Australian Broker Call

Bell Potter rates ADA as Buy (1) -

Bell Potter assumes a US$59m contract win by Adacel Technologies was included in FY24 guidance and leaves its forecasts unchanged, yet the broker's target rises to 80c from 75c on higher valuation multiples.

Around six years ago, Adacel lost its contract with the Federal Aviation Administration and has now won it back for hardware only. The broker suspects another contract may arise for an upgrade of the software, in a system Adacel originally installed.

The Buy rating is maintained.

Target price is $0.80 Current Price is $0.71 Difference: $0.095
If ADA meets the Bell Potter target it will return approximately 13% (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

Morgans rates AKE as Add (1) -

Despite weaker lithium pricing since July, Morgans continues to see value for Allkem, which can still throw-off attractive cash flows at lower pricing levels.

In particular, the analyst highlights how established pure play producers should be able to maintain EBITDA margins above 65%, even in the face of the broker's forecast for an overall fall in 2023 pricing of between -20-30%.

While Pilbara Minerals is preferred among the pure plays, Morgans retains its Add rating and $15.30 target for Allkem. The company is considered a higher risk alternative, but does have a larger growth pipeline than Pilbara Minerals.

Target price is $15.30 Current Price is $10.90 Difference: $4.4
If AKE meets the Morgans target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $16.85, suggesting upside of 53.0% (ex-dividends)

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

UBS rates AKE as No Rating (-1) -

UBS analysts have reduced price forecasts for lithium by between -10%-30% as supply is keeping up in an ongoing positive demand cycle, but a maturing supply chain needs to work through inventories in the shorter term.

The broker acknowledges while overall industry transparency is improving, the situation inside China in particular remains opaque for outsiders outside that country.

Equally important, perhaps, is UBS suggests demand expectations outside of China are being tested in the light of macro-economic weakness.

In response, EPS forecasts for lithium companies under coverage go down by -19%-57% for FY24-26, depressing valuations by -5%-13%.

UBS is under research restriction for Allkem so no rating and no price target for the time being.

Current Price is $10.90. Target price not assessed.

Current consensus price target is $16.85, suggesting upside of 53.0% (ex-dividends)

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

Ord Minnett rates ARB as Buy (1) -

Australian new vehicle sales hit another record in September, rising 18.3% observes Ord Minnett thanks to strong back orders and easier supply chains. All-vehicle sales rose 16.2% in the September quarter.

The broker points out new vehicle sales rose 14.7% in key SUV and LCV segments for ARB Corp. While good for the order book, the broker says staff shortages are proving a brake on further growth.

Long term, the broker's a fan. Buy rating and $36 target price retained.

Target price is $36.00 Current Price is $29.46 Difference: $6.54
If ARB meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $29.55, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.2

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

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

Morgan Stanley sees minimal risk for landlords arising from the ACCC report (released this week) into childcare services, including the draft recommendation of potential direct price controls.

While land costs are the second largest cost, the broker points out they comprise just 15% of total expense for centre based service providers. It's thought labour will be the main focus given it comprises 69% of operators' costs.

The Equal-weight rating and $4.36 target are unchanged. Industry view: In-Line.

Target price is $4.36 Current Price is $3.29 Difference: $1.07
If ARF meets the Morgan Stanley target it will return approximately 33% (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

UBS rates BPT as Buy (1) -

UBS is adopting the view that global oil markets are likely to remain tight for the remainder of 2023, with more conservative projections for 2024.

This leads to the broker lifting 4Q23 and average 2024 Brent oil price forecasts to US$92/bb & US$87/bbl from US$85/bbl & US$80/bbl prior.

Higher oil price forecasts have triggered upgrades to EPS forecasts across the industry of up to 20%. Santos is the broker's most preferred exposure on the ASX.

Beach Energy's rating remains Buy with a revised price target of $1.85 (was $1.80).

Target price is $1.85 Current Price is $1.52 Difference: $0.335
If BPT meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $1.81, suggesting upside of 19.9% (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

Morgan Stanley rates CBA as Underweight (5) -

Morgan Stanley highlights a historical correlation between the CommBank share price and the bank's rate of mortgage growth.

As mortgage growth has turned negative in the past two months there's potential for a lower price earnings multiple and upcoming negative investor sentiment, in the broker's view.

Australian housing loans account for more than 60% of CommBank's total loan balance.

The target is $85.50. Underweight. Industry View: In-Line.

Target price is $85.50 Current Price is $98.09 Difference: minus $12.59 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $91.08, suggesting downside of -8.0% (ex-dividends)

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 CGF as Neutral (3) -

Macquarie observes Challenger's front book margins contracted in the September quarter as credit spreads and annuity spreads tightened (down -10bps and -5bps respectively).

The bank's annuities relative to major bank deposit rates feel across three-year and five-year offerings, although the broker observes this only affects new business.

Earnings forecasts are eased. Neutral rating retained. Target price rises to $6.20 from $6.10.

Target price is $6.20 Current Price is $6.20 Difference: $0
If CGF meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $6.79, suggesting upside of 7.6% (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

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

Morgan Stanley retains its Equal-weight rating and $13.95 target for Charter Hall after reviewing the investment case following a -20% share price decline so far in 2023. Industry view: In Line.

While the valuation for the active business is currently attractive, the broker concedes bond yields are a major headwind and picking the bottom is challenging given how macro-driven the stock has been lately.

The analysts' final conclusion: investors should "wait for the long end of the rate curve to ease before the stock bounces back in a sustainable manner."

Target price is $13.95 Current Price is $9.17 Difference: $4.78
If CHC meets the Morgan Stanley target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $13.85, suggesting upside of 49.1% (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

Bell Potter rates CRN as Buy (1) -

Coronado Global Resources now expects lower full year production due to a mechanical failure of a dragline at Curragh and a rock intrusion at Buchanan. Saleable production guidance has decreased by -4% at the midpoint, notes Bell Potter.

Lower tonnes produced and elevated mining costs have driven unit costs guidance up by 16%, explains the analyst.

There is also a decrease in expected full year capital expenditure due to efficiencies, notes the broker, and guidance for FY23 has fallen by -16%.

Last week, Seven Group ((SVW)) Investments announced it had signed a binding agreement to acquire all of The Energy & Minerals Group’s 51% interest in Coronado Global Resources.

Bell Potter's Buy rating and $2.00 target are unchanged.

Target price is $2.00 Current Price is $1.69 Difference: $0.315
If CRN meets the Bell Potter target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 15.8% (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: 0.9

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

Bell Potter rates CUV as Initiation of coverage with Buy (1) -

Sales of Clinuvel Pharmaceuticals' treatment Scenesse grew at a three-year compound annual growth rate (CAGR) of 34% to $78m in FY23.

Scenesse is the only approved treatment for patients suffering from a rare inherited disease called erythropoietic protoporphyria (EPP).

Bell Potter initiates coverage of Clinuvel with a Buy rating and $24 target. The company is directly commercialising novel pharmaceuticals across the US and EU. It's noted very few ASX-listed biopharma companies operate in such a highly profitable manner.

Management is looking to diversify its opportunities beyond EPP via expanding the approved indications of Scenesse and developing additional melanocortin pharmaceuticals, explains Bell Potter.

The company is also launching a range of topical ‘PhotoCosmetic’ consumer products over the next 2-3 years, notes the broker.

Target price is $24.00 Current Price is $14.12 Difference: $9.88
If CUV meets the Bell Potter target it will return approximately 70% (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

Morgans rates CXO as Hold (3) -

Morgans sees ongoing material uncertainty around the investment proposition for Core Lithium given the recent need for a capital raise.

After incorporating this equity dilution into forecasts and allowing for higher longer-term operating overheads, the broker slashes its target price to 41c from 60c. No changes are made to production or pricing fortecasts.

The Hold rating is maintained.

Target price is $0.41 Current Price is $0.40 Difference: $0.015
If CXO meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $0.49, suggesting upside of 31.5% (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 GMD as Outperform (1) -

Genesis Minerals' preliminary production and cash flow data for the September quarter outpaced Macquarie's forecasts.

Leonora outpaced by 8% and Genesis increased cash and bullion by $14m, compared with a forecast -$15m outflow, taking the company's closing cash and bullion to $170m.

Stockpiles grew to 43kt from 38kt and the broker expects these will keep rising as the Admiral open pit pitches in (first ore has been mined ahead of schedule).

The broker observes all in sustaining costs compared favourably with the previous management. FY25 EPS forecasts rise 2%.

Outperform rating and $1.90 target price retained. 

Target price is $1.90 Current Price is $1.33 Difference: $0.57
If GMD meets the Macquarie target it will return approximately 43% (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

UBS rates IGO as Buy (1) -

UBS analysts have reduced price forecasts for lithium by between -10%-30% as supply is keeping up in an ongoing positive demand cycle, but a maturing supply chain needs to work through inventories in the shorter term.

The broker acknowledges while overall industry transparency is improving, the situation inside China in particular remains opaque for outsiders outside that country.

Equally important, perhaps, is UBS suggests demand expectations outside of China are being tested in the light of macro-economic weakness.

In response, EPS forecasts for lithium companies under coverage go down by -19%-57% for FY24-26, depressing valuations by -5%-13%. Rating for IGO remains Buy. Price target declines to $14.10 from $14.90.

Target price is $14.10 Current Price is $12.05 Difference: $2.05
If IGO meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $14.80, suggesting upside of 28.2% (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

UBS rates LTR as No Rating (-1) -

UBS analysts have reduced price forecasts for lithium by between -10%-30% as supply is keeping up in an ongoing positive demand cycle, but a maturing supply chain needs to work through inventories in the shorter term.

The broker acknowledges while overall industry transparency is improving, the situation inside China in particular remains opaque for outsiders outside that country.

Equally important, perhaps, is UBS suggests demand expectations outside of China are being tested in the light of macro-economic weakness.

In response, EPS forecasts for lithium companies under coverage go down by -19%-57% for FY24-26, depressing valuations by -5%-13%.

UBS is under research restriction for Liontown Resources so no rating and no price target for the time being.

Current Price is $2.97. Target price not assessed.

Current consensus price target is $3.09, suggesting upside of 4.3% (ex-dividends)

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

UBS rates MIN as Sell (5) -

UBS analysts have reduced price forecasts for lithium by between -10%-30% as supply is keeping up in an ongoing positive demand cycle, but a maturing supply chain needs to work through inventories in the shorter term.

The broker acknowledges while overall industry transparency is improving, the situation inside China in particular remains opaque for outsiders outside that country.

Equally important, perhaps, is UBS suggests demand expectations outside of China are being tested in the light of macro-economic weakness.

In response, EPS forecasts for lithium companies under coverage go down by -19%-57% for FY24-26, depressing valuations by -5%-13%. Mineral Resources has kept its Sell rating with a new target of $60, down from $64 prior.

Target price is $60.00 Current Price is $63.33 Difference: minus $3.33 (current price is over target).
If MIN 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 $76.86, suggesting upside of 25.0% (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 NCM as Neutral (3) -

It is UBS's opinion there is little risk to the completion of the acquisition of Newcrest Mining by Newmont, and the broker points out the combined portofolio will comprise ten Tier-1 assets, as well as three emerging Tier-1 assets. 

Despite a moderating short term outlook for gold, UBS sees decent catalysts throughout the financial year as the portfolio is optimised, and with improved production expected from Akyem, Canada and Cerro Negro, and positive news coming from Tanami and Ahafo. 

The Neutral rating and target price of $26.20 are retained.

Target price is $26.20 Current Price is $23.87 Difference: $2.33
If NCM meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $28.08, suggesting upside of 15.6% (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: 0.1

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

UBS rates ORG as No Rating (-1) -

UBS is adopting the view that global oil markets are likely to remain tight for the remainder of 2023, with more conservative projections for 2024.

This leads to the broker lifting 4Q23 and average 2024 Brent oil price forecasts to US$92/bb & US$87/bbl from US$85/bbl & US$80/bbl prior.

Higher oil price forecasts have triggered upgrades to EPS forecasts across the industry of up to 20%. Santos is the broker's most preferred exposure on the ASX.

UBS is under research restriction on Origin Energy.

Current Price is $8.71. Target price not assessed.

Current consensus price target is $8.81, suggesting upside of 1.7% (ex-dividends)

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

Morgans rates PLS as Add (1) -

Despite weaker lithium pricing since July, Morgans continues to see value in Add-rated Pilbara Minerals, which can still throw-off attractive cash flows at lower pricing levels.

In particular, the analyst highlights how established pure play producers should be able to maintain EBITDA margins above 65%, even in the face of the broker's forecast for an overall fall in 2023 pricing of between -20-30%.

While the company remains Morgans' key pick among the lithium pure plays, the broker's target falls to $5.10 from $5.60 after a moderation in forecast for the expansiom at the Pilgangoora asset in WA.

Target price is $5.60 Current Price is $4.05 Difference: $1.55
If PLS meets the Morgans target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $5.04, suggesting upside of 27.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

UBS rates PLS as Neutral (3) -

UBS analysts have reduced price forecasts for lithium by between -10%-30% as supply is keeping up in an ongoing positive demand cycle, but a maturing supply chain needs to work through inventories in the shorter term.

The broker acknowledges while overall industry transparency is improving, the situation inside China in particular remains opaque for outsiders outside that country.

Equally important, perhaps, is UBS suggests demand expectations outside of China are being tested in the light of macro-economic weakness.

In response, EPS forecasts for lithium companies under coverage go down by -19%-57% for FY24-26, depressing valuations by -5%-13%. Neutral rating retained for Pilbara Minerals with a new target of $4.15, versus $4.75 prior.

Target price is $4.15 Current Price is $4.05 Difference: $0.1
If PLS meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.04, suggesting upside of 27.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Ord Minnett rates RWC as Hold (3) -

Ord Minnett expects Reliance Worldwide will continue to log lower FY24 returns on invested capital, expecting short-term returns will largely meet the cost of capital. 

Medium to long term, the broker expects the company's cost-cutting, lower working capital requirements and a business recovery should improve returns. 

Hold rating and $4.10 target price retained.

Target price is $4.10 Current Price is $3.75 Difference: $0.35
If RWC meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.17, suggesting upside of 10.5% (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: 0.3

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

UBS rates STO as Buy (1) -

UBS is adopting the view that global oil markets are likely to remain tight for the remainder of 2023, with more conservative projections for 2024.

This leads to the broker lifting 4Q23 and average 2024 Brent oil price forecasts to US$92/bb & US$87/bbl from US$85/bbl & US$80/bbl prior.

Higher oil price forecasts have triggered upgrades to EPS forecasts across the industry of up to 20%. Santos is the broker's most preferred exposure on the ASX.

The stock is rated Buy with an increased price target of $8.95, up from $8.80 prior.

Target price is $8.95 Current Price is $7.45 Difference: $1.5
If STO meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $9.52, suggesting upside of 28.5% (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: 0.8

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

Morgan Stanley rates TRS as Overweight (1) -

In an ongoing review of Australian emerging companies, Morgan Stanley suggests the Reject Shop can outperform and increase its index relevance over time.

The broker highlights the company's defensive characteristics and leadership position in discount retail. The AGM on October 18 is awaited for evidence of earnings upside, improved store economics and ultimately roll-out potential.

Overweight rating. Target is $6.40. Industry view is In-Line.

Target price is $6.40 Current Price is $5.56 Difference: $0.84
If TRS meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $6.15, suggesting upside of 7.9% (ex-dividends)

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

Morgan Stanley rates TUA as Overweight (1) -

In an ongoing review of Australian emerging companies, Morgan Stanley suggests Tuas can outperform and increase its index relevance over time.

The broker highlights ongoing mobile subscriber momentum (around 10% share) and the imminent launch of broadband in H1 FY24.

It's suggested the company's growth plans can be self-funded with net cash $40m and the approach of free cash flow (FCF) break-even in FY24.

The Overweight rating and $2.40 target are maintained. Industry view is In-Line.

Target price is $2.40 Current Price is $2.07 Difference: $0.33
If TUA meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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

UBS rates WDS as Neutral (3) -

UBS is adopting the view that global oil markets are likely to remain tight for the remainder of 2023, with more conservative projections for 2024.

This leads to the broker lifting 4Q23 and average 2024 Brent oil price forecasts to US$92/bb & US$87/bbl from US$85/bbl & US$80/bbl prior.

Higher oil price forecasts have triggered upgrades to EPS forecasts across the industry of up to 20%. Santos is the broker's most preferred exposure on the ASX.

UBS' price target for Woodside Energy has gained 40c to $35.40. Rating remains Neutral.

Target price is $35.40 Current Price is $34.58 Difference: $0.82
If WDS meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $36.82, suggesting upside of 7.3% (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