Australian Broker Call

Morgans rates AMX as Add (1) -

While the recent trading update was pretty much as expected by Morgans, the broker also notes company management is now noticing competitive pressure.

As a direct result of the latter, management is now guiding annual recurring revenues (ARR) to be only slightly above the $4.26m seen at 31 March.

Morgans sticks with its view Aerometrex's core MetroMap product continues to enjoy a long growth runway ahead, with a large addressable market.

Forecasts have been reduced, which also pulls back the price target to $1.36 from $1.61. Add rating retained, for the patient investor, as Morgans puts it.

Target price is $1.36 Current Price is $0.80 Difference: $0.56
If AMX meets the Morgans target it will return approximately 70% (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

Macquarie rates CQR as Outperform (1) -

Charter Hall Retail REIT has increased its asset valuations by 4.1%, which net of capex implies a 5.2% increase to net tangible asset value, the broker notes.

While the REIT now has limited balance sheet capacity, it is offering a 6.5% yield and is trading roughly at its NTA. The broker sees upside risk to shopping centre valuations and retains Outperform. Target rises to $4.18 from $4.04.

Target price is $4.18 Current Price is $3.94 Difference: $0.24
If CQR meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting downside of -2.8% (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

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

Foot traffic at CSL's US collection centres continues to increase, but the pace has slowed somewhat from the burst in April/May, Macquarie notes. Consensus earnings forecasts have risen modestly, while CSL has outperformed the index by 7%.

This implies a level PE multiple expansion that the broker finds stretched. On a forecast total shareholder return now of only 4.4%, Macquarie pulls back to Neutral from Outperform. Target unchanged at $312.

Target price is $312.00 Current Price is $302.90 Difference: $9.1
If CSL meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $300.19, suggesting downside of -0.7% (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 EBO as Neutral (3) -

The broker sees Ebos Group's operational momentum as on balance positive, but takes issue with the current price. From here, it is difficult to see what might lead either to a re-rating or de-rating.

The stock currently trades on an 18x forward EBIT forecast, which is close to all-time highs, but is offering only a 4.1% free cash flow yield, the broker notes, compared to a 5.1% average among A&NZ peers.

Target rises to NZ$33.70 from US$29.53, Neutral retained.

Current Price is $30.55. Target price not assessed.

Current consensus price target is $28.87, suggesting downside of -5.5% (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

Macquarie rates ELD as Outperform (1) -

ABARES has increased its FY21 farm production value forecast by 0.6% from the March forecast, to a record $66.2bn, expecting strong seasonal conditions in both FY21 and FY22. A 2.7% increase to the FY22 forecast is nevertheless a little down on FY21.

Such conditions will support Elders' earnings but the company also has other levers to pull, the broker notes, such as bolt-on acquisitions and footprint expansion. Outperform retained, target slips to $13.96 from $14.11.

Target price is $13.96 Current Price is $11.89 Difference: $2.07
If ELD meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $13.10, suggesting upside of 11.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Morgans rates HDN as Add (1) -

HomeCo Daily Needs REIT's security holders have approved the purchase of large format retail (LFR) centres for $266.4m, implying a 6.75% cap rate. Settlement is expected in July 2021. The seller is Home Consortium ((HMC)).

In addition, the broker notes HomeCo Daily Needs REIT recently announced preliminary positive June 2021 asset revaluations of 6.5%.

Morgans believes the REIT offers an attractive dividend profile. Add rating retained, as well as the $1.50 price target.

Target price is $1.50 Current Price is $1.47 Difference: $0.03
If HDN meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.45, suggesting downside of -0.7% (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

Credit Suisse rates IAG as Outperform (1) -

Insurance Australia Group has estimated natural perils claims will be $720-743m for FY21. The upper end of this range represents the stock-loss protection limit for the maximum net perils cost post quota share.

Credit Suisse increases perils expenses modestly and as a result downgrades FY21 cash estimates for earnings per share by -4%.

The broker continues to believe the stock offers value at current levels, with conservative provisions factored into earnings and tailwinds from a hardening insurance cycle. Outperform rating reiterated. Target is $5.35.

Target price is $5.35 Current Price is $5.17 Difference: $0.18
If IAG meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $5.41, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

Ord Minnett rates IAG as Accumulate (2) -

Insurance Australia Group now estimates its FY21 net peril claims will amount to $720-743m as a result of the Victorian floods, compared with previously restated guidance of $660-700m.

Ord Minnett updates forecasts accordingly and also incorporates a slight increase in reserve releases assumptions. The broker maintains an Accumulate rating and raises the target to $5.30 from $5.15.

Target price is $5.30 Current Price is $5.17 Difference: $0.13
If IAG meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $5.41, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

UBS rates IAG as Buy (1) -

Insurance Australia Group has increased its FY21 natural peril cost estimate to $720-743m. As estimates assume the stop-loss protection is fully utilised, UBS assesses downside risk if there are any large events for the remaining two weeks of FY21.

With the stop-loss not likely to be renewed into FY22, the broker expects the company will face a sharp increase in its natural perils budget next year. Buy rating and $6 target retained.

Target price is $6.00 Current Price is $5.17 Difference: $0.83
If IAG meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.41, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

Macquarie rates LLC as Neutral (3) -

A recent Lendlease board presentation included a change of commentary, the broker suggests, with documents signalling a potential cost-out opportunity. Every -1% reduction in costs translates to around a 2.5% earnings uplift in FY23 earnings forecasts.

This would support return on invested capital targets, and is earnings positive in isolation, but for the broker, a sustained re-rate of the stock would require actual revenue growth. Neutral and $12.99 target retained.

Target price is $12.99 Current Price is $12.36 Difference: $0.63
If LLC meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $13.84, suggesting upside of 12.1% (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

Macquarie rates MAH as Initiation of coverage with Outperform (1) -

The broker has "initiated" coverage of mining service provider Macmahon Holdings, having previously abandoned coverage in 2015. An Outperform rating and 30c target reflect increased gold activity in Australia and copper in Indonesia.

Presently, Macmahon is underpinned by the Batu Hijau copper project in Indonesia, the broker notes, with revenue and margin growth expected to come from an increase in underground contracts.

Near term risks include covid restrictions and wage inflation.

Target price is $0.30 Current Price is $0.19 Difference: $0.11
If MAH meets the Macquarie target it will return approximately 58% (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

Ord Minnett rates MAI as Hold (3) -

Ord Minnett notes competing takeover proposals now number 15 from at least three different parties over the last four months.

The latest is Apex Group at $2.80 a share with SS&C Technologies, which offered $2.76 on June 1, having until June 17 to match the proposal.

The broker increases the target to $2.80 from $2.35 to reflect the current offer and believes material upside for shareholders is unlikely at this point. Hold maintained.

Target price is $2.80 Current Price is $2.84 Difference: minus $0.04 (current price is over target).
If MAI meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.0

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

Macquarie rates NWH as Initiation of coverage with Outperform (1) -

The broker has "initiated" coverage of mining service provider NRW Holdings, having previously abandoned coverage in 2015. An Outperform rating and $2.10 target reflect the benefits of converting a $14bn order book to secured work.

NRW is highly leveraged to increased spending on iron ore production and infrastructure in general, the broker notes, both of which have significant tailwinds.

Near term risks include covid restrictions and wage inflation.

Target price is $2.10 Current Price is $1.50 Difference: $0.6
If NWH meets the Macquarie target it will return approximately 40% (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 NXL as Overweight (1) -

Morgan Stanley notes the company is in the highly unusual position of having its chief financial officer departing at the same time the CEO is retiring. In addition, the company is also hiring a chief operating officer and internal investor relations personnel.

The broker believes these are constructive steps and necessary to rebuild confidence but at the same time it will contribute to an elevated risk profile.

The broker remains positive on the business outlook yet expects the shares will continue to trade at a discount until investor confidence is restored. Overweight rating and $6.40 target maintained. Industry view is Attractive.

Target price is $6.40 Current Price is $2.60 Difference: $3.8
If NXL meets the Morgan Stanley target it will return approximately 146% (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

Ord Minnett rates PPS as Buy (1) -

Ord Minnett changes its valuation approach for Praemium because of changing industry dynamics. The broker moves to a sum-of-the-parts methodology to better reflect value across various parts of the business.

While neither Powerwrap nor the international business are profitable both have improving opportunities from ongoing investment.

Ord Minnett retains a Buy rating and raises the target to $1.35 from $1.00.

Target price is $1.35 Current Price is $0.95 Difference: $0.4
If PPS meets the Ord Minnett target it will return approximately 42% (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

Macquarie rates PRN as Initiation of coverage with Outperform (1) -

The broker has initiated coverage of mining service provider Perenti Global. An Outperform rating and 90c target reflect a shift in work away from riskier African nations to less risky Botswana, as well as North America.

Perenti has significant levels of work in hand and a large order book, the broker notes, which should support cash flow and attractive 9-10% dividend yields.

Near term risks include covid restrictions and wage inflation.

Target price is $0.90 Current Price is $0.68 Difference: $0.22
If PRN meets the Macquarie target it will return approximately 32% (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

Credit Suisse rates SCP as Neutral (3) -

The company has acquired Marketown, Newcastle, for $150.5m on an initial passing yield of 5.6%. The centre has an east wing anchored by Woolworths ((WOW)) and a west wing anchored by Coles ((COL)).

Credit Suisse estimates gearing is now around 33% and from now on any material acquisitions could require additional equity.

The broker revises FY22 and FY23 estimates up to reflect the Marketown and Raymond Terrace acquisitions. Neutral maintained. Target rises to $2.54 from $2.50.

Target price is $2.54 Current Price is $2.59 Difference: minus $0.05 (current price is over target).
If SCP meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.46, suggesting downside of -3.7% (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 SCP as Outperform (1) -

Shopping Centres Group has acquired Marketown Newcastle for $150m, which implies a 6.1% cap rate, the broker calculates. Recent acquisitions have increased the broker's FY22 funds from operations forecast by some 5%.

The balance sheet is now more limited, with gearing around 33%, but a 6.0% forecast FY22 dividend yield, resilient cash flows and upside risk to asset valuations underpin an Outperform rating. Target rises to $2.68 from $2.56.

Target price is $2.68 Current Price is $2.59 Difference: $0.09
If SCP meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $2.46, suggesting downside of -3.7% (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

Ord Minnett rates SCP as Hold (3) -

The company has acquired Marketown Newcastle for $150.5m, lifting the value of the 2021 acquisitions to $361m at an average yield of 5.9%.

Ord Minnett observes the business has been able to deploy the capacity on the balance sheet and source opportunities at a market price despite increased competition.

The acquisitions are accretive to earnings and lift gearing to 32%, below the stated target of 35%. Hold rating and $2.60 target price are unchanged.

Target price is $2.60 Current Price is $2.59 Difference: $0.01
If SCP meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.46, suggesting downside of -3.7% (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 SFR as Outperform (1) -

Sandfire Resources has provided a final resource/reserve upgrade for the ailing DeGrussa mine, ahead of cessation of production in September 2022. Sandfire will run the mine full tilt until the last pound of copper is removed.

The broker thus increases forecast earnings, while at the same time removing the Thaduna project at DeGrussa from valuation. The Old Highway gold project will now be brought online to extend production.

Commencement of the T3 Motheo project in Botswana offers both the next key catalyst, and any delay a key risk. Outperform retained, target falls to $8.90 from $9.30.

Target price is $8.90 Current Price is $6.90 Difference: $2
If SFR meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $7.25, suggesting upside of 7.0% (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

Morgans rates SKI as Add (1) -

Today's update was triggered by the need to update Morgans' modeling to incorporate TransGrid’s Project EnergyConnect. This project is meaningful for TransGrid but a lot less important for Spark Infrastructure, the broker explains.

Having said so, today's update has lifted the broker's target price for Spark by 4c to $2.34. Morgans adds it also supports Spark's narrative regarding de-carbonisation exposure.

Project EnergyConnect is a new 330kV 900km electricity transmission interconnector between SA and NSW. Add rating retained.

Target price is $2.34 Current Price is $2.27 Difference: $0.07
If SKI meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates TYR as Overweight (1) -

Morgan Stanley assesses Tyro Payments is fighting back after its terminal outages caused havoc in January-February and has a sharper competitive edge.

The company is now better equipped than its competitors to deal with any future outage and this message appears to be resonating with small-medium enterprise merchants.

Part of the story the broker believes is not well understood is the potential from the deal with Bendigo & Adelaide Bank ((BEN)), particularly as the roll-out of Tyro Payments hardware & software to the bank's customers has just started.

Morgan Stanley estimates this will lift total transaction value for Tyro Payments by $5bn and EBITDA by $12m in its first full year.

Overweight rating. Target price is raised to $4.60 from $4.10. Industry view is Attractive.

Target price is $4.60 Current Price is $3.91 Difference: $0.69
If TYR meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.01, suggesting upside of 1.5% (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