Australian Broker Call

Citi rates ASB as Buy (1) -

Citi was disappointed with the FY21 guidance downgrade but assesses this was driven by circumstances beyond the company's control. Some liquidated damages, caused by the pandemic, may also be retrievable in the future. The broker finds upside still exists to forecasts.

Citi maintains a Buy rating, calculating investors are paying only 3x FY22 EBIT for the shipbuilding business, which is a -77% discount to peers. This appears excessive given the multiple shipbuilding opportunities in the US, Australia and the Philippines.

Target is raised to $3.35 from $3.30. Citi also asserts the ASIC lawsuit is not a material headwind, noting the maximum financial penalty is likely to be $1-2m.

Target price is $3.35 Current Price is $2.33 Difference: $1.02
If ASB meets the Citi target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $2.80

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 ASB as Outperform (1) -

Austal has downgraded its FY21 earnings guidance range by -6-10%, citing the A&NZ covid impact of border closures, travel restrictions and resourcing challenges. The company insists however it is a matter of revenue being deferred, not lost.

The core US division continues to perform well nonetheless, the broker notes, but in order for the stock to re-rate the broker suggests new contract wins are needed.

Outperform retained, target falls to $2.80 from $3.00.

Target price is $2.80 Current Price is $2.33 Difference: $0.47
If ASB meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.80

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

Ord Minnett rates ASB as Hold (3) -

Austal has downgraded EBIT guidance because of a delay to shipbuilding programs and expects FY21 EBIT of $112-118m, implying a significantly weaker second half result.

There is also a provision for expected future expenses associated with the civil penalty proceedings commenced by ASIC.

Ord Minnett observes Austal has faced several challenges and the share price is now trading at a reduced 12% premium to net tangible assets. The broker retains a Hold rating and lowers the target to $2.30 from $2.35.

Target price is $2.30 Current Price is $2.33 Difference: minus $0.03 (current price is over target).
If ASB meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.80

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

Citi rates BOQ as Buy (1) -

Bank of Queensland expects to release $75m from collective provisioning. Citi suggests this improves the likelihood of a better final dividend. The one-off nature of this provision release only affects current earnings and outer year earnings are unchanged.

The broker retains a Neutral rating and $9.50 target. Bank of Queensland remains the preferred regional bank exposure because of its strong lending momentum and lower funding costs as well as improving asset quality.

Target price is $9.50 Current Price is $8.90 Difference: $0.6
If BOQ meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $9.73, suggesting upside of 8.5% (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

Credit Suisse rates BOQ as Outperform (1) -

Bank of Queensland announced a reduction of -$75m in collective provisioning for the period ending May 31, 2021. This is largely because of an improved economic outlook.

Credit Suisse notes the bank has $58m in collective provisioning available to cover any potential losses arising from the pandemic.

The recent launch of Virgin Money digital bank provides a strong platform to move current brands onto a single cloud-based platform and the broker expects further efficiency benefits.

Credit Suisse retains an Outperform rating and $10 target.

Target price is $10.00 Current Price is $8.90 Difference: $1.1
If BOQ meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.73, suggesting upside of 8.5% (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 BOQ as No Rating (-1) -

Bank of Queensland has announced an expected decline of -$75m in collective provisions in the third quarter based on an improving economic outlook. The update does not however specifically update on bad debt impairment charges, as is the case with peers.

But with such a material provision reduction the broker expects the bank to deliver a negative impairment charge in the second half, leading to earnings forecast upgrades.

The broker is currently restricted from providing a rating or target.

Current Price is $8.90. Target price not assessed.

Current consensus price target is $9.73, suggesting upside of 8.5% (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

Morgan Stanley rates BOQ as Overweight (1) -

Bank of Queensland will make a collective provision release that is earlier and larger than Morgan Stanley expected. The bank has announced a release of $75m primarily because an improved economic outlook.

This compares with Morgan Stanley's expectations for $22m in the second half and a total of $61m by the end of FY23. This early release implies around 11% upside risk to the broker's FY21 estimates for earnings per share.

Overweight retained given the supportive operating environment and improving franchise momentum. Target is $10. Industry view: In-line.

Target price is $10.00 Current Price is $8.90 Difference: $1.1
If BOQ meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.73, suggesting upside of 8.5% (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 BOQ as Add (1) -

Bank of Queensland has reduced its collective provisions by -$75m and Morgans grabs the opportunity to highlight this is exactly what the broker has been anticipating, as stated in prior research updates.

Add rating retained with the target price lifting to $10.80 from $10.50. Morgans predicts current positive momentum on market revisions to credit impairment charge forecasts and prospective dividends will clear the gap between share price and its revised target.

Today only forecasts for FY21 have been upgraded by the broker.

Target price is $10.80 Current Price is $8.90 Difference: $1.9
If BOQ meets the Morgans target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $9.73, suggesting upside of 8.5% (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

Ord Minnett rates BOQ as Accumulate (2) -

Bank of Queensland expects a decrease in collective provisioning of -$75m. Ord Minnett increases forecasts for diluted earnings per share by 6% in FY21.

In addition, the broker reduces the expected contribution to the second half from the ME Bank acquisition to one month from the prior assumption of three months as the bank is still awaiting final approvals.

Accumulate retained. Target is raised to $9.60 from $9.50.

Target price is $9.60 Current Price is $8.90 Difference: $0.7
If BOQ meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $9.73, suggesting upside of 8.5% (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

Credit Suisse rates CGF as Neutral (3) -

Ahead of the investor briefing, Credit Suisse reiterates a Neutral rating and $6.05 target. The broker believes there are a number of factors that make entry into banking and the sale of term deposits attractive.

Firstly the addressable market is significantly larger and there appears to be a capital arbitrage opportunity. The term annuity portfolio has also contracted around -20% over the last 18 months, creating the need for a replacement.

The steepening of the yield curve could also push term annuity sales to longer duration, which is more favourable with a bank than a life company.

Target price is $6.05 Current Price is $5.56 Difference: $0.49
If CGF meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $6.17, suggesting upside of 9.2% (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 DMP as Neutral (3) -

The acquisition of the Domino's Pizza business in Taiwan opens up a new market but Citi considers the multiple paid is relatively high, unless the company can improve sales per store and margins.

The broker acknowledges a higher multiple could be the result of a reduced need for store conversions in Taiwan compared to some of the European acquisitions and/or the modest capital outlay. Citi retains a Neutral rating and raises the target to $120.00 from $104.20.

Target price is $120.00 Current Price is $118.08 Difference: $1.92
If DMP meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $100.43, suggesting downside of -14.7% (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

Morgans rates DMP as Downgrade to Hold from Add (3) -

Domino's Pizza Enterprises will acquire 100% of Domino's Taiwan for a payment of $79m. Morgans considers the move a first step to building a larger presence in Asia, despite the relatively smaller size of the Taiwan business. 

The proximity of the new business to Japan will allow these two regions to share marketing and operational functions. Management has noted a target of 400 stores in Taiwan, and Morgans expects strategy to be similar to that of Japan with a focus on growing volume and stores. 

Domino's Taiwan currently operates 157 stores and reported underlying earnings of $4.8m in FY20. The purchase price represents 16.5 times FY20 underlying earnings, notably higher than the 10 times paid for the Japan stake. 

The rating is downgraded to Hold and the target price increases to $123.35 from $118.60. 

Target price is $123.35 Current Price is $118.08 Difference: $5.27
If DMP meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $100.43, suggesting downside of -14.7% (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

Macquarie rates FBU as Neutral (3) -

Fletcher Building's investor day has led to an upgrade of the broker's earnings forecasts, although these remain a little below consensus. There is upside to forecasts if the upper bound of Australia earnings guidance can be met, but the second half did not provide progress.

Macquarie suggests the main risk is sustained lower net migration in New Zealand.

Targat rises to NZ$7.15 from NZ$6.78, Neutral retained.

Current Price is $7.35. Target price not assessed.

Current consensus price target is $7.60, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

This company reports in NZD. 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

Ord Minnett rates FMG as Buy (1) -

Fortescue Metals has confirmed speculation it is in talks with government on developing a hydro project in the Democratic Republic of the Congo. The company's strategy is to diversify into green energy, ammonia and hydrogen via its Fortescue Future Industries.

Ord Minnett assesses the lack of market reaction following the FFI development has likely highlighted a change in the register, suggesting investors that are not wanting to participate in this investment have already sold the stock and those retaining stock do not envisage it as a near-term threat to Fortescue Metals.

The broker does not expect Fortescue Metals will own a majority stake in the Congo project and would likely use non-recourse debt.

Moreover, a project of this scale carries significant development, ESG and country risk and the returns are likely to be modest at the project level. Buy rating and $28 target retained.

Target price is $28.00 Current Price is $23.33 Difference: $4.67
If FMG meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $21.88, suggesting downside 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: 0.1

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

Ord Minnett rates GOZ as Hold (3) -

Growthpoint Properties has acquired 11 Murray Rose Avenue at Sydney Olympic Park for $52m. This adds to the two existing Olympic Park office assets.

The building is fully leased with a weighted average expiry of 4.9 years. Ord Minnett reduces share buyback assumptions and maintains a Hold rating. Target is raised to $3.80 from $3.50.

Target price is $3.80 Current Price is $3.99 Difference: minus $0.19 (current price is over target).
If GOZ meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.67, suggesting downside of -9.9% (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

Macquarie rates IAG as Neutral (3) -

Ongoing market share contraction in Insurance Australia Group's most profitable products leads the broker to believe the company may turn to M&A to fill the gap. The recent acquisition of Westpac's insurance business by Allianz leaves CommInsure in focus.

The broker thinks the ACCC won't disapprove and it would be a sensible move in the short term, albeit required synergies may be difficult to deliver in the longer term. Neutral and $5.30 target retained.

Target price is $5.30 Current Price is $5.11 Difference: $0.19
If IAG meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.39, suggesting upside of 4.3% (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

Macquarie rates IAP as No Rating (-1) -

Irongate Group has announced a $50m capital raising to partly fund the $73.8m acquisition of a Canberra office block, with the balance to be funded by existing and new debt facilities. The issue price represents a -3.9% discount to the last closing price.

The initial yield is 5.1%, the broker notes.

Being involved in the raising, the broker is on research restriction.

Current Price is $1.53. Target price not assessed.

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Ord Minnett rates IAP as Accumulate (2) -

Irongate Group will acquire a $74m office asset in Canberra, partly funded by a $50m capital raising.

Ord Minnett assesses the acquisition is neutral to earnings but there is potential upside if Irongate can lease the 43% of the asset currently standing vacant within a 24-month guarantee period.

Accumulate retained. Target rises to $1.65 from $1.60.

Target price is $1.65 Current Price is $1.53 Difference: $0.12
If IAP meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

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

Strong demand and ongoing supply issues are driving zircon prices higher, Macquarie notes, hence the broker has upgraded forecasts.

The broker had forecast Sierra Rutile to post negative earnings over the next two years, thus concurs with the decision to suspend operations, which should provide a modestly positive impact on rutile prices.

With price momentum for both zircon and titanium turning positive, the broker upgrades to Outperfom from Neutral. Target rises to $8.60 from $7.30.

Target price is $8.60 Current Price is $8.19 Difference: $0.41
If ILU meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $7.21, suggesting downside of -11.1% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates ISD as Hold (3) -

isentia Group has announced a cash takeover offer from Access Intelligence at $0.175 per share. The isentia board is unanimously in favour of the deal. isentia's largest shareholder, Spheria, has entered into an agreement to sell its 19.85% stake in the offer. 

The deal is dependent on shareholder approval from isentia and Access Intelligence, and Access has announced an equity raising to fund the offer. Management noted that without the offer, isentia would likely need to raise equity, implying earnings continue to trend lower. 

Morgans reiterates its Hold rating in the short term as the broker awaits more details. The target price increases to $0.175 from $0.119.

Target price is $0.18 Current Price is $0.16 Difference: $0.015
If ISD meets the Morgans target it will return approximately 9% (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

Morgans rates MME as Add (1) -

Morgans reports a trading update from MoneyMe highlighted accelerating loan originations growth, up 384% on the corresponding period in 2020 to $57m. 

The new Autopay product, launched in late April, has financed over $1.2m in secured car loans and is set to more than double that amount in June. Management continues to seek new dealerships and brokers to add to the platform. 

No update on FY21 guidance was provided leaving expectations for gross loans above $300m and revenue between $58-62m. 

The Add rating is retained and the target price increases to $2.13 from $2.04. 

Target price is $2.13 Current Price is $1.90 Difference: $0.23
If MME meets the Morgans target it will return approximately 12% (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

Credit Suisse rates MMS as Outperform (1) -

Hopes for a normalisation of new car supply have not been realised, with the industry still affected by the pandemic across the global supply chain. This makes the expected improvement in novated lease volumes an FY22 event, Credit Suisse asserts.

Still, this is just a timing difference rather than a structural issue and customer demand remains very healthy as signalled by higher order rates. The broker retains an Outperform rating and raises the target to $14.10 from $14.00.

Target price is $14.10 Current Price is $12.13 Difference: $1.97
If MMS meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $13.66, suggesting upside of 6.1% (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

Citi rates RMD as Neutral (3) -

ResMed is expected to benefit from the recall of some DreamStation products by Philips as its devices do not use the same foam. Nevertheless, ResMed has warned it remains constrained because of persistent supply issues caused by the pandemic.

Until the issue is resolved by Philips new patients are likely to disproportionately buy from ResMed and Citi suspects some of the market share may become permanent although it is premature to allow for this. Buy rating and $28.50 target maintained.

Target price is $28.50 Current Price is $30.31 Difference: minus $1.81 (current price is over target).
If RMD 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 $28.92, suggesting downside of -5.9% (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 RMD as Equal-weight (3) -

Morgan Stanley expects ResMed will experience increased demand for devices now Philips is issuing voluntary recall notices for its Bi-Level devices to address risks related to sound abatement foam. The majority of the affected devices are first-generation DreamStation.

The broker notes ResMed devices use a different foam and are therefore not subject to recall. Nevertheless, ResMed is also facing well-known global supply issues which may limit a supply response.

Equal-weight. Industry view: In-Line. Price target is $27.40.

Target price is $27.40 Current Price is $30.31 Difference: minus $2.91 (current price is over target).
If RMD meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.92, suggesting downside of -5.9% (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

Ord Minnett rates RMD as Accumulate (2) -

Philips has recalled CPAP and ventilators among its DreamStation devices because of degradation in the soundproofing foam.

Ord Minnett believes ResMed has been provided a rare opportunity to expand its position in the sleep apnoea market. This is because Philips faces a challenge to replace or repair millions of devices.

The broker calculates sales for ResMed will rise a modest 5% above prior forecasts, because of supply constraints. This uplift and operating leverage have led to a 7% boost to FY22 estimates for earnings per share.

Ord Minnett retains an Accumulate rating and raises the target to $32.00 from $28.50.

Target price is $32.00 Current Price is $30.31 Difference: $1.69
If RMD meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $28.92, suggesting downside of -5.9% (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

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

Macquarie estimates the removal of the recruiter discount results in a 9% yield tailwind in total for Seek and the broker's recruiter survey suggests a 24% uplift in yield is achievable before volumes are impacted.

The broker's economists are forecasting a fall to the low 4s for the unemployment rate during 2023, and ad volumes and the labour market are strongly correlated. The recent sale of Zhaopin has reduced financial leverage and lowered capital outlay requirements.

Macquarie sees Seek as "quality" stock, and upgrades to Outperform from Neutral. Target rises to $40.00 from $31.60.

Target price is $40.00 Current Price is $32.21 Difference: $7.79
If SEK meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $31.27, suggesting downside of -5.1% (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

Macquarie rates SGM as Outperform (1) -

Sims has provided a strong FY21 earnings guidance update, to $360-380m from $260-310m, with volumes still tracking -5% below FY19 levels. As post-covid normalisation continues, improvement should continue, the broker suggests, given a better backdrop for scrap.

The risk is a rollover in steel prices, but at present the broker sees a favourable risk/reward balance. Outperform and $19.80 target retained

Target price is $19.80 Current Price is $16.93 Difference: $2.87
If SGM meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $18.57, suggesting upside of 10.9% (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

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

Sims is capitalising on improved scrap prices, although Morgan Stanley finds it unclear just how much of the trading upgrade is driven by inventory. The company has guided to a substantial upgrade in EBIT, to $360-380m.

Strength is coming from intake volumes, and improving gross margins owing to higher scrap prices and inventory management.

Morgan Stanley raises FY21 EBIT forecasts by around 20% and lifts the target to $19.50 from $18.00. Equal-weight retained. The industry view is In-Line.

Target price is $19.50 Current Price is $16.93 Difference: $2.57
If SGM meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $18.57, suggesting upside of 10.9% (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

Ord Minnett rates SGM as Upgrade to Buy from Hold (1) -

Upgraded guidance for EBIT in FY21 is now $360-380m, stemming from higher gross margin and zorba prices. Ord Minnett was surprised at a modest reaction in the share price, given the strong trading update.

The broker increases FY22 estimates for EBIT by 66%, believing scrap and zorba markets will remain strong in the short term. Rating is upgraded to Buy from Hold and the target lifted to $20.00 from $16.30.

Overall, Ord Minnett is attracted to the scrap markets for the medium term because of the potential for Chinese imports to increase and the positive ESG backdrop.

Target price is $20.00 Current Price is $16.93 Difference: $3.07
If SGM meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $18.57, suggesting upside of 10.9% (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

Credit Suisse rates SIQ as Outperform (1) -

SmartGroup Corp is experiencing increased settlement times on novated leases because of a tight new car market. Supply has not yet recovered from the impact of the pandemic on global production.

Still, customer demand remains healthy and the broker notes conversion rates are good, with the company having a very strong novated lease order book. Outperform rating maintained. Target rises to $7.50 from $7.24.

Target price is $7.50 Current Price is $7.30 Difference: $0.2
If SIQ meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $7.46, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates SOM as Downgrade to Hold from Add (3) -

SomnoMed shares have rallied in recent months as access to dental and sleep clinics in North America and Europe has improved. The broker looks to a July quarter update for company management to provide guidance on stabilisation of the North American region.

Morgans highlights that a recall on an estimated 3.5m ventilation devices from competitor Philips may provide a boost in demand for MAD devices, but notes it is too early to call. 

The rating is downgraded to Hold and the target price of $2.55 is retained.

Target price is $2.55 Current Price is $2.42 Difference: $0.13
If SOM meets the Morgans target it will return approximately 5% (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

Macquarie rates SSM as Neutral (3) -

Delays to NBN works continue to hinder Service Stream, but the broker is becoming more positive on the realisation of organic growth opportunities in the telco sector, contributing to the company's earnings and scale.

Macquarie suggests a successful outcome with respect the $4.5bn NBN program represents upside potential, but the market is already pricing in confidence. Neutral retained as the broker is not prepared to price in additional NBN revenues for now. Target falls to 95c from $1.40.

Target price is $0.95 Current Price is $0.91 Difference: $0.04
If SSM meets the Macquarie target it will return approximately 4% (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

Citi rates SUN as Buy (1) -

Following severe weather in Victoria Suncorp is likely to exceed its FY21 natural hazards allowance by -$50-70m. Citi lowers FY21 estimates for earnings per share by -2% and allows for a small special dividend to be paid at the full year results.

The broker also believes a full review of collective provisioning and associated assumptions in preparation for the FY21 accounts could mean there are meaningful releases which are not currently factored into estimates.

Citi envisages attractive upside potential if Suncorp can deliver on at least some of its FY23 targets and retains a Buy rating with an $11.80 target price.

Target price is $11.80 Current Price is $11.20 Difference: $0.6
If SUN meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.83, suggesting upside of 4.3% (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

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

Suncorp has updated on its catastrophe expenses in the light of flooding in Victoria. In assuming the events in Victoria create an additional expense of -$50m, Credit Suisse assesses FY21 peril expenses will be at least -$1.05bn.

The broker points out the insurer has probably negotiated most of its July 1 reinsurance renewals so while the current event could affect pricing of the remainder of the program, the impact should be minimal.

Following a strong run in the share price, Credit Suisse downgrades to Neutral from Outperform. Target is $11.25.

Target price is $11.25 Current Price is $11.20 Difference: $0.05
If SUN meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $11.83, suggesting upside of 4.3% (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

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

An update from Suncorp shows it was -$40m over its FY21 catastrophe budget run rate at the end of May while the recent floods in Victoria added up to -$50m in June.

Nevertheless, Morgan Stanley envisages only modest downside risk to earnings forecasts, having already expected Suncorp would exceed its budget by -$50m.

The broker does not expect Suncorp, or competitor Insurance Australia Group ((IAG)), will need to purchase additional reinsurance for the remaining two weeks of FY21.

The broker suspects investors are disappointed by the general insurers consistently exceeding their catastrophe budgets despite no cyclone impact in recent years, and this could lead to a de-rating.

Equal-weight rating. Target is $11. Industry view: In-line.

Target price is $11.00 Current Price is $11.20 Difference: minus $0.2 (current price is over target).
If SUN 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 $11.83, suggesting upside of 4.3% (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

UBS rates SUN as Buy (1) -

Suncorp expects a maximum potential loss from Victoria's flooding event will be -$50m. UBS considers its assessment of FY21 natural perils costs of -$1.03bn is reasonable in the face of the remaining available reinsurance cover.

The broker makes no changes to estimates, noting Suncorp is trading at a -10% PE discount to the market which is the upper end of the -10-30% discount at which it has traded historically.

Buy rating and $12 target retained.

Target price is $12.00 Current Price is $11.20 Difference: $0.8
If SUN meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.83, suggesting upside of 4.3% (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

Morgan Stanley rates TRS as Overweight (1) -

Tesco will exit its global wholesale business. Morgan Stanley estimates Tesco accounts for two of around 320 bays in a typical Reject Shop store so it will not have a material impact on sales.

Nevertheless, the relationship was great publicity and Tesco is willing to help fund UK-based alternatives for top-selling lines. The broker also believes The Reject Shop is in a better position to deal with suppliers compared with a year ago.

Overweight with a target price of $10. Industry view: In-line.

Target price is $10.00 Current Price is $5.52 Difference: $4.48
If TRS meets the Morgan Stanley target it will return approximately 81% (excluding dividends, fees and charges).

Current consensus price target is $7.50, suggesting upside of 36.9% (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 WHC as Downgrade to Neutral from Buy (3) -

While noting the in-house commodities team has revised up 2021 Newcastle 6000kcal thermal coal price forecast to an average of US$93/t from $84/t, Citi sector analysts have downgraded their rating for Whitehaven Coal to Neutral from Buy.

Price target has increased to $2.20 on higher forecasts, incorporating the revised coal price projections, but the share price has rallied too. The latter explains the downgrade.

Target price is $2.20 Current Price is $2.10 Difference: $0.1
If WHC meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.21, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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