Australian Broker Call

Citi rates AHY as Buy (1) -

Asaleo Care's operating income margin is likely to be 20.7% in FY20, suggests Citi, down from a peak of 25% in FY15. The dip is on account on feminine hygiene sales that are -$25m below FY15 levels.

Citi forecasts operating income of $91m in FY20 but acknowledges downside risk of $2-3m in the second half from B2B sales given the restrictions in Victoria.

Asaleo has had a difficult journey as a listed company, notes Citi and believes the ability to demonstrate better sales and earnings will be crucial to the company's defence.

Citi retains a Buy rating and $1.30 target.

Target price is $1.30 Current Price is $1.29 Difference: $0.01
If AHY meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.30, suggesting upside of 1.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Morgan Stanley rates APE as Overweight (1) -

Eagers Automotive has upgraded guidance to 2020 pre-tax profit of $195-205m, materially ahead of Morgan Stanley's estimates.

While believing it somewhat premature to annualise the stellar 2020 second-half run rate, the broker still lifts 2021 estimates for pre-tax profit to $250m and 2022 to $282m.

Underpinning this is a stabilisation and improvement in the new vehicle sales trajectory and sustained new vehicle margins over the medium term.

The broker believes these tailwinds more than offset any headwinds from the normalising of used car pricing. Overweight rating reiterated. Target is raised to $17 from $16. Industry view: In-Line.

Target price is $17.00 Current Price is $13.53 Difference: $3.47
If APE meets the Morgan Stanley target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $13.33, suggesting downside of -5.8% (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 has set FY20 underlying profit (NPBT) guidance at $195-205m (up 100% year-on-year).

Morgans highlights the company has experienced the powerful margin tailwind that comes when inventory conditions are tight (resulting from OEM constraints/manufacturing shut-downs during covid).  It's considered the second half has also benefited from the structural cost-out executed during the second quarter FY20.

The analyst lifts FY20 forecasts by around 16%, and by circa 7% in FY21/FY22. In FY21, Morgans expects the company to benefit from an additional quarter of the $78m cost-out program.

With national new car volumes still well below ‘normalised’ levels and optionality around the group’s used car/EA123 strategy, the Add rating is unchanged and the target price increased to $15.05 from $13.89.

Target price is $15.05 Current Price is $13.53 Difference: $1.52
If APE meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $13.33, suggesting downside of -5.8% (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

Ord Minnett rates APE as Hold (3) -

Eagers Automotive has provided a strong trading update, signalling fourth quarter underlying pre-tax profit of $98.4-108.4m. Ord Minnett believes the company will be a substantial beneficiary of a revamped industry structure.

A return to growth in new vehicle sales in November is a positive but the broker notes this relates only to vehicles that have been delivered, and is not necessarily an indication of future sales growth. Ord Minnett retains a Hold rating and raises the target to $13 from $12.

Target price is $13.00 Current Price is $13.53 Difference: minus $0.53 (current price is over target).
If APE 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 $13.33, suggesting downside of -5.8% (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

Morgan Stanley rates API as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley prefers stocks in the healthcare sector that have positive industry momentum as well as legacies from the pandemic.

The broker upgrades Australian Pharmaceutical to Equal-weight from Underweight on a better valuation and more funding certainty.

Target is raised to $1.25 from $1.04. Industry view is In-Line.

Target price is $1.25 Current Price is $1.29 Difference: minus $0.04 (current price is over target).
If API meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.29, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in August.

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 APX as Buy (1) -

After years of earnings upgrades, FY20 was a year of multiple downgrades, highlights Citi, raising concerns about the lack of Appen’s earnings visibility. Management has pointed to weaker demand with Appen’s large tech customers reprioritising their projects.

Citi is more positive and continues to see Appen as well placed to benefit from the higher spending on artificial intelligence. The broker expects the company to leverage its increased capabilities and expand its addressable market.

If some new projects ramp-up faster than expected, Citi forecasts revenue growth of circa 20% in FY21 with potential upside.

The broker retains a Buy rating with the target falling to $32.60 from $45.

Target price is $32.60 Current Price is $25.44 Difference: $7.16
If APX meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $35.12, suggesting upside of 38.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Macquarie rates APX as Outperform (1) -

Appen has cut its 2020 operating income guidance on slower fourth quarter top-line growth and forex headwinds.

Macquarie's revised forecasts peg revenue growth at 28% in FY20. Operating income margin is expected to expand in 2021, although management is cautious.

Macquarie retains its Outperform rating with a target price of $43.

Target price is $43.00 Current Price is $25.44 Difference: $17.56
If APX meets the Macquarie target it will return approximately 69% (excluding dividends, fees and charges).

Current consensus price target is $35.12, suggesting upside of 38.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Ord Minnett rates BHP as Buy (1) -

Ord Minnett upgrades long-term iron ore price forecasts to US$70/t, as well as the 2021 forecast to US$126/t and the 2022 forecast to US$110/t.

Materially higher revenue and cash flow have driven substantial upgrades to valuations for the miners as a result.

Buy rating retained. Target rises to $50 from $43.

Target price is $50.00 Current Price is $42.82 Difference: $7.18
If BHP meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $44.75, suggesting upside of 4.4% (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

Morgans rates BKG as Initiation of coverage with Add (1) -

Morgans initiates coverage on Booktopia Group with an Add rating and $3.17 target price.

The group is the leading Australian-owned domestic online book retailer. The offering has reached over 5m customers (2.3m repeat) since formation, processing 2.56m orders in FY20.

The broker explains traffic growth, conversion rates, gross margins and repeat visitation are all tracking strongly. It’s considered the group is well placed for sustained growth.

Morgans believes in the ability to gain significant market share of the wider book industry and deliver meaningful operating leverage.

Share of the Australian book market has tripled since FY15 and has been achieved with little external capital.

The broker sees the capital taken on pre-IPO and in the IPO process as continuing to enable growth rates ahead of market.

Target price is $3.17 Current Price is $2.60 Difference: $0.57
If BKG meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Ord Minnett rates CSL as Accumulate (2) -

Ord Minnett believes the cancellation of the covid-19 vaccine being developed by CSL and the University of Queensland has removed an important opportunity that could have provided a boost to earnings from FY22.

No allowance was made for this in forecasts and there are no implications for the company's technology. As a result, Ord Minnett retains an Accumulate rating and $330 target.

Target price is $330.00 Current Price is $291.53 Difference: $38.47
If CSL meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $316.81, suggesting upside of 10.2% (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: 0.4

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

Morgan Stanley rates EHE as Downgrade to Underweight from Equal-weight (5) -

Negative earnings revisions have led to a reduction in the valuation of Estia Health across Morgan Stanley's various scenarios.

The broker suspects earnings will be challenged while the outcome of the Royal Commission is still uncertain.

Rating is downgraded to Underweight from Equal-weight and the target is lowered to $1.50 from $1.60. In-Line industry view.

Target price is $1.50 Current Price is $1.72 Difference: minus $0.22 (current price is over target).
If EHE meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.71, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Credit Suisse rates HVN as Outperform (1) -

Credit Suisse believes the market is too bearish regarding expenditure on the household goods sector. A permanent shift to working from home should provide a step change, in the broker's view.

On the basis of 30% of the Australian workforce working from home two days a week, the broker calculates a 4ppts direct and 3ppts indirect increase in furniture and electrical goods consumption.

The broker forecasts FY21 and FY22 like-for-like sales growth of 12.9% and 0.6%, respectively, for Harvey Norman Australia. Outperform retained. Target rises to $5.30 from $5.06.

Target price is $5.30 Current Price is $4.56 Difference: $0.74
If HVN meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.18, suggesting upside of 11.8% (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

Morgans rates IME as Initiation of coverage with Add (1) -

Morgans initiates coverage of IMEXHS with a Speculative Buy rating and price target of $2.73.

The company is a next generation cloud-based medical imaging solution for healthcare organisations. It has a focus on next-generation A.I. applications and a move into other “ologies” within the hospital system.

It provides the full suite of services including radiology information systems (RIS), workflow management, patient data and image distribution systems, and picture archiving and communications systems.

The Company was founded in 2012, with a goal of bringing high quality medical imaging to radiologists through modern technology, all while keeping care accessible and affordable.

Morgans considers recent regulatory approvals in the US and Brazil have opened up further opportunities with a recent capital injection now allowing an acceleration into larger global markets.

The company is considered to be trading at a significant discount to peers, which the broker believes will reduce as further contracts (ex-Latin America) are won and the company approaches profitability.

Target price is $2.73 Current Price is $1.65 Difference: $1.08
If IME meets the Morgans target it will return approximately 65% (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

Credit Suisse rates JBH as Upgrade to Outperform from Neutral (1) -

Credit Suisse believes the market is too bearish regarding expenditure on the household goods sector. A permanent shift to working from home should provide a step change, in the broker's view.

On the basis of 30% of the Australian workforce working from home two days a week, the broker calculates a 4ppts direct and 3ppts indirect increase in furniture and electrical goods consumption.

As JB Hi-Fi has a near debt-free balance sheet amid surplus franking credits, capital management is considered likely in FY21. Credit Suisse upgrades to Outperform from Neutral and raises the target to $53.02 from $50.62.

Target price is $53.02 Current Price is $44.02 Difference: $9
If JBH meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $48.39, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Ord Minnett rates LEP as Lighten (4) -

Management will continue to prioritise a predictable distribution, growing by at least the CPI each year. A distribution of 21.5c is slated for FY21, up 2.9%.

Gearing is expected to drift higher as the company pays out more than it is earning. Ord Minnett lifts distribution estimates in line with guidance and assumes a pay-out ratio of 125-130% of operating earnings for FY22 and beyond.

Lighten maintained. Target rises to $4.20 from $3.90.

Target price is $4.20 Current Price is $4.90 Difference: minus $0.7 (current price is over target).
If LEP meets the Ord Minnett target it will return approximately minus 14% (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: -0.5

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

Citi rates MHJ as Neutral (3) -

Michael Hill International posted a better than expected trading update, observes Citi, led by favourable retail conditions and self-help strategies. Citi increases its FY21-23 earnings forecasts by 4-6%.

The broker prefers to remain cautious going into the Christmas trading period given new covid-19 cases in Canada. Also, Citi believes the company continues to lack long term growth strategies that can materially impact earnings.

Citi maintains a Neutral rating. Target is raised to $0.62 from $0.50.

Target price is $0.62 Current Price is $0.62 Difference: $0
If MHJ meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.69, suggesting upside of 14.2% (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

Credit Suisse rates OML as Outperform (1) -

The company's update indicated its audience is recovering across all formats and media expenditure is following suit.

Balance-sheet concerns are now at rest. Credit Suisse considers the stock is cheap and its conviction around an Outperform rating has been strengthened.

Lease abatements drive an earnings upgrade for 2020 while 2021-22 forecasts are unchanged.

Outperform rating retained. Target is $2.30.

Target price is $2.30 Current Price is $1.80 Difference: $0.5
If OML meets the Credit Suisse target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $2.06, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Macquarie rates OML as Outperform (1) -

While revenue growth was softer than expected, Macquarie observes oOh!media has demonstrated considerable ability to flex its cost base.

Given the group has a relatively fixed cost base, the broker expects oOh!media to benefit positively from a recovery in revenues, especially in airports and offices.

Macquarie maintains its Outperform rating with the target rising to $2.08 from $1.45.

Target price is $2.08 Current Price is $1.80 Difference: $0.28
If OML meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.06, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Ord Minnett rates OML as Hold (3) -

In the latest update, Ord Minnett notes emerging signs of a regional recovery and promising digital penetration, amid the company's delivery of cost savings.

The broker notes a meaningful slowdown in the airport and transport sectors with the share price instead benefiting from value rotation and investing.

While raising 2021 earnings forecasts because of lower capital expenditure and cost reduction measures, Ord Minnett retains a Hold rating on valuation. Target rises to $1.80 from $1.05.

Target price is $1.80 Current Price is $1.80 Difference: $0
If OML meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.06, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Morgan Stanley rates SIG as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley prefers stocks in the healthcare sector that have positive industry momentum as well as legacies from the pandemic.

The broker upgrades Sigma Healthcare to Equal-weight from Underweight because of better valuation and more funding certainty. In-Line industry view. Target is $0.60.

Target price is $0.60 Current Price is $0.61 Difference: minus $0.01 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.67, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in January.

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 SO4 as Outperform (1) -

Salt Lake Potash received commitments to raise up to $52m via a share placement along with an additional $5m through a share purchase plan.

The placement will satisfy the US$138m syndicated debt facility's remaining conditions and allow the first drawdown of US$105m to take place in December 2020. The company also reported Lake Way’s development schedule and capex to be on track.

Given the larger than required capital raise, Macquarie believes the company will move into commissioning and ramp-up of Lake Way in a strong working capital position.

The broker retains its Outperform rating with the target price falling to $0.80 from $0.95.

Target price is $0.80 Current Price is $0.41 Difference: $0.39
If SO4 meets the Macquarie target it will return approximately 95% (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 VRT as Downgrade to Underweight from Equal-weight (5) -

Versus Health is trading ahead of Morgan Stanley's target which leads to a downgrade to Underweight from Equal-weight.

The broker remains cautious about the longer-term shift to lower-priced IVF services within the business.

Target is raised to $4.90 from $4.00. Industry view is In-Line.

Target price is $4.90 Current Price is $5.60 Difference: minus $0.7 (current price is over target).
If VRT meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.30, suggesting downside of -3.0% (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

Credit Suisse rates WES as Outperform (1) -

Credit Suisse believes the market is too bearish regarding expenditure on the household goods sector. A permanent shift to working from home should provide a step change, in the broker's view.

Credit Suisse upgrades sales assumptions for Officeworks and Bunnings to growth of 5.5% and 8.9% in FY21, respectively.

The broker acknowledges the potential for negative comparables in the June and September 2021 quarters but believes the market is not giving adequate recognition of the change in sales rates that could significantly counter this.

Outperform retained. Target is raised to $55.83 from $51.59.

Target price is $55.83 Current Price is $49.59 Difference: $6.24
If WES meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $47.75, suggesting downside of -6.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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