Australian Broker Call

Citi rates ALU as Buy (1) -

Visits to Altium's Octopart website were up year-on-year for the second consecutive month in January, also representing a monthly record. Citi expects this to benefit website revenue in the second half. Visits increased 44% month-on-month and 26% year-on-year.

Elsewhere, the broker expects the recent release of Altium Designer 24 to drive seats growth over the first half. Citi anticipates 4,500 new Altium Designer seats in the half, up 7% year-on-year, partly driven by enterprise licences.

The Buy rating and target price of $56.60 are retained.

Target price is $56.60 Current Price is $51.25 Difference: $5.35
If ALU meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $48.07, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Macquarie rates CCX as Neutral (3) -

City Chic Collective's 1H trading update revealed a -2.4% miss for sales against Macquarie's forecast, with numbers falling by around -30% across both A&NZ and the US.

Management's expected earnings (EBITDA) loss of  of -$7-$10m was larger than the -$3.5m forecast by the analyst due to promotional activity. The company still expects a return to profitability over the 2H.

Should there be a successful sale of the US business (media speculation), Macquarie arrives at a 54c target, up around 40%, after valuing City Chic as a standalone A&NZ business.

The Neutral rating is maintained.

Target price is $0.54 Current Price is $0.54 Difference: $0
If CCX meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

UBS rates COH as Downgrade to Sell from Neutral (5) -

UBS has downgraded Cochlear to Sell from Neutral while lowering its price target to $240 from $260. The move is related to Moderna's mRNA-1647 vaccine, still in phase III trials but any success is expected to impact on Cochlear's business/growth.

Moderna's vaccine-in-development potentially addresses CMV, a virus transmitted in utero that accounts for an estimated 20% of childhood deafness, the broker explains.

As the broker has taken the view that 5-6% of top line growth for Cochlear could be at risk, future growth projections have been halved; to circa 6.5% growth per annum.

With the market yet to catch up on this freshly emerging risk, UBS has decided to shift to Sell. Ironically, short-term forecasts have been lifted.

Target price is $240.00 Current Price is $308.45 Difference: minus $68.45 (current price is over target).
If COH meets the UBS target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $237.73, suggesting downside of -17.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.7

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

Morgan Stanley rates CPU as No Rating (-1) -

Morgan Stanley anticipates EPS growth for Computershare will normalise well below the company's long-term trends, unless growth can be generated via acquisitions.

The broker sees downside risk for the company's Margin income (MI) metric as global short-end interest rates begin to fall. Around 75% of the broker's forecast earnings (EBIT) are supposed to derive from this source.

While capital markets activity is re-starting, momentum is slow, note the analysts.

No target or rating are currently set by Morgan Stanley.

Current Price is $24.68. Target price not assessed.

Current consensus price target is $28.24, suggesting upside of 14.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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 CTM as Outperform (1) -

Centaurus Metals has achieved major permitting milestones for the Jaguar Nickel Sulphide project, notes Macquarie. The upcoming (March) feasibility study for the project is considered the next share price catalyst.

Management has received key approvals for Environmental Impact Assessment (EIA). The analyst notes the Preliminary Licence (LP) has been formally issued by Semas, the Para State Environmental Agency.

The 70c target and Outperform rating are maintained.

Target price is $0.70 Current Price is $0.29 Difference: $0.41
If CTM meets the Macquarie target it will return approximately 141% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Bell Potter rates DXC as Buy (1) -

Dexus Convenience Retail REIT released a first half result in line with Bell Potter's expectations, including funds from operations of 10.5 cents per share.

The company has now narrowed its full year funds from operations guidance, lifting the bottom end to 20.8-21.1 cents per share.

Its is Bell Potter's opinion that there is clear price discovery for the stock, with transactions over the last year proving up book value and the stock trading at a -27% discount to net tangible assets.

The Buy rating is retained and the target price increases to $3.00 from $2.90.

Target price is $3.00 Current Price is $2.64 Difference: $0.36
If DXC meets the Bell Potter target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 12.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Ord Minnett rates DXC as Accumulate (2) -

Dexus Convenience Retail REIT's 1H result was broadly in line with Ord Minnett's forecasts while the lower end of the FY24 guidance range for funds from operations ((FFO)) and DPU was increased.

The broker notes management commentary was much more positive, indicating buyers are returning, in particular syndicators, as sentiment improves on interest rates.

The Accumulate rating is retained and the target price increases to $2.80 from $2.79. Ord Minnett notes the attractive dividend yield on offer.

Target price is $2.80 Current Price is $2.64 Difference: $0.16
If DXC meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 12.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Citi rates FBU as Buy (1) -

Citi warns the latest update from Fletcher Building on the New Zealand international convention centre project (NZICC) may have implications for the company's balance sheet, but is waiting on further detail.

The company has announced a further $165m provision for the project, relating to cost blow outs and lower insurance recoveries. Citi points out timing of the project appears to be largely unimpacted.

Citi expects the additional outflow to largely occur in FY24. The Buy rating and target price of NZ$5.70 are retained.

Current Price is $3.98. Target price not assessed.

Current consensus price target is $5.37, suggesting upside of 36.2% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. 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 FBU as Accumulate (2) -

Following a project update by Fletcher Building, Ord Minnett was disappointed by the increased costs that will be incurred for the New Zealand International Convention Centre, in the wake of the 2019 fire.

Thankfully the impact from the time value of money in the broker's financial model offsets these additional cash costs of -NZ$165m, and the  Accumulate rating and target price of $5.50 are retained.

Target price is $5.50 Current Price is $3.98 Difference: $1.52
If FBU meets the Ord Minnett target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $5.37, suggesting upside of 36.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. 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

Shaw and Partners rates GMD as Initiation of coverage with Buy (1) -

Shaw and Partners initiates coverage of Genesis Minerals with a Buy recommendation and $2.20 price target.

The broker describes Genesis as a West Australian gold producer that is fast evolving into a premier Australian gold business with sustainable, high quality, 300kozpa production.

Genesis has established a dominant land position in the Leonora region in WA, the broker notes, and acquired a suite of assets including 4.3mtpa of milling capacity, 15moz in resources and 3.9moz in reserves.

Dec Q production was ahead of the FY24 guidance run-rate. Genesis ended the quarter with $192m in cash and bullion and no debt. The broker is forecasting gold at US$2150/oz this year and US$2250/oz next year.

Target price is $2.20 Current Price is $1.61 Difference: $0.595
If GMD meets the Shaw and Partners target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $1.97, suggesting upside of 23.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Bell Potter rates ING as Upgrade to Buy from Hold (1) -

Bell Potter anticipates the recent decline in grain and soymeal prices will prove an emerging tailwind for Inghams Group in FY25. The broker points out given grain prices lead feed costs by around 6-9 months, the benefits are likely to be seen in the coming financial year.

As per Bell Potter, an improved outlook for the upcoming winter crop may also suggest a slightly more bullish feed costs forecast might be supported.

With the stock having de-rated -10% from pre-covid prices while improving business performance and prospects, the broker sees it as an opportunity to gain exposure to the sector.

The rating is upgraded to Buy from Hold and the target price increases to $4.90 from $3.95.

Target price is $4.90 Current Price is $4.32 Difference: $0.58
If ING meets the Bell Potter target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.33, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Citi rates JLG as Buy (1) -

Just over a month ago, Citi notes, there have been some concerns around progressively weakening pipeline for Johns Lyng beyond FY24 given the expectations of persistent dry conditions (El Nino).

This seems like a distant memory, the broker notes, with back-to-back cyclones dominating the headlines onshore.

In the US, Johns Lyng has secured a long-awaited panel contract with Allstate. This should not only support both business-as-usual and catastrophe growth in the US, but it also presents an opportunity to build relationships with potential business partners and scope out M&A targets, Citi suggests.

Buy retained, target rises to $8.35 from $7.00.

Target price is $8.35 Current Price is $7.13 Difference: $1.22
If JLG meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $7.45, suggesting upside of 4.9% (ex-dividends)

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Morgan Stanley rates JLG as Overweight (1) -

In a positive for market penetration in the US, notes Morgan Stanley, Johns Lyng has been appointed to Allstate's Emergy Response and Mitigation Panel, which grants access to 16m policyholders.

Allstate is the second largest US homeowner insurance carrier with around 8% market share, explain the analysts.

The Overweight rating and $7.20 target are unchanged.

Target price is $7.20 Current Price is $7.13 Difference: $0.07
If JLG meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.45, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Bell Potter rates LGI as Upgrade to Buy from Hold (1) -

LGI has announced a long-term gas management agreement with Bingo Industries for the installation of landfill ags extraction infrastructure, and the installation, operation and ownership of a 4m watt renewable on-site power station.

Under an initial 15-year agreement, electricity generated on site will be sold to Bingo Industries, but Bell Potter points out options for two 5-year extensions on the contract.

The company has outlined intentions to develop this project in two stages, starting with the installation of the power station. Capital expenditure is estimated at -$16.5-18.5m over the next fifteen months, and will be funded by existing and new debt facilities.

Phase one investment is expected to return annual earnings between $3.0-3.5m, which Bell Potter expects to impact from FY26. The rating is upgraded to Buy from Hold and the target price increases to $2.55 from $2.32.

Target price is $2.55 Current Price is $2.07 Difference: $0.48
If LGI meets the Bell Potter target it will return approximately 23% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Citi rates MTS as Neutral (3) -

Given the food service industry is highly fragmented, the broker sees Metcash's acquisition of Superior Foods as offering bolt-on  acquisition opportunities, and sees sense in Metcash moving away from supplying independent food retailers whose market position continues to be challenged. 

The broker feels the price paid is reasonable, particulalry relative to Woolworths Group's ((WOW)) purchase of PDF.

While the company is targeting $14m in synergies, Citi notes half of this appears revenue-based, warning this is historically harder to achieve than cost-based synergies.

The Neutral rating and target price of $4.00 are retained.

Target price is $4.00 Current Price is $3.64 Difference: $0.36
If MTS meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.98, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Ord Minnett rates MTS as Accumulate (2) -

Ord Minnett assesses the acquisition of the food service distribution business Superior Food Group by Metcash is broadly value-neutral. The company will also make two bolt on hardware acquisitions; Bianco Construction Supplies and Alpine Truss.

The purchases will be funded via a $300m institutional share placement and $278m from existing cash and debt facilities.

Management also announced a share purchase plan of up to $25m, which the broker suggests eligible shareholders take-up.

The broker retains an Accumulate rating and $4.00 target.

Target price is $4.00 Current Price is $3.64 Difference: $0.36
If MTS meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.98, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

UBS rates MTS as Buy (1) -

Metcash has announced acquisitions for a total outlay of -$577m (including transaction costs), which will be funded by $278m of debt and a $300m equity placement. Management also announced a share purchase plan of up to $25m

UBS notes the Hardware acquisitions are consistent with management's strategy to fill geographic and product gaps. The Superior Food acquisition is considered a more incremental step, by adding another customer group within the Food division.

The Hardware acquisitions are Bianco Construction Supplies and Alpine Truss. The latter is one of Australia's largest frame and truss operators.

The Buy rating is retained and the target price decreases to $4.00 from $4.10 despite the broker's higher long-term earnings forecasts due to a lower valuation multiple.

Target price is $4.00 Current Price is $3.64 Difference: $0.36
If MTS meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.98, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.4

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

Citi rates NCK as Neutral (3) -

In an early response to Nick Scali's first half, Citi notes a net profit beat, both to the broker's forecasts and the company's own guidance range, appears to be primarily due to the offsetting impact of better than expected gross margins.

The company reported first half net profits of $43m, compared to its guidance range of $40-42m, despite weaker than expected sales and higher operating costs in the period.

The company reported a first half gross margin of 65.6%, in-line with the previous half in a result that impressed Citi considering the previous half had benefitted from falling shipping rates.

The Neutral rating and target price of $12.60 are retained.

Target price is $12.60 Current Price is $12.01 Difference: $0.59
If NCK meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Macquarie rates NWS as Neutral (3) -

Macquarie expects a subdued 2Q result from News Corp, relative to the consensus expectation, upon release this Thursday.

The company's valuation is in line with historical averages and the broker feels the (more than -US$160m) cost-out program has largely been factored-in.

The broker highlights the Australian advertising markets are soft though subscriber growth is resilient for Foxtel.

The analyst raises EPS forecasts on REA Group ((REA) depth and geographic mix benefits, largely offset by slowing advertising revenues. The target rises to $37 from $33 reflecting a valuation roll-forward. Neutral.

Target price is $37.00 Current Price is $39.42 Difference: minus $2.42 (current price is over target).
If NWS meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.67, suggesting downside of -5.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Bell Potter rates NXD as Buy (1) -

NextEd Group has reiterated expectations it will deliver first half revenue at the lower end of its guidance range, with the guided $59.2m reflecting 36% year-on-year growth. The result, due late February, will be accompanied by more detailed guidance for the second half.

The impact of this, as well as softer December and January student numbers, sees Bell Potter revise revenue forecasts. Actively studying English language students declined -13% quarter-on-quarter in the December quarter, while international student enrolments lifted 7%.

The Buy rating and target price of $1.05 are retained.

Target price is $1.05 Current Price is $0.69 Difference: $0.36
If NXD meets the Bell Potter target it will return approximately 52% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Macquarie rates S32 as Neutral (3) -

Macquarie believes softer commodity prices and higher costs in the last six months should result in a weaker 1H result for South32, by comparison to both the prior half and year.

The broker forecasts underlying earnings (EBITDA) of US$652m and an underlying profit of US$42m.

In the analyst's opinion, there is risk to Sierra Gorda and Illawara cost guidance, which has the potential to offset tailwinds from alumina costs.

The Neutral rating and $3.10 target are maintained.

Target price is $3.10 Current Price is $3.23 Difference: minus $0.13 (current price is over target).
If S32 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 $3.82, suggesting upside of 21.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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 SHV as Initiation of coverage with Buy Higher Risk (1) -

Ord Minnett initiates research coverage on vertically-integrated almond company Select Harvests with a Buy, Higher Risk rating and $5.09 target price.

The analyst suggests the share price fall over the past 28 months represents an excellent opportunity for investors to gain exposure to quality agricultural assets, which are just now emerging from temporary distress.

The broker anticipates a return of volumes in FY24 and increasing price tailwinds from FY25. Over the remainder of the decade, Ord Minnett forecasts a structural deficit in almond production, following the third consecutive year of falling Californian production.

Target price is $5.09 Current Price is $3.91 Difference: $1.18
If SHV meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $4.66, suggesting upside of 19.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Macquarie rates SLR as Downgrade to Neutral from Outperform (3) -

Macquarie expects shares of Silver Lake Resources will now trade in line with those of Red 5 ((RED)) now that the two companies will merge via a scheme of arrangement.

The rating is downgraded to Neutral from Outperform and the target falls to $1.20 from $1.50, while the analyst's forecasts remain unchanged.

In the broker's view, the merger will create a gold business of notable scale capable of producing 400koz per annum.

The scheme will see shareholders of Silver Lake emerge with 48.3% of the merged entity and Red 5 shareholders the balance.

Target price is $1.20 Current Price is $1.12 Difference: $0.08
If SLR meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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