Australian Broker Call

Citi rates BSL as Neutral (3) -

Demand in the US for steel has enabled prices to lift. Spot prices for North Star hot rolled coil spreads are now US$275/t. Citi lifts its forecasts for North Star earnings (EBIT) in FY21 to $182m.

Domestic dispatches are expected to be -5% lower in FY21 because of weaker construction. Hence, this being where Australian Steel Products makes money, the broker envisages FY21 ASP earnings of $150m compared with FY20 of $305m.

Neutral rating retained. Target rises to $13.60 from $13.00.

Target price is $13.60 Current Price is $12.89 Difference: $0.71
If BSL meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $13.88, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Ord Minnett rates BSL as Accumulate (2) -

The North Star spread is above the Australian Steel Products spread for the first time since the end of April, Ord Minnett observes. US prices continue to sharply move upwards despite another rise in capacity utilisation.

The broker assesses some of this could be driven by stronger-than-expected light vehicle production, anticipated in the third quarter of 2020. Accumulate rating and $15.30 target retained.

Target price is $15.30 Current Price is $12.89 Difference: $2.41
If BSL meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $13.88, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Macquarie rates CHN as Outperform (1) -

Macquarie has visited the Julimar site in WA, noting plans to accelerate the drilling. Land outside of the state forest has been largely secured and should enable a complete drill-out of the Gonneville intrusion over the next year.

A maiden resource is expected by mid 2021. Strong palladium prices drive material upside risk to the valuation, the broker points out. Outperform rating and $1.80 target retained.

Target price is $1.80 Current Price is $1.75 Difference: $0.05
If CHN meets the Macquarie target it will return approximately 3% (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

Ord Minnett rates CLV as Buy (1) -

Clover Corp 's FY20 results were in line with expectations. However, guidance has disappointed the market. Nevertheless, Ord Minnett considers de-stocking is likely to be a temporary condition, expected to clear in a matter of months.

The broker is comforted by the ongoing EU sales and new client order rates maturing into 2021.

Ord Minnett is increasingly confident in the opportunity for DHA minimums to be included in infant formula brands in China. With more than 50% of the world's infant formula consumed in China, the regulation could set a minimum level for DHA in formula globally.

Buy rating reiterated. Target is reduced to $3.00 from $3.07.

Target price is $3.00 Current Price is $2.25 Difference: $0.75
If CLV meets the Ord Minnett target it will return approximately 33% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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 CLV as Neutral (3) -

UBS finds Clover Corp's second half was strong with net profit up 26% and ahead of UBS's estimate led by a higher-than-expected contribution from Europe after February's regulatory change.

FY21 will be challenging, expects the broker, with the pandemic having impacted the order book visibility for the first half and demand tracking flat year on year. In the medium term, the broker remains attracted to the company due to its market-leading products with structural tailwinds and opportunities from new products.

UBS maintains its Neutral rating with the target reducing to $2.30 from $2.50.

Target price is $2.30 Current Price is $2.25 Difference: $0.05
If CLV meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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

Morgan Stanley rates DXS as Downgrade to Underweight from Overweight (5) -

Morgan Stanley believes equity investors should be more cautious over the next 6-12 months on the Australian office market. The broker elaborates by stating it expects occupancy to drop to circa 93% in the next 12 months with incentives expected to elevate to 30% in FY22, from 20%.

Dexus Property Group's office portfolio's weighted average lease expiry at 4.2 years is the weakest versus its peers Mirvac Group ((MGR)) and GPT Group ((GPT)), notes the broker, and reflects 28% of its portfolio will be expiring in the next 24 months. Morgan Stanley recommends Mirvac Group above Dexus or GPT Group for investors keen on Office.

Led by higher unemployment, lower occupancy, challenged leasing environment and delayed work from home risks, Morgan Stanley downgrades its rating to Underweight from Overweight. The target price decreases to $8.15 from $10.20. Industry View: In-line.

Target price is $8.15 Current Price is $9.02 Difference: minus $0.87 (current price is over target).
If DXS meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.35, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates FSF as Neutral (3) -

Fonterra Shareholders Fund achieved the top end of guidance in FY20. Credit Suisse acknowledges the company still needs to make allowance for the pandemic-related uncertainty that is affecting the food services business.

Consumer markets in Hong Kong and Chile have been a drag on performance although improvement in FY21 guidance is still possible, the broker notes.

Credit Suisse would welcome more visibility on the investment required for the change in direction and the expectations for core growth products over the next five years. Neutral rating maintained. Target is raised to NZ$4.20 from NZ$3.97.

Current Price is $3.73. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

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: -0.3

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

Macquarie rates FSF as Underperform (5) -

FY20 earnings were below Macquarie's estimates. The FY21 outlook for earnings per share of NZ$0.20-35 assumes improved trading in Asia as pandemic restrictions ease, amid lower finance costs. Macquarie assesses NZ$0.28 would be a starting point.

The review of the capital structure is ongoing and a priority, while the significant range in earnings guidance continues to highlight the volatility and lack of visibility in the business, Macquarie asserts. Underperform maintained. Target rises to NZ$3.74 from NZ$3.50.

Current Price is $3.73. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

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: -0.3

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

UBS rates FSF as Neutral (3) -

UBS notes Fonterra Shareholders' Fund appears to have stabilised its earnings and repaired its balance sheet.

The fund's FY20 operating income rose 15% and was slightly ahead of UBS's forecast. However, the quality of the earnings beat is considered relatively low by the broker.

The broker expects foodservice volumes to recover in FY21 with covid-19 restrictions easing. The company has guided to better outcomes over the next five years but the broker expects the pace recovery to be slower-than-expected due to margin pressure.

Looking at the uncertainties surrounding the fund's turnaround outcomes, UBS maintains a Neutral rating with the target price rising to NZ$4.05 from NZ$3.95 target.

Current Price is $3.73. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

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: -0.3

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

Citi rates ING as Buy (1) -

Citi analysts observe the share price has declined by -9% since Inghams Group updated on its FY20 performance, suggesting concerns about Victorian demand is keeping investors at bay.

Citi analysts concede the current six-month period is looking like a tough one for the poultry market leader, but they do see a strong recovery on the horizon next.

The title above this latest research report sums it up: Time to look beyond six months. Citi retains its Buy rating with a target price of $3.70 (down -20c from August).

Target price is $3.70 Current Price is $3.07 Difference: $0.63
If ING meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.57, suggesting upside of 18.6% (ex-dividends)

The company's fiscal year ends in June.

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 SBM as Underperform (5) -

Following a rockfall, St Barbara has announced a temporary interruption to production at Gwalia. The interruption is likely to result in around 8,000 ounces of first quarter production being shifted into the second quarter.

Full-year production guidance has been maintained at 175-190,000 ounces. Macquarie trims its expectations to account for some impact on production and notes the processing plant is currently constrained by ore availability. Underperform. Target is $3.30.

Target price is $3.30 Current Price is $3.37 Difference: minus $0.07 (current price is over target).
If SBM meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.79, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates SBM as Overweight (1) -

The seismic event at the Gwalia gold mine has delayed the 8koz of gold that was expected in the September to December quarter, observes Morgan Stanley.

Despite the delay to production, the broker notes FY21 Gwalia guidance has been maintained, with the September quarter forecast falling by -2% to 20% of the group's annual guidance.

Overweight rating is maintained with a target price of $3.85. Industry view is Attractive.

Target price is $3.85 Current Price is $3.37 Difference: $0.48
If SBM meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.79, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SCG as Neutral (3) -

UBS assesses Scentre Group's hybrid notes issuance will solidify its existing credit ratings and increase the buffer to debt covenants. The earnings forecast has been downgraded by circa -10% due to the hybrid issue.

The broker highlights from an ordinary security holder's perspective, the gearing is high at 40% and leads the broker to maintain its dividend payout ratio of 70%. 

Due to increasing holdovers and a shortening weighted average lease expiry (WALE) in a period when the leasing power has shifted to retailers, the broker considers income uncertainty to be high. 

Reflecting reduced financial risk, UBS reaffirms its Neutral rating with the target price rising to $2.40 from $2.25 

Target price is $2.40 Current Price is $2.27 Difference: $0.13
If SCG meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.38, suggesting upside of 9.1% (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

Citi rates SHL as Neutral (3) -

Citi increases FY21 estimates for earnings per share by 15%, given coronavirus testing in the US and Australia is higher than expected. The additional cash flow should allow the company to de-leverage more quickly and pursue acquisitions.

However, the broker does not include any acquisitions in forecasts. Expected revenue from coronavirus testing is increased to $1.02bn.

Citi expects a more normal state of play in the second half and a return to longer-term growth rates with little coronavirus testing in FY22. Neutral rating retained. Target is $35.50.

Target price is $35.50 Current Price is $32.41 Difference: $3.09
If SHL meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $34.25, suggesting upside of 2.9% (ex-dividends)

The company's fiscal year ends in June.

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 STO as Neutral (3) -

Given capital constraints and challenging oil/LNG markets, Macquarie defers expectations for a final decision on Barossa and Dorado to 2022.

The broker expects the company will soften its growth profile and notes it has more control over growth projects compared with peers.

Macquarie still believes an equity raising may be needed, depending on the oil price and suspects a deal to purchase a stake in P'nyang is unlikely to proceed in its current form. Neutral rating retained. Target is reduced to $5.50 from $6.00.

Target price is $5.50 Current Price is $5.22 Difference: $0.28
If STO meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.55, suggesting upside of 26.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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 SYD as Hold (3) -

Passenger numbers fell -97% in August against the same period in 2019. Traffic numbers were the third lowest behind April and May and well down on July, which had a much stronger contribution prior to Queensland shutting its borders to NSW.

Ord Minnett expects passenger numbers will remain weak until state borders re-open, likely in November or December. International will remain subdued until at least mid 2021. A distribution in 2021 with a 50% pay-out ratio is considered possible.

The $2bn capital raising substantially removes covenant risks and the broker expects a coronavirus vaccine will be required for international passenger numbers to resume normal levels. Hold rating and $5 target retained.

Target price is $5.00 Current Price is $5.46 Difference: minus $0.46 (current price is over target).
If SYD meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.75, suggesting upside of 6.0% (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

Macquarie rates URW as Neutral (3) -

Unibail-Rodamco-Westfield has announced an EUR9bn "re-set" plan including an EUR3.5bn capital raising. Macquarie assesses the plan could be -50% dilutive to earnings per share and -66% dilutive to net tangible assets.

The company has noted continued access to debt markets as a reason, which Macquarie interprets is driven by certainty regarding the group's credit rating post the raising.

The main unknown is the pricing and the broker expects the stock to be range bound. Neutral rating. A -25% decline in asset values is already factored into the valuation. Target is reduced -28% to $2.96.

Target price is $2.96 Current Price is $2.80 Difference: $0.16
If URW meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.88, suggesting upside of 48.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

This company reports in EUR. 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

Morgan Stanley rates WEB as Underweight (5) -

With Webject's FY20 result out, Morgan Stanley has rebased its earnings forecast down materially. The broker expects an operating loss of -$40m in FY21 before a return to profitability in FY22.

The broker remains Underweight on Webjet since the company is leveraged to leisure air travel and increasing competitive intensity.

Underweight with the target price falling to $3 from $3.30. Industry view: In-line.

Target price is $3.00 Current Price is $3.91 Difference: minus $0.91 (current price is over target).
If WEB meets the Morgan Stanley target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.85, suggesting upside of 1.2% (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

UBS rates WHC as Buy (1) -

UBS notes market weakness has impacted Whitehaven Coal's performance and earnings with the miner down circa -65% year to date led by low coal prices. The broker reckons a return to normal depends on an improvement in the market conditions.

The broker suggests patience, seeing good returns for shareholders at Whitehaven's long term thermal coal price of US$70/t while noting at current coal prices the company is free cash flow negative.

UBS reiterates its Buy rating with a target price of $2.

Target price is $2.00 Current Price is $0.89 Difference: $1.11
If WHC meets the UBS target it will return approximately 125% (excluding dividends, fees and charges).

Current consensus price target is $1.56, suggesting upside of 59.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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