Australian Broker Call

UBS rates A2M as Buy (1) -

UBS expects a meaningful recovery in indirect infant formula sales in the next two years plus substantial share gains in China. The broker's research supports the company's view of a large opportunity in a modestly growing Chinese infant formula market.

Meanwhile, online brand strength remains strong with high WeChat engagement. UBS retains a Buy rating and raises the target to NZ$16.00 from NZ$15.60.

Current Price is $9.40. Target price not assessed.

Current consensus price target is $9.20, suggesting downside of -1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.1

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

Macquarie rates ABC as Neutral (3) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

For Adbri there remains a number of opaque complexities with market-structure issues remaining at the forefront and a marked improvement in demand is needed to overcome these concerns, explains Macquarie. The Neutral rating and $3.20 target are retained.

Target price is $3.20 Current Price is $3.32 Difference: minus $0.12 (current price is over target).
If ABC meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.19, suggesting downside of -3.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.3

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

Macquarie rates AFG as Outperform (1) -

Earlier this week, the first half result prompted a 7.7% upgrade to Macquarie's FY21 EPS forecasts. After a review of margin outlook, book growth and commissions the broker forecasts past headwinds will become tailwinds and support earnings growth.

Outperform and target of $3.06 are retained. The company continues to benefit from activity levels in the residential mortgage market and favourable margins, and Macquarie believes earnings risk remains to the upside.

Target price is $3.06 Current Price is $2.67 Difference: $0.39
If AFG meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.92, suggesting upside of 9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Ord Minnett rates AGL as Accumulate (2) -

Ord Minnett notes lower wholesale electricity prices drove AGL Energy’s earnings materially lower in the first half. Also, the broker expects earnings to continue to deteriorate going ahead.

Accumulate rating with the target rising to $14.05 from $14.

Target price is $14.05 Current Price is $9.48 Difference: $4.57
If AGL meets the Ord Minnett target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $10.95, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.5

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

Ord Minnett rates AMC as Buy (1) -

Looking at Nielsen's latest data for the four weeks to 20 February, Ord Minnet notes North American beverage volumes remain a key focal point for Amcor.

The broker highlights retail sales volumes for beverages were modestly higher year-on-year. For sports drinks, volumes were up slightly in the period while sales for Kraft Heinz continued to grow strongly in the period.

The data overall showed strong trends in food and moderate growth in beverages, concludes the broker, suggesting the demand environment for Amcor’s North America business has been supportive so far.

Accumulate rating with a $17 target price.

Target price is $17.00 Current Price is $14.75 Difference: $2.25
If AMC meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $17.00, suggesting upside of 14.6% (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: 0.7

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

Morgans rates AND as Add (1) -

Ansarada Group delivered a first half result better than Morgans had expected as subscriptions customers rose 12% year-on-year. It's considered this will result in revenue growth from the 1H21 to 2H21.

The merger of the company with thedocyard was consummated and operating costs were reduced leading to an earnings (EBITDA ) positive position, explains the broker.

The analyst upgrades FY21-22 pro forma revenue forecasts by 5-10% which, combined with forecasts for lower opex, leads to material upgrades to EPS forecasts.The Add rating and $1.55 target are maintained.

Target price is $1.55 Current Price is $1.30 Difference: $0.25
If AND meets the Morgans target it will return approximately 19% (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 BKW as Neutral (3) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

In the US, with little direct stimulus to date, structural factors have played a larger role in demand and the analyst feels this has a longer time to play out.

For Brickworks, Macquarie retains a Neutral rating and $20.60 target with the group reporting in late-March. A solid outlook in Australia is expected though US Building Products could still see a soft context in non-residential building.

Target price is $20.60 Current Price is $18.88 Difference: $1.72
If BKW meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $21.32, suggesting upside of 12.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Macquarie rates BLD as No Rating (-1) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

In the US, with little direct stimulus to date, structural factors have played a larger role in demand and the analyst feels this has a longer time to play out.

There was no specific commentary pertaining to Boral and the broker is currently restricted from making a recommendation.

Current Price is $5.37. Target price not assessed.

Current consensus price target is $5.47, suggesting upside of 3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

Macquarie rates CSR as Outperform (1) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

In the US, with little direct stimulus to date, structural factors have played a larger role in demand and the analyst feels this has a longer time to play out.

Macquarie considers CSR is well positioned to gain from the strength in domestic detached housing demand. The broker's FY22 profit (NPAT) estimate is around 11% above consensus driven by Buiding Products and Aluminium. Outperform with a $6 target.

Target price is $6.00 Current Price is $5.60 Difference: $0.4
If CSR meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $5.42, suggesting downside of -3.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Macquarie rates FBU as Neutral (3) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

No specific commentary was provided by the broker on Fletcher Building. Neutral retained and target of NZ$6.40 are maintained.

Current Price is $6.09. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.2

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

UBS rates FMG as Buy (1) -

UBS observes Fortescue Metals has only delivered a 4% total return over the year to date despite a 10% increase in iron ore prices. The broker suspects this is partly because of some recent announcements regarding executive changes stemming from issues at Iron Bridge.

Amid questions regarding what the stock is worth, in its modelling UBS calculates a -14% price discount in FY21, improving to around -7% in the long-term because of the shift towards higher quality iron ore.

The broker also assumes 178-182mt in shipments for FY21 and no growth expenditure from FY24 onwards. UBS retains a Buy rating and $25 target.

Target price is $25.00 Current Price is $22.84 Difference: $2.16
If FMG meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $23.24, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.4

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

Macquarie rates JHX as Outperform (1) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

In the US, with little direct stimulus to date, structural factors have played a larger role in demand and the analyst feels this has a longer time to play out.

Macquarie considers James Hardie Strong had a strong result. It's currently viewed as a good operating environment with the company intending to expand its addressable market through new innovative products. Outperform and $45.30 target are retained.

Target price is $45.30 Current Price is $38.07 Difference: $7.23
If JHX meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $43.60, suggesting upside of 15.6% (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: 0.6

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

Macquarie rates KLL as Outperform (1) -

After a recent site visit to the Beyondie sulphate of potash (SOP) development project, Macquarie came away impressed with the progress made.

The project is considered to remain on budget and on schedule for first SOP production in mid-first quarter FY22.

No changes to forecasts.Target $0.40. Rating Outperform.

Target price is $0.40 Current Price is $0.20 Difference: $0.2
If KLL meets the Macquarie target it will return approximately 100% (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

Citi rates NXT as Buy (1) -

NextDC delivered a solid result, observes Citi, with both revenue and operating income margins ahead of the broker's forecasts.

The company remains a key pick for Citi with a majority of the near-term earnings already contracted and customer expansion underpinning its medium-term forecasts.

The broker also expects the pandemic to accelerate cloud adoption and digitisation, expected to lead to higher demand for NextDC (from both enterprise and hyperscale customers).

Buy rating with the target falling to $14.45 from $14.80.

Target price is $14.45 Current Price is $11.02 Difference: $3.43
If NXT meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $14.07, suggesting upside of 32.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

Macquarie rates PMV as Outperform (1) -

Macquarie reviews earnings sensitivity to total sales, channel mix and margin.

The broker highlights online has a significantly higher earnings (EBIT) margin versus stores. Each move of 100 basis points (bps) in online penetration impacts earnings margins by 20 bps and earnings by 1.1%.

Outperform rating and target of $28 are retained. The analyst notes the retailer is trading at a -13% discount to pre-pandemic multiples and -15% discount to A&NZ peers (pre-pandemic trading).

Target price is $28.00 Current Price is $21.55 Difference: $6.45
If PMV meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $24.77, suggesting upside of 12.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Macquarie rates PSI as Outperform (1) -

PSC Insurance has entered into agreements to acquire 100% of two UK-based commercial SME broking businesses (subject to approvals by the UK Financial Conduct Authority (FCA). 

The Trust Insurance Services business cost around -$28m and Abaco Insurance Brokers was -$38m. They are to be paid for by around -$49m in cash and the balance in scrip. Macquarie expects them to contribute approximately $1.8m to FY21 earnings (EBITDA).

Outperform and target price is increased to $3.85 from $3.60.

Target price is $3.85 Current Price is $3.35 Difference: $0.5
If PSI meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Credit Suisse rates QAN as Underperform (5) -

Credit Suisse adjusts forecasts to allow for a more favourable working capital position in FY22.

Qantas has a very large negative working capital position, which is expected to increase to -$6.3bn in FY22 and -$6.7bn in FY24 as a recovery in unearned ticket revenue offsets a decline in unearned loyalty revenue.

Credit Suisse maintains an Underperform rating and raises the target to $4.15 from $3.90.

Target price is $4.15 Current Price is $5.03 Difference: minus $0.88 (current price is over target).
If QAN meets the Credit Suisse target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.38, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Morgan Stanley rates QBE as Overweight (1) -

QBE Insurance has appointed Andrew Horton as CEO, commencing September 1, 2021.

Morgan Stanley believes the priorities should include reducing earnings volatility while restoring growth, and capitalising on the global pricing environment to improve margins.

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

Target price is $11.00 Current Price is $9.28 Difference: $1.72
If QBE meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $10.67, suggesting upside of 11.8% (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: 0.8

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

Ord Minnett rates QBE as Accumulate (2) -

QBE Insurance Group announced a new group CEO, Andrew Horton. Ord Minnett does not expect any undue concern to the equity markets given that management change was already anticipated.

Ord Minnett retains an Accumulate rating. Target price is $11.

Target price is $11.00 Current Price is $9.28 Difference: $1.72
If QBE meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $10.67, suggesting upside of 11.8% (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: 0.8

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

Macquarie rates RIO as Outperform (1) -

Rio Tinto has announced that Non-Executive Chairman Simon Thompson will not seek board re-election at the 2022 AGM. In addition, Michael L’Estrange will retire from the board at the 2021 AGM.

Separately Macquarie highlights iron-ore prices continue to drive upgrade momentum, outweighing the rising cost pressures. 

Macquarie retains the Outperform rating and $135 target.

Target price is $135.00 Current Price is $129.75 Difference: $5.25
If RIO meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $127.71, suggesting upside of 5.2% (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: 0.6

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

Macquarie rates RWC as Outperform (1) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

In the US, with little direct stimulus to date, structural factors have played a larger role in demand and the analyst feels this has a longer time to play out.

Macquarie thinks Reliance Worldwide Corp will continue to execute well in meeting demand and mitigating potential cost inflation. The broker's estimates are well above consensus in FY22, backing a view that the market environment will be more supportive for longer.

The Outperform rating and $5 target are retained.

Target price is $5.00 Current Price is $4.27 Difference: $0.73
If RWC meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.86, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

UBS rates SXL as Buy (1) -

UBS observes radio markets continue to improve and expects FY21 revenues of $545m. Lower depreciation & amortisation drives a 8-9% upgrade to FY21 estimates for earnings per share.

A further rebound in advertising revenue, offset by the cessation of JobKeeper and PING benefits, is expected in FY22.

Potential negatives include the upcoming renegotiation of the current affiliate agreement with Nine Entertainment ((NEC)), with speculation also suggesting the latter is evaluating other options. Buy rating retained. Target is $2.50.

Target price is $2.50 Current Price is $2.25 Difference: $0.25
If SXL meets the UBS 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: 0.0

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

Macquarie rates TCL as Outperform (1) -

Macquarie highlights traffic recovery continues with NSW and QLD growth going positive. Strong employment and a rebound in registration growth supports the broker's 2H estimated earnings (EBITDA) rises of 30% and 26% for FY22.

After exploring additional details around Maryland, the analyst notes the size of the project may be smaller if the economics of certain sections do not make sense.

Outperform retained and target falls to $14.76 from $14.83.

Target price is $14.76 Current Price is $13.03 Difference: $1.73
If TCL meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $14.27, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Macquarie rates WGN as Outperform (1) -

Macquarie reviews the reporting season for building stocks and concludes it delivered solid results across the board. Operating leverage delivered beats in profitability and balance sheets are considered in great shape, benefitting from strong cash flows and capex cuts.

The broker notes the toughest question to answer is how long this current environment will last. In Australia, HomeBuilder has brought forward demand and building pipelines (especially detached homes) are now full and activity will be elevated deep into 2022.

Macquarie considers Wagners Holdings reported a solid result where volume growth drove operating leverage, helping to lift margins, particularly in construction materials and services (CMS).

Structural issues are receding and early signs of a cyclical recovery are evident, concludes the broker. The Outperform rating and $2.25 target are retained.

Target price is $2.25 Current Price is $1.87 Difference: $0.38
If WGN meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.38, suggesting upside of 29.5% (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

Citi rates Z1P as Neutral (3) -

With the US still early in the buy now pay later penetration phase along with a large total addressable market, Citi sees upside risks to the near-term forecasts for Zip Co.

Zip Co showed better than expected first-half gross profit and operating income margins with both the core Australian business and International business demonstrating strong unit economics. 

Cash gross profit margins expanded by circa 200bps year over year to circa 54%, leading to Zip Co delivering a break-even cash operating income result despite the rise in investment.

Even so, continuing to see medium-term risks to the outlook from the competition and Zip’s lack of scale internationally, Citi decides to stick to its Neutral rating. The target price rises to $11.35 from $6.50.

Target price is $11.35 Current Price is $10.55 Difference: $0.8
If Z1P meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $9.10, suggesting downside of -9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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