Australian Broker Call

Macquarie rates ALD as Resume coverage with Outperform (1) -

Macquarie resumes coverage with an Outperform rating and $32.25 target. Retail fuel margins have strengthened in 2020 which has more than offset the pandemic related weakness in volumes. The broker expects volume decline of -7% in the first half.

Fuels marketing, convenience retail & infrastructure continue to have strong appeal despite operating in a sunset industry. Hence, the broker considers another bid is possible.

Macquarie expects proactive capital management to continue, and notes reception of the rebranding of all assets over the next 2.5 years to Ampol will be key.

Target price is $32.25 Current Price is $28.88 Difference: $3.37
If ALD meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $27.53, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgan Stanley rates APE as Overweight (1) -

First half results substantially beat Morgan Stanley's estimates. The broker observes the company has emerged as a stronger, more efficient business.

Tailwinds are envisaged from instant asset write-offs, access to superannuation, subsidies and an improving sales trajectory.

Overweight maintained. Target is raised to $9.00 from $6.70. Industry view: In-Line.

Target price is $9.00 Current Price is $8.39 Difference: $0.61
If APE meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.00, suggesting downside of -7.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgans rates AQZ as Add (1) -

Alliance Aviation Services posted a FY20 profit (NPBT) figure of $40.7m that was in-line with recent guidance and consensus. Morgans points to extremely strong trends in 2H20 for aircraft utilisation and company outlook comments for earnings growth in FY21 that were above the broker’s expectations.

Accordingly, Morgans upgrades profit estimates by 9.1%, 4.5% and 11.5% for FY21, FY22 and FY23, respectively.

The company’s outlook comments identified key opportunities including the conversion of short-term contracts to long-term charter contracts, an expected sustained increase in flight schedules for a number of clients to pre-covid-19 levels and the gradual recovery in Revenue Per Transaction (RPT) revenues and the benefit of new routes launched.

Morgans sees progress on resuming Virgin wet lease services as the near-term catalyst for the stock. The rating of Add is maintained. The target price is increased to $4.00 from $3.65.

Target price is $4.00 Current Price is $3.60 Difference: $0.4
If AQZ meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Ord Minnett rates AQZ as Buy (1) -

Ord Minnett was impressed with the FY20 result, which revealed a strong jump in the contribution from contract and charter segments. With the need for reliable regional/FIFO services, Alliance Aviation is considered well-placed to deliver for its growing customer base.

The broker observes changes occurring in the Western Australian and Queensland aviation market appear to be more persistent and structural in nature, which should benefit the company. Buy rating retained. Target rises to $4.15 from $3.70.

Target price is $4.15 Current Price is $3.60 Difference: $0.55
If AQZ meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Ord Minnett rates ASX as Lighten (4) -

Total listed entities declined to 2185 in July from 2265 in July 2019. Capital raised was $4.4bn, down -8%. While total value traded rose it was lower than the past 12-month average.

Registered market share of 83.2% in July has now moved closer to the 2019 average and Ord Minnett expects market share will continue to hover around this figure. Lighten rating and $79.14 target maintained.

Target price is $79.14 Current Price is $83.47 Difference: minus $4.33 (current price is over target).
If ASX 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 $72.30, suggesting downside of -13.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -1.0

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

Credit Suisse rates COF as Outperform (1) -

FY20 results were ahead of Credit Suisse estimates mainly because of the broker's overly conservative rent relief assumptions. The business remains well within debt covenants.

FY21 estimates are raised by 1.8% and FY22 reduced by -2.5%. The distribution guidance of 16.5c for FY21 is in line with guidance.

Credit Suisse suggests Centuria Office is likely to be suffering from negative investor sentiment because of its office exposure, and possibly the relatively higher gearing.

However, a short-term breach of debt covenants is considered unlikely. Outperform retained. Target is reduced to $2.14 from $2.16.

Target price is $2.14 Current Price is $1.95 Difference: $0.19
If COF meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.31, suggesting upside of 19.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgan Stanley rates ELO as Overweight (1) -

FY20 results were pre-guided and Morgan Stanley notes muted expectations for FY21 sales. The fact that the company was prepared to provide guidance for FY21 is considered a positive.

The annual recurring revenue target of $200-300m provides scope to capture significant value for shareholders and implies $10-15m of incremental income, explain the analysts.

Morgan Stanley reiterates an Overweight rating with a target price of $9. Industry view: In-line.

Target price is $9.00 Current Price is $6.45 Difference: $2.55
If ELO meets the Morgan Stanley target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Macquarie rates JHX as Outperform (1) -

Macquarie observes the market is recovering and structural conditions are improving. On the demand side, record low interest rates continue to be supportive despite the risks associated with the pandemic and unemployment.

While expectations are high going into the first quarter, Macquarie believes James Hardie will benefit from the current patterns in the US and is well-positioned to manage downside risks.

Outperform retained. Target is lifted to $36 from $35.

Target price is $36.00 Current Price is $30.12 Difference: $5.88
If JHX meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $32.63, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in March.

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: 1.0

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

Ord Minnett rates MYR as Hold (3) -

Myer has extended its lending facilities until August 2022 and reduced the size of the facility to $340m. A net cash position for FY20 has been guided, in line with Ord Minnett's expectations. There was no quantitative trading update.

Myer has closed its 11 metropolitan Melbourne stores for six weeks following the announcement of stage 4 restrictions. The three regional Victorian stores will continue to operate. Hold rating and $0.20 target retained.

Target price is $0.20 Current Price is $0.19 Difference: $0.01
If MYR meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $0.29, suggesting upside of 46.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Citi rates NCK as Buy (1) -

First half guidance appears conservative to Citi. Growth is likely to slow, however, from the fourth quarter of FY21 as the company cycles extraordinary sales growth.

The broker assesses the disruption caused by the pandemic may also provide acquisition opportunities and the market is ascribing little value to the $75m in land and buildings on the balance sheet.

First half net profit growth guidance of 50-60% assumes lower sales orders during August and September because of the Melbourne lockdown. The company is cycling weak comparables over the second quarter of FY21.

Citi retains a Buy rating and raises the target to $9.80 from $8.20.

Target price is $9.80 Current Price is $8.80 Difference: $1
If NCK meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Macquarie rates NCK as Outperform (1) -

FY20 results were ahead of prior guidance and Macquarie's expectations. The result was supported by deliveries for orders ahead of the pandemic lockdowns and store closures, as well as cost savings and government support.

A strong result in the first half of FY21 is expected. Visibility beyond the support of stimulus packages is challenging, as Macquarie notes it depends on how long consumer trends towards at-home categories remain elevated.

The broker is also cautious of capitalising peak earnings and wage support. Still, guidance is considered relatively conservative and an Outperform rating is retained. Target is raised to $9.20 from $7.00.

Target price is $9.20 Current Price is $8.80 Difference: $0.4
If NCK meets the Macquarie 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: 1.0

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

Ord Minnett rates ORA as Hold (3) -

As visibility on North America is low because of lack of relevant comparable numbers and data, Ord Minnett would like to witness an actual improvement in reported earnings before considering a more positive view on the stock.

The company will report its FY20 result in August 20 and Ord Minnett expects a net profit of $172m, down -21%.

The broker retains a Hold rating and reduces the target to $2.50 from $2.65 because of changes in currency assumptions.

Target price is $2.50 Current Price is $2.33 Difference: $0.17
If ORA meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.76, suggesting upside of 18.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

UBS rates ORE as Neutral (3) -

Orocobre reported June quarter sales volume in-line with UBS’s estimate at a price that was slightly below guidance.

The lithium producer announced a capital expenditure increase for the phase 2 expansion of its Olaroz facility (Argentina) to -US$330m. UBS suspects there is a risk of delays and capex increases due to covid-19.

Inventory levels have almost doubled to circa six months of inventory from the circa three months pre-covid. However, the company sees market momentum strengthening in Europe.

The broker thinks while the near-term outlook offers more depressed pricing and low sales, things will start improving in the medium-term.

UBS maintains its Neutral rating with a target price of $2.50.

Target price is $2.50 Current Price is $3.28 Difference: minus $0.78 (current price is over target).
If ORE meets the UBS target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.77, suggesting downside of -13.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Citi rates RMD as Neutral (3) -

Citi found the fourth quarter result better than expected. Near-term forecasting is difficult as the pandemic continues, the broker observes.

Ventilator revenue is set to decline while obstructive sleep apnoea revenue is recovering, albeit at a slower rate. The broker retains a Neutral rating and $27 target.

Target price is $27.00 Current Price is $25.88 Difference: $1.12
If RMD meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $24.96, suggesting downside of -0.7% (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

Credit Suisse rates RMD as Neutral (3) -

Fourth quarter results were in line with Credit Suisse estimates. The broker observes the long-term strategy and growth potential remain intact.

However, CPAP sales are not expected to return to pre-pandemic levels until the third quarter of FY21.

The company has increased its investment in out-of-hospital platforms which means it can benefit from any behavioural shift post the pandemic. Potentially, there is greater demand for home health care.

The broker retains a Neutral rating and raises the target to $28.00 from $27.50.

Target price is $28.00 Current Price is $25.88 Difference: $2.12
If RMD meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $24.96, suggesting downside of -0.7% (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

Macquarie rates RMD as Underperform (5) -

ResMed results were better than Macquarie expected, supported by robust ventilator demand because of the pandemic.

The broker considers the near-term growth outlook is modest.

With reimbursement risk and elevated multiples Macquarie retains an Underperform rating. Target is raised to $20.00 from $19.70.

Target price is $20.00 Current Price is $25.88 Difference: minus $5.88 (current price is over target).
If RMD meets the Macquarie target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.96, suggesting downside of -0.7% (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

Morgan Stanley rates RMD as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley considers the business is emerging from the pandemic in a stronger position but this has been encapsulated in the outperformance of the stock over the year to date.

Hence, the broker downgrades to Equal-weight from Overweight. Earnings in FY20 beat estimates largely because of slower costs growth.

The company has tripled production capacity for ventilators, while mask resupply sales associated with obstructive sleep apnoea have remained solid in the US, albeit below estimates. Target is reduced to $25.40 from $26.60. Industry view: In-Line.

Target price is $25.40 Current Price is $25.88 Difference: minus $0.48 (current price is over target).
If RMD 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 $24.96, suggesting downside of -0.7% (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

Morgans rates RMD as Add (1) -

ResMed released 4Q20 results with adjusted earnings ahead of Morgans forecasts. Revenue of US$770.3 m was also above the consensus of the broking community. 

The broker states the results were underpinned by significant ventilator sales, gross margin expansion and lower operating expenses driving strong operating leverage.

As expected by Morgans, Rest Of the World (ROW) ventilator and US masks benefited from a covid-19 surge, but was somewhat offset by double-digit losses across the sleep business due to lockdowns.

The broker believes in a solid earnings outlook beyond a challenging 1HFY21, due to an above 15m installed base supporting a US mask resupply annuity stream, generally receding new patient diagnosis headwinds, pandemic accelerated macro trends (including digital health), large markets with unmet need and upside on potential covid-19 vaccines and therapies.

The Add rating is maintained. The target price is increased to $29.33 from $29.00.

Target price is $29.33 Current Price is $25.88 Difference: $3.45
If RMD meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $24.96, suggesting downside of -0.7% (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 RMD as Lighten (4) -

Revenue in the June quarter was in line with Ord Minnett's estimates and net profit was ahead. The broker believes demand from the pandemic has now largely run its course and the focus will switch to the outlook, in the face of diminished rates of diagnosis.

Ord Minnett remains concerned that sales will grow at a more modest rate because of weaker economic conditions. Lighten rating maintained. Target rises to $20.00 from $19.70.

Target price is $20.00 Current Price is $25.88 Difference: minus $5.88 (current price is over target).
If RMD meets the Ord Minnett target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.96, suggesting downside of -0.7% (ex-dividends)

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: -0.1

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

UBS rates RMD as Neutral (3) -

The June quarter revenue was -5% below UBS’s estimates due to lower accessory sales. Favourable product mix was offset by higher freight costs.

Ventilator products contributed about US$125m in revenue in the June quarter, offsetting the decline in sleep-related sales of US$105m.

UBS does not expect ventilator sales momentum to continue in FY21, leading to a somewhat lower gross margin. The broker considers the fundamental drivers of long-term growth remain intact.

UBS maintains its Neutral rating with a target price of US$200.

Current Price is $25.88. Target price not assessed.

Current consensus price target is $24.96, suggesting downside of -0.7% (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

Morgan Stanley rates SCG as Overweight (1) -

Scentre Group has pre-released first half cash flow, which is in excess of $250m. The company has also confirmed asset devaluation of approximately -10%.

Cash flow is a little under Morgan Stanley's expectations, having expected rent collection would be around 70% of net operating income and it appears more likely to have been closer to 60%.

Overweight rating. Target is $2.66. Industry view: In-line.

Target price is $2.66 Current Price is $1.92 Difference: $0.74
If SCG meets the Morgan Stanley target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $2.40, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Ord Minnett rates SCG as Hold (3) -

Scentre Group expects the book value of the portfolio to decline -10% in the June half while anticipating net operating cash flow in excess of $250m.

For better analysis, Ord Minnett would like to know the percentage rent paid on average by tenants and the percentage of tenants that have paid rent.

Nevertheless, it was encouraging that cash flow has remained positive. Hold rating and $2.10 target maintained. The company will release its first half result on August 25.

Target price is $2.10 Current Price is $1.92 Difference: $0.18
If SCG meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.40, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

UBS rates SCG as Neutral (3) -

Scentre Group's cash flows in the first half are below UBS’s estimate. The broker expects challenges to continue which include low number of long-term leasing deals, a downward resetting of rents and a second wave.

Asset values declined by -10% due to the impact of the pandemic. This will likely take gearing levels to 38%, UBS points out.

The broker expects funds from operations per share to be $0.09 although the REIT has not provided any update on this.

UBS reaffirms its Neutral rating with a target price of $2.25.

Target price is $2.25 Current Price is $1.92 Difference: $0.33
If SCG meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.40, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Macquarie rates SO4 as Outperform (1) -

A fully underwritten $98.5m equity raising and US$138m syndicated debt facility will complete the funding for Lake Way. Macquarie considers this a key milestone.

First production remains on track for the third quarter of FY21. The broker maintains an Outperform rating and reduces the target to $0.95 from $1.

Target price is $0.95 Current Price is $0.61 Difference: $0.34
If SO4 meets the Macquarie target it will return approximately 56% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates TPG as Downgrade to Sell from Neutral (5) -

UBS thinks TPG Telecom’s share price has not fully adjusted for the special dividend payment.

The stock appears to be trading at a premium to Telstra which UBS considers fair given that synergies will take time to achieve and the broker expects more growth from TPG in the near term.

Even so, the broker believes the magnitude of the premium is excessive. Valuation remains highly dependent on synergy assumptions.

UBS downgrades its rating to Sell from Neutral with its target price decreasing to $7.20 from $8.

Target price is $7.20 Current Price is $8.24 Difference: minus $1.04 (current price is over target).
If TPG meets the UBS target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.49, suggesting upside of 5.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Citi rates VUK as Buy (1) -

Citi analysts have reiterated their Buy rating post Virgin Money UK's Q3 market update, which was in-line or better-than-expected on key financial metrics.

Most importantly, Citi believes, confidence among investors would have grown that they can trust the tangible book value per share, seen as a major positive.

While loan volumes were in-line, impairment charges were much lighter than anticipated. Costs are kept in check, and deposit volumes surprised by 5%. Target price GBP1.30 (unchanged).

Current Price is $1.64. Target price not assessed.

Current consensus price target is $1.70, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

This company reports in GBP. 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