Australian Broker Call

Macquarie rates APA as No Rating (-1) -

Macquarie remains on research restriction but nevertheless issued a quick response to APA Group indicating it is progressing with the stage 2 expansion of the ECG, with an all-in cost for stage 1 and 2 of -$270m.

Macquarie explains both stage 1 and stage 2 involve additional compression (4 compressors in total) and add circa 100-120TJ/day, i.e. 25%.

The broker remains concerned about potential demand destruction as a result of high prices for gas, plus there's potential for government intervention.

Current Price is $11.59. Target price not assessed.

Current consensus price target is $9.93, suggesting downside of -14.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Macquarie rates CGC as Outperform (1) -

In a quick response to today's AGM, Macquarie reports trading commentary by Costa Group seems to be in-line with prior commentary and expectations and is broadly interpreted as a positive by the broker.

The broker believes Costa Group is back on a growth path in 2022, and beyond.

Outperform and $3.80 target.

Target price is $3.80 Current Price is $2.91 Difference: $0.89
If CGC meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.64, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates CGF as Neutral (3) -

Rising interest rates and wider credit spreads should benefit Challenger, supporting return on equity and cost of equity margins moving forward. 

Credit Suisse notes while full benefit will take around three years to flow through, the cost of equity margin is already being positively impacted.

Challenger has suggested it will close out the year towards the upper end of its profit guidance range of $430-480m, while an excess capital reduction of -$100m suggests the company now has limited deployable capital. 

While the Neutral rating and target price of $7.60 are retained, Credit Suisse is becoming increasingly positive on Challenger.

Target price is $7.60 Current Price is $7.53 Difference: $0.07
If CGF meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.27, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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

Morgans rates CGF as Add (1) -

Challenger reaffirmed its guidance metrics at its investor day and expects returns and margins will benefit from higher recent bond yields and wider spreads.

Morgans likes the new strategy idea that the company's SaaS Investment Administration platform can/will compete against the likes of State Street, via providing a better service at a lower cost. 

Morgans maintains its Add rating and raises its target price to $8.21 from $8.14.

Target price is $8.21 Current Price is $7.53 Difference: $0.68
If CGF meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $7.27, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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

Ord Minnett rates CGF as Downgrade to Lighten from Hold (4) -

Challenger left its profit guidance unchanged at its investor day though suggested a return on equity (ROE) enhancement
from yields may be delayed and pointed to a weaker capital position.

The analyst explains the capital position has gone from being strong to just at the target range over the past five months.

Following a 53% rise in share price over the last year, Ord Minnett lowers its rating to Lighten from Hold and reduces its target price to $6.90 from $7.00.

Target price is $6.90 Current Price is $7.53 Difference: minus $0.63 (current price is over target).
If CGF meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.27, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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

UBS rates CGF as Neutral (3) -

Challenger's investor day revealed covid proved a drag for the company as easy rates and lockdowns eroded margins and volumes.

But Jarden believes the company is poised for a sharp recovery in Life profitability, thanks to rising interest rates (and better credit spreads), strategic repricing, and optimisation of fixed income yields, shifting return-on-equity (ROE) to above cost of equity.

Guidance was reiterated and there was no change to the ROE.

Rating upgraded to Buy from Neutral. Target price rises to $8.30 a share from $7.30.

Target price is $8.30 Current Price is $7.53 Difference: $0.77
If CGF meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.27, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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

Ord Minnett rates CHN as Speculative Buy (1) -

Following a $100m capital raise announced by Chalice Mining, Ord Minnett lowers its target price to $9.50 from $10.00. Funds (including $50m existing cash) are expected to last another 18 months. The Speculative Buy rating is unchanged.

Management also pushed out by a month the Gonneville resource update to July. Access to the Julimar state forest north of Gonneville was granted last week and the analyst expects drilling of the priority Hartog anomaly targets to begin imminently.

Target price is $9.50 Current Price is $6.81 Difference: $2.69
If CHN meets the Ord Minnett target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates CIA as Buy (1) -

Ahead of tomorrow's FY22 results for Champion Iron, Citi expects a -4% drop in FY22 earnings (EBITDA) versus the prior year. A net realised FOB iron ore price for the company's 67% concentrate of US$141/t is expected for the 4Q versus the US$110/t in the 3Q.

Longer term, the analyst expects benefits from a trend to higher grade steel-making inputs. The Buy rating and $9.00 target price are maintained.

Target price is $9.00 Current Price is $7.81 Difference: $1.19
If CIA meets the Citi target it will return approximately 15% (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: 1.0

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

Citi rates FPH as Buy (1) -

On initial assessment, Citi finds today's reported FY22 financials were in-line with expectations. No FY23 guidance was provided, but this is as expected.

While the next 12 months will be extremely difficult to forecast, on Citi's own admission, the broker does believe the path for the next 3-5 years, as guided by company management, fits in with its own projections.

Buy. Target NZ$25.75.

Current Price is $18.72. Target price not assessed.

Current consensus price target is $27.00, suggesting upside of 47.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in NZD. 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

Macquarie rates FPH as Outperform (1) -

Fisher & Paykel Healthcare's FY22 performance, on initial assessment, proved in-line with consensus expectations and only fell short of Macquarie's estimate by -1%. Macquarie points out management provided no forward guidance.

Instead, management guidance is for FY22 device utilisation likely to be 60-70% of pre-covid average, which is below Macquarie's estimate of circa 77%.

While the impact from freight is forecast to persist for longer, the broker also highlights the company has now moved to a normal pricing cycle, increasing prices at regional CPI rates.

Outperform, with a price target of NZ$28.21.

Current Price is $18.72. Target price not assessed.

Current consensus price target is $27.00, suggesting upside of 47.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in NZD. 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 GUD as Outperform (1) -

Credit Suisse expects G.U.D. Holdings is more likely to deliver results towards the lower end of its guidance range despite limited exposure to industry pressures, with the broker adjusting its full year earnings forecast to $156.2m from a previous $159.9m. 

Elsewhere, the broker notes first deliveries of the 2023 Ranger look to be delayed by a month, now due in showrooms in July, while the Raptor is due in August.

Credit Suisse expects component constraint, driven by China lockdowns, is the primary cause. Further delays on vehicle deliveries present risk to forecasts.

The Outperform rating is retained and the target price decreases to $16.40 from $17.00.

Target price is $16.40 Current Price is $11.71 Difference: $4.69
If GUD meets the Credit Suisse target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $15.55, suggesting upside of 36.8% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates IPL as Buy (1) -

Incitec Pivot's record March first-half result outpaced UBS by 4% (but fell -8% short of consensus) thanks to stronger ammonia prices and positive foreign exchange movements. The operating cash outflow proved a slight miss on the broker's forecasts due to rising fertiliser inventory values.

The company also announced it would split the group into two ASX-listed entities to provide greater strategic focus, with separation targeted in the first-half of FY23. Dyno Nobel will be the Explosives business, and Incitec Pivot the Fertiliser business, which will target the mining and agriculture industries.

Incitec Pivot expects this will unlock shareholder value by allowing greater individual strategic focus and by improving capital allocation for technology adoption.

Incitec Pivot shareholders are expected to retain interests in both companies, and the split is expected to cost -$80m to -$105m with continuing costs of -$25m to -$35m across both companies. More details on the deal are expected in August.

Target price slips to $4.43 from $4.50. Buy rating retained, the broker expecting strong conditions to continue.

Target price is $4.43 Current Price is $3.55 Difference: $0.88
If IPL meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.03, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Ord Minnett rates LGL as Buy (1) -

Lynch Group has lowered FY22 profit guidance by -18%, which Ord Minnett believes is largely priced-in at current share price levels. It's felt the downgrade resulted from elevated freight and energy prices (ongoing), as well as China lockdowns.

Although margins may take several years to return to 2019 levels, the broker expects some of the heightened costs will begin to unwind in the first half of FY23. The target price is reduced to $3.30 from $4.00. The Buy rating is retained.

Target price is $3.30 Current Price is $2.17 Difference: $1.13
If LGL meets the Ord Minnett target it will return approximately 52% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Macquarie rates PLS as Outperform (1) -

Pilbara Minerals' fifth sale on its Battery Material Exchange platform has exceeded Macquarie's price expectations, with the realised sale price 9% higher than the broker had estimated from current spot pricing and 5% above the previous sale at US$5,955 per dry metric tonne.

The broker noted elevated lithium-carbonate, lithium-hydroxide and spodumene are all trading above short, medium and long-term forecasts, and at spot pricing could drive earnings 180%, 250% and 360% above Macquarie's forecasts through to FY25.

The Outperform rating and target price of $4.00 are retained.

Target price is $4.00 Current Price is $2.90 Difference: $1.1
If PLS meets the Macquarie target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 38.8% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates PPE as Buy (1) -

Ord Minnett likes Peoplein's attractive valuation and the favourable sector tailwinds provided by the Federal budget. Record low unemployment and solid wages growth also support a Buy rating.

Leading into August results, the broker highlights a high level of earnings certainty. In-line with higher global risk-free rates, a higher cost of capital is applied to the company's future cash flows. As a result, the target price drops to $4.35 from $4.60.

Target price is $4.35 Current Price is $3.29 Difference: $1.06
If PPE meets the Ord Minnett target it will return approximately 32% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 PRN as Outperform (1) -

An incident at Perenti Global's Zone 5 Botswana mine has resulted in the death of two Barminco employees and an investigation has been launched. Macquarie notes the company's strategy update has been delayed.

Separately, the company tightened revenue guidance to $2.4bn from a previous $2.2-2.4bn and earnings guidance to $170-175m from a previous $165-185m. The update sees Macquarie decrease its earnings forecast -4% for the current financial year.

The Outperform rating is retained and the target price decreases to $1.00 from $1.10.

Target price is $1.00 Current Price is $0.69 Difference: $0.31
If PRN meets the Macquarie target it will return approximately 45% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 SUL as Neutral (3) -

Macquarie reports Super Retail continues to perform well with trading broadly in line with pre-pandemic averages, but it is now faced with cycling tough comparables.

The company is set for capital spend of -$125m in capital in FY22, with a sizeable amount directed towards new larger format stores for the rebel brand after a period of underinvestment. 

Macquarie notes this could provide upside risk to valuation if returns on investment are strong. The Neutral rating is retained and the target price decreases to $9.80 from $10.57.

Target price is $9.80 Current Price is $9.33 Difference: $0.47
If SUL meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $13.08, suggesting upside of 40.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Credit Suisse rates TAH as Outperform (1) -

Tabcorp has emerged on the other side of its demerger as a wagering, media and gaming business, and while the stock is initially trading below Credit Suisse's expectations the broker has faith in a potential transformation. 

The broker notes a number of developments in progress for the company, including the expiration of Tabcorp's Victoria wagering license in 2024 and the subsequent license tender process, the WA wagering operation tender being open in 2022, and legal proceedings brought by Racing Queensland that could result in $40m annual earnings.

Credit Suisse expects earnings to grow around 15% on the previous comparable period in FY23 amid ongoing covid recovery.

The Outperform rating is retained and the target price decreases to $1.25 from $5.85.

Target price is $1.25 Current Price is $1.06 Difference: $0.19
If TAH meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.32, suggesting upside of 225.2% (ex-dividends)

The company's fiscal year ends in June.

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 TAH as Downgrade to Neutral from Outperform (3) -

Following the demerger of Lottery Corp ((TLC), Tabcorp has closed its first day of trading with a market capitalisation of $2.4bn. Macquarie expects investors to take a cautious view of Tabcorp given structural challenges to be overcome. 

The broker noted additional capital may be required for license renewals and the WA TAB tender. Macquarie expects covid recovery to drive near-term growth, and hopes the company can stabilise earnings in FY23 before achieving long-term annual growth of 2%. 

Notably, with Tabcorp closing out its first day of trading at a price of $1.06 per share and Lottery Corp at $4.70 per share, the combined value implies the creation of more than $900m compared to the previous price.

The rating is downgraded to Neutral from Outperform and the target price decreases to $1.00 from $6.00.

Target price is $1.00 Current Price is $1.06 Difference: minus $0.06 (current price is over target).
If TAH meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.32, suggesting upside of 225.2% (ex-dividends)

The company's fiscal year ends in June.

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 TLC as Initiation of coverage with Outperform (1) -

Following the demerger from Tabcorp ((TAH)), Lottery Corp has listed on the ASX. Macquarie anticipates lottery volumes to reach record highs in the current financial year, and forecasts a 3% compound annual growth rate in lottery volumes through to FY25.

With Lottery Corp holding lotteries and keno licenses in Australia, and with more than 85% of earnings expected to be generated through lottery licenses, the broker notes the company could achieve more than $800m in earnings in FY25.

 Macquarie finds Lottery Corp a higher quality business than other comparable listed lottery companies. The broker initiates coverage with an Outperform rating and a target price of $5.00.

Target price is $5.00 Current Price is $4.70 Difference: $0.3
If TLC meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Morgan Stanley rates TLC as Initiation of coverage with Overweight (1) -

Morgan Stanley commences coverage of the largest domestic lotteries operator Lottery Corp, following its demerger from Tabcorp ((TAH)), with an Overweight rating and $5.15 target price.

The demerger is a catalyst for unlocking value, according to the analysts, after a discount by association with the wider Tabcorp group. The new company is one of two listed pure-play lotteries operators globally and has a monopoly position in the applicable states and territories. 

The broker highlights a rare combination of defensiveness, growth and yield. While gaming revenues are known to be resilient through economic cycles, it's thought a potentially weaker consumer (due to rising interest rates) may weigh.

Target price is $5.15 Current Price is $4.70 Difference: $0.45
If TLC meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 TNE as Neutral (3) -

A solid top-line result from TechnologyOne in the first half according to Macquarie, with total revenue up 19% on the previous comparable period and the result underpinned by the company's ongoing software as a service transition.

The company guided to full year software as a service annual recurring revenue year-on-year growth of 40%, which Macquarie notes implies ending annual recurring revenue of $269m, offering upside risk to the broker's FY23 forecasts if achieved. 

A target of more than $500m in annual recurring revenue by FY26 is retained, and Macquarie notes a 13% compound annual growth rate will be required to meet the target.

The Neutral rating and target price of $11.00 are retained.

Target price is $11.00 Current Price is $10.24 Difference: $0.76
If TNE meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.28, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Morgans rates TNE as Add (1) -

While TechnologyOne's 1H result marginally exceeded Morgans expectations (and guidance was in-line), the target price falls to $11.53 from $13.73 after peers and the technology sector overall have de-rated.

The broker retains its Add rating and increases EPS forecasts by around 2%. The transition to SaaS from upfront sales is effectively complete, and the analyst now forecasts 15% year-on-year revenue growth for FY22, a massive jump from 5% in FY21.

The company is Morgans' preferred technology pick.

Target price is $11.53 Current Price is $10.24 Difference: $1.29
If TNE meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $11.28, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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