Australian Broker Call

UBS rates ADH as Buy (1) -

While acknowledging the near-term uncertainty for domestic retailers relating to mobility restrictions, UBS believes investors should consider the earnings potential in a post-pandemic environment and Adairs presents an attractive entry opportunity.

The broker considers Adairs a quality retailer with a loyal customer base, flexible lease profile and a track record of pre-pandemic organic growth. FY23 net profit is forecast at $72m, above pre-pandemic levels. Buy rating retained. Target rises to $5.40 from $4.40.

Target price is $5.40 Current Price is $3.69 Difference: $1.71
If ADH meets the UBS target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $4.57, suggesting upside of 17.1% (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

Macquarie rates BHP as Outperform (1) -

BHP Group has formally approved the first stage of the Jansen project with the initial development aiming for an underground mine with a production capacity of 4.35mtpa.

Macquarie believes the decision to develop Jansen is part of a much larger commitment by the company to the potash market.

The broker considers the outlook for potash positive over the medium term. Demand growth of around 2.5% is expected to outpace growth in supply and the market move to a deficit after 2026. Outperform rating retained. Target is raised to $55 from $54.

Target price is $55.00 Current Price is $41.48 Difference: $13.52
If BHP meets the Macquarie target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $47.23, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Citi rates BXB as Buy (1) -

Management is guiding to 5-7% revenue growth from FY22-25, slightly ahead of current market expectations. Yet, Citi points out FY22 profit growth is expected to lag at 1-2% because of higher investments, while the share buyback will support earnings growth in this period.

Given the size of the planned expenditure - management has a potential $1.1bn four-year investment plan - Citi believes the realisation of returns will be the main focus. That said, the risk of returns not materialising on the $415m supply chain expenditure appear relatively low.

The broker retains a Buy rating and $13.58 target.

Target price is $13.58 Current Price is $12.26 Difference: $1.32
If BXB meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $12.74, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

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: 0.5

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

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

Brambles is guiding to 5-7% constant currency revenue growth yet Morgan Stanley suspects the actual outcome may disappoint the market.

The company has announced a number of initiatives across its digital, supply chain and short-term investments.

The presentation highlighted elevated operating and capital expenditure in coming years and, while this may generate a return eventually, the broker suspects expenditure in FY22 should mean earnings are below consensus expectations.

Equal-weight maintained. Target is $12.50. Industry view: In line.

Target price is $12.50 Current Price is $12.26 Difference: $0.24
If BXB meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $12.74, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

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: 0.5

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

Ord Minnett rates CGF as Hold (3) -

Challenger has sold a 30% stake in Whitehelm Capital to Germany's PATRIZIA for $50m. This will result in the loss of -$5bn in funds under management which Ord Minnett assesses will have a relatively immaterial effect on earnings.

Management has indicated, while it is not actively selling its interests in boutique partners, the price provided value to shareholders. Hold rating and $6 target maintained.

Target price is $6.00 Current Price is $6.38 Difference: minus $0.38 (current price is over target).
If CGF meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.01, suggesting downside of -7.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.1

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

Macquarie rates COE as Neutral (3) -

Cooper Energy has new contractual arrangements at Sole, reducing the third-party gas purchases. Macquarie assesses the contracts provide greater certainty on volume but lock in lower pricing at Otway until at least 2024.

The broker also expects investors will be looking for a renegotiation of tolls with APA Group ((APA)) or, potentially, a purchase of the Orbost plant, which is likely to be difficult to finance. Neutral retained. Target rises to $0.24 from $0.22.

Target price is $0.24 Current Price is $0.24 Difference: $0
If COE meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.26, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.2

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

Ord Minnett rates CWY as Accumulate (2) -

Cleanaway Waste's planned energy-from-waste project at Eastern Creek is not within the four listed regions the NSW government has identified in its plan for infrastructure locations.

Ord Minnett asserts the decision by the government is partially driven by politics as such facilities are not popular with locals. Given the uncertainty, the broker suspects Cleanaway may reassess its plans.

Accumulate rating and $3.00 target maintained.

Target price is $3.00 Current Price is $2.63 Difference: $0.37
If CWY meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 7.1% (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 FCL as Resume Coverage with Outperform (1) -

Macquarie resumes coverage with an Outperform rating and $4.92 target.

The company has raised additional equity and, along with the net cash position, this provides three years of requirements based on the monthly operating cash burn, the broker assesses.

Funds will be used primarily to support opportunities and provide working capital for R&D investment.

Target price is $4.92 Current Price is $4.30 Difference: $0.62
If FCL meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.85, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: 0.9

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

Macquarie rates HDN as Outperform (1) -

Homeco Daily Needs has acquired six assets for $222m by having raised $88.3m in equity. Macquarie notes the acquisitions are accretive, partially because of the favourable cost of equity.

On an annualised basis the broker forecasts the transaction to be around 3.4% accretive to earnings. Following completion of the transaction, gearing is now at 36% and leverage is expected to be positively impacted by revaluations.

Macquarie estimates a 5% valuation uplift will result in gearing moving to 34.3%. The broker retains an Outperform rating and raises the target to $1.74 from $1.64.

Target price is $1.74 Current Price is $1.67 Difference: $0.07
If HDN meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $1.63, suggesting upside of 2.0% (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 HDN as Downgrade to Hold from Accumulate (3) -

HomeCo Daily Needs has made a $88.3m placement to partially fund the acquisition of six assets for $222m and will establish a distribution reinvestment plan for the remainder of FY22.

The acquisitions are expected to be more than 3% accretive to earnings and include a Coles-anchored neighbourhood centre, three large format retail (LFR) centres and two strategic adjoining properties.

Ord Minnett downgrades to Hold from Accumulate because of the recent rally and raises the target to $1.58 from $1.54.

Target price is $1.58 Current Price is $1.67 Difference: minus $0.09 (current price is over target).
If HDN meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.63, suggesting upside of 2.0% (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

UBS rates HDN as Neutral (3) -

HomeCo Daily Needs has used the improved cost of capital to acquire six assets for $222m on a yield of 5.8%. The transaction is assessed to be 3% accretive as it is partially funded with an $88m placement.

Distribution guidance has been increased to 8.25c. UBS finds the favourable tenant mix and growth outlook attractive yet believes the market has priced this into the stock. Neutral maintained. Target rises to $1.59 from $1.55.

Target price is $1.59 Current Price is $1.67 Difference: minus $0.08 (current price is over target).
If HDN meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.63, suggesting upside of 2.0% (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

UBS rates IEL as Buy (1) -

UBS assesses IDP Education has performed well over a tough year and the worst should be behind the business. The covid situation in India continues to improve rapidly since mobility restrictions and search trends for IELTS are up strongly.

Recent vaccination trends from in Australia position the industry to re-open in 2022, the broker asserts. As the operating environment improves the broker envisages increased momentum around the earnings recovery and retains a Buy rating. Target is raised to $36.40 from $32.25.

Target price is $36.40 Current Price is $32.72 Difference: $3.68
If IEL meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $32.94, suggesting upside of 0.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Macquarie rates IPL as Outperform (1) -

Hurricane Ida has impacted the production at the Louisiana plant with four weeks of maintenance expected. Macquarie notes the plant has been running at nameplate since the last re-start at the end of May and is now a more fully-resourced operation.

The broker suspects the market is looking through the event, given the better recent performance and a favourable backdrop in fertiliser prices. Outperform maintained. Target is raised to $3.15 from $3.04.

Target price is $3.15 Current Price is $2.76 Difference: $0.39
If IPL meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.05, suggesting upside of 10.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgan Stanley rates IPL as Overweight (1) -

No material damage has been identified at the Waggaman ammonia plant in Louisiana after Hurricane Ida. Still, it is expected to remain out of action for four weeks. The company estimates the cost of the outage at -US$28m at the EBIT line.

Morgan Stanley notes urea prices have increased in the wake of the hurricane. NOLA diammonium phosphate prices have increased while China's diammonium phosphate prices are unchanged.

Overweight maintained. Industry view: In-Line. Target is $2.90.

Target price is $2.90 Current Price is $2.76 Difference: $0.14
If IPL meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.05, suggesting upside of 10.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgan Stanley rates PWR as Overweight (1) -

Morgan Stanley has become more bullish on Peter Warren Automotive. This stems from the housing wealth effects remaining intact, international leisure travel still being some time in the future and a continued preference of personal over public transport.

Morgan Stanley takes a long view on the growth trajectory although notes the market remains concerned about where the next catalyst will be. While restrictions in NSW will ease at the end of October, the re-opening trajectory is uncertain and, therefore, so too is the shape of the demand recovery.

Overweight maintained. Target is $4.60. Industry view: In-Line.

Target price is $4.60 Current Price is $3.20 Difference: $1.4
If PWR meets the Morgan Stanley target it will return approximately 44% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates SYD as Neutral (3) -

Sydney Airport has received an $8.75 per share non-binding offer from the IFM consortium, above the previous offer, and the board is granting non-exclusive due diligence.

Credit Suisse assesses foreign and cross-holding ownership restrictions, as well as the size of the deal, make a competing bid unlikely. The broker assigns a high probability to the deal proceeding and raises the target to $8.75 from $8.00. Neutral retained.

Target price is $8.75 Current Price is $8.37 Difference: $0.38
If SYD meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.60, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates SYD as Hold (3) -

The IFM consortium has revised its bid for Sydney Airport to $8.75 per share and due diligence has been granted. Morgans would be surprised if due diligence reveals any deal breakers, given the public disclosures by Sydney Airport and the consortium's intimate knowledge of the industry.

The broker takes the opportunity to materially downgrade passenger forecasts and retail revenue recovery for coming years, continuing to assume passenger recovery to pre-pandemic levels occurs by FY24.

Target is set at the new bid price of $8.75, up from the prior bid price of $8.45. Hold maintained.

Target price is $8.75 Current Price is $8.37 Difference: $0.38
If SYD meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.60, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates SYD as Hold (3) -

Sydney Airport has received a revised offer from IFM Consortium, raising the bid price to $8.75 per share from $8.45, and has allowed non-exclusive due diligence for a period of four weeks. Ord Minnett considers this offer fair.

While domestic leisure travel is likely to rebound quickly, the broker points out international will take longer and this is the most important segment in the recovery, given higher passenger charges and expenditure per capita.

The broker does not rule out a competing bid, particularly given the appeal of long-duration infrastructure assets, and maintains a Hold rating. Target is raised to $8.75 from $8.45.

Target price is $8.75 Current Price is $8.37 Difference: $0.38
If SYD meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.60, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in December.

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 Z1P as Underperform (5) -

In reviewing its outlook on the stock, Macquarie notes an increased risk appetite is driving elevated bad debt write-offs, particularly from QuadPay where these were around 25% of closing receivables and around 1.8% of total transaction value in the second half of FY21.

The elevated bad debts, reduced customer growth and subdued web traffic mean the broker remains cautious about the outlook. Moreover, the company will be cycling very strong months in the December quarter.

Underperform maintained. Target is reduced to $5.70 from $6.15.

Target price is $5.70 Current Price is $7.03 Difference: minus $1.33 (current price is over target).
If Z1P meets the Macquarie target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.67, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.1

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