Australian Broker Call

Credit Suisse rates ALU as Outperform (1) -

A high offer from Autodesk to acquire Altium has driven up the company's target price, with Credit Suisse saying the offer honours Altium's ability to attract future partnerships and strategic arrangements. 

Autodesk's offer of $38.50 implies a valuation of 21x revenue for FY21 and 56x underlying earnings. The broker notes this sits at the very high end of corporate valuation metrics. Credit Suisse wouldn't rule out a higher offer. 

The Outperform rating is retained and the target price increases to $42.00 from $35.00. 

Target price is $42.00 Current Price is $34.71 Difference: $7.29
If ALU meets the Credit Suisse target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $35.30, suggesting upside of 0.8% (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: 0.8

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

Citi rates ARB as Buy (1) -

Due to fewer supply constraints and stronger supplier bookings, Citi’s US auto analysts expect a stronger second half 2021 for the industry to be a tailwind for ARB Corp's export sales momentum in FY22.

While Citi expects strong trading conditions to continue over 2021, the broker thinks the market may under-appreciate ARB’s longer term growth potential.

The broker also expects export sales, which has been going from strength to strength, to be supported by the company’s recent acquisition of Truckman in the UK, and the company has reduced its payout to invest in future growth.

Buy rating and target price of $45.95 remain unchanged.

Target price is $45.95 Current Price is $45.48 Difference: $0.47
If ARB meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $38.89, suggesting downside of -14.3% (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

Macquarie rates BHP as Outperform (1) -

Macquarie upgrades earnings forecasts across its iron ore coverage after incorporating a material increase to iron ore price forecasts.

BHP Group's earnings estimates rise 11% and 27% for FY21 and FY22, respectively. Medium-term earnings for BHP Group also benefit from an upgrade to long-term hard coking (metallurgical) coal price estimates.

Outperform retained. Target rises to $61 from $57.

Target price is $61.00 Current Price is $48.30 Difference: $12.7
If BHP meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $49.16, suggesting upside of 0.5% (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

Credit Suisse rates BLD as Neutral (3) -

Boral has provided underlying earnings guidance for FY21 of $340-450m, 5% below consensus, as well as further detail into the $300m transformation targets. 

Based on updated information, Credit Suisse has modeled Boral's Australian transformation benefits. The broker forecasts relatively flat underlying earnings for FY20-21 despite attributed net transformation benefits totaling $75m and a prior period one-off of -$85m. 

A revised property valuation of $850m compared to previous $525m has also influenced an increased valuation. 

The Neutral rating is retained and the target price increases to $6.60 from $6.40. 

Target price is $6.60 Current Price is $6.83 Difference: minus $0.23 (current price is over target).
If BLD meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.22, suggesting downside of -8.1% (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

Morgan Stanley rates BLD as Overweight (1) -

Morgan Stanley expects Boral will benefit from several opportunities along with US building product asset sales and reiterates an Overweight rating.

In its target statement in response to the offer from Seven Group ((SVW)), the company downgraded FY21 expectations to EBIT of US$430-450m, -9% compared with Morgan Stanley's prior estimate. The main driver of the softer performance appears to be the Australian business.

The company has identified that around 11% of its sites could be considered surplus and there is a significant upgrade to property valuations. Morgan Stanley raises the target to $7.60 from $6.30. Industry view is in-line.

Target price is $7.60 Current Price is $6.83 Difference: $0.77
If BLD meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.22, suggesting downside of -8.1% (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

Ord Minnett rates BLD as Lighten (4) -

Boral has released a target statement in response to the takeover offer from Seven Group ((SVW)). FY21 EBIT guidance has been reduced to $430-450m while Boral expects to update the market on the sale process for the US building products later this month.

Ord Minnett lowers earnings forecasts by -2.8% on average over FY21-23 to reflect lower margins in Australia and North America as well as to incorporate the updated guidance. Lighten rating retained. Target is raised to $5.70 from $5.50.

Target price is $5.70 Current Price is $6.83 Difference: minus $1.13 (current price is over target).
If BLD meets the Ord Minnett target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.22, suggesting downside of -8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

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

Macquarie has upgraded its outlook, expecting US steel prices will stay around current levels over the third quarter and any moderation subsequently will be mild.

The broker expects earnings momentum should be strong in the short term and considers the risk/reward balance has improved for BlueScope Steel.

As a result, the rating is upgraded to Outperform from Neutral and the target raised to $25.40 from $23.90.

Target price is $25.40 Current Price is $22.12 Difference: $3.28
If BSL meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $23.57, suggesting upside of 3.1% (ex-dividends)

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

Macquarie rates CIA as Outperform (1) -

Macquarie upgrades iron ore price forecasts which transforms the earnings outlook for Australian iron ore producers. Champion Iron offers the greatest leverage to movements in iron ore prices and the broker lifts FY22 estimates by 46% and FY23 by 78%.

The boost to long-term price forecasts drives a 133% lift to the FY26 earnings estimate. Outperform maintained. Target is raised to $11 from $8.

Target price is $11.00 Current Price is $6.71 Difference: $4.29
If CIA meets the Macquarie target it will return approximately 64% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

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

Macquarie rates CRN as Neutral (3) -

Macquarie assesses multiples remain attractive for coal miners and upgrades to metallurgical coal price forecasts drive material increases to earnings estimates. Coronado Global's earnings estimates increase 9% for 2021.

The broker retains a Neutral rating and raises the target to $0.80 from $0.60. The increase in long-term metallurgical coal price forecasts means material upgrades of more than 100% from 2026 onwards.

Target price is $0.80 Current Price is $0.83 Difference: minus $0.03 (current price is over target).
If CRN meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.11, suggesting upside of 29.4% (ex-dividends)

The company's fiscal year ends in December.

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: 0.5

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

Credit Suisse rates DMP as Underperform (5) -

Australian web traffic for Domino's Pizza has slowed, but continued strong growth in Europe suggests some permanency in that market according to Credit Suisse. 

Both Japan and Europe reported 21% year-on-year increase to web traffic during the first five months of FY21's second half, while Australia was up just 1% on the weak corresponding period in FY20. 

Based on results the broker downgrades like-for-like sales growth assumptions for Australia and New Zealand to 4% and increases assumptions for Japan to 10%, while Europe remains at 8%.

The broker reduces new net stores forecast for Australia and New Zealand to 12 from 25 and reduces Japan to 65 from 75, while Europe store openings are increased to 60 from 55. 

The Underperform rating is retained and the target price decreases marginally to $70.71 from $71.11. 

Target price is $70.71 Current Price is $114.05 Difference: minus $43.34 (current price is over target).
If DMP meets the Credit Suisse target it will return approximately minus 38% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $97.92, suggesting downside of -15.3% (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

Macquarie rates DRR as Outperform (1) -

Macquarie upgrades iron ore price forecasts which transforms the earnings outlook for Australian iron ore producers.

Deterra Royalties' royalty-based earnings offer lower leverage to iron ore price movements compared with the miners so upgrades to estimates are lower, at 11% for FY21 and 24% for FY22.

Outperform maintained. Target rises to $5.50 from $4.80.

Target price is $5.50 Current Price is $4.37 Difference: $1.13
If DRR meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $4.93, suggesting upside of 8.6% (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

Macquarie rates DXS as Neutral (3) -

Dexus will acquire a stake in Australian Unity Healthcare Property Trust, investing $180m as part of the trust's $320m equity raising. This represents a 7% equity interest.

Macquarie assesses the acquisition compliments the company's strategy of increasing exposure to the healthcare sector.

Implications for earnings over the short term are limited, the broker adds, and similar to the acquisition of APN funds Dexus will need to demonstrate strategic growth to justify the price. Neutral maintained. Target is $10.85.

Target price is $10.85 Current Price is $10.95 Difference: minus $0.1 (current price is over target).
If DXS meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.42, suggesting downside of -2.9% (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 FMG as Outperform (1) -

Macquarie makes significant upgrades to iron ore price forecasts which transforms the earnings outlook for Australian iron ore producers. Preferences remain unchanged, although Fortescue Metals has closed the gap to the other majors.

Incorporating the upgrade means earnings estimates rise 8% and 21% for FY21 and FY22, respectively. Forecasts incorporate a slightly wider discount for lower grade ore than previously assumed.

Outperform maintained. Target rises to $27 from $23.

Target price is $27.00 Current Price is $22.83 Difference: $4.17
If FMG meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $21.88, suggesting downside of -5.8% (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: 0.1

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

UBS rates IEL as Buy (1) -

While initial indications in India suggest a likely near-term drag on IPD Education's 2H21 earnings, UBS believes this represents deferred, not lost revenue, with the ability to recoup in 1H22.

Meanwhile, the broker notes, delays in reopening the Australian border will likely impact the seasonally strongest March 2022 intake and the trajectory of the recovery beyond.

Based on its current thesis, UBS expects IDP Education to emerge a stronger player, leveraging technology to differentiate itself relative to the long-tail of bricks and mortar student placement businesses.

Buy rating is maintained with the target lowered to $28.25 from $29.05. 

Target price is $28.25 Current Price is $22.71 Difference: $5.54
If IEL meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $29.92, suggesting upside of 31.4% (ex-dividends)

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 MGX as Outperform (1) -

Macquarie upgrades iron ore price forecasts which transforms the earnings outlook for Australian iron ore producers.

Mount Gibson's earnings leverage is significant, with estimates rising 29% for FY21 and 44% for FY22. The broker retains an Outperform rating and raises the target to $1.20 from $1.00.

Target price is $1.20 Current Price is $0.86 Difference: $0.34
If MGX meets the Macquarie target it will return approximately 40% (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 MIN as Outperform (1) -

Macquarie makes significant upgrades to iron ore price forecasts which transforms the earnings outlook for Australian iron ore producers.

Mineral Resources' commodity diversification partially offsets the operating leverage of its iron ore business although this remains substantial, particularly in the short term as the lithium business ramps up.

Earnings forecasts rise 17% for FY21 and 56% for FY22 and FY23. Outperform maintained. Target rises to $73 from $61.

Target price is $73.00 Current Price is $49.02 Difference: $23.98
If MIN meets the Macquarie target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $49.64, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Macquarie rates NHC as Downgrade to Neutral from Outperform (3) -

While multiples remain attractive for coal miners, Macquarie downgrades New Hope to Neutral from Outperform following recent strength in the share price.

Despite there being significant earnings and valuation upside at spot prices, the broker's base case assumptions for thermal coal are muted. Target is raised to $1.70 from $1.50.

Target price is $1.70 Current Price is $1.83 Difference: minus $0.13 (current price is over target).
If NHC meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.61, suggesting downside of -13.8% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates RDY as Outperform (1) -

ReadyTech has indicated its business is performing strongly across all divisions. The recent acquisition of Open Office is tracking in line with expectations and integration is progressing to plan.

The company envisages significant opportunities in customer acquisition and up selling.

Macquarie believes the valuation is undemanding and the company should continue to re-rate as it executes against its growth strategy. Outperform rating and $2.75 target maintained.

Target price is $2.75 Current Price is $2.10 Difference: $0.65
If RDY meets the Macquarie target it will return approximately 31% (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 RIO as Outperform (1) -

Macquarie upgrades earnings forecasts across its iron ore coverage after incorporating a material increase to iron ore price forecasts. Earnings upgrades average around 45% for Rio Tinto over the next five years.

The broker continues to favour the stock over both BHP Group ((BHP)) and Fortescue Metals ((FMG)), although the gap has narrowed. Outperform retained. Target is raised to $157 from $140.

Target price is $157.00 Current Price is $124.92 Difference: $32.08
If RIO meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $129.57, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.6

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

Macquarie rates SGM as Outperform (1) -

Macquarie has upgraded scrap price forecasts amid support from greater electric arc furnace demand. The broker assesses the outlook for Sims is shaping up well, given improving scrap prices.

Macquarie anticipates strong momentum in earnings per share with the main variable being volumes and maintains an Outperform rating. Target is raised to $19.80 from $19.40.

Target price is $19.80 Current Price is $16.63 Difference: $3.17
If SGM meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $17.70, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.3

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

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

Silver Lake has reported the death of an underground contractor at the Daisy Complex underground mine at Mount Monger. Operations are temporarily suspended.

Minimal production loss is considered likely and Morgan Stanley suspects ore lost from the underground can be replaced at the mill by open pit ore.

Equal-weight rating and $2 target price. Industry view is Attractive.

Target price is $2.00 Current Price is $1.70 Difference: $0.3
If SLR meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

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

Ord Minnett rates STG as Buy (1) -

Straker Translations has raised $20m via an institutional placement and entitlement offer. A further $5m will be raised by the retail entitlement offer. Funds will be used for growth initiatives and targeting new enterprise customers.

Ord Minnett believes there is a long growth pathway ahead as the business adds scale. Moreover, Straker Translations is in advanced discussions with several potential acquisition targets.

Buy rating and $2.46 target maintained.

Target price is $2.46 Current Price is $2.20 Difference: $0.26
If STG meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Macquarie rates WHC as Outperform (1) -

Incorporating upgrades to metallurgical coal price forecasts has driven material increases to Macquarie's estimates for coal miners. Whitehaven Coal remains the broker's preferred exposure because of its leverage to both metallurgical and thermal coal.

The broker envisages material upside should the company pursue returns to shareholders rather than growth. Outperform maintained. Target rises to $2.30 from $1.70.

Target price is $2.30 Current Price is $2.03 Difference: $0.27
If WHC meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.19, suggesting upside of 3.6% (ex-dividends)

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