Australian Broker Call

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

Morgan Stanley lowers its target for AGL Energy to $9.18 from $9.99 after incorporating the draft determinations for the Default Market Offer (DMO) and Victorian Default Offer (DFO) for FY25.

The broker feels the -10% fall in AGL Energy's share price this year is due to both softer electricity prices and because investors have not yet attributed value to the company's renewables investment plans.

The pool price risk skew remains to the downside, in the analysts' view, which will act as a cyclical headwind.

The Equal-weight rating is unchanged. Industry View: Cautious.

Target price is $9.18 Current Price is $8.59 Difference: $0.59
If AGL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $10.38, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Citi rates AWC as Neutral (3) -

Citi considers it a positive for Alumina Ltd that the company's share price has disconnected from alumina pricing, and is instead tied to Alcoa's scrip offer price. 

As per the broker, this sees Alumina Ltd benefit from Alcoa's share price surge over the last month, with the former now trading at a 45% premium to its discounted cash flow.

The Neutral rating and target price of $1.30 are retained.

Target price is $1.30 Current Price is $1.54 Difference: minus $0.24 (current price is over target).
If AWC meets the Citi target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.27, suggesting downside of -16.2% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

This company reports in USD. 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 CIA as Buy (1) -

Anticipating a tough fourth quarter for Champion Iron, Citi has significantly downgraded its earnings forecast for the period to CA$57m. 

The broker anticipates the quarter will be impacted by winter weather effects, maintenance downtime and constrained rail capacity, as well as higher sea freight and cash costs.

Earnings forecasts decrease -25% for FY24 and -14% for FY25. The Buy rating is retained and the target price decreases to $8.60 from $9.60.

Target price is $8.60 Current Price is $7.14 Difference: $1.46
If CIA meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.5

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

Ord Minnett rates COH as Sell (5) -

The ACCC has approved Cochlear's takeover of Oticon's cochlear implant business, as Ord Minnett expected. Cochlear will acquire the loss-making business at a zero headline price, and will provide ongoing support for Oticon's devices.

Cochlear anticipates a revenue increase of 2%. Ord Minnett nevertheless suggests the shares remain overvalued as current earnings growth is unlikley to be maintained. Management expects growth to moderate to high single-digits in the long term.

Sell and $220 target retained.

Target price is $220.00 Current Price is $333.59 Difference: minus $113.59 (current price is over target).
If COH meets the Ord Minnett target it will return approximately minus 34% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $257.75, suggesting downside of -21.3% (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

Bell Potter rates EBR as Buy (1) -

With results from a sub-study for EBR Systems' WiSE technology proving statistical and clinical significance of improved measures of efficacy and improved patient outcomes, the company now anticipates submitting a pre-market approval to the FDA in the third quarter of 2024.

The study's treatment group showed a mean 14.6% improvement in left ventricular end-systolic volume, a near three fold improvement over the control group. Bell Potter notes a decision from the FDA is likely in the first quarter of 2025. 

The Buy rating is retained and the target price increases to $1.43 from $1.30.

Target price is $1.43 Current Price is $0.87 Difference: $0.56
If EBR meets the Bell Potter target it will return approximately 64% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 1.0

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

Citi rates EDV as Initiation of coverage with Neutral (3) -

Citi has initiated coverage on Endeavour Group with a Neutral rating and $5.94 price target.

The company has a number of levers to drive earnings growth in its Hotels and Retail segments over the medium-term, the broker acknowledges, but regulatory risk is real and tangible.

Citi is in particular worried about further impacts on the Gaming side of the business.

Within this framework, the valuation is considered "reasonably appropriate".

Target price is $5.94 Current Price is $5.37 Difference: $0.57
If EDV meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $5.77, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

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

In an ongoing analysis of Endeavour Group, Morgan Stanley explores the free cash flow (FCF) profile of the Hotels division and management's ability to fund the capex pipeline of the group.

The broker suggests cash flows from Hotels alone is insufficient to fund Hotels capex, which increases the odds of other funding options including freehold divestments.

At the same time, potential interdependance of funding between divisions reduces the medium-term possibility of a change to Endeavour Group's corporate structure, explains Morgan Stanley.

The freehold sale alternative would be a positive share price catalyst given recent shareholder concerns around capital discipline, in the analysts' view.

Morgan Stanley's $5.80 target and Equal-weight rating are maintained. Industry view is In-Line.

Target price is $5.80 Current Price is $5.37 Difference: $0.43
If EDV meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.77, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

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

Macquarie raises its target for Elders to $10.45 from $7.12 and upgrades its rating to Outperform from Neutral after adopting profit forecasts around 10% ahead of consensus over FY24 and FY25.

These higher forecasts are based on a more positive view on both the seasonal outlook and livestock prices. Above average rainfall at the end of 2023 on the east coast of Australia is expected to result in a strong winter plant over April to June.

Also, the National Oceanic and Atmospheric Administration (NOAA) in the US is suggesting a 62% probability of La Nina conditions emerging later in the year, providing the analyst with confidence for the 2024/25 season.

Livestock prices have rebounded from depressed levels, and Macquarie expects strong demand for Australian beef (particularly out of the US as slaughter rates decline) will underpin prices over FY24/25.

The broker's target price is also boosted by a multiple re-rate and lower discount applied to earnings thanks to a dissipation of El Nino/weather risk.

Target price is $10.45 Current Price is $9.61 Difference: $0.84
If ELD meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $9.06, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in September.

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

Bell Potter rates IMM as Buy (1) -

First data readouts from Immutep's phase two head and neck cancer trial are a near-term catalyst for Immutep, says Bell Potter. With the results set to be the first data evaluating Efti in combination with pembrolizumab, the broker is particularly excited for the readout.

Expecting the initial readout in the second quarter of 2024, Bell Potter anticipates it will cover typical tumour response and safety data, and is confident the combination treatment will demonstrate improved clinical outcomes.

The Buy rating and target price of 65 cents are retained.

Target price is $0.65 Current Price is $0.39 Difference: $0.26
If IMM meets the Bell Potter target it will return approximately 67% (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

Ord Minnett rates LNK as Hold (3) -

Ord Minnett recommends shareholders vote in favour of the offer for Link Administration by Trust Bank, noting the cash price is in the range suggested by the independent expert, and that the board has unanimoulsy approved the takeover.

The broker increases its target to $2.26 from $2.10 to match the bid and increases its takeover probability assumption to 100% from 75%, noting no other offer has emerged.

Hold retained.

Target price is $2.26 Current Price is $2.23 Difference: $0.03
If LNK meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.23, suggesting downside of -0.4% (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

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

Investors in Origin Energy must be anticipating a positive investor update (in early-June) around capital allocation and distributions, suggests Morgan Stanley, given the 10% share price rally year-to-date.

At current oil prices, there is upside risk to the broker's earnings numbers given Morgan Stanley's US$81/bbl average oil price forecast for FY24.

The pool price risk skew remains to the downside, in the analysts' view, which will act as a cyclical headwind.

The Equal-weight rating and target price of $8.88 are retained. Industry view: Cautious.

Target price is $8.88 Current Price is $9.33 Difference: minus $0.45 (current price is over target).
If ORG 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 $9.29, suggesting downside of -0.3% (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

Citi rates SUN as Neutral (3) -

Citi considers the sale of Suncorp Group's New Zealand life insurance business an "incremental strategic positive".

The broker considers the sale price of NZ$410m, partly deferred, broadly reasonable, and expects it to free up capital and allow a focus on general insurance.

Having sold off its Australian life insurance business in 2019, the broker isn't surprised to see Suncorp Group find a solution for its New Zealand operations. The business is removed from the broker's forecasts moving forward.

The Neutral rating and target price of $16.60 are retained.

Target price is $16.60 Current Price is $16.38 Difference: $0.22
If SUN meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $16.31, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Morgan Stanley rates SUN as Overweight (1) -

Suncorp Group will have even more capital to return to shareholders, notes Morgan Stanley, following the sale of the NZ Life business for $375m, which is due to complete in nine month's time. Up front payment is $230m, and the balance is due 18 months post completion.

The price achieved is reasonable, in the broker's view, and the group structure will be simplified. NZ Life only accounted for around 2% of the group's earnings, points out the analyst.

The Overweight rating and $17.05 target are maintained. Industry View: In-Line.

Target price is $17.05 Current Price is $16.38 Difference: $0.67
If SUN meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $16.31, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

UBS rates SUN as Buy (1) -

UBS suggests Suncorp Group will benefit by focusing on the existing general insurance operations after management announced the sale of the NZ Life business for $376m.

The sale proceeds represent a13% premium to the analyst's sum-of-the-parts valuation.

Following sale completion, Suncorp Group's new organisational structure will mirror that of pure-play Insurance Australia Group ((IAG)). As a result, the broker believes Suncorp may trade up to the current premium trading multiple IAG currently enjoys.

The Buy rating and target of $16.80 are unchanged.

Target price is $16.80 Current Price is $16.38 Difference: $0.42
If SUN meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $16.31, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Citi rates TLC as Neutral (3) -

Despite no significant jackpots since the record $200m Powerball draw in February, Citi notes lottery revenue in the March quarter is up 65% year-on-year. 

With the broker factoring in no further major jackpots in the second half, it does see upside to lottery revenue for Lottery Corp. Further, Citi points out like-for-like Powerball revenue growth has remained strong since price increases last May.

The Neutral rating and target price of $5.50 are retained.

Target price is $5.50 Current Price is $5.09 Difference: $0.41
If TLC meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.38, suggesting upside of 4.8% (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