Australian Broker Call

Citi rates A2M as Neutral (3) -

In a time of shortage in the US, the US FDA has announced Bubs Australia ((BUB)) will provide at least 1.25m tins of infant formula to the US. 

The announcement was tweeted by the US President, which may have positive implications for the company's marketing efforts, suggests Citi.

Regarding a2 Milk Co, the analyst believes gaining US market access is not impossible, and the stock could be re-rated should the company articulate a credible US infant formula strategy. The Neutral rating and $4.64 target are maintained.

Target price is $4.64 Current Price is $4.32 Difference: $0.32
If A2M meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $5.45, suggesting upside of 14.2% (ex-dividends)

The company's fiscal year ends in June.

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: 0.0

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

Ord Minnett rates AGL as Hold (3) -

Ord Minnett had previously expressed the view it believed the separation of AGL Energy's businesses would be in the best interests of existing shareholders, as Accel Energy as a standalone entity will generate substantial cash flow, while AGL Australia is likely to generate corporate interest.

But with the demerger being scuppered by shareholder revolt, the broker believes AGL Energy is now in limbo. The shelved plan incurred no less than $160m in costs.

Ord Minnett suggests establishing new debt facilities for the combined entity will be the key near-term focus, adding this may prove difficult and more expensive considering the current interest rate environment and increased environmental focus.

The broker reiterates its Hold rating. Target $8.70.

Target price is $8.70 Current Price is $8.87 Difference: minus $0.17 (current price is over target).
If AGL meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.85, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Citi rates ANZ as Buy (1) -

Despite the prospect of even higher mortgage rates for new borrowers in the medium term, there has been a material rotation back to variable rate products, explains Citi. This is expected to provide some relief for major banks from 1H mortgage net interest margin drag.

The broker retains its positive sector view and keeps its Buy rating and $30.75 target price for ANZ Bank.

Target price is $30.75 Current Price is $25.68 Difference: $5.07
If ANZ meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $29.46, suggesting upside of 14.3% (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

Morgans rates APE as Add (1) -

Morgans expects medium-term earnings will be better than the current valuation for Eagers Automotive implies. The target price, lowered to $14.40 from $16.70, is still well in advance of the current share price and the Add rating is retained. 

The broker feels the market is being very cautious around consumer demand though notes forward indicators (including a 25% increase in the order book) have remained strong for 2022 to-date.

The analyst believes changing industry dynamics will support scale operators such as Eagers Automotive over the long term.

Target price is $14.40 Current Price is $10.74 Difference: $3.66
If APE meets the Morgans target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $15.97, suggesting upside of 44.1% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates APX as Hold (3) -

The bid made for Appen by Telus International on May 26 has been revoked, with Ord Minnett noting Telus International has not provided detail as to why the proposal was withdrawn. 

Telus had made an indicative proposal for Appen for a purchase price of $9.50 per share, and Appen sought to negotiate a confidentiality and standstill agreement that was not signed.

Elsewhere, Ord Minnett notes a soft start to FY22 from Appen, with the company guiding to first half operating earnings to be materially lower than a year ago with elevated costs placing pressure on margins.

The Hold rating and target price of $7.00 are retained.

Target price is $7.00 Current Price is $6.54 Difference: $0.46
If APX meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $7.28, suggesting upside of 16.3% (ex-dividends)

The company's fiscal year ends in December.

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 BHP as Outperform (1) -

Macquarie notes reflecting the demerger of BHP Petroleum and the subsequent merger with Woodside Energy, BHP Group's shares have started to trade as if ex-dividend on both the ASX and LSE as of May 25.

The broker has upgraded BHP's earnings multiple to 5.5x from 5.0x, noting the post-demerger company offers a diversified commodities portfolio with material copper exposure and potential upside from nickel and potash, and a smaller carbon footprint. 

The Outperform rating and target price of $57.00 are retained.

Target price is $57.00 Current Price is $43.67 Difference: $13.33
If BHP meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $49.86, suggesting upside of 11.0% (ex-dividends)

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: 0.6

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

Ord Minnett rates BSL as Buy (1) -

Having reviewed latest steel spread movements in relation to BlueScope Steel, Ord Minnett notes global pricing continues to soften with US and Australian steel product spreads declined -12% and -19% respectively in May.

The broker further highlighted US and East Asia hot rolled coil pricing down -14% and -9% respectively in May, but notes a spot scenario continues to offer a potential 45% upside to FY23 consensus earnings. 

Further, BlueScope Steel remains one of the highest free cash flow yielding stocks in the broker's coverage. The Buy rating and target price of $26.00 are retained.

Target price is $26.00 Current Price is $18.17 Difference: $7.83
If BSL meets the Ord Minnett target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $24.53, suggesting upside of 32.5% (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

Citi rates CBA as Sell (5) -

Despite the prospect of even higher mortgage rates for new borrowers in the medium term, there has been a material rotation back to variable rate products, explains Citi. This is expected to provide some relief for major banks from 1H mortgage net interest margin drag.

The broker retains its positive sector view though keeps its Sell rating and $30.75 target price for CommBank.

Target price is $90.75 Current Price is $106.63 Difference: minus $15.88 (current price is over target).
If CBA meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $92.08, suggesting downside of -13.6% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates EDV as Underperform (5) -

The second day of Endeavour Group's investor presentations focused on digital scale economies, with Credit Suisse noting the company outlined digital benefits including basket size and profitability, but the broker is less clear on scale being achieved on-premise.

Commentary also indicated a number under-utilised sites within the Hotel portfolio which could hold potential for commercial and accommodation development, although the broker notes the opportunity is a work in progress for the company, and benefits unlikely to be realised before FY24.

The Underperform rating and target price of $6.60 are retained.

Target price is $6.60 Current Price is $7.25 Difference: minus $0.65 (current price is over target).
If EDV meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.52, suggesting upside of 3.8% (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

Macquarie rates EDV as Neutral (3) -

Macquarie highlights a number of key themes from Endeavour Group's second day of investor presentations, including personalisation in its endeavourX segment with the company highlighting its ability to leverage digital platforms for a better customer experience.

The company also reaffirmed its sustainability commitments, including commitments to responsible gambling and alcohol consumption, and various environmental goals including aiming to be net zero by 2050.

The Neutral rating and target price of $7.70 are retained.

Target price is $7.70 Current Price is $7.25 Difference: $0.45
If EDV meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $7.52, suggesting upside of 3.8% (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 EDV as Neutral (3) -

UBS provides a second installment on Endeavour Group's Investor Day to focus on the company's sustainability and the growth potential of Pinnacle drinks and Dan Murphy's property prospects.

On the sustainability front, the focus was firstly on responsibility and community, the company committing to ending the practice of providing free alcohol to gamblers, training all staff in responsible service for alcohol and gaming, and implementing an algorithm to identify problem gamblers.

The company also plans to use 100% renewable power by 2030 and commits to net zero by 2050.

Meanwhile, the alcohol division's online sales have been growing sharply, albeit on slightly lower earnings (EBIT) margins.

Pinnacle Drinks sales have risen 50% since FY19 and UBS expects growth will continue given Pinnacle's above average exposure to premium and younger customers, and strong share in emerging and fast growing customers.

Meanwhile, UBS observes strong potential windfalls from property development in the Dan Murphy business, the broker noting well targeted capital expenditure could deliver a return on investment of greater than 15% over the longer term.

Neutral rating and $7.20 target price retained.

Target price is $7.20 Current Price is $7.25 Difference: minus $0.05 (current price is over target).
If EDV meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.52, suggesting upside of 3.8% (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 EXP as Buy (1) -

Ord Minnett continues to expect Experience Co can deliver post-covid earnings of around $45m, but now anticipates it will take until FY25 for this to be achieved with delays in the return of inbound visitors and labour shortages both impacting on the recovery of tourism.

Allowing for slower than expected recovery, Ord Minnett has downgraded its earnings per share estimates -132%, -45% and -16% through to FY24. 

The Buy rating is retained and the target price decreases to $0.44 from $0.48.

Target price is $0.44 Current Price is $0.24 Difference: $0.2
If EXP meets the Ord Minnett target it will return approximately 83% (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

UBS rates IFM as Buy (1) -

Infomedia has received a conditional non-binding indicative cash bid from Battery Ventures - a US tech-focused private-equity firm for $1.75, dependent on the company entering an exclusivity arrangement, due diligence, board approval and entry into a successful scheme implementation.

The bid follows hot on the heels of TA Consortium's offer of $1.70 in cash. UBS says Infomedia will provide Battery Ventures with the same limited historical information provided to other interested parties.

All up, UBS observes that the company continues to benefit from strong top-line growth and operating leverage and considers the medium-term outlook to be positive, the company offering a FY23 to FY26 compound annual growth rate of 23% - while casting an eye to recent big contract losses.

Target price steady at $2.15. Buy rating retained.

Target price is $2.15 Current Price is $1.72 Difference: $0.43
If IFM meets the UBS target it will return approximately 25% (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 IPL as Equal-weight (3) -

Morgan Stanley highlights the Tampa ammonia price has declined -30% to US$1000/t, -38% below the March 2022 peak of $1,625/t. The Tampa price is the reference price for ammonia sold at Incitec Pivot's Waggaman plant in Louisiana.

While the current price is in-line with the broker's forecast, there's now considered to be a more challenging environment for short-term performance. The Equal-weight rating and $4.05 target are retained. Industry view: In-Line.

Target price is $4.05 Current Price is $3.50 Difference: $0.55
If IPL meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.03, suggesting upside of 15.8% (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

Morgan Stanley rates JIN as Overweight (1) -

Morgan Stanley estimates the optionality of Jumbo Interactive's software growth has not been incorporated into the share price at all.

By contrast, management's goal is to scale software to 50% of revenue in FY26 (from 18% in FY23) versus a much lower estimate by consensus.

While the analysts see potential for a $46 share price under a bull case scenario, a $25.50 target price is set for the next 12 months, up from $22.00.

The broker likes the company's leverage to digitisation and defensive demand characteristics, and suggests there's currently a compelling entry point for such a long-term compounding business. Overweight. Industry view: In-line.

Target price is $25.50 Current Price is $15.53 Difference: $9.97
If JIN meets the Morgan Stanley target it will return approximately 64% (excluding dividends, fees and charges).

Current consensus price target is $21.00, suggesting upside of 34.4% (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

Macquarie rates JMS as Outperform (1) -

Having recently visited Jupiter Mines' Tshipi site, Macquarie notes the manganese mine retains a long life of more than 25 years with strong operational efficiency, while barrier pillar mining between Tshipi and Mamatwan offers access to higher quality manganese ore in the near-term. 

Longer-term, the Macquarie analysts highlighted material potential for consolidation in the Kalahari Manganese Fields, noting consolidation could support a value over volume approach. Rallying manganese prices should support earnings momentum. 

The Outperform rating and target price of $0.30 are retained.

Target price is $0.30 Current Price is $0.21 Difference: $0.09
If JMS meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in February.

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 KLS as Outperform (1) -

Kelsian Group has announced the sale of East London Bus Operations to Stagecoach for GBP20m, with settlement expected in late June, with Macquarie noting this completes the restructure of Kelsian Group's London operations.

Consideration will include a GBP10m upfront payment, and further GBP1m payment annually for the following ten years. The broker highlights Kelsian Group will retain a London exposure through a 12.5% stake in the Transit London JV and a hold in the Westbourne Park bus depot. 

The Outperform rating and target price of $8.70 are retained.

Target price is $8.70 Current Price is $7.54 Difference: $1.16
If KLS meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $8.86, suggesting upside of 16.6% (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 KLS as Buy (1) -

Kelsian Group has exited its East London operations as planned for $35m and the sale should be completed in late June.

UBS says this lowers the losses from the London business and reduces the cash drag on its international operations. The company retains its exposure to London through the West London JV.

The company was unsuccessful in its bid for the Darwin metro bus contract but UBS estimates the impact to be small.

All up, the broker cuts EPS forecasts -2% from FY23 onwards. Target price falls -5% to $9.50 from $10, Buy reatined.

Target price is $9.50 Current Price is $7.54 Difference: $1.96
If KLS meets the UBS target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $8.86, suggesting upside of 16.6% (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

Morgan Stanley rates MPL as Overweight (1) -

Morgan Stanley continues to prefer health insurers over hospitals following the release of recent APRA data. While there has been a deferred premium increase for private health insurance, this is thought to increase the likelihood of membership retention. 

Meanwhile, hospital activity in the June quarter to-date has remained subdued. The Overweight rating and $3.50 target for Medibank Private are retained. Industry View: In-Line.

Target price is $3.50 Current Price is $3.19 Difference: $0.31
If MPL meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.44, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates NAB as Neutral (3) -

Despite the prospect of even higher mortgage rates for new borrowers in the medium term, there has been a material rotation back to variable rate products, explains Citi. This is expected to provide some relief for major banks from 1H mortgage net interest margin drag.

The broker retains its positive sector view though keeps its Neutral rating and $32.25 target price for National Australia Bank.

Target price is $32.25 Current Price is $31.68 Difference: $0.57
If NAB meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $33.42, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.2

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

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

Morgan Stanley continues to prefer health insurers over hospitals following the release of recent APRA data. While there has been a deferred premium increase for private health insurance, this is thought to increase the likelihood of membership retention. 

Meanwhile, hospital activity in the June quarter to-date has remained subdued. The Equal-weight rating and $6.40 target for nib Holdings are retained. Industry View: In-Line.

Target price is $6.40 Current Price is $7.36 Difference: minus $0.96 (current price is over target).
If NHF 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 $6.89, suggesting downside of -6.9% (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

Morgan Stanley rates RHC as Underweight (5) -

Morgan Stanley continues to prefer health insurers over hospitals following the release of recent APRA data. While there has been a deferred premium increase for private health insurance, this is thought to increase the likelihood of membership retention. 

Meanwhile, hospital activity in the June quarter to-date has remained subdued. The Underweight rating and $62.00 target for Ramsay Health Care are retained. Industry View: In-Line.

Target price is $62.00 Current Price is $78.41 Difference: minus $16.41 (current price is over target).
If RHC meets the Morgan Stanley target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $78.60, suggesting upside of 1.1% (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 SHV as Buy (1) -

Select Harvests' March first-half result reveals wet weather hit earnings and costs.

Almond production costs were only slightly lower given a lower water bill, but poorer crop quality hit margins.

UBS now takes a more conservative stance on pricing and costs and cuts FY22 EPS forecasts -65%, FY22 forecasts -46% and FY24 forecasts -10%. Almond prices are expected to be the key and while the recovery is slow, UBS believes they should tick up in FY23, drought conditions worsening in California.

Buy rating retained. Target price falls -8% to $7.20 from $7.80.

Target price is $7.20 Current Price is $5.63 Difference: $1.57
If SHV meets the UBS target it will return approximately 28% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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

Credit Suisse rates STX as Outperform (1) -

Credit Suisse is has described the twelve months ahead as a year of delivery for Strike Energy, with Walyering cashflow, West Erregulla construction and South Erregulla appraisal all targeted. 

With a number of potential catalysts ahead, Credit Suisse highlights the upcoming resource estimate for Walyering, which should confirm if the company has become more conservative. The company should be funded through to Walyering's start, but delays could impact on liquidity headroom.

The Outperform rating is retained and the target price increases to $0.34 from $0.27.

Target price is $0.34 Current Price is $0.30 Difference: $0.04
If STX meets the Credit Suisse target it will return approximately 13% (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 WBC as Buy (1) -

Despite the prospect of even higher mortgage rates for new borrowers in the medium term, there has been a material rotation back to variable rate products, explains Citi. This is expected to provide some relief for major banks from 1H mortgage net interest margin drag.

The broker retains its positive sector view and keeps its Buy rating and $29 target price for Westpac.

Target price is $29.00 Current Price is $24.09 Difference: $4.91
If WBC meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $25.49, suggesting upside of 5.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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