell Potter rates BDM as Initiation of coverage with Buy (1) -

Bell Potter initiates coverage on Burgundy Diamond Mines with a Buy rating and $0.50 target. The core asset is the Ekati mine located in the Northwest Territories of Canada. The mine was previously developed by BHP Group ((BHP)) and commenced production in 1998.

The broker believes there is material potential to de-risk and extend the current mine life with the new open pit footprint potentially expanding to increase output.

The mine is a highly strategic asset within the thriving global luxury goods value chain with the broker noting Russia and Africa currently account for around 80% of global diamond supply.

Target price is $0.50 Current Price is $0.19 Difference: $0.315
If BDM meets the Bell Potter target it will return approximately 170% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Citi rates BSL as Neutral (3) -

US automotive workers have taken strike action and hot rolled coil pricing has contracted as a result, Citi observes. While the Australian market is holding up, BlueScope Steel's North Star profits will be under pressure at lower spot levels with the spread now at US$345/t.

Guidance for the first half assumed a spread of around US$485/t. US prime scrap has fallen further, to US$406/t, which may help to offset to some degree the lower HRC pricing.

First half EBIT guidance for North Star appears to be at risk, Citi concludes. Neutral rating and $23.50 target maintained.

Target price is $23.50 Current Price is $18.82 Difference: $4.68
If BSL meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $21.36, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Citi rates BWP as Sell (5) -

Citi welcomes the incoming managing director of BWP Trust, Mark Scatena, noting he has a strong knowledge of Bunnings and other Wesfarmers companies.

The broker envisages potential for increased acquisition activity from BWP Trust as valuations become more attractive. The company's access to capital is robust and a defensive balance sheet positions it for execution on real estate acquisitions and developments in the future.

Sell rating. Target is $3.40.

Target price is $3.40 Current Price is $3.69 Difference: minus $0.29 (current price is over target).
If BWP meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.59, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.8

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

Ord Minnett rates CGC as Hold (3) -

Paine Schwartz Partners has lowered its indicative offer to acquire Costa Group by -9% to $3.20 a share, yet Ord Minnett continues to believe the deal will likely proceed.

The premium is reduced but the offer is still relatively attractive on valuation grounds and a 22% premium to the closing price prior to the proposal.

The broker was not surprised by the lowered bid, given the more challenging outlook in the short term, with the overhang from wet weather conditions likely to weigh on citrus volumes in the second half and amid softer tomato demand.

Hold rating retained. Target is $3.18.

Target price is $3.18 Current Price is $2.84 Difference: $0.34
If CGC meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Citi rates DMP as Neutral (3) -

Citi envisages potential for Domino's Pizza Enterprises to reveal positive momentum at its AGM update in November. Same-store sales improved in the first seven weeks of FY24 after a flat second half, despite more challenging comparables.

The broker suspects there is greater risk to the longer-term roll-out of stores and retains a Neutral rating, needing to see improvements in franchise profitability to become more positive. Target is $57.95.

Target price is $57.95 Current Price is $52.90 Difference: $5.05
If DMP meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $57.33, suggesting upside of 8.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Citi rates EVN as Neutral (3) -

After a visit to Evolution Mining's Red Lake mine, Citi observes how much the company had underestimated the task at hand. It appears there is a lot of work to do before the operation can be turned around.

While not downplaying the effort that has already gone into this, the broker highlights the "buy-in" of the local workforce has improved the prospect for the mine.

Red Lake owes the company $1bn yet Citi acknowledges there is no other stock in its coverage that has provided the level of access and disclosures, which is to the company's credit. Neutral rating and $3.60 target.

Target price is $3.60 Current Price is $3.65 Difference: minus $0.05 (current price is over target).
If EVN meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.48, suggesting downside of -6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Macquarie rates EVN as Underperform (5) -

Macquarie made a site visit to Evolution Mining's Red Lake and assesses past investment is starting to gain traction. The performance of the mine had been underwhelming for the broker but appears to be getting better.

The problem is less ore is being mined than can fill two process plants yet the company was keen to highlight the progress made to date that should mean a more consistent performance in the future.

Macquarie forecasts Red Lake to incrementally increase output to average 200,000 ozpa in FY24-30 before lifting to 247,000 ozpa. Underperform retained. Target is $3.50, raised from $3.40.

Target price is $3.50 Current Price is $3.65 Difference: minus $0.15 (current price is over target).
If EVN meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.48, suggesting downside of -6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Citi rates FPH as Neutral (3) -

Fisher & Paykel Healthcare provided an investor briefing in California and Mexico for its manufacturing facilities. Citi now understands the recovery in gross margins to 65% will be gradual but this is a clear focus of all levels of management.

The broker reduces FY24-26 estimates for EPS by -5-7% and moves the target to NZ$22.75, implying a PE for FY26 of 33.5x. Citi remains cautious about the outlook for the homecare division ahead of trial results for GLP-1 in OSA. Neutral retained.

Current Price is $20.06. Target price not assessed.

Current consensus price target is $21.00, suggesting upside of 4.0% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. 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

Ord Minnett rates GNC as Hold (3) -

Ord Minnett observes three consecutive bumper crops and stronger demand for Australian grain has allowed GrainCorp to command high supply-chain margins.

Global supply shortages have lifted global prices and encouraged exports, allowing the company to maximise capacity in its processing infrastructure.

The broker warns back-to-back bumper harvests are not typical, particularly in combination with higher grain prices globally, and therefore profitability should likely normalise over coming years.

The Australian crop report has forecast the 2024 east coast winter grain production will be around 21m tonnes, a -30% decline from 2023.  The broker retains a Hold rating and $7.20 target.

Target price is $7.20 Current Price is $7.03 Difference: $0.17
If GNC meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.83, suggesting upside of 25.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Citi rates IMD as Neutral (3) -

Citi observes drilling activity appears to have suffered a setback in August, falling to the second lowest level in 2023 to date. The broker expects volatility will linger, resulting in subdued improvements in instrumentation volumes.

A substantial recovery in exploration is seen as increasingly unlikely in the near term and the risk for Imdex is considered to the downside at this point in time.

Declines in exploration in August have been attributed to lower gold and copper projects reported during the month.

While solid commodity prices should be conducive to exploration-related capital raisings, the broker points out the general uncertainty is discouraging junior players from deploying capital in a meaningful way. Neutral rating maintained. Target is $1.60.

Target price is $1.60 Current Price is $1.48 Difference: $0.125
If IMD meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.86, suggesting upside of 25.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Morgan Stanley rates PMV as Overweight (1) -

Morgan Stanley continues to evaluate the outlook for Premier Investments, noting margin downside is a key concern for investors. The company achieved retail EBIT margins of 21.7% in FY23, up 8.5 percentage points compared with FY19.

The broker is increasingly confident margins can be sustained because rent/sales are consistent with the industry and online sales doubled to $300m in FY23.

The broker believes any temporary factors should have now unwound, noting the company has held its margins at 21-22% for three years. Target is $32.25. Overweight rating retained. Industry view: In line.

Target price is $32.25 Current Price is $25.49 Difference: $6.76
If PMV meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $24.82, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates PRU as Outperform (1) -

Perseus Mining has extended the mine life for Yaoure to at least 2035. Production and costs are largely in line with Macquarie's expectations while capital expenditure is higher.

The mine plan incorporates an underground operation below the CMA open pit for the first time as well as the existing CMA open pit and an expanded Yaoure open pit.

The broker updates forecasts to align with the new plan, estimating total gold production of 1.97m ozpa, with an average life-of-mine AISC of US$1133/oz. These two numbers are 2% above the company's guidance. Outperform retained. Target is reduced -4% to $2.60.

Target price is $2.60 Current Price is $1.76 Difference: $0.845
If PRU meets the Macquarie target it will return approximately 48% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Bell Potter rates VIT as Buy (1) -

Bell Potter notes prescribing activity has surged in August. SAS-B applications, mostly used by new prescribers of medicinal cannabis, in August totalled 15,400 applications, significantly ahead of previous monthly averages.

The Authorised Prescriber path, used by clinicians with greater prescribing experience, was also significantly higher during the month, at 2300 applications.

While there are an increasing number of smaller distributors in the segment, the broker notes Vitura Health has significant market share and is well-positioned to capture industry growth.

The broader integration of CanView 2.0 among prescribers will also be critical to sustaining growth in FY24. Buy rating and $0.70 target unchanged.

Target price is $0.70 Current Price is $0.31 Difference: $0.39
If VIT meets the Bell Potter target it will return approximately 126% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

UBS rates WHC as Neutral (3) -

UBS explores the funding options and potential for the Blackwater and Daunia mines, given Whitehaven Coal has confirmed it is participating in BHP Group's ((BHP)) divestment process for these assets.

The broker assumes the company would partner with a customer/trading house that would fund around 25% of a base case valuation of US$3.3bn for both assets.

UBS estimates Whitehaven Coal could potentially fund 50-70% of the acquisition in cash, requiring US$800m-1.3bn in debt with gearing at around 18-30%.

The assets would lift the company's revenue share for metallurgical coal to around 60% from less than 20%. Neutral rating retained. Target is $6.30.

Target price is $6.30 Current Price is $6.61 Difference: minus $0.31 (current price is over target).
If WHC meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.12, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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