Australian Broker Call

UBS rates A2M as Buy (1) -

UBS believes there is a real possibility of another "profit warning" from a2 Milk although this is somewhat factored into the share price.

The main source of reduced infant formula sales is related to the disruptions to the daigou channel from the pandemic, which should ease substantially over time.

The broker is prepared to look through short-term volatility amid the likelihood of substantial gains in market share in China as mother & baby stores are rolled out and free trade zones are expanded. Buy rating and NZ$20.50 target retained.

Current Price is $14.30. Target price not assessed.

Current consensus price target is $16.12, suggesting upside of 12.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.1

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

UBS rates AMC as Neutral (3) -

First quarter results were stronger than expected. Earnings growth was largely from organic sources as well as merger synergies from Bemis and lower interest expenses.

Strong organic growth in North America is reflective of consumer trends towards greater at-home consumption, UBS assesses, as well as market share gains within the flexible packaging division.

The broker retains a Neutral rating and raises the target to $16.66 from $15.90. UBS expects strong volume trends in North America and Asia will continue throughout FY21.

Target price is $16.66 Current Price is $16.14 Difference: $0.52
If AMC meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $17.53, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.6

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

Macquarie rates AZJ as Outperform (1) -

Macquarie observes Aurizon Holdings serves a sunset industry and organic growth is hard to obtain. Hence, the speculated acquisition of OneRail interests the broker.

OneRail is considered the most plausible opportunity for acquisitive growth although, as it owns coal assets, it would need to be a highly structured deal, Macquarie asserts, and that makes it less probable.

The broker concludes Aurizon is a low growth and high yielding company and buybacks are likely to continue. Outperform retained. Target is reduced to $4.69 from $4.70.

Target price is $4.69 Current Price is $3.94 Difference: $0.75
If AZJ meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.12, suggesting upside of 29.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

UBS rates BLD as Buy (1) -

UBS observes a lot of changes at Boral over recent months. The broker is confident in modelling a slow and steady margin recovery in Australian earnings (EBIT), to 11% by FY24.

In addition to higher Australian returns, a recovery in end markets is expected to be supported by de-urbanisation and low rates.

While the company has not been explicit, the broker suspects the US BMAT assets are non-core. UBS lifts FY21-23 estimates for earnings per share by 13-31%. Buy rating retained. Target rises to $5.60 from $4.30.

Target price is $5.60 Current Price is $5.12 Difference: $0.48
If BLD meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting downside of -2.4% (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

Macquarie rates CSL as Neutral (3) -

Foot traffic at around 100 of the company's US-based collection centres has eased in recent weeks. New coronavirus cases in the US have increased and the current seven-day rolling average is ahead of the previous peak.

Macquarie continues to envisage plasma collection presents a risk in relation to the short-term outlook for CSL. Neutral rating. Target is $295.

Target price is $295.00 Current Price is $304.92 Difference: minus $9.92 (current price is over target).
If CSL 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 $309.96, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.4

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

Ord Minnett rates JHX as Accumulate (2) -

In an initial response to today's Q2 market update, Ord Minnett notes James Hardie already communicated various key financial metrics in advance. Nevertheless, today's numbers, with extra colour, are still considered to be very strong.

The bottom line is broadly in-line (very slightly lower than the broker's numbers) but there is plenty of positive news, including the company announcing it is ready to announce the return of the ordinary dividend in May next year.

Target price is $39.00 Current Price is $38.35 Difference: $0.65
If JHX meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $39.56, suggesting upside of 9.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.8

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

Macquarie rates KAR as Outperform (1) -

The Bauna oil project acquisition is finally complete, albeit for a higher price than expected by Macquarie. Led by lower oil price assumptions, Karoon Energy has reduced its expected reserves from Bauna by around -10% (post-production).

Macquarie considers the Bauna deal closure to be a major milestone. Key drivers in the near term will be the performance of the Bauna oilfield, oil prices and how well the company executes field intervention, adds the broker.

Outperform rating maintained with the target price slipping to $1.25 from $1.36. 

Target price is $1.25 Current Price is $0.80 Difference: $0.45
If KAR meets the Macquarie target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $1.33, suggesting upside of 51.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgans rates KAR as Add (1) -

Karoon Energy has announced the completion of the Bauna acquisition transaction, leaving it as the 100% owner and operator.

Morgans attributes the muted share price response to weak investor sentiment towards the sector, given growing covid fears on short-term global oil demand. Also, mixed views on what the outcome of the US elections means for oil may be having an impact.

The company finished the transaction with higher pro forma cash than Morgans had estimated at around $185m versus $175m.

The Add rating is unchanged and the target is increased to $1.61 from $1.56.

Target price is $1.61 Current Price is $0.80 Difference: $0.81
If KAR meets the Morgans target it will return approximately 101% (excluding dividends, fees and charges).

Current consensus price target is $1.33, suggesting upside of 51.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Ord Minnett rates MFG as Upgrade to Buy from Hold (1) -

The flagship Global Fund has continued to perform well and Magellan Financial has added new growth avenues, including the investment in Barrenjoey.

In addition, Ord Minnett notes the company has generated its strongest institutional net inflow for a half year since 2015.

As the stock has remained flat since early July, the broker now envisages a valuation gap re-emerging and upgrades to Buy from Hold. Target is raised to $70.48 from $63.57.

Target price is $70.48 Current Price is $61.38 Difference: $9.1
If MFG meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $61.18, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Morgans rates MMI as Speculative Buy (1) -

Metro Mining mined and shipped 2.48m wet metric tonnes (WMt) of bauxite in 2020 (to September), mainly into its Xinfa contract. Other sales contracts didn’t complete and production was suspended well before the planned wet season shutdown.

The company has contracts for 2.3M WMt for 2021, with Morgans expecting these will be honoured as activity returns to pre-covid-19 levels.

The proposed stage 2 expansion to 6m WMt is likely to be delayed, notes the broker. After production of 3.5m WMt in 2019, the analyst anticipates a strong performance for 2020 after the wet season shutdown.

The broker reduces projected sales tonnage in 2021 and 2022 to 2.3m WMt and pushes out expansion to 6.0m WMt. The broker has also risked the net present value by -50% for a valuation and target price of $0.10, from the former price target of $0.35.

The rating is decreased to Speculative Buy from Add.

Target price is $0.10 Current Price is $0.07 Difference: $0.03
If MMI meets the Morgans target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Credit Suisse rates NEC as Outperform (1) -

Nine Entertainment has announced an agreement to acquire rights to Rugby Union content, at a cost of -$100m in cash and contra over a three-year period. The agreement underpins a new streaming channel, Stan Sports, in 2021.

Credit Suisse notes anyone wanting to access the sports bundle will need a Stan subscription first. No pricing has been provided.

The broker suggests forecasts already appropriately capture licensing costs of the Rugby Union agreement and retains a target of $2.35 with an Outperform rating.

Target price is $2.35 Current Price is $2.34 Difference: $0.01
If NEC meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

UBS rates NEC as Buy (1) -

Nine Entertainment will launch Stan Sports and acquire Rugby Union rights for around -$100m over three years, including test matches, Premier domestic and trans-Tasman competitions, international matches and NZ/South African domestic competitions.

The network is also progressing its opportunity to acquire another exclusive sports deal. UBS expects a majority of broadcast costs will be booked in Stan and, given Stan Sports is likely to be initially loss-making, expects it will be disclosed separately.

Buy rating under review. Target is $2.05.

Target price is $2.05 Current Price is $2.34 Difference: minus $0.29 (current price is over target).
If NEC meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.14, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Macquarie rates QBE as Underperform (5) -

Macquarie reviews the third quarter offshore results as a readthrough for QBE Insurance Group's FY20 and concludes the pricing momentum continues to be exceptionally strong. Also, even with substantial natural perils during the quarter, the US crop remains on track.

The broker remains concerned large portions of the group remain non-core to QBE Insurance Group's DNA.

The Underperform rating is maintained with a target price of $8.00.

Target price is $8.00 Current Price is $9.24 Difference: minus $1.24 (current price is over target).
If QBE meets the Macquarie target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.40, suggesting upside of 15.2% (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: 0.6

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

Morgan Stanley rates REA as Overweight (1) -

Morgan Stanley believes the market is under estimating the potential operating leverage in 2021-22, with the prospect of a "super cycle".

Listings growth will be part of a cyclical recovery and the broker expects additional volumes as Australians re-assess work and living structures and priorities.

Overweight rating. Target is $150. Industry view: Attractive.

Target price is $150.00 Current Price is $139.50 Difference: $10.5
If REA meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $123.05, suggesting downside of -7.4% (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

Credit Suisse rates SDF as Outperform (1) -

First quarter earnings (EBITA) growth of 21% was well above that implied by upwardly-revised FY21 guidance of $245-255m.

Assuming no relapse in insured volumes, Credit Suisse considers further upside to guidance is highly likely.

Credit Suisse retains an Outperform rating and raises the target to $4.20 from $3.80.

Target price is $4.20 Current Price is $3.78 Difference: $0.42
If SDF meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.17, suggesting upside of 9.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

Morgan Stanley rates SHL as Overweight (1) -

Morgan Stanley expects earnings from coronavirus testing could be higher for longer and help sustain a re-rating.

As cases accelerate in most of the company's markets the broker's calculations have testing contributing around $956m to EBIT in FY21 and $167m in FY22.

Morgan Stanley has also factored in a general recovery in the base business as improvement was observed in the first quarter, although there may be some risk as second and third waves of coronavirus unfold.

Target is raised to $40 from $35. Overweight rating. Industry view: In-line.

Target price is $40.00 Current Price is $36.75 Difference: $3.25
If SHL meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $36.06, suggesting upside of 4.2% (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

Ord Minnett rates SHL as Hold (3) -

Ord Minnett observes a rapid upward trend in coronavirus testing in the northern hemisphere markets and, accordingly, raises FY21 profit forecasts by a further 6% to capture the contribution.

The broker assumes testing revenues will peak in the current half year and fall away to much lower levels by 2022. The timing will be dependent on the introduction of improved point-of-care tests and vaccines.

Ord Minnett retains a Hold rating and raises the target to $37.00 from $36.50.

Target price is $37.00 Current Price is $36.75 Difference: $0.25
If SHL meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $36.06, suggesting upside of 4.2% (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

Ord Minnett rates SSG as Buy (1) -

Online sales drove a rise of 20% in overall sales, despite Melbourne stores re-entering lockdown in the first quarter.

With a tough comparable and the looming Christmas period, Ord Minnett upgrades FY21 estimates for earnings per share by just 14% and FY22 by 8%.

The broker retains a Buy rating and raises the target to $1.38 from $1.26.

Target price is $1.38 Current Price is $1.06 Difference: $0.32
If SSG meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

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

Suncorp Group has given a natural hazard update following the significant Queensland/New South Wales hailstorm on 31 October 2020.

The group has disclosed that natural hazards for the four months ended October are tracking at -$348m-$408m, which compares to the group’s FY21 hazard allowance of -$950m (split evenly 1st half vs 2nd half).

Morgans lowers FY21 and FY22 EPS forecasts by -2%-4%, which reflects an update of numbers for a mark-to-market.

The rating is increased to Add from Hold on valuation grounds. While the operating environment remains difficult for the group near term, Morgans thinks the recent pullback in share price is probably overdone.  

The target is decreased to $9.90 from $10.32.

Target price is $9.90 Current Price is $8.57 Difference: $1.33
If SUN meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $10.42, suggesting upside of 14.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Ord Minnett rates TWE as Hold (3) -

Ord Minnett reiterates concerns that the Chinese investigation into alleged wine dumping by Australia and the broader outlook for Australian wine exports to China remain difficult risks to price.

There has been no progress on the reported banning of Australian exports of wine and no progress officially on the dumping investigation.

The absence of any interim ruling removes a near-term positive, as it would have provided some context and a base on which to price risk. Hold rating. Target is $9.

Target price is $9.00 Current Price is $9.01 Difference: minus $0.01 (current price is over target).
If TWE meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.66, suggesting upside of 7.0% (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

Ord Minnett rates VVA as Buy (1) -

Recent relaxation of restrictions in NSW and opening of Victoria bode well for reactivation of member suspensions, Ord Minnett asserts, and yields should improve as a result.

The broker envisages strong momentum heading into FY22 amid an expanded member and club network. The broker also assesses an increase in debt facilities is required to support further acquisitions and franchise buybacks.

Ord Minnett retains a high conviction Buy rating with a $4.25 target.

Target price is $4.25 Current Price is $2.68 Difference: $1.57
If VVA meets the Ord Minnett target it will return approximately 59% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Morgan Stanley rates WHC as Overweight (1) -

Morgan Stanley is comfortable with Whitehaven Coal's gearing. In FY21-23 some breaches of the internal debt targets are considered likely but gearing is expected to fall to 10% by FY25.

Positive free cash flow from FY22 is expected to increase available liquidity. The broker calculates thermal coal prices would need to be below US$58/t for negative free cash flow in FY22.

Morgan Stanley maintains its Overweight rating with a target price of $1.30. Industry view: Attractive.

Target price is $1.30 Current Price is $1.08 Difference: $0.22
If WHC meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $1.47, suggesting upside of 30.9% (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