Australian Broker Call

Morgan Stanley rates APT as Overweight (1) -

Morgan Stanley believes PayPal's decision to raise its US BNPL pricing will instigate a positive share price reaction for Afterpay.

The broker believes some markets and channels may require Afterpay to reduce its fees but in others the fee is much lower than e-commerce platforms charging more than 10%.

Hence, the broker suggests Afterpay has further merchant monetisation opportunities in the US. PayPal is also launching BNPL in the UK & Australia so the broker emphasises this enhanced view only reflects the US.

The Overweight rating and $145 target are retained. Industry view: In-Line.

Target price is $145.00 Current Price is $117.21 Difference: $27.79
If APT meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $120.90, suggesting upside of 1.7% (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

Citi rates BLD as No Rating (-1) -

Boral has announced the sale of the US light building products business for US$2.15bn. Citi notes the US housing market to date has exceeded FY19 levels and there is a high level of correlation between the performance of light building product and the macro environment.

The transaction will reduce Boral's targeted net debt to $1.3bn and generate significant surplus capital, paving the way for a capital return. How the funds are distributed will depend on a number of factors at the time of sale, the broker notes.

The review of fly ash is still underway. Citi is restricted on providing a rating and target at present.

Current Price is $6.87. Target price not assessed.

Current consensus price target is $6.58, suggesting downside of -4.0% (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

Morgan Stanley rates BLD as Overweight (1) -

Boral has sold its North American building products business to Westlake Chemical for US$2.15bn. Profit on the sale was not disclosed. Morgan Stanley assesses proceeds from the recent sales will increase surplus capital and likely result in further capital management.

Boral is expected to update the market in August on the progress of the sale of the fly ash business. Overweight maintained. Target is $7.60. Industry view is in-line.

Target price is $7.60 Current Price is $6.87 Difference: $0.73
If BLD meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.58, suggesting downside of -4.0% (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 BLD as Upgrade to Hold from Lighten (3) -

Boral has sold its North American building products business to Westlake Chemical. The sale price of $2.9bn (US$2.15bn) is $1bn more than Ord Minnett's valuation. Boral is looking at options for capital returns.

Net debt has been reduced to $1.3bn and the broker calculates there could be up to $3.56bn in potential shareholder returns.

The rating is upgraded to Hold from Lighten as the valuation has increased and Ord Minnett assesses Seven Group ((SVW)) could raise its bid for Boral. Target is raised to $6.70 from $5.70.

Target price is $6.70 Current Price is $6.87 Difference: minus $0.17 (current price is over target).
If BLD meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.58, suggesting downside of -4.0% (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

Citi rates CBA as Neutral (3) -

Commonwealth Bank has announced the sale of the general insurance business to Hollard. The price of $625m appears light, Citi suggests.

There are unspecified deferred payments to come in time and the broker suspects the lower-than-expected price reflects less competitive tension given a number of comparable general insurance sales.

The underperformance in the stock following the announcement reflects the strong run up in recent months, Citi asserts, and the relatively minor capital release resulting from the transaction is unlikely to add to the buyback debate in the short term. Neutral rating and $95 target maintained.

Target price is $95.00 Current Price is $98.06 Difference: minus $3.06 (current price is over target).
If CBA meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $88.25, suggesting downside of -12.0% (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

Morgan Stanley rates CBA as Underweight (5) -

Commonwealth Bank will sell its general insurance business and establish an exclusive 15-year alliance with Hollard. The upfront consideration is $625m.

Morgan Stanley notes the transaction will be completed mid 2022 and expects it to add around 9 basis points to the CET1 ratio. The broker estimates a strong pro forma CET1 ratio of 13.2% and a $5bn buyback announcement at the FY21 result in August.

The Underweight rating and $89.50 target are retained, as the stock is trading on record multiples that more than reflect its superior franchise performance. Industry view: In-line.

Target price is $89.50 Current Price is $98.06 Difference: minus $8.56 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $88.25, suggesting downside of -12.0% (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 CBA as Hold (3) -

Commonwealth Bank has sold its general insurance business to Hollard for $625m up front and deferred payments tied to business milestones. It has also established an exclusive 15-year strategic alliance with Hollard.

Ord Minnett finds it difficult to assess the underlying transaction multiple given the uncertainty around milestone payments amid significant volatility in insurance earnings.

The proceeds will add to capital management potential and the broker already factors in $9bn in buybacks over the next three years. Hold rating and $91 target maintained.

Target price is $91.00 Current Price is $98.06 Difference: minus $7.06 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $88.25, suggesting downside of -12.0% (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

Citi rates LOV as Neutral (3) -

Citi notes the UK property market has adversely affected the roll-out of Lovisa's business in that jurisdiction in recent years but the pressure could be easing. Citi expects the decline in rents will be close to -20% as a result of structural impacts on retail stores stemming from increased online sales.

The broker suggests the UK is a 98-store opportunity for Lovisa although in the short term a third wave of coronavirus may present downside risk to sales forecasts for the fourth quarter of FY21 and first quarter of FY22. Citi maintains a Neutral rating and $13.30 target.

Target price is $13.30 Current Price is $14.43 Difference: minus $1.13 (current price is over target).
If LOV meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.44, suggesting upside of 6.7% (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

Morgans rates MLG as Initiation of coverage with Hold (3) -

Morgans initiates coverage of MLG Oz with a $1.08 target and a Hold rating, while awaiting greater visibility after recent setbacks in the crushing business. The company is an integrated provider of key mine site, haulage and logistics services to Australia’s mining sector. 

MLG Oz operates from 29 sites in WA and the NT and services more than 15 resource sector clients in the gold (82% of FY20 revenue), iron ore (14%) and nickel sectors (4%).

The company leverages its strategic asset base to offer five revenue streams under a single, reliable and safe delivery model, explains the broker. It’s considered the length of client relationships and consistent scope increases illustrate the strength of its service offering.

The analyst cautions falling prices for gold, iron ore and nickel can impact client profitability, reduce production volumes and, ultimately, lower the demand for the company’s services.

Target price is $1.08 Current Price is $0.94 Difference: $0.14
If MLG meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

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

Morgan Stanley rates SBM as Overweight (1) -

St Barbara expects third-party and toll treated ore will fill its 1.4mtpa mill in FY22. This provides the potential to beat FY22 production and/or cost forecasts, Morgan Stanley assesses.

The increase in resources of 28% could also help long-term mill feed while the company is also studying mill expansion.

Morgan Stanley notes Gwalia intermediates and the Jasper region are short-term production targets and inclusion in the next reserve update would be positive for FY23 onwards.

Overweight rating. Target is $2.65. Industry view is Attractive.

Target price is $2.65 Current Price is $1.75 Difference: $0.9
If SBM meets the Morgan Stanley target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $2.32, suggesting upside of 30.3% (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

Citi rates SHL as Downgrade to Neutral from Buy (3) -

Citi notes the stock has outperformed the ASX 200 by 6% over the last quarter and 10% over the last 12 months. Sonic Healthcare has benefited enormously from coronavirus testing and Citi anticipates peak earnings will occur in FY21.

While there is a risk FY22 earnings will also be elevated the broker considers the stock fairly valued and downgrades to Neutral from Buy.

Meanwhile, Sonic Healthcare has acquired Canberra Imaging Group, which generates annual revenue of $60m. The acquisition is expected to be immediately accretive. This will increase the company's revenue from imaging by 10%. Target is $37.50.

Target price is $37.50 Current Price is $37.54 Difference: minus $0.04 (current price is over target).
If SHL meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $37.36, suggesting downside of -1.4% (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

UBS rates STO as Buy (1) -

Santos plans to establish a stand-alone midstream business unit by the end of the year, aiming to unlock $800m-2.7bn in value by selling down a 25-49% interest to an investor.

UBS has analysis that shows Santos can increase the valuation of midstream business by including synthetic tolls on a broader asset mix and considers this a possible catalyst for value that is not yet in the price.

The broker does not expect material pressure on credit metrics over the next 12-24 months but some weakness could be sustained if oil prices decline to less than US$50/bbl.

UBS retains a Buy rating and $8.30 target.

Target price is $8.30 Current Price is $7.25 Difference: $1.05
If STO meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $7.92, suggesting upside of 5.8% (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: 0.5

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

Credit Suisse rates VCX as Neutral (3) -

Prompted by the declaration of a second half dividend of 6.6 cents, Credit Suisse increases forecast FY21-FY23 DPS by 5.5-5.6% to reflect a higher assumed payout ratio.

Management indicated the payout was towards the lower end of the REIT's 95-100% adjusted funds from operations (AFFO) payout policy. As a result, the broker assumes a dividend payout of 95% of estimated AFFO over the forecast period.

The analyst's underlying earnings estimates are unchanged and the Neutral rating and $1.69 target are unchanged.

Target price is $1.69 Current Price is $1.64 Difference: $0.05
If VCX meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.64, suggesting downside of -3.1% (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 VCX as Outperform (1) -

Vicinity Centres has announced a second half distribution of 6.6c, taking FY21 distributions to 10c. The company has indicated this is comprised of one-off and underlying components of 2.5c and 4.1c, respectively.

Macquarie expects the 10c distribution will form a base moving into FY22 before growing again in FY23. The broker notes a strong balance sheet has absorbed the declines in asset values, with total devaluations of -14.4% since December 2019.

Macquarie retains an Outperform rating and raises the target to $1.70 from $1.64.

Target price is $1.70 Current Price is $1.64 Difference: $0.06
If VCX meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $1.64, suggesting downside of -3.1% (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

Morgan Stanley rates VCX as Underweight (5) -

Vicinity Centres estimates the distribution will be 6.6c per security in the second half of FY21, taking full year distributions to 10c. Morgan Stanley considers this noteworthy as the company is one of the few large A-REITs with no FY21 guidance.

The broker warns this 6.6c figure may be too high to conclude as a new base for half yearly distributions going forward and forecasts FY22 distributions of 10.8c.

The company has also confirmed the pay-out ratio for FY21 will be at the bottom of its 95-100% range.

Underweight rating. The target is $1.59. Industry view: In-line.

Target price is $1.59 Current Price is $1.64 Difference: minus $0.05 (current price is over target).
If VCX meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.64, suggesting downside of -3.1% (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

UBS rates VCX as Sell (5) -

Vicinity Centres has announced a distribution for the second half of 6.6c, bringing FY21 distributions to 10c. Asset revaluations signal a -1.2% decline and no change has been made to capitalisation rates.

UBS retains a Sell rating and $1.54 target and will review assumptions after the FY21 results on August 18.

Target price is $1.54 Current Price is $1.64 Difference: minus $0.1 (current price is over target).
If VCX meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.64, suggesting downside of -3.1% (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 WGX as Outperform (1) -

Westgold Resources expects fourth quarter production between 56,500-61,500 ozs, which is around -14% below Macquarie's forecasts. Cost guidance for FY21 has been maintained.

The revised outlook has been blamed on staff shortages, haulage constraints and weather conditions as well as mine sequencing.

Macquarie reduces expectations for the ramp up for Big Bell. Big Bell remains the single largest component in expectations for improved cash flows in FY22, amid a reduction in capital expenditure and improving production, the broker explains.

Outperform maintained. Target is reduced to $2.50 from $2.60.

Target price is $2.50 Current Price is $2.02 Difference: $0.48
If WGX meets the Macquarie target it will return approximately 24% (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