Australian Broker Call

Macquarie rates ANZ as Outperform (1) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

Only ANZ Bank didn’t see a revenue (excluding Markets) decline, explains the analyst. While it's considered the bank continues to offer better relative value in the medium term, the 2H21 outlook appears less optimistic.

This is partly due to a lift in expenses and slowing balance sheet momentum, explains the broker. Macquarie maintains the Outperform rating and $30.50 target.

Target price is $30.50 Current Price is $27.42 Difference: $3.08
If ANZ meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $30.17, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in September.

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 APA as Downgrade to Neutral from Outperform (3) -

Macquarie feels emissions policies are driving a structural decline in gas usage and, hence, growth for APA Group over a 30-year horizon. The broker lowers the rating to Neutral from Outperform. The target price falls to $10.09 from $10.40.

The analyst believes renewables are still an avenue for growth though the space remains competitive.

While the government release of the RIS Gas pipeline review has minimal impact on the group, increased information disclosure may cause pricing pressure, cautions the broker. 

Target price is $10.09 Current Price is $9.66 Difference: $0.43
If APA meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $10.60, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates BEN as Outperform (1) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

No specific commentary was made for Bendigo and Adelaide Bank. The Outperform rating and $11 target are unchanged.

Target price is $11.00 Current Price is $10.21 Difference: $0.79
If BEN meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $10.27, suggesting downside of -0.4% (ex-dividends)

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

Macquarie rates BGL as Outperform (1) -

After a site tour, Macquarie believes mineral inventory growth is likely to continue at Bellevue Gold, as drilling efficiency improves from additional underground drill positions. 

The broker now lifts the mining inventory assumption by 22% ahead of the Stage Two Feasibility Study, which is expected in mid-2021.

Consequently, the increase in valuation for Bellevue, and a reduction in the share dilution assumption (a smaller equity raise base case), are the primary drivers behind an uplift to $1.20 from $1.05 for the target price.

Target price is $1.20 Current Price is $0.82 Difference: $0.38
If BGL meets the Macquarie target it will return approximately 46% (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

Macquarie rates BOQ as No Rating (-1) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

Macquarie is under advice restriction for Bank of Queensland and no rating is provided.

Current Price is $8.82. Target price not assessed.

Current consensus price target is $9.67, suggesting upside of 9.7% (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

Credit Suisse rates CAR as No Rating (-1) -

Carsales.com has acquired Trader Interactive for $797m. As well, the company has provided higher FY21 guidance compared with Credit Suisse estimates.

A strong performance domestically and in Korea has been signalled while Brazil is described as "resilient". To reflect the trading update Credit Suisse anticipates adjusted operating earnings of $252.9m, within the guidance range of $250-254m.

The broker is restricted from providing a target or rating at present.

Current Price is $19.51. Target price not assessed.

Current consensus price target is $22.07, suggesting upside of 27.6% (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 CBA as Neutral (3) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

The analyst believes the performance of Commonwealth Bank sets it apart, with better revenue growth than peers, the ability to sustain balance sheet momentum and improving margins. The bank's capital position is also considered sector leading.

The pro forma CET1 of around 13.4% is circa 60-100bps ahead of peers. When coupled with a healthy franking credit balance, it suggests to Macquarie an increased likelihood of a structured buyback in 1H22. The Neutral rating and $86 target are retained.

Target price is $86.00 Current Price is $96.58 Difference: minus $10.58 (current price is over target).
If CBA meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $86.82, suggesting downside of -11.5% (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) -

Morgan Stanley expects a strong rebound in FY23. Nevertheless, some uncertainty exists regarding the shape of a recovery in plasma. The latter keeps the broker on an Equal-weight footing.

Having forecast collection growth of 45% to March 2022, given recent data, the broker now suspects this may be too optimistic.

After a review of competitor numbers, Morgan Stanley forecasts CSL will recover plasma collection to be just -5% below pre-pandemic levels by FY24.

The broker reduces its target to $267 from $275. Industry view: In-Line.

Target price is $267.00 Current Price is $277.68 Difference: minus $10.68 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $297.90, suggesting upside of 7.7% (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

UBS rates CSR as Neutral (3) -

FY21 earnings of $238m were ahead of UBS estimates. This was driven by aluminium and building product earnings. The main update centred on the western Sydney property valuation, which at $900m is in line with the broker's expectations.

Over the next three years CSR has $146m in property sales contracted and land sales have also been expanded at Horsley Park. UBS lifts estimates for FY22-24 by 6-23%.

The broker believes the company's solid leverage to the Australian housing market and aluminium hedge book should support the outlook. Neutral maintained. Target rises to $6.17 from $5.73.

Target price is $6.17 Current Price is $5.96 Difference: $0.21
If CSR meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.40, suggesting upside of 3.6% (ex-dividends)

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

Citi rates EVT as Buy (1) -

Citi highlights Chinese box office during May Day holiday reached a record high despite the absence of Hollywood blockbuster releases with local films dominating the Chinese box office.

The broker thinks this indicates there is indeed demand for movies in cinemas once the covid disruption eases and thus bodes well for Event Hospitality and Entertainment.

While Event’s businesses will take some time to return to pre-covid profitability, Citi expects the improving momentum will likely be taken positively.

Buy rating and $12.25 price target left intact.

Target price is $12.25 Current Price is $12.36 Difference: minus $0.11 (current price is over target).
If EVT meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Macquarie rates FPH as Outperform (1) -

Macquarie increases EPS forecasts to reflect an upgrade to Hospital device and consumables expectations, as covid-19 continues to drive adoption/use. This comes after a review of recent vaccine and hospital data in key markets.

With virus variants proliferating and a slower vaccine rollout (particularly in low-middle income countries), the broker sees an increasing risk of elevated respiratory hospitalisations into the second half FY22 and FY23.

The Outperform rating is unchanged and the target is increased to NZ$40.38 from NZ$39.01.

Current Price is $30.68. Target price not assessed.

Current consensus price target is $33.50, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

This company reports in NZD. 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

Macquarie rates JHX as Outperform (1) -

James Hardie Industries will be reporting on 18 May and holding its “A New James Hardie” investor day on 21 May.

A recent survey, combined with builder and distributor feedback, continues to indicate to Macquarie strong underlying demand
in residential R&R and new construction. However, tighter supply chains and rising costs are considered weighing on contractor sentiment. 

On this latter point, Macquarie foresees further pressures over summer. The Outperform rating and $45.30 target are retained.

Target price is $45.30 Current Price is $41.93 Difference: $3.37
If JHX meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $44.84, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Macquarie rates NAB as Neutral (3) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

While National Australia Bank reported a clean first half result, the result fell short of providing an additional catalyst for a further re-rating, explains the analyst. The Neutral rating and $28 target are retained.

Target price is $28.00 Current Price is $26.22 Difference: $1.78
If NAB meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $27.58, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates NUF as Hold (3) -

Nufarm will report its first-half FY21 result on May 20. Ord Minnett notes the year has been challenging with Nufarm hit by factors like supply chain disruptions and poor seasonal conditions, although the company has recovered since then.

With crop prices at elevated levels and upbeat commentary from peers, the broker believes the current market backdrop is supportive for Nufarm. Going ahead, the broker expects better performance and forecasts earnings before interest and tax of $66m in the first half.

Hold rating with the target price rising to $4.90 from $4.50.

Target price is $4.90 Current Price is $5.05 Difference: minus $0.15 (current price is over target).
If NUF 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 $5.49, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

Ord Minnett rates OZL as Lighten (4) -

Even though copper recently hit all-time highs, Ord Minnett thinks the elevated levels could be sustained for some time. Still, the broker struggles to be constructive on OZ Minerals' valuation which is currently at a 20% premium over the broker's net present value.

On balance, Ord Minnett retains its Lighten rating with the target price rising to $21 from $14.50.

Target price is $21.00 Current Price is $25.16 Difference: minus $4.16 (current price is over target).
If OZL meets the Ord Minnett target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.31, suggesting downside of -5.6% (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

Macquarie rates RWC as Outperform (1) -

A recent survey, combined with builder and distributor feedback, continues to indicate to Macquarie strong underlying demand
in residential R&R and new construction. However, tighter supply chains and rising costs are considered weighing on contractor sentiment. 

On this latter point, Macquarie foresees further pressures over summer. The Outperform rating and $5.30 target are retained for Reliance Worldwide.

Target price is $5.30 Current Price is $5.07 Difference: $0.23
If RWC meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.21, suggesting downside of -0.6% (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

Citi rates SHV as Buy (1) -

Blue Diamond, California’s largest almond grower co-operative and processor, has lowered the USDA’s 2021 crop forecast of 3.2bn lbs due to ongoing water supply deficits across the state.

As a result, Citi sees an upside to both US almond prices for the 2021 season and Select Harvests' expected earnings in FY22.

Buy rating with a $6.50 target price.

Target price is $6.50 Current Price is $6.04 Difference: $0.46
If SHV meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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

Credit Suisse rates TNE as Initiation of coverage with Neutral (3) -

Credit Suisse expects pre-tax profit growth of around 12.5% with the top line supported by the transition of existing customers to software-as-a-service as well as increasing product penetration. The broker believes the business has a compelling offering and is well regarded.

Yet, over the medium term Credit Suisse is concerned regarding competition from best-of-breed solutions and believes the current PE ratio is adequately capturing the risk/reward profile. Credit Suisse initiates coverage with a Neutral rating and $9.10 target.

Target price is $9.10 Current Price is $8.79 Difference: $0.31
If TNE meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.35, suggesting upside of 7.3% (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

Ord Minnett rates TPG as Upgrade to Buy from Hold (1) -

Ord Minnett believes market concerns about TPG Telecom's management change and the impact of covid on subscribers have been the key drivers of TPG Telecom's underperformance.

While concerned over the mobile business with covid headwinds not expected to ease until mid-2022, the broker does expect strong earnings growth driven partly by cost synergies from the merger.

Ord Minnett upgrades to Buy from Hold with the target price lowered to $6.45 from $7.40 led by lower post-paid revenue and fixed average revenue per user (ARPU).

Target price is $6.45 Current Price is $5.26 Difference: $1.19
If TPG meets the Ord Minnett target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $7.70, suggesting upside of 49.0% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates TWE as Upgrade to Add from Hold (1) -

Morgans lifts the rating to Add from Hold and raises the target price to $13 from $11.10, after developing greater confidence in Treasury wine Estate's growth profile. The FY21-23 profit forecasts were increased by 4.4%, 9.0% and 4.8%, respectively.

The FY21 trading update was better than the broker expected, despite covid-impacts on some of the higher-margin channels and no China sales in the second half.

To maximise the benefits of a separate focus across brand portfolios, rather than regions, management has created new divisions (Penfolds, Treasury Americas and Treasury Premium Brands). 

The analyst believes this will allow the market to properly value the Penfolds brand, and prove that the sum-of-the-parts is worth more than the whole.

Target price is $13.00 Current Price is $10.84 Difference: $2.16
If TWE meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $10.89, suggesting downside of -1.9% (ex-dividends)

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

Macquarie rates WBC as Neutral (3) -

In a review of first half bank results, Macquarie observes that, contrary to expectations, pre-provision earnings excluding markets income continued to decline. A focus on costs is considered driven by an inability to deliver revenue growth.

Compared to the FY20 average, the majority of banks experienced a revenue decline, explains the broker. In the lead-up to results, the market was also looking for improving pre-provision earnings growth, which failed to materialise, explains Macquarie. 

For Westpac Bank, the analyst expects general caution before potential cost-out benefits are believed. Over the last five years, it's considered such ambitious cost-out strategy announcements by the majors have generally failed to materialise.

The Neutral rating and $27.25 target are retained.

Target price is $27.25 Current Price is $25.41 Difference: $1.84
If WBC meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $28.49, suggesting upside of 12.5% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates XRO as Overweight (1) -

Xero has lowered expectations for earnings margins and Morgan Stanley notes a negative response from the market.

The broker takes a different stance, pointing out that to sustain a leadership position requires continual reinvestment in product, and this is why the decision to revert to previous expenditure/investment ratios makes financial sense.

Revenue estimates for FY22 are lifted by 3% and by 7% for FY23. Overweight maintained. Target is reduced to $135 from $140. Industry view: Attractive.

Target price is $135.00 Current Price is $112.50 Difference: $22.5
If XRO meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $116.83, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in NZD. 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