Australian Broker Call

Credit Suisse rates A2M as Neutral (3) -

Credit Suisse sticks to the view that a2 Milk Co is expanding its market share in China, as its product resonates with consumers and on the back of a significant increase in marketing spending.

On a bird's eye view of the sector in China, Credit Suisse's updated modeling projects infant formula industry volumes declining -5%-7% per annum 2022-2025 inclusive.

Another observation made is post the recent rally, the shares are now higher valued than global luxury goods peers, as well as ASX-listed China-focused companies.

Neutral. Target $5.30. No changes have been made to forecasts.

Target price is $5.30 Current Price is $6.92 Difference: minus $1.62 (current price is over target).
If A2M meets the Credit Suisse target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.10, suggesting downside of -26.2% (ex-dividends)

Forecast for FY23:

Forecast for FY24:

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

Macquarie rates APA as Neutral (3) -

FY23 is another transition year, posit analysts at Macquarie in their general update on APA Group ahead of the release of interim financials, scheduled for February 23.

The broker sticks with a Neutral rating, acknowledging there should be improvement in H2 and 2024, but prefers to remain cautious due to structural headwinds.

APA Group is transitioning away from gas, with Macquarie suggesting this process might take 3-5 years to materialise. Target $10.13. Small adjustments have been made to forecasts.

Target price is $10.13 Current Price is $10.67 Difference: minus $0.54 (current price is over target).
If APA meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.82, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Ord Minnett rates BOQ as Accumulate (2) -

After a review of its investment thesis for Bank of Queensland, Ord Minnett maintains its Accumulate rating and 8.80 target.

The target jumps from the early-December level of $7.60 in the FNArena database as the broker is now whitelabeling research from Morningstar instead of JP Morgan.

The broker feels risks for the bank are being overstated by the market concerning the quality of the loan book, the outlook for margins and strategic uncertainty arising from a change in leadership.

Target price is $8.80 Current Price is $7.05 Difference: $1.75
If BOQ meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $7.63, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Macquarie rates BST as Neutral (3) -

Best & Less's trading update revealed H1 earnings -30% lower than last year, despite last year's numbers were heavily impacted by lockdowns, points out Macquarie.

The broker remains cautious. From here onwards the year-on-year comparisons are not getting any easier, and the customer base looks "vulnerable".

All in all, the market update missed Macquarie's estimates and thus forecasts have been reduced. Target falls to $2 from $2.20. Neutral.

Target price is $2.00 Current Price is $1.93 Difference: $0.075
If BST meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Macquarie rates CCX as Neutral (3) -

City Chic Collective's trading update had already been flagged, and this time came out in line with Macquarie's estimates. Positives were smaller inventory on the back of serious promotion efforts and also a lower debt facility.

Management did confirm the FY23 balance sheet outlook, the broker highlights.

Macquarie is expecting a greater FY23 loss as promotions continue, but lower gearing helps set a higher valuation and thus the price target moves to $0.61 from $0.42. Neutral.

The broker emphasises City Chic Collective is facing ongoing headwinds in the near- to medium-term.

Target price is $0.61 Current Price is $0.62 Difference: minus $0.005 (current price is over target).
If CCX meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.67, suggesting upside of 5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Macquarie rates CNB as Outperform (1) -

Macquarie seems pleased with Carnaby Resources' latest update on drilling results, with high grades at Mount Hope ("continue to impress"), ongoing results for prospect Burke and Wills and a maiden resource upcoming for Greater Duchess.

Macquarie believes the maiden resource for Greater Duchess could be a positive catalyst in Q2.

On the back of share price strength, the broker has reduced dilution estimates from the next round of capital raisings. Target rises to $1.70 from $1.30. Outperform.

Target price is $1.70 Current Price is $1.20 Difference: $0.5
If CNB meets the Macquarie target it will return approximately 42% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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) -

Centuria Office REIT's interim market update pleased analysts at Credit Suisse. As expected, rising interest costs are starting to impact, but FY23 guidance has been left intact.

Metrics relating to portfolio fundamentals (occupancy, leasing spreads, incentives) came with a positive skew with asset values holding relatively firm, the analysts comment.

Credit Suisse highlights its own valuation calculation assumes a -8% further decline in the investment portfolio valuation.

Target loses -1c to $1.89. Outperform.

Target price is $1.89 Current Price is $1.76 Difference: $0.13
If COF meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.89, suggesting upside of 6.9% (ex-dividends)

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

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

Morgan Stanley adjusts its forecasts for Centuria Office REIT to reflect 1H results.

The target rises to $1.70 from $1.50 after the broker reduces its cap rate expansion assumption and allows for higher occupancy. Rent growth is raised to 2-2.5% per year from 1.5% to reflect more stable occupancy.

The analyst forecasts 15.8cpu for funds from operations (FFO) for FY23, in line with management guidance.

The Equal-weight rating is unchanged. Industry View: In-Line.

Target price is $1.70 Current Price is $1.76 Difference: minus $0.06 (current price is over target).
If COF meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.89, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

UBS rates COF as Neutral (3) -

Better than anticipated rental income assisted in a 1H23 earnings beat for Centuria Office REIT, according to UBS.

Management retained earnings guidance for FY23 of 15.8c, due to the potential deferral of some 5% of the portfolio under heads of agreement, notes the analyst.

Centuria Office REIT generated a better result from leasing, with the group portfolio reflecting an occupancy rate of 96.4%. up from 94.7%, 

Adjusting for a change in the cap rate, the NAV generated price target is raised to $1.75 from $1.70.

With potential macro headwinds from more subdued leasing demand and increased supply, UBS remains cautious on the office sector and retains a Neutral rating.

Target price is $1.75 Current Price is $1.76 Difference: minus $0.01 (current price is over target).
If COF meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.89, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Morgan Stanley rates CSL as Overweight (1) -

Indications are the immunoglobulin (Ig) market is strengthening, according to Morgan Stanley.

The broker notes core sales of Ig rose by 23% quarter-to-date for Japanese peer Takeda, while albumin (the most abundant protein in plasma) also rose by 47%.

The analyst expects CSL's plasma collections and Ig revenue growth will rise by 23% in FY23, which is around 3% ahead of the top end of Takeda's guidance.

The Overweight rating and $354 target are unchanged.

Target price is $354.00 Current Price is $304.58 Difference: $49.42
If CSL meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $329.03, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

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

Following a comparison of underlying insurance margin drivers, Morgan Stanley believes Overweight-rated Suncorp Group ((SUN)) will outperform Insurance Australia Group over the next two years.

While Insurance Australia Group should fare better on reserving, the broker expects Suncorp to perform better on cost savings and CAT costs and retentions.

In addition, Suncorp renewed its reinsurance and its quota share agreement on more favorable terms.

The Equal-weight rating and $4.80 target are retained. Industry View: In-Line. 

Target price is $4.80 Current Price is $4.83 Difference: minus $0.03 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.29, suggesting upside of 11.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.4

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

Citi rates JHG as Sell (5) -

Citi believes the 4Q result for Janus Henderson was of low quality, with the main drivers of a significant beat (versus both the broker's and consensus forecasts) due to performance fees and a slightly lower rate of tax.

While performance fees were $28m better in FY22 than management's guidance, it's hard to rely on the consistency of these fees, points out the broker.

Net outflows were of an even greater concern to the analyst, as well as a decline in near-term investment performance. The Sell rating is retained, while the target rises to $34.50 from $31.00.

Target price is $34.50 Current Price is $36.74 Difference: minus $2.24 (current price is over target).
If JHG meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.50, suggesting downside of -19.3% (ex-dividends)

The company's fiscal year ends in December.

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: -0.7

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

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

Janus Henderson's 4Q adjusted EPS beat the forecasts of both Morgan Stanley and consensus by 48%, with a 40% beat for operating income on improved performance fees. Other revenues and fee rate metrics were considered further positives, offset by higher costs.

Assets under management (AUM) were 1% better than forecast though the analyst is concerned by elevated institutional outflows that have continued for several years, despite being a management area of focus. 

Morgan Stanley maintains its Equal-Weight rating and $32.50 target price. Industry view: Attractive.

Target price is $32.50 Current Price is $36.74 Difference: minus $4.24 (current price is over target).
If JHG meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.50, suggesting downside of -19.3% (ex-dividends)

The company's fiscal year ends in December.

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: -0.7

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

Ord Minnett rates NCM as Accumulate (2) -

In a modestly disappointing update, according to Ord Minnett, Newcrest Mining's 2Q gold sales were -11% shy of the broker's forecast due to lower production at Lihir and Brucejack, partially offset by Cadia.

While management maintained FY23 gold production guidance, the analyst decides to modestly lower its FY23 forecast and expects a lower ramp-up in production at Lihir.

The broker maintains its Accumulate rating and points out Newcrest shares are trading at an around -25% discount to fair value, probably due to fears of rising interest rates. The $31 target is unchanged.

Target price is $31.00 Current Price is $23.11 Difference: $7.89
If NCM meets the Ord Minnett target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $24.73, suggesting upside of 10.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.5

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

Morgans rates PNI as Upgrade to Add from Hold (1) -

Second quarter net flows for Pinnacle Investment Management showed some improvement on the first quarter. While flows remain uncertain, upcoming leverage is expected after investment by several affiliates in longer-term initiatives.

The broker upgrades its rating to Add from Hold, while the target slips to $10.75 from $10.95. Medium-term earnings (FY25) are expected to step-up on improving flows and performance fees, as well as operating leverage on improved funds under management (FUM).

The investment management firm reported profit for the 2Q of $30.5m, missing the $32.9m expected by the analyst. While group funds FUM closed flat over six months, it's thought the composition improved.

Target price is $10.75 Current Price is $9.39 Difference: $1.36
If PNI meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $9.98, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

Ord Minnett rates PNI as Hold (3) -

Ord Minnett lowers its underlying EPS forecasts by -9-13% over the forecast period for Pinnacle Investment Management after 1H results. Near-term growth is expected to be more subdued given current volatility in equity markets.

Profit for the 1H of $30.5m was a -3.2% miss versus the broker's estimate on lower performance fees for Affiliates, and higher investment in affiliate-level growth initiatives. The 15.6cps fully franked interim dividend was also less than expected.

The analyst incorporates into the outlook lower-than-expected flows and Affiliate profitability, and also updates funds under management (FUM) estimates for the latest market values. As a result of these changes, the target falls to $9.50 from $11.50. Hold.

Target price is $9.50 Current Price is $9.39 Difference: $0.11
If PNI meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $9.98, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

UBS rates PNI as Sell (5) -

Pinnacle Investment Management reported an -11% 1H23 earnings miss compared to consensus and -3% compared to UBS forecasts.

Notably, the affiliate fee margins came under pressure, dropping to 52.8bps, versus the broker's 57.6bps expectation, as the fees from Metrics were not booked in this period.

UBS highlights that the business model of a more diversified stable of strategies to accommodate differing market conditions is proving more cyclical than anticipated when it comes to generating performance fees, realising fee out-performance in robust markets and fee under-performance during weak markets.

EPS forecasts are upgraded 3% for FY23 on the expectation of a stronger 2H23 and remain unchanged for FY24.

Sell rating retained due to the premium valuation and the target raised to $8.60 from $8.50.

Target price is $8.60 Current Price is $9.39 Difference: minus $0.79 (current price is over target).
If PNI meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.98, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

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

Citi rates PPM as Initiation of coverage with Neutral (3) -

Non-bank lenders in Australia look "cheap", comment analysts at Citi. It doesn't automatically mean here are investment opportunities on display.

Citi thinks wholesale costs need to improve, in a general sense, for the sector to re-rate. Another vital ingredient might be a general return of risk-on sentiment.

Citi remains cautious for the time being, but considers a better environment might become apparent later in the year. The broker has initiated coverage of Pepper Money with a Neutral rating and $1.60 price target.

Target price is $1.60 Current Price is $1.56 Difference: $0.04
If PPM meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.77, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates RIO as Neutral (3) -

Prior to February 22, when the company is scheduled to release 2022 financials, Macquarie forecasts Rio Tinto's result will be more than -35% below the numbers achieved in the previous period.

Softer prices for key commodities will be outweighing the company's on-the-ground performance, the broker suggests. Underlying earnings are estimated at US$13.7bn, a fall of -36% year-on-year.

Final dividend is estimated to come out as US$1.87 per share. Macquarie retains a positive view also because there's renewed momentum in the iron ore market.

Target lifts to $121 from $115. Neutral. UK target is GBP59 (up 4%).

Target price is $121.00 Current Price is $125.43 Difference: minus $4.43 (current price is over target).
If RIO 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 $116.57, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in December.

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: 0.0

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

Citi rates RMC as Initiation of coverage with Sell (5) -

Non-bank lenders in Australia look "cheap", comment analysts at Citi. It doesn't automatically mean here are investment opportunities on display.

Citi thinks wholesale costs need to improve, in a general sense, for the sector to re-rate. Another vital ingredient might be a general return of risk-on sentiment.

Citi remains cautious for the time being, but considers a better environment might become apparent later in the year. The broker has initiated coverage of Resimac Group with a Sell rating and $1.20 price target.

Target price is $1.20 Current Price is $1.32 Difference: minus $0.12 (current price is over target).
If RMC meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.5

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

Macquarie rates S32 as Neutral (3) -

Looking ahead to the release of interim financials, scheduled to be released on February 16, Macquarie anticipates weaker results from South32 on softer commodity prices and higher costs.

The broker suggests investors are looking for new catalysts. The interim dividend is forecast at US$4.5c with the added observation forecasts elsewhere range from US2.9c to US5.7c per share.

Target $4.60. Neutral.

Target price is $4.60 Current Price is $4.72 Difference: minus $0.12 (current price is over target).
If S32 meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.95, suggesting upside of 6.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Morgan Stanley rates SUN as Overweight (1) -

Following a comparison of underlying insurance margin drivers, Morgan Stanley believes Suncorp Group will outperform Insurance Australia Group (Equal-weight) over the next two years.

While Insurance Australia Group should fare better on reserving, the broker expects Suncorp to perform better on cost savings and CAT costs and retentions.

In addition, Suncorp renewed its reinsurance and its quota share agreement on more favorable terms.

The Overweight rating and $14.50 target are retained. Industry View: In-Line. 

Target price is $14.50 Current Price is $12.31 Difference: $2.19
If SUN meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $14.08, suggesting upside of 14.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Macquarie rates TWE as Outperform (1) -

When Treasury Wine Estates reports 1H results on February 15, Macquarie forecast $1.4bn of revenue, $311m of earnings (EBITS) and $197m of profit (UNPAT).

The broker observes global demand for wine remains strong, with a shift in location to On premise from Off Premise and points out transport costs have begun to ease.

Minor changes are made to the analyst's forecasts. The Outperform rating is unchanged and a $15.50 target is set.

Target price is $15.50 Current Price is $14.52 Difference: $0.98
If TWE meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $14.57, suggesting downside of -1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Macquarie rates VNT as Outperform (1) -

Ventia Services reports its full year results on February 24, and Macquarie believes prospectus 2022 profit (NPATA) guidance of $172m is on-track.

The analyst feels the focus will be upon the outlook and predicts 11% EPS growth for FY23 largely driven via increased revenues. Margins are expected to be stable at around 8% of earnings (EBITDA).

The $3 target and Outperform rating are unchanged.

Target price is $3.00 Current Price is $2.39 Difference: $0.61
If VNT meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Ord Minnett rates VUK as Upgrade to Accumulate from Hold (2) -

Ord Minnett assesses a solid 1Q (September year end) and believes management at Virgin Money UK will reduce operating costs and add business customers in the greater London market.

The broker's rating is increased to Accumulate from Hold, while the target falls by -2.5% to $3.80.

The 1Q revealed a 3bps improvement to 1.89% in net interest margin (NIM) thanks to the higher interest rate environment and the analyst expects 1.90% will be achieved for FY23. Management is guiding to a range of 1.85-1.90%.

Target price is $3.80 Current Price is $3.23 Difference: $0.57
If VUK meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

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