Australian Broker Call

Citi rates ABP as Neutral (3) -

Abacus Property Group is raising equity worth $402m with the proceeds intended to fund storage acquisitions and other opportunities.

The group has also revised its dividend guidance for the first half and now expects 8.5c, implying a payout ratio of about 95%. Assuming a flat dividend in the second half, Citi believes the group's FY21 funds from operations guidance of circa 17.9c will be circa 3% above Citi’s estimate.

Citi is of the view the equity raising will improve Abacus's balance sheet while allowing the group to continue to progress on its strategy of having a higher recurring income from a combined office and storage portfolio.

Neutral rating is retained with a target price of $2.53.

Target price is $2.53 Current Price is $3.15 Difference: minus $0.62 (current price is over target).
If ABP 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 $2.92, suggesting downside of -1.1% (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 ABP as No Rating (-1) -

Abacus Property has launched a $402m equity raising at $2.98 a share. Macquarie notes the company has deployed $926m in capital of which $413m has been in self-storage, or around 39% of the portfolio value.

The company has $160m of self-storage assets under consideration of which $130m is in advanced negotiations, likely to be completed in the third quarter of FY21. Macquarie is on research restrictions and cannot provide a rating or target at present.

Current Price is $3.15. Target price not assessed.

Current consensus price target is $2.92, suggesting downside of -1.1% (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

Ord Minnett rates ABP as Hold (3) -

Abacus Property will undertake a $402m capital raising, initially to reduce debt and provide further funding capabilities. Ord Minnett was surprised by the size of the raising and calculates this is -8% dilutive to funds from operations per share.

Abacus has identified $160m in storage acquisitions and accelerated its acquisition-led growth. Nevertheless, the share price is weighed down by the office exposure, in the broker's view. Hold retained. Target is reduced to $3.10 from $3.20.

Target price is $3.10 Current Price is $3.15 Difference: minus $0.05 (current price is over target).
If ABP meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.92, suggesting downside of -1.1% (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

UBS rates ABY as Initiation of coverage with Neutral (3) -

UBS initiates coverage on Adore Beauty Group with a Neutral rating and a target price of $6.20.

Adore Beauty Group is Australia's largest pure-play online retailer of beauty and personal care (BPC) products with a circa 10% online share.

Driven by a wide product range, strong online capabilities and a differentiated customer engagement strategy, UBS considers the group a good investment.

The broker believes the key opportunity for Adore is to increase brand awareness via marketing initiatives and expand its active customer base. Sales are expected to grow by 27% over FY20-25.

Target price is $6.20 Current Price is $5.12 Difference: $1.08
If ABY meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

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 ADH as Add (1) -

In the wake of a trading update (first 23 weeks of the first half FY21), Morgans assesses strong sales trends have continued.

The broker highlights the re-opening of Melbourne has seen in-store sales bounce back quickly, while online sales growth continues to show strong momentum.

Material upside to the current valuation/rating will depend on an ability to prove current elevated earnings levels are sustainable, believes the analyst. It’s considered this may take 6-12 months.

Morgans sees upside risk to second half forecasts, largely relating to gross margins and opex leverage.

The Add rating is maintained and the target price is increased to $4.00 from $3.92.

Target price is $4.00 Current Price is $3.31 Difference: $0.69
If ADH meets the Morgans target it will return approximately 21% (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 ADH as Buy (1) -

Adairs' first-half sales guidance (between $235-245m) is in line with UBS's forecast with the operating income guidance of $62-66m about 30% ahead of broker estimate. Year to date first-half sales have been strong, observes UBS, and imply a recovery in the November store sales. 

With 2020 estimates only about 4% ahead of pre-covid levels, the pull forward risk is considered low by the broker. Key catalysts include normalising inventory availability and lease flexibility.

UBS reaffirms its Buy rating with the target price increasing to $4.20 from $4.

Target price is $4.20 Current Price is $3.31 Difference: $0.89
If ADH meets the UBS target it will return approximately 27% (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 AGI as Upgrade to Outperform from Neutral (1) -

Ainsworth Game appears likely to return to profitability in FY22 and Macquarie notes material operating leverage from improved volumes.

The broker believes slot products suppliers should be through the worst of the pandemic now, as most casinos around the world have reopened. The broker now forecasts a -$22m pre-tax loss in FY21.

Ainsworth should gain from opportunities in North America, with Kentucky Historical Horse Racing turnover at 30% above pre-pandemic levels.

The MTD Gaming acquisition should also deliver incremental sales, supported by an exclusive year deal with Golden Gaming in Montana. Macquarie upgrades to Outperform from Neutral and raises the target to $0.65 from $0.45.

Target price is $0.65 Current Price is $0.37 Difference: $0.28
If AGI meets the Macquarie target it will return approximately 76% (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

Ord Minnett rates AQR as Accumulate (2) -

The company has announced a $30m institutional placement and a $5m security purchase plan to partially fund the acquisition of 12 service stations.

Ord Minnett suspects the company has accelerated its acquisitions to offset any downtime or rental reversions from expiring leases.

Incremental earnings from the acquisitions should now underpin growth in FY22. Ord Minnett retains an Accumulate rating and raises the target to $3.87 from $3.82.

Target price is $3.87 Current Price is $3.63 Difference: $0.24
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

Credit Suisse rates ARF as Neutral (3) -

Credit Suisse revises FY21-23 estimates higher following the upgrade to FY21 distribution guidance.

The broker also now incorporates net acquisitions in the first half of $33.1m and development completions of $41m.

Neutral retained. Target is raised to $2.91 from $2.84.

Target price is $2.91 Current Price is $2.91 Difference: $0
If ARF meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.88, suggesting downside of -0.7% (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 AWC as Buy (1) -

Alumina Ltd's earnings estimates for 2020-21 have been revised up 3-5% on account of Citi raising its 2020-21 aluminium price forecasts by 1-7%. Even though Alumina's shares are up 30% in the last month, Citi thinks the company still offers good dividend support.

Buy rating is retained with the target rising to $2.20 from $1.80.

Target price is $2.20 Current Price is $1.92 Difference: $0.28
If AWC meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 2.3% (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: 0.6

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

Citi rates BHP as Neutral (3) -

Led by higher iron ore and copper forecasts and offset partially by lower 2021 hard coking coal price forecasts, Citi has raised BHP Group's FY21-22 earnings forecasts by 20-25%.

The broker expects Australian hard coking coal prices to rise to $130/t from the current spot levels of $102/t by mid-2021 before reaching $150/t in 2022 and 2023.

Citi retains its Neutral rating with the target rising to $45.70 from $40.

Target price is $45.70 Current Price is $42.25 Difference: $3.45
If BHP meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $41.96, suggesting downside of -2.2% (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: 0.9

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

Ord Minnett rates BOQ as Hold (3) -

Bank of Queensland has revealed a continued reduction in housing and small business loans under deferral. Ord Minnett edits earnings forecasts to reflect lower credit costs.

The broker assesses the recent surge in the share price has stretched the relative valuation to peers and believes management needs to deliver on its transformation plan and improve deposits.

Hold maintained. Target rises to $7.50 from $6.70.

Target price is $7.50 Current Price is $7.80 Difference: minus $0.3 (current price is over target).
If BOQ meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.04, suggesting downside of -9.2% (ex-dividends)

The company's fiscal year ends in August.

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 CIA as Downgrade to Sell from Neutral (5) -

Champion Iron is considered the star performer amongst global iron ore exposures. Citi has revised upwards its FY22-23 operating income forecasts by 26-59%.

Even so, the broker notes the shares price has risen by 60% in three months, surpassing the mid-term earnings changes.

Citi downgrades its rating to Sell from Neutral with the target price rising to $4.40 from $3.35.

Target price is $4.40 Current Price is $5.08 Difference: minus $0.68 (current price is over target).
If CIA meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

This company reports in CAD. 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

Citi rates DRR as Sell (5) -

Citi has raised its 2021 benchmark iron ore price forecast by 28% to US$115/t. The broker expects Deterra Royalties to generate a profit of $108m in FY22. FY23 earnings estimate has been raised by 23%.

Sell rating is maintained with the target rising to $4.50 from $3.40.

Target price is $4.50 Current Price is $5.12 Difference: minus $0.62 (current price is over target).
If DRR meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.80, suggesting downside of -5.5% (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

Macquarie rates EHE as Upgrade to Outperform from Neutral (1) -

Macquarie acknowledges the short-term outlook for the residential aged care sector is uncertain, yet increased government funding represents potential upside while corporate action is also a possibility.

The broker assesses Estia Health has lower relative earnings risk and a favourable balance sheet. Hence, the rating is upgraded to Outperform from Neutral. Target is raised to $1.95 from $1.70.

Target price is $1.95 Current Price is $1.70 Difference: $0.25
If EHE meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.74, suggesting downside of -1.3% (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

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

Backed by Citi's revised iron ore price forecasts, the broker has revised Fortescue Metals Group's FY21-22 operating income and net profit forecasts up by 32-33% and 38-43% respectively. 

On the flip side, the company's shares are up 40% in the last six months.

Citi downgrades its rating to Neutral from Buy with the target rising to $21 from $18.50.

Target price is $21.00 Current Price is $21.46 Difference: minus $0.46 (current price is over target).
If FMG meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.54, suggesting downside of -14.6% (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: 0.3

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

UBS rates GEM as Buy (1) -

Even though G8 Education's underpayment of the staff for 6.5 years is a negative, UBS believes this is distracting investors from the company's improving operating conditions. Group occupancy improved to 75.5% in November from 69% in August.

The broker continues to believe G8 Education will be a key beneficiary of a covid-19 vaccination.

UBS retains its Buy rating with the target price falling to $1.40 from $1.52.

Target price is $1.40 Current Price is $1.21 Difference: $0.19
If GEM meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $1.09, suggesting downside of -11.1% (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

Citi rates GXY as Neutral (3) -

Citi notes the recent momentum indicates the market is ascribing higher multiples to the battery materials theme. Within battery materials, the broker prefers lithium exposure due to less risk of substitution, highest leverage to electric vehicles growth and price upside potential.

Neutral rating is retained with the target rising to $2.50 from $2.05.

Target price is $2.50 Current Price is $2.16 Difference: $0.34
If GXY meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $1.83, suggesting downside of -11.0% (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: -0.2

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

UBS rates JIN as Initiation of coverage with Neutral (3) -

UBS initiates coverage on Jumbo Interactive with a Neutral rating and a target price of $14.10.

UBS notes Jumbo Interactive is Australia's only pure-play exposure to online lottery ticket sales. Furthermore, the company is exposed to the conversion of lottery tickets to online which is expected to underpin growth for some time.

With Tabcorp Holdings ((TAH)) continuing to gain share online, the broker prefers to be cautious and would like the trend to stabilise before becoming more constructive.

Target price is $14.10 Current Price is $13.78 Difference: $0.32
If JIN meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $14.10, suggesting upside of 8.1% (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 MGX as Buy (1) -

Mount Gibson Iron's FY21-22 operating income forecasts have been revised up by 30-45%. Citi expects net cash to increase to $1.24bn by the end of FY23.

Mount Gibson Iron aims to make an acquisition as Koolan Island has a limited mine life. Citi thinks this is both an opportunity and a risk for the investors depending on the asset and price.

Citi reaffirms its Buy rating with the target price increasing to $1.15 from $1.

Target price is $1.15 Current Price is $0.90 Difference: $0.25
If MGX meets the Citi target it will return approximately 28% (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

Ord Minnett rates ORG as Buy (1) -

Ord Minnett observes wholesale electricity prices are weak, amid low fuel costs and the roll-out of new renewable supply. The broker suggests current prices are unsustainable as few baseload generators are able to make appropriate returns.

The broker believes the market is yet to account fully for the impact of lower electricity prices on Origin Energy's future earnings. Ord Minnett downgrades estimates to factor this in and lowers the target to $6.10 from $7.35. A Buy rating is retained on valuation.

Target price is $6.10 Current Price is $5.19 Difference: $0.91
If ORG meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $6.24, suggesting upside of 21.4% (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

Citi rates RIO as Buy (1) -

Rio Tinto's 2021-22 earnings forecasts have been raised by 24-39% given the higher prices of iron ore, aluminium and copper.

Citi believes the company has a strong dividend capacity with net cash of circa US$1bn (2020-end) expected to rise to $3bn by end of 2021.

Citi retains a Buy rating with the target rising to $125 from $115.

Target price is $125.00 Current Price is $115.02 Difference: $9.98
If RIO meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $109.50, suggesting downside of -5.3% (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 S32 as Buy (1) -

South32's FY21 earnings forecast is revised down -9% due to lower expected hard coking coal and silver prices. The earnings forecast for FY22 has been revised up by 8% on the back of higher expected aluminium, zinc and silver prices.

Citi expects S32’s balance sheet to be net cash at $1.1bn at end of FY22.

Buy rating is retained with the target rising to $3 from $2.60.

Target price is $3.00 Current Price is $2.59 Difference: $0.41
If S32 meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 4.7% (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

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

Scrap prices have improved, although Morgan Stanley expects lockdowns will limit the upside to volumes during the northern hemisphere winter.

The broker suggests the worst has passed for Sims and the robust balance sheet and restructured cost base mean the business is well-positioned. Despite potential trading opportunities, the broker believes the valuation remains fair.

Equal-weight rating retained. Target is raised to $12.00 from $9.50. Industry view is Cautious.

Target price is $12.00 Current Price is $13.00 Difference: minus $1 (current price is over target).
If SGM meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.96, suggesting downside of -13.8% (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 WPL as Neutral (3) -

Woodside Petroleum disclosed CEO Peter Coleman will be retiring in the second half of 2021. Citi notes the board looks committed to the strategy of sanctioning Pluto-2 to process Scarborough.

Citi believes CEO Coleman will continue to progress the projects towards a final investment decision with key commercial decisions, such as a Scarborough-Pluto tolling agreement, expected to be concluded during the first half.

Citi retains a Neutral rating with a target price of $22.36.

Target price is $22.36 Current Price is $23.11 Difference: minus $0.75 (current price is over target).
If WPL meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.58, suggesting upside of 3.4% (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: 0.6

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

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

Woodside Petroleum has given notice the current CEO will retire mid 2021. Management has assured the market the current strategic plan will be retained, although in Ord Minnett's view the announcement is a surprise and comes at a critical time.

There are particularly important negotiations underway with joint-venture partners as well as a final investment decision due on the Scarborough/Pluto train 2.

The broker downgrades, the second in two days, to Hold from Accumulate. Target is $23.80.

Target price is $23.80 Current Price is $23.11 Difference: $0.69
If WPL meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $23.58, suggesting upside of 3.4% (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: 0.6

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