Australian Broker Call

Ord Minnett rates AZJ as Initiation of coverage with Lighten (4) -

Ord Minnett initiates coverage on Aurizon Holdings with a target price of $3.10 and a Lighten rating. The broker is concerned about the longer term outlook and notes a share-price overhang from the company's thermal coal exposure.

This comes despite management's efforts to reduce the company's reliance on thermal coal. 

The analyst views Aurizon’s discount of circa -25% to the ASX200 Industrials Index (from the long run average of a 10% premium) as the ‘new normal’.

Target price is $3.10 Current Price is $3.39 Difference: minus $0.29 (current price is over target).
If AZJ meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.59, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Morgans rates CWY as Hold (3) -

As the completion of Cleanaway Waste Management's acquisition of Suez Sydney nears, Morgans sharply raises earnings forecasts. However, the valuation impact is considered immaterial, given the size and the limited-life of the key assets acquired.

Target price rises $2.75 from $2.53. Hold rating is maintained.

The analyst assumes debt will fund the acquisition (the company has established a $500m acquisition debt facility), and that free cash flow will be used to pay down the acquisition debt.

Target price is $2.75 Current Price is $2.90 Difference: minus $0.15 (current price is over target).
If CWY meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.84, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgans rates EBO as Hold (3) -

Ebos Group has bought leading medical device company Lifehealthcare for -$1.17bn, a reasonable price given its strategic importance, says Morgans. 

Hold rating is maintained given the strength of the share price.

After allowing for a $642m placement at $34.50, a $100m retail offer and a $540m new debt facility, the broker increases its target price to $36.75 from $33.14. The deal is expected to be completed by the end of FY22.

Target price is $36.75 Current Price is $36.31 Difference: $0.44
If EBO meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $38.06, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Morgans rates FMG as Hold (3) -

While Morgans has lost conviction in Fortescue Metals Group's overall strategy (read renewables strategy) there's still considered to be strength in the core iron-ore business. The recent iron ore sell-off is thought to have pushed the company towards fair value.

As a result, the analyst lifts the target price to $16.90 from $13 though maintains a Hold rating.

Rather than renewables, Morgans suggests the focus should be upon iron ore or even diversification into other mature markets.

Target price is $16.90 Current Price is $18.10 Difference: minus $1.2 (current price is over target).
If FMG meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.51, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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 IAG as Downgrade to Sell from Neutral (5) -

A change in covering analyst has led UBS to downgrade Insurance Australia Group to Sell from Neutral to reflect the company's numerous  challenges.

NRMA is being sued by the regulator for overcharging. The commercial business is undergoing remediation work. Most of IAG's growth options have been divested in recent years. Positive covid impacts have reversed due to supply-chain issues driving a spike in claims. 

Management is confident of achieving its $250m insurance profit target by FY24. In FY22 to date, price increases of 9% are apparently holding without major volume loss, the broker notes, but doubts this level of repricing is sufficient to restore double-digit margins.

Target price falls to $4.20 from $5.35.

Target price is $4.20 Current Price is $4.40 Difference: minus $0.2 (current price is over target).
If IAG 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 $5.00, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Credit Suisse rates IPL as Neutral (3) -

Credit Suisse reports that nitrogen prices have reached a level high enough to lure high-cost producers back into the market, which should contain further upside, with limited effect on Incitec Pivot.

The broker expects prices will continue to be strong in the December and March quarters before sliding in the second half of 2022.

Neutral rating and $3.14 target price retained for now.

On a blue-sky scenario (appreciation of the $A) could drive the target price to $3.77. On a grey sky (depreciation scenario), the target price is pegged at $2.51.

Target price is $3.14 Current Price is $3.06 Difference: $0.08
If IPL meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.60, suggesting upside of 14.6% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Ord Minnett rates LYC as Lighten (4) -

Ord Minnett remains cautious on elevated Neodymium-praseodymium (NdPr) prices and operational and project risk for Lynas Rare Earths.

Despite such misgivings, the broker raises its target to $4.60 from $4.30. Lighten rating retained on valuation concerns.

The analyst increases the FY22 NdPr price forecast to US$98/kg from US$80/kg, which offsets lower utilisation assumptions. The NdPr price is approaching 10-year highs.

Target price is $4.60 Current Price is $9.16 Difference: minus $4.56 (current price is over target).
If LYC meets the Ord Minnett target it will return approximately minus 50% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

UBS rates OZL as Neutral (3) -

UBS last covered OZ Minerals in February but has reinstated coverage with a new analyst, a retained Neutral rating and a new target price of $26.94, up from $19.00 previously.

New forecasts reflects updated asset models, including West Musgrave, and the broker's latest commodity price forecasts for copper, gold and nickel.

At current levels OZ is pricing in some scarcity value as a consensus play on the electrification thematic with its superior growth profile, the broker suggests.

Target price is $26.94 Current Price is $27.01 Difference: minus $0.07 (current price is over target).
If OZL meets the UBS target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.13, suggesting downside of -8.7% (ex-dividends)

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

Morgan Stanley rates PDL as Overweight (1) -

Despite a trading update pointing to about -3.5% of Pendal Group's funds under management (FUM) flowing out, Morgan Stanley feels valuation looks compelling. Overweight rating and $8.80 target price are retained. Industry view: In-Line. 

The analyst notes J O Hambro Capital Management's performance fees are tracking above September 2021 levels. Meanwhile, the Thompson, Seigal and Walmsley acquisition is set to deliver double-digit EPS accretion.

The performance across the group is strong particularly over a over five-year timeframe as at September 2021, explains the broker.

Target price is $8.80 Current Price is $5.72 Difference: $3.08
If PDL meets the Morgan Stanley target it will return approximately 54% (excluding dividends, fees and charges).

Current consensus price target is $8.12, suggesting upside of 43.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates RIO as Overweight (1) -

In Morgan Stanley's meeting with Rio Tinto regarding aluminium, it was noted alumina, manganese and electricity prices have increased considerably during the year, resulting in a shift in the aluminium cost curve.

The company expects alumina prices to roll forward. While labour costs are also rising, management doesn't expect a significant escalation in long-term energy prices, given the company's substantial hydro footprint.

Overweight rating and $110.50 target price are retained. Industry View: Attractive.

Target price is $110.50 Current Price is $95.83 Difference: $14.67
If RIO meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $107.07, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates S32 as Buy (1) -

South32 has scaled back planned longwall production at Dendrobium by -56% in response to earlier project rejection by NSW's Independent Planning Tribunal. UBS notes lower production is offset by lower capex and higher realised prices.

Th changes, while not guaranteeing approval, do meaningfully reduce impacts and therefore should increase the odds of approval.

Buy and $4.10 target retained.

Target price is $4.10 Current Price is $3.82 Difference: $0.28
If S32 meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.52, suggesting upside of 18.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Market Sentiment: 1.0

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

Macquarie rates SIG as Neutral (3) -

Sigma Healthcare has downgraded underlying earnings guidance after operational issues caused by a software upgrade triggered customer losses and an expected -10% year-on-year earnings decline (pointing underlying earnings of $73m), says Macquarie. 

Expecting issues to continue to impact in FY23, and one-off costs of $25-30m and $6m in FY22 and FY23 respectively, the broker downgrades earnings per share forecasts -25.7%, -30.9% and -21.6% through to FY24. 

Neutral rating is retained. Target price decreases to $0.45 from $0.65.

Target price is $0.65 Current Price is $0.43 Difference: $0.22
If SIG meets the Macquarie target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 22.7% (ex-dividends)

The company's fiscal year ends in January.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Ord Minnett rates STO as Buy (1) -

After incorporating the now completed Oil Search ((OSH)) acquisition into the Santos financials, Ord Minnett increases its target price to $8.45 from $7.90. More than more than 95% of Oil Search shareholders voted in favour of the deal.

While management indicated pre-tax synergies could amount to US$90-115m, the analyst excludes this potential from the base-case scenario. Net present value would jump by a further $0.33-0.42cps if included, notes the broker. Buy ratiing is maintained.

Target price is $8.45 Current Price is $6.48 Difference: $1.97
If STO meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $8.68, suggesting upside of 30.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.7

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

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

Morgan Stanley sees downside risk to Suncorp Group's insurance margins from exposure to motor claims and flooding events with La Nina expected to persist until next March.

Equal-weight rating and $11.90 target price are retained. Industry view: In-Line.

Target price is $11.90 Current Price is $10.85 Difference: $1.05
If SUN meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $13.13, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Citi rates TWE as Buy (1) -

Citi sees positive implications for Treasury Wine Estates from US competitor Duckhorn's quarterly results.

Improving sales momentum for the higher-margin on-premise and cellar-door channels, and strong consumer demand for luxury wines in the US are promising, says the analyst.

Buy rating and $13.80 target price are retained. 

Target price is $13.80 Current Price is $12.08 Difference: $1.72
If TWE meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $13.45, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Citi rates WBC as Buy (1) -

Westpac Bank has amended the discount and extended the tender period for its off market buyback, which has resulted in a modest improvement in after-tax returns, explains Citi. Management has pledged to redirect any shortfall into an on-market buy-back.

The broker maintains a Buy rating, asserting Westpac Bank is the cheapest major bank, and a target price of $27.50.

Target price is $27.50 Current Price is $20.85 Difference: $6.65
If WBC meets the Citi target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $26.33, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

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

Westpac Bank has made changes to its $3.5bn buyback. The bank "remains committed” to buying back $3.5bn of shares and intends to commence an on-market buyback if demand for the off-market buyback is less than $3.5bn, explains Morgan Stanley.

The broker maintains an Equal-weight rating and $24.80 target price. Industry view: In-line.

Target price is $24.80 Current Price is $20.85 Difference: $3.95
If WBC meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $26.33, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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