Australian Broker Call

Macquarie rates AGL as Upgrade to Outperform from Neutral (1) -

The draft ruling from the AEMC has lifted the real maximum price (MPC) by 37% to FY28, increasing volatility in Macquarie's view. This should translate to a lift in market prices by around $10/megawatt-hour over that period.

The gains for AGL Energy will mitigate some earnings pressure associated with loss of gas and coal contracts in FY29. Peak earnings are expected in FY24 and thereafter the decline could be shallower than previously anticipated.

Macquarie assesses value has re-emerged and upgrades to Outperform from Neutral. Target is raised to $11.56 from $11.43.

Target price is $11.56 Current Price is $10.71 Difference: $0.85
If AGL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $11.68, suggesting upside of 5.9% (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

Macquarie rates ALL as Outperform (1) -

Macquarie has become more bullish on Aristocrat Leisure's land-based growth in the Americas. The operating environment is robust amid ongoing casino revenue growth and casino budgets are resilient.

That said, Pixel United has challenges with social casino volume stabilising at current levels and the company not pursuing a direct-to-consumer platform strategy like its peers.

The broker is likely to make upgrades to expectations as it gains more confidence in the company's iGaming strategy. Outperform retained. Target is raised to $48.50 from $46.50.

Target price is $48.50 Current Price is $40.69 Difference: $7.81
If ALL meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $44.66, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.9

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

Citi rates BSL as Neutral (3) -

BlueScope Steel's investor briefing highlighted the challenges in decarbonising its Port Kembla operations. Citi notes a hydrogen solution appears very far off and a gas-fired solution is the more likely outcome. This would still require more electricity plus an upgraded transmission capacity.

The broker points out the easiest way to reduce carbon emissions in the blast furnace steel-making route is via increased scrap use and in this the company's leading the way. In turn, this is a significant threat to long-term iron ore demand which the broker suggests is yet to get much attention. Neutral rating and $23.50 target maintained.

Target price is $23.50 Current Price is $19.23 Difference: $4.27
If BSL meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $21.36, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Macquarie rates BXB as Upgrade to Outperform from Neutral (1) -

Macquarie, after visiting the US, has now a higher appreciation of the structural benefits to pallet pooling businesses such as Brambles, given their ability to keep pushing price despite increasing pallet availability and some deflationary impacts.

The broker suspects FY24 may continue the company's track record of upgrading guidance throughout a reporting period.

As a result, forecasts are moved to the higher end of the constant-FX range of 6-8% sales revenue growth and 9-12% underlying profit growth. Rating is upgraded to Outperform from Neutral and the target lifted to $15.45 from $15.05.

Target price is $15.45 Current Price is $14.36 Difference: $1.09
If BXB meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $15.58, suggesting upside of 7.0% (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: 0.3

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

Bell Potter rates CGC as Hold (3) -

Costa Group has entered into a scheme implementation deal with a consortium led by Paine Schwartz Partners at $3.20 a share.

The deal will be subject to a number of approvals, including the Australian FIRB,  European Commission, and the Moroccan Competition Council.

Bell Potter notes there are the usual caveats such as material adverse effect clauses around net asset value and earnings. iI approval is gained the transaction is expected to complete in the first quarter of FY24.

The broker lifts its target to the revised offer price of $3.20, from $3.10. This represents a 43% premium to the share price prior to PSP acquiring its initial position in October 2022. Hold maintained.

Target price is $3.20 Current Price is $3.09 Difference: $0.11
If CGC meets the Bell Potter target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.11, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Morgans rates CGC as Hold (3) -

Costa Group has entered a scheme of arrangement with Paine Schwartz Partners and a consortium that includes its berry joint venture partner Driscoll's.

The offer price is now $3.20 a share, having been reduced from $3.50, and Morgans considers this a reasonable outcome for shareholders given the risks involved in delivering the company's growth projects and targeted returns. The broker is of the view that Costa Group's earnings are just too volatile for the listed market.

Morgans points out PSP knows the business well having entered into a strategic partnership with the Costa family in 2011 to support further growth and development of the business. Morgans retains a Hold rating and raises the target to $3.20 from $2.95.

Target price is $3.20 Current Price is $3.09 Difference: $0.11
If CGC meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.11, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Ord Minnett rates CGC as Hold (3) -

Ord Minnett asserts the proposed takeover by Paine Schwartz Partners now looks a done-deal although there are still a number of hurdles including regulators in Australia, Morocco and China.

The broker raises its target to $3.20 from $3.18 to reflect the takeover price. As the consortium includes the most likely strategic partner, Driscoll's, the broker believes an alternative offer is unlikely to be forthcoming.

Ord Minnett would revert to a stand-alone valuation of $3.10 a share if the deal fell through. Hold rating.

Target price is $3.20 Current Price is $3.09 Difference: $0.11
If CGC meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.11, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.2

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

Shaw and Partners rates CY5 as Buy (1) -

Cygnus Metals has provided high-grade results that reveal large widths at its Bencubbin clay-hosted target in Western Australia.

Shaw and Partners envisages potential for a spin-off, given the company's major focus is lithium exploration in James Bay Quebec, where it has three projects.

The results at Bencubbin have almost doubled the known strike length to 4.5km and it remains open. Buy rating maintained. Target is steady at $0.50 and is based on the company doubling its resource base in the next 12 months.

Target price is $0.50 Current Price is $0.19 Difference: $0.31
If CY5 meets the Shaw and Partners target it will return approximately 163% (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

Bell Potter rates DVP as Buy (1) -

Develop Global's Woodlawn update indicates a mine life of seven years with payable zinc production of 159,000t and payable copper production of 56,000t over its life.

First production has been delayed, which Bell Potter now expects by early 2025, and will coincide with increased revenue generation in the underground mining services business.

The outlook for free cash flow and the funds likely to be raised from deep in-the-money options de-risks project financing for the Sulphur Springs and Pioneer Dome, the broker adds, which represent medium-term earnings growth drivers.

Buy rating retained. Target is reduced to $3.70 from $3.80.

Target price is $3.70 Current Price is $3.22 Difference: $0.48
If DVP meets the Bell Potter target it will return approximately 15% (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

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

Morgan Stanley believes Lendlease Group needs to divest its communities business to keep gearing in check. A sale may not alleviate gearing pressure permanently but it would provide substantial headroom and enable the company to finance its share of development expenditure in FY24/25.

The broker notes a number of projects are due for completion in FY24-26 but the release of invested capital may not be concurrent and will only occur when its stakes are divested.

Eventually, a total of $2bn in cash could be "liberated", Morgan Stanley asserts, meaning the company has a pathway to being self-funded, but ultimately asset divestment is required.

Equal-weight rating. Target $9.20. Industry View: In-Line.

Target price is $9.20 Current Price is $7.13 Difference: $2.07
If LLC meets the Morgan Stanley target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $10.19, suggesting upside of 42.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Citi rates MQG as Neutral (3) -

Citi observes the operating environment for deal-making has become very challenging and as a result Macquarie Group has been in the unusual position of downgrading FY24 guidance, first at the AGM and now at an investor conference.

The broker observes the share price is trading sideways and consensus estimates for first half earnings do not fully reflect the subdued environment.

The slow pace of the current economic cycle will have negative implications for the deal outlook in the second half and could lead to another downgrade to FY24 guidance, Citi adds, opening up a "negative catalyst watch" leading into the results in November. Neutral retained with a $175 target.

Target price is $175.00 Current Price is $169.50 Difference: $5.5
If MQG meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $189.88, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Ord Minnett rates NHC as Hold (3) -

Ord Minnett increases its New Hope target to $6.30 from $6.10, after updating assumptions for thermal and metallurgical coal prices over the near term. The broker also incorporates the latest FX assumptions along with higher coal royalty rates imposed by NSW.

The NSW government will scrap the cap on domestic thermal coal prices  effective July 1, 2024 and replace this with a 2.6% increase in state coal royalties.

The broker notes thermal coal prices are elevated compared with historical values and cost support, as the Russia/Ukraine war reinforces the importance of energy security. Thermal coal is expected to average around US$175/t from 2023 to 2025. Hold.

Target price is $6.30 Current Price is $6.08 Difference: $0.22
If NHC meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.33, suggesting downside of -14.1% (ex-dividends)

The company's fiscal year ends in July.

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

Bell Potter rates NIC as Buy (1) -

Nickel Industries has completed a placement to United Tractors' subsidiary PT Danusa Tambang Nusantara at $1.10 a share for proceeds of $942.7m. The latter will hold 19.99% of Nickel Industries.

The agreement and premium paid, Bell Potter asserts, are a strong endorsement of the company's assets, management and strategic objectives.

Funds will represent a significant contribution to the funding commitment for the Excelsior nickel-cobalt project and a final investment decision is expected shortly. Buy rating and $1.64 target are unchanged.

Target price is $1.64 Current Price is $0.78 Difference: $0.86
If NIC meets the Bell Potter target it will return approximately 110% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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: 0.7

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

Ord Minnett rates NUF as Accumulate (2) -

After three years of floods and rain, Australia's Bureau of Meteorology has now formally declared the first El Nino event in eight years, predicting hot and dry conditions ahead for eastern Australia.

Ord Minnett observes this is not ideal for Nufarm's Australian business but El Nino also tends to bring wet weather to North America and the company is now a geographically diverse enterprise.

North America, on average, comprises around 36% of revenue with Australasia a similar proportion. The shares are down sharply from the December highs and the broker considers them materially undervalued. Accumulate rating and $7.70 target maintained.

Target price is $7.70 Current Price is $4.75 Difference: $2.95
If NUF meets the Ord Minnett target it will return approximately 62% (excluding dividends, fees and charges).

Current consensus price target is $6.97, suggesting upside of 48.9% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates ORI as Buy (1) -

Citi asserts it is "unlucky" that Orica has a major turnaround at Kooragang Island plan for the first half during a period when explosives volume and prices are expected to rise.

Margins are relatively volatile yet earnings are more stable as contracts now quickly accommodate the rise and fall in ammonia. The broker envisages value in the stock because demand growth for ammonium nitrate is expected to outpace GDP growth.

The broker incorporates expenditure at the upper end of the $400-420m range for FY23 while underlying EBIT estimates are unchanged. FY24 estimates are downgraded by -4% to $775m for net profit of $457m. Buy rating retained. Target is reduced to $17.00 from $17.45.

Target price is $17.00 Current Price is $15.22 Difference: $1.78
If ORI meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $17.93, suggesting upside of 19.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.7

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

Morgan Stanley rates RIO as Overweight (1) -

Morgan Stanley observes Rio Tinto has stopped work at one of its Nummuldi pits after identifying a blast on the tenements that caused the fall of a Pilbara tree and some rock. The area has a rock shelter believed to be 40,000-50,000 years old.

The broker continues to monitor for further updates as the matter remains highly sensitive but remains "somewhat relieved" by the initial assessment there was no structural damage to cultural material and the shelter is 150m outside the company's tenement.

The pit is one of many at the site and it is temporary shutdown is unlikely to have an impact on total production in the near term. Target is $135. Overweight maintained. Industry View: Attractive.

Target price is $135.00 Current Price is $114.57 Difference: $20.43
If RIO meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $116.00, suggesting upside of 2.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.3

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

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

UBS downgrades Westpac to Sell from Neutral and reduces the target to $20 and $22. The change is driven by a higher cost outlook, somewhat offset by lower credit charges as the asset quality cycle now appears more benign.

 Some of the higher cost should be offset by higher net interest margin expectations, the broker acknowledges.

Return on equity is now expected to compress by around -140 basis points to FY27 and UBS asserts the bank is struggling to contain inflation pressures, particularly around staff expenses, coupled with amortisation headwinds from previous expenditure on regulatory systems.

Target price is $20.00 Current Price is $21.14 Difference: minus $1.14 (current price is over target).
If WBC 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 $22.45, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

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