Australian Broker Call

Macquarie rates AMI as Outperform (1) -

June quarter production numbers revealed strong gold output which translates directly to improved cash generation.

Maintaining higher levels of gold production is crucial, in Macquarie's view. Base metals improved as well.

Developments at Kairos and Peak North remain key prospects. Outperform rating and $0.70 target maintained.

Target price is $0.70 Current Price is $0.60 Difference: $0.1
If AMI meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

UBS rates ANN as Neutral (3) -

UBS points out PMI data for the fourth quarter indicates manufacturing is recovering at a faster-than-expected pace.

In the US, in the month of June manufacturing recovered to a level not seen in over 12 months.

Europe, while also rebounding significantly, had a greater trough in April and has not yet attained pre-pandemic levels.

UBS believes this signals Ansell will likely experience growth in both of its divisions, given sustained demand for healthcare gloves as well.

Neutral rating retained. The target is increased to $36.75 from $35.00.

Target price is $36.75 Current Price is $37.48 Difference: minus $0.73 (current price is over target).
If ANN meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.55, suggesting downside of -13.7% (ex-dividends)

The company's fiscal year ends in June.

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: 0.1

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

Citi rates ASB as Buy (1) -

 Citi believes the market is under appreciating the company's ability to win new work with the US Navy.

The broker believes the pending additional EPF contract in the US is likely to shore up Austal's FY22-23 pipeline as the LCS program winds down.

Buy rating and $4.23 target maintained.

Target price is $4.23 Current Price is $3.21 Difference: $1.02
If ASB meets the Citi target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $3.36, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates BKW as Reinstate Coverage with Buy (1) -

UBS extends its building materials coverage and reinstates Brickworks with a Buy rating and $17.10 target.

The broker has a positive view on the company's leased and undeveloped land at the Oakdale Estate.

UBS suspects the market is overlooking the upside from developing this estate and the joint venture's track record with securing key tenants.

Moreover, e-commerce growth has put industrial property in high demand for warehousing and distribution centres.

Target price is $17.10 Current Price is $15.90 Difference: $1.2
If BKW meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $15.67, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

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

BlueScope Steel is considered to be a high-quality business with a strong balance sheet and good cash generation. However, the broker suggests the company should follow an agile approach with challenging conditions in the US.

The US steel industry utilisation, functioning at around 55%, is under pressure while steel spreads have declined to their lowest levels since 2011. Even though North Star is expected to perform better than peers, the broker expects a negative impact on volume.

The broker has reduced FY20-21 earnings estimates for North Star along with lower earnings forecasted in Australian steel products. This implies lower operating income for FY20 and FY21.

Morgan Stanley reduces its rating to Underweight from Equal-weight with the target price reducing to $10 from $13.50. Industry view: Cautious.

Target price is $10.00 Current Price is $11.44 Difference: minus $1.44 (current price is over target).
If BSL 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 $12.37, suggesting upside of 11.8% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates COE as Add (1) -

The broker has reviewed the progress of Cooper Energy's Sole project with regard the APA Group ((APA)) operated Orbost gas plant. July will be a big month, the broker notes, as output will allow bridging agreements with customers to be reached.

This and other catalysts ensure an Add rating but the broker has conservatively scaled back its Sole production forecasts for FY21, leading to a target decrease to 53c from 56c.

Target price is $0.53 Current Price is $0.36 Difference: $0.17
If COE meets the Morgans target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $0.53, suggesting upside of 47.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgans rates GNX as Add (1) -

Genex Power has announced the extension of a number of agreements to September 30 for its K2-H pumped hydro project. While the capital required for the project is increasing, Genex is in discussions with the government's Australian Renewable Energy Agency which the broker notes is keen to provide hand-outs.

There remain a few key issues to be resolved, hence while the broker sees significant upside potential there are also risks. Speculative Buy retained, target rises to 37c from 35c.

Target price is $0.37 Current Price is $0.20 Difference: $0.17
If GNX meets the Morgans target it will return approximately 85% (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

Morgan Stanley rates GXY as Underweight (5) -

Second-quarter production and sales results proved in-line with Morgan Stanley’s expectations. Shipments were ahead of the broker's estimates, though Morgan Stanley did not note any revenue impact.

The broker expects near-term weakness in the lithium market and is also concerned about Galaxy Resources’ mine life at Mt Cattlin.

Morgan Stanley retains its Underweight rating with a target price of $0.70. Industry view: Attractive.

Target price is $0.70 Current Price is $0.82 Difference: minus $0.12 (current price is over target).
If GXY meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.80, suggesting downside of -1.9% (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: -0.3

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

UBS rates GXY as Neutral (3) -

The company has indicated June quarter production was 31,000t with sales of 42,000t. Full details will be released on July 23.

UBS believes the main driver of the share price will be the level at which lithium inventory unwinds.

The broker maintains a Neutral rating and $1.09 target.

Target price is $1.09 Current Price is $0.82 Difference: $0.27
If GXY meets the UBS target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $0.80, suggesting downside of -1.9% (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: -0.3

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

Credit Suisse rates HMC as Outperform (1) -

Credit Suisse updates estimates to allow for the equity raising and related acquisitions.

This has introduced grocery-anchored neighbourhood centre assets into the portfolio.

Around 6% of the portfolio income after the transaction will be derived from Woolworths ((WOW)).

Subject to shareholder approval, the first aged care asset will also be introduced to the portfolio.

Credit Suisse raises the target to $3.22 from $3.18 and retains an Outperform rating.

Target price is $3.22 Current Price is $3.04 Difference: $0.18
If HMC meets the Credit Suisse target it will return approximately 6% (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

Credit Suisse rates HUB as Downgrade to Neutral from Outperform (3) -

HUB24 has outperformed the market by 15-20% over the last three months, Credit Suisse observes.

The benefits from the rebound in equity markets are expected to be diluted by the tiered pricing structure and the likely deployment of high investor cash balances.

The broker continues to expect significant inflow and market share gains but assesses the company still needs to reduce platform fees.

A greater proportion of earnings are leveraged to cash which Credit Suisse expects will be deployed in the next 12 months.

Rating is, therefore, downgraded to Neutral from Outperform and the target is raised to $12.00 from $10.20.

Target price is $12.00 Current Price is $11.16 Difference: $0.84
If HUB meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $11.39, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Morgans rates KAR as Add (1) -

The broker notes Karoon Energy was just about to make a transformational acquisition before oil prices collapsed in March. The broker now sees the Bauna deal as unlikely to progress, with valuations and debt markets severely impacted.

However, Karoon is keeping its options open, and lower-for-longer oil prices mean it's a buyers market. Add and $1.13 target retained.

Target price is $1.13 Current Price is $0.59 Difference: $0.54
If KAR meets the Morgans target it will return approximately 92% (excluding dividends, fees and charges).

Current consensus price target is $0.94, suggesting upside of 59.3% (ex-dividends)

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

Credit Suisse rates KMD as Outperform (1) -

Credit Suisse found the trading update better than anticipated. FY20 operating earnings (EBITDA) are expected to exceed NZ$70m.

The balance sheet is also robust, providing comfort for the broker into FY21.

Credit Suisse upgrades estimates substantially, to reflect the better revenue outcome as well as operating leverage.

Outperform retained. Target is raised to NZ$1.55 from NZ$1.40.

Current Price is $1.18. Target price not assessed.

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Citi rates LOV as Sell (5) -

The company's trading update signalled the expected slowdown in costume jewellery demand as consumers stopped going out.

Citi assesses the medium-term sales outlook remains under pressure.

The broker considers the stock is expensive, given growth prospects have been delayed.

First half like-for-like sales are expected to decline by around -14%. Sell maintained. Target is reduced to $5.75 from $5.85.

Target price is $5.75 Current Price is $6.11 Difference: minus $0.36 (current price is over target).
If LOV meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.64, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in June.

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

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

Lovisa Holdings’ FY20 earnings are below Morgan Stanley’s expectations. However, the balance sheet looks well-positioned for an eventual recovery, comments the broker. The company has guided to FY20 sales of $237m, implying a -3% miss.

Australia and New Zealand have been the strongest markets but trading has been less as compared to other retailers. The company has decided to not re-open its stores in Spain.

Morgan Stanley expects the company to lag the rest of the retail sector and rates the stock as Equal-weight with a target price of $6.50. Industry view: In-line.

Target price is $6.50 Current Price is $6.11 Difference: $0.39
If LOV meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.64, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates NWL as Downgrade to Underperform from Neutral (5) -

Credit Suisse observes Netwealth has outperformed the market by 15-20% over the last three months.

Looking into FY21 the broker envisages a flatter earnings profile and a declining revenue margin.

Consensus earnings estimates are assessed to be too high, with little valuation protection, and this increases the risk of disappointment.

Hence, the broker downgrades to Underperform from Neutral. Target is raised to $8.30 from $7.50.

Target price is $8.30 Current Price is $9.48 Difference: minus $1.18 (current price is over target).
If NWL meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.49, suggesting downside of -17.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Credit Suisse rates NXT as Reinstate Coverage with Neutral (3) -

Credit Suisse reinstates coverage with a Neutral rating and $11.35 target.

The broker envisages NextDC will be a beneficiary of higher demand resulting from work-from-home arrangements.

Moreover, it is operating in an industry which is already exposed to structural growth.

The market is highly competitive but recent contract wins should underpin the near-term development pipeline.

Target price is $11.35 Current Price is $10.76 Difference: $0.59
If NXT meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $10.63, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 will raise $15m via a convertible note to ensure Lake Way construction activities while project funding is finalised.

Macquarie expects development will accelerate in the second half of 2020 and the completion of project financing presents a key catalyst.

Outperform rating and $1 target maintained.

Target price is $1.00 Current Price is $0.54 Difference: $0.46
If SO4 meets the Macquarie target it will return approximately 85% (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 TCL as Upgrade to Accumulate from Hold (2) -

Ord Minnett expects earnings should stabilise at around 20% ahead of pre-pandemic levels in FY23, and then grow at a relatively strong 7-9% per annum.

The broker incorporates new assumptions for the three airport-exposed assets, Citylink, Airport Link and Eastern Distributor.

Rating is upgraded to Accumulate from Hold and the target lifted to $16.00 from $15.25.

Target price is $16.00 Current Price is $14.54 Difference: $1.46
If TCL meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $13.80, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Credit Suisse rates WEB as Neutral (3) -

Webjet has issued EUR100m in convertible notes, primarily for M&A capacity because of attractive opportunities in the market.

The company has emphasised this was not necessary from a liquidity perspective.

Acquisition opportunities that interest Credit Suisse centre on technology or ancillary products, to leverage the global footprint.

The broker is more cautious about consumer-facing opportunities. Neutral rating retained. Target is reduced to $3.80 from $4.50.

Target price is $3.80 Current Price is $3.47 Difference: $0.33
If WEB meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Morgan Stanley rates WEB as Underweight (5) -

Webjet successfully completed a $163m convertible note issue with the proceeds to be used for strengthening the balance sheet and looking for potential M&A opportunities, but Morgan Stanley suspects its mostly about the balance sheet.

Morgan Stanley notes the high rate of cash burn plus the fact the share price has declined by more than -80% from all-time highs will make it difficult to find a meaningful M&A opportunity.

The broker expects leisure to lead the recovery rather than corporate. This implies the company’s biggest earnings contributor – B2B – will be a late-cycle story.

Morgan Stanley rates the stock as Underweight with a target price of $3.30. Industry view: In-line.

Target price is $3.30 Current Price is $3.47 Difference: minus $0.17 (current price is over target).
If WEB 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 $4.07, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Morgans rates WEB as Hold (3) -

Webjet has strengthened its balance sheet with a EUR100m convertible note offering which will allow for further acquisitions. Bookings are now improving as interstate borders reopen, the broker notes, but a greater leverage to international travel leads the broker to forecast an earnings loss in FY21.

An assumed recovery is now pushed out to FY23. The broker sees valuation as fair at this point, although investors will need to be patient. Hold retained, target rises to $3.39 from $3.20.

Target price is $3.39 Current Price is $3.47 Difference: minus $0.08 (current price is over target).
If WEB meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.07, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Ord Minnett rates WEB as Buy (1) -

While at first blush the decision to raise $160m via a convertible note suggests financial stress, Ord Minnett notes the transaction is more likely a reflection of the company being cautious.

Webjet is seen as well-positioned for the inevitable recovery in the business-to-business segment post the pandemic.

The broker now assumes a full return to international travel does not begin until the second half of 2022.

Buy rating retained. Target is reduced to $4.51 from $4.86.

Target price is $4.51 Current Price is $3.47 Difference: $1.04
If WEB meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

UBS rates WEB as Buy (1) -

The company has raised EUR100m in convertible notes to obtain flexibility for acquisitions and ongoing capital management.

UBS believes the share price will remain volatile in the short term as a high degree of uncertainty surrounds the travel market.

Still, the broker acknowledges the outlook has improved materially since April and allows for a faster recovery in leisure travel and additional market share gains in its estimates.

Buy rating retained. Target is raised to $5.35 from $3.75.

Target price is $5.35 Current Price is $3.47 Difference: $1.88
If WEB meets the UBS target it will return approximately 54% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Macquarie rates WGX as Outperform (1) -

Westgold Resources sold around 65,000 ounces of gold in the June quarter, in line with Macquarie's estimates.

Big Bell is gaining traction, exiting FY20 at a 0.5mtpa run rate.

The better cash position lifts Macquarie's valuation and the target is raised to $3.00 from $2.90. Outperform.

Target price is $3.00 Current Price is $2.22 Difference: $0.78
If WGX meets the Macquarie target it will return approximately 35% (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