Australian Broker Call

Citi rates A2M as Buy (1) -

Further consolidation in the infant milk formula industry could be an opportunity for local companies to differentiate product offerings under reduced pressure from foreign brands who may be looking to exit the market, according to Citi. 

Alongside China brand health metrics remaining positive despite issues over the last year, Citi is encouraged by a2 Milk Company's improved inventory position and new strategies leading to improved momentum. 

The Buy rating and target price of $7.30 are retained. 

Target price is $7.30 Current Price is $5.56 Difference: $1.74
If A2M meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $6.96, suggesting upside of 26.3% (ex-dividends)

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: 0.2

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

Credit Suisse rates ARB as Downgrade to Underperform from Neutral (5) -

Credit Suisse expects to see yet another cracking result (interim) in February, but also that ARB Corp will temper expectations regarding the outlook as the company will need to allow for costs to rise because of the step-up in the revenue base.

The broker is projecting margin pressure and slower growth which, all else remaining equal, should spell trouble for shares in this high quality company as it is trading on elevated multiples.

Credit Suisse anticipates market consensus will reset at a lower level post February. Target price falls to $38 from $46.90. Downgrade to Underperform from Neutral.

Target price is $38.00 Current Price is $52.82 Difference: minus $14.82 (current price is over target).
If ARB meets the Credit Suisse target it will return approximately minus 28% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $48.29, suggesting upside of 4.3% (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

Citi rates BUB as Buy (1) -

Further consolidation in the infant milk formula industry could be an opportunity for local companies to differentiate product offerings under reduced pressure from foreign brands who may be looking to exit the market, according to Citi. 

Despite being currently loss-making, Citi notes relatively small Bubs Australia has potential to capture market share given the fast growing category and strong partnerships. The broker noted evidence of sales momentum in both CBEC and corporate daigou channels. 

The Buy/High Risk rating is retained and the target price increases to $0.63 from $0.58.

Target price is $0.63 Current Price is $0.48 Difference: $0.15
If BUB meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Citi rates CCX as Neutral (3) -

In analysis of City Chic Collective's website traffic, Citi notes online sales accounted for 71% of the company's total revenue in FY21, but while web traffic increased on average 63% from July to December 2021, site visits have slowed month to month since December.

Traffic to the Australian site grew only 28% in December, compared to 32% in November but the broker notes traffic continues to support a second half sales growth forecast of 39%

The Neutral rating is retained and the target price decreases to $6.22 from $6.75.

Target price is $6.22 Current Price is $4.88 Difference: $1.34
If CCX meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $6.71, suggesting upside of 49.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Macquarie rates CGC as Outperform (1) -

Costa Group Holdings' new leases for seven farms previously leased from Vitalharvest are now effective with the latter's new owner, Macquarie Asset Management ((MQG)).

The direct impact is calculated as -7% at the NPAT-S level. On top of this, average pricing for retail fruit and vegetables has been calculated as some -6% below average prices in 2020.

Hence, profit estimates have been reduced for the three years ahead, by between -5% and -7%, predominantly led by the new lease arrangements, explains the broker.

Price target falls to $3.41 from $3.51. Outperform rating retained as last year's underperformance is seen as presenting a buying opportunity in the beaten-down share price.

Target price is $3.41 Current Price is $3.01 Difference: $0.4
If CGC meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.54, suggesting upside of 20.5% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates CHC as Accumulate (2) -

Following the announcement that Charter Hall Group has entered into an agreement to acquire 50% of Paradice Investment Management at a cost of $207m, Ord Minnett notes the company's share price fell -8%. 

While the move was surprising and raises some questions around shifting strategy and the future direction of Charter Hall Group, the broker notes the price of purchase appears in-line with peers and offers 1.3% accretion to FY22 and 3% annual accretion from FY23.

Ord Minnett forecasts a 19% earnings per share compound annual growth rate to FY24. The Accumulate rating and target price of $23.00 are retained.

This report was published on December 24, 2021.

Target price is $23.00 Current Price is $19.20 Difference: $3.8
If CHC meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $22.55, suggesting upside of 21.1% (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 IPL as Neutral (3) -

Incitec Pivot is of the intent to acquire French-based explosives distributor Titanobel and Credit Suisse finds the immediate financial impact immaterial, but the rationale behind the deal is warmly welcomed.

The acquisition, explains the broker, allows for leveraging Incitec Pivot's detonator and emulsion technology, on top of the optionality of geographical expansion.

For now, Neutral rating retained. Target price unchanged at $3.14.

Target price is $3.14 Current Price is $3.37 Difference: minus $0.23 (current price is over target).
If IPL meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.60, suggesting upside of 5.0% (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 IPL as Overweight (1) -

Incitec Pivot has announced the acquisition of Titanobel in France and Morgan Stanley suggests the move is sound from a strategic point of view.

The broker does make the point the market in Europe is not exactly growing at high speed but is confident the acquirer can achieve synergies, as well as leverage off its existing systems and tech platform.

Morgan Stanley retains its Overweight rating on the expectation of earnings upside given fertiliser markets are currently "booming". Price target $4.30. Industry view is In-Line.

Target price is $4.30 Current Price is $3.37 Difference: $0.93
If IPL meets the Morgan Stanley target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.60, suggesting upside of 5.0% (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 JHX as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley downgrades James Hardie to Equal-Weight from Overweight on the assessment that uncertainty has increased now that the CEO has left and US housing is slowing.

James Hardie remains a quality business, the broker suggests, while not anticipating the interim CEO is ready to make any major changes.

Forecasts have been slightly increased (2%), towards the top end of guidance, with the FY23 forecast lifting by 5%. Management uncertainty injects a -10% discount, which is why the price target falls to $58 from $62.

Industry view is In-Line.

Target price is $58.00 Current Price is $50.89 Difference: $7.11
If JHX meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $57.76, suggesting upside of 17.2% (ex-dividends)

The company's fiscal year ends in March.

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

Credit Suisse rates PTM as Underperform (5) -

Platinum Asset Management's market update revealed funds under management in line with Credit Suisse's projection. The broker notes outflows improved slightly from recent updates and estimates have been left untouched.

The broker points out Platinum has consistently suffered monthly outflows over the past three years. The lost -$7bn over the period represents circa -30% of the fund manager's total assets under management.

Credit Suisse reiterates its Underperform rating as longer term performance of the International fund remains underwhelming. The stock may well be facing its next de-rating, the stockbroker suggests. Target $2.50.

Target price is $2.50 Current Price is $2.64 Difference: minus $0.14 (current price is over target).
If PTM meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.15, suggesting upside of 19.8% (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

Ord Minnett rates QUB as Accumulate (2) -

Qube Holdings has completed the sale of the Moorebank property for a  before-tax proceed of $1.36bn as well as a further deferred conditional $312m, with Ord Minnett noting the sale closes a major chapter in the company's corporate history. 

The broker expects the company to provide further guidance around capital deployment at the first half result in February, but notes the upfront portion of sale proceeds provides capacity for a special dividend of more than 10 cents per share. 

The Accumulate rating is retained and the target price increases to $3.40 from $3.37.

This report was published on December 21, 2021.

Target price is $3.40 Current Price is $2.99 Difference: $0.41
If QUB meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.37, suggesting upside of 14.2% (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

Ord Minnett rates RIO as Hold (3) -

Rio Tinto has announced the US$825m acquisition of Rincon Mining's undeveloped Argentinian lithium brine asset. Ord Minnett reports the project has an estimated 40-year mine life with potential production of 50,000 tonnes per annum lithium carbonate equivalent from 2026. 

The acquisition price alongside an expected capital expenditure of US$770m makes the project an expensive purchase, but the broker likes the increased exposure to battery metals. Lithium could represent more than 5% of total group earnings by 2030. 

The Hold rating and target price of $102.00 are retained. 

This report was published on December 23, 2021. 

Target price is $102.00 Current Price is $105.99 Difference: minus $3.99 (current price is over target).
If RIO meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $107.50, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.4

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

UBS rates RIO as Sell (5) -

In assessment of Rio Tinto's acquisition of the Rincon lithium project in Argentina for US$825m, UBS analysts reiterate their own positive view regarding the outlook for lithium prices, anticipating demand to remain stronger than supply in the years ahead.

Also, if Rio Tinto develops both Rincon and its Jadar lithium-borates project in Serbia, the company will effectively become a global top-10 producer of lithium with US$1-2bn in revenues annually, on the broker's calculations.

UBS retains a negative outlook for iron ore pricing and this dominates its view, hence its Sell rating remains in place. Price target 3,900p.

This report was released on January 6, 2022.

Target price is $80.00 Current Price is $105.99 Difference: minus $25.99 (current price is over target).
If RIO meets the UBS target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $107.50, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.4

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

Citi rates SBM as Neutral (3) -

The start of St. Barbara's Simberi project this month has prompted Citi to update forecasts. Despite St. Barbara continuing to guide to 60-70,000 ounces from Simberi, Citi forecasts 50,000 ounces but notes the reduction is offset by a 5% increase to expected gold pricing. 

The broker highlights Gwalia performance in the December quarter will be key given management focus has been pulled from the key asset due to recent merger and acquisition activity, which has become a market concern. 

The Neutral/High Risk rating and target price of $1.60 are retained.

Target price is $1.60 Current Price is $1.31 Difference: $0.29
If SBM meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $1.77, suggesting upside of 33.1% (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

Macquarie rates SDF as Outperform (1) -

Macquarie suggests Steadfast Group may benefit from earnings upside to forecasts given the strongest pricing cycle in a decade, increased debt facilities providing an approximate $550m capacity for acquisition and improved efficiencies from technology rollout. 

A 9% premium rate increase across competitor Insurance Australia Group's ((IAG)) portfolio in the first quarter is a notable beat on Steadfast's expected 5-7% increase in FY22, and data suggests price strengthening should continue over the coming twelve months. 

Earnings per share forecasts increase 1.9% for FY22, 11.5% for FY23, and between 3-10% for the following years. 

The Outperform rating is retained and the target price increases to $5.85 from $5.40.

Target price is $5.85 Current Price is $5.26 Difference: $0.59
If SDF meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $5.39, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.9

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

UBS rates SFR as Buy (1) -

UBS notes Sandfire Resources remains on track to close the acquisition of Matsa in Spain by February 1st, having received the two outstanding regulatory approvals for the deal.

UBS suggests the outlook for zinc might be better than generally accepted, with its own price forecasts likely due an upgrade.

Price target $8. Buy.

This report was released on January 5, 2022.

Target price is $8.00 Current Price is $6.99 Difference: $1.01
If SFR meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $6.83, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Ord Minnett rates TCL as Buy (1) -

Ord Minnett notes resolution on the West Gate Tunnel project between Transurban Group and the Victorian government should allow the project to complete. The design and construction contract will be raised by $3.4bn, with $1.7bn to be footed by each party. 

This likely allows for tunneling to commence early 2022, and a completion date of late 2025. Further, the broker notes as yet no changes to tolling concessions have been raised, with Transurban set to operate the tunnel until 2045. 

The Buy rating is retained and the target price decreases to $15.40 from $16.30. 

This report was published on December 20, 2021.

Target price is $15.40 Current Price is $13.46 Difference: $1.94
If TCL meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $14.65, suggesting upside of 9.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

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

Morgans has remodeled The Reject Shop, this time incorporating the AASB 16 lease accounting standard and although no major changes have occurred in forecasts, the price target rises as peers are now trading on higher multiples.

Incorporating a higher  multiple, the broker's price target climbs to $6.80 from $6.51. Alas, the share price is trading at a higher level, hence why the decision was made to downgrade to Hold from Add.

The company, with a long-established, 40-year history, has positioned itself as a turnaround story, suggests the broker, but near-term challenges are on the horizon. Think supply chains and cost inflation on top of reduced foot traffic.

Target price is $6.80 Current Price is $6.92 Difference: minus $0.12 (current price is over target).
If TRS meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.47, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates VNT as Initiation of coverage with Buy (1) -

Ord Minnnett initiates coverage on essential infrastructure services provider Ventia Services Group. The company offers full asset lifestyle capabilities across Australia and New Zealand, including operations and maintenance, facilities management and minor capital works.

The broker expects Ventia Services Group to be able to capitalise on industry growth in coming years given its capital light model, long-term contracts and and high level of diversification across services, clients and geography. 

With $15.5bn work in hand as of the end of July 2021, Ord Minnett is confident in the company's ability to deliver strong near-term earnings and cash flow growth. The broker initiates with a Buy rating and a target price of $2.60.

This report was published on December 28, 2021.

Target price is $2.60 Current Price is $2.01 Difference: $0.59
If VNT meets the Ord Minnett target it will return approximately 29% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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