Australian Broker Call

Citi rates AMP as Sell (5) -

Citi reduces 2020 estimates for earnings per share by -10% as there are several one-off items that contributed to a weak first half but the outlook is still tough. Asset devaluation in AMP Capital is more than expected.

Bad debt provisions are in line and cost cutting is delayed albeit reaffirmed. The broker expects no capital return or dividend in 2020. AMP will also provide an update on capital management and proceeds from the AMP Life sale at the official results.

Citi maintains its Sell rating with the target price reduced to $1.45 from $1.50.

Target price is $1.45 Current Price is $1.47 Difference: minus $0.02 (current price is over target).
If AMP meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.72, suggesting upside of 17.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Credit Suisse rates AMP as Outperform (1) -

AMP expects to report retained operating earnings of around $195m. The company is prioritising servicing clients, including a temporary increase to resources which has resulted in additional costs.

The pandemic has also affected the pace of investment expenditure. The extent of the costs is unclear.

With cost reductions not being achieved and the company being silent about capital, Credit Suisse believes investors can rightly question the reason for owning the stock.

However, with a market cap of $5bn and over $1bn in excess capital the broker believes there is valuation appeal. Outperform retained. Target is reduced to $1.95 from $2.05.

Target price is $1.95 Current Price is $1.47 Difference: $0.48
If AMP meets the Credit Suisse target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $1.72, suggesting upside of 17.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Ord Minnett rates AMP as Hold (3) -

The first half result has been pre-released and was weaker than Ord Minnett expected. The main positive is a continued emphasis on capital management from the proceeds of the sale of the life business.

Operating earnings of $195m are expected in the first half. Ord Minnett reduces estimates by -17% for 2020 and -8% for 2021 in response to the update.

The broker will await the results to ascertain whether the update represents an opportunity to re-set or remains a continuation of the tough trends in the sector. Hold rating retained. Target is reduced to $1.73 from $1.78.

Target price is $1.73 Current Price is $1.47 Difference: $0.26
If AMP meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $1.72, suggesting upside of 17.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Citi rates BAP as Buy (1) -

Citi retains a Buy rating for Bapcor as the end of JobKeeper is likely to have a limited impact on profitability, unlike other discretionary retailers eligible for the scheme.

Trade is well-placed to benefit from increased use of personal transport while there are multiple growth opportunities in Thailand, suggests the broker. Target is $6.85.

Target price is $6.85 Current Price is $6.26 Difference: $0.59
If BAP meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $6.92, suggesting upside of 12.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Citi rates BKL as Neutral (3) -

Diversification away from China-influenced sales through growth in other Asian countries, the Australian practitioner network and the veterinary market is necessary, in Citi's view.

However, these opportunities will take time to scale up and match the size of the Chinese market.

The broker expects the August 25 results should reveal the progress of the efficiency programs to date and whether the company is on track to realise the $50m in expected operating earnings benefits by FY23.

Downside risk is envisaged to the medium-term sales outlook. Neutral rating and $79.80 target maintained.

Target price is $79.80 Current Price is $70.50 Difference: $9.3
If BKL meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $72.47, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Ord Minnett rates CBA as Hold (3) -

Ord Minnett expects a full year cash net profit of $7.45bn when Commonwealth Bank reports on August 12.

Improved deposit spreads and lower bank bill swap to overnight index swap spreads will be supportive of net interest margins, in the broker's view.

The bank appears well provisioned relative to its peers and the broker expects the dividend decision will be closely watched, forecasting a final of $0.85 a share. Hold rating and $65.30 target retained.

Target price is $65.30 Current Price is $71.20 Difference: minus $5.9 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $66.94, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

Citi rates EVT as Neutral (3) -

Citi opens a negative catalyst watch on Event Hospitality, believing there is a possibility studios will increase pressure on cinema exhibitors in deals similar to the one that was recently announced between AMC and Comcast.

The broker remains concerned that exhibitors may have limited negotiating power, given the increased bargaining power of studios as content owners, and increased reliance on blockbusters as small/medium budget movies increasingly shift to SVOD/PVOD.

Neutral rating and $9.75 target maintained.

Target price is $9.75 Current Price is $7.43 Difference: $2.32
If EVT meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Morgans rates FCT as Add (1) -

Firstwave Cloud Technology reported 4QFY20 results that exceeded the expectations of Morgans.

The broker states that meaningful sales traction has been made and new solutions have been added to the platform. The analyst's key takeaways from the quarter are channel partners starting to gain sales traction and the company delivering on key targets.

Morgans' main focus was the company's ability to grow International Annualised Recurring Revenue (IARR). This metric grew from $232,000 in Jan 20 to $448,000 by June 30, a good performance in light of many international locations being in lockdown, according to the broker.

The analyst believes the sales trajectory is looking good and the addition of 26 billing partners in FY20 means IARR should continue to grow at a healthy rate.

The Speculative Buy rating is maintained. The price target is increased to $0.179 from $0.165.

Target price is $0.18 Current Price is $0.15 Difference: $0.029
If FCT meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Credit Suisse rates OGC as Upgrade to Outperform from Neutral (1) -

2020 production has been downgraded because of factors outside of the company's control. First half production was 40% of the revised lower guidance of 340-360,000 ounces.

Credit Suisse observes the physical aspect of Haile is encouraging, despite a challenging period because of rainfall.

There is no advancement on a resolution for Didipio but October appears to be potentially critical, when a six-month grace period for temporary lay-offs conclude and formal retrenchment of workers is required.

The long-term growth opportunity is building and the broker upgrades to Outperform from Neutral. Target is raised to $4.10 from $2.90.

Target price is $4.10 Current Price is $3.65 Difference: $0.45
If OGC meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Ord Minnett rates OGC as Accumulate (2) -

OceanaGold's second quarter production numbers are considered a good effort and were ahead of Ord Minnett's forecasts, despite the obvious impact of the pandemic. Macraes has returned to normal while Haile continues to process significantly higher grades.

Ord Minnett revises 2020-21 estimates to reflect changes to guidance and updated assumptions for the mine plans at these two projects. Accumulate rating and $4.20 target maintained.

Target price is $4.20 Current Price is $3.65 Difference: $0.55
If OGC meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Credit Suisse rates ORG as Neutral (3) -

Credit Suisse assesses the fourth quarter produced a good result from LNG, with production in line with guidance despite Origin Energy curtailing production.

The company's share of APLNG distributions was at the top end of guidance. The main change to the broker's FY21 estimates is a reduction in operating expenditure being carried forward.

Residential demand uplift as a result of increased working from home did not eventuate and declines in retail electricity demand continue. Neutral maintained. Target is reduced to $5.70 from $6.00.

Target price is $5.70 Current Price is $5.37 Difference: $0.33
If ORG meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.70, suggesting upside of 20.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgans rates ORG as Upgrade to Add from Hold (1) -

In releasing its quarterly report for the period to 30 June, Origin Energy received $1.275bn cash from its 37.5% ownership in the Australia Pacific LNG joint venture. This was significantly more cash than Morgans had forecast. However, the broker points out this windfall could be tempered by the expected cash outflow caused by movements in electricity futures prices.

The company's electricity sales were down -7% in FY20 and business demand was down -11% in the last quarter, compared to the previous corresponding period (pcp), due to covid-19. Quarterly retail demand was also down -9% on pcp driven by increasing behind the meter generation/efficiency of households along with lower Small to Medium Enterprise demand.

Morgans believes that despite a challenging FY21 ahead, most issues are widely understood and have been priced in by the market. The broker sees valuation upside and lifts its expectations for prices in the retail electricity sector in FY22. Additionally, the analyst forecasts there may be a positive surprise for the company’s share of earnings from Octopus.

The rating is increased to Add from Hold. The target price is increased to $6.21 from $5.95.

Target price is $6.21 Current Price is $5.37 Difference: $0.84
If ORG meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $6.70, suggesting upside of 20.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates ORG as Accumulate (2) -

Ord Minnett assesses the headwinds in the energy markets represent the biggest near-term risk for Origin Energy. All key metrics in the June quarter were below the broker's estimates.

However, on the positive side, the FY20 cash distribution from APLNG was larger than expected and the response in output is largely discretionary and related to weak demand.

Moreover, LNG realised prices were higher than for peers, partially because this was sold into spot markets. Accumulate rating and $7.70 target maintained.

Target price is $7.70 Current Price is $5.37 Difference: $2.33
If ORG meets the Ord Minnett target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $6.70, suggesting upside of 20.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates RMD as Lighten (4) -

ResMed will report its results on August 6 and Ord Minnett anticipates gross margins will reflect the benefit of sales mix as the company pivots towards ventilator production.

Ventilator sales are expected to more than offset a drop in continuous positive airway pressure device sales. Lighten retained. Target is reduced to $19.70 from $21.90.

Target price is $19.70 Current Price is $28.28 Difference: minus $8.58 (current price is over target).
If RMD meets the Ord Minnett target it will return approximately minus 30% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.73, suggesting downside of -13.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

Citi rates SUL as Buy (1) -

Trading in May and June beat Citi's estimates substantially. The one relatively soft area was Rebel where sales growth was just 5% in June. Tailwinds from JobKeeper and rent relief are unlikely to repeat throughout FY21.

Citi estimates underlying second half earnings (EBIT) growth of 8%. FY21 estimates are upgraded by 10% to reflect a better run rate. Buy rating retained. Target rises to $10.80 from $9.70.

Target price is $10.80 Current Price is $8.88 Difference: $1.92
If SUL meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $9.68, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Credit Suisse rates SUL as Outperform (1) -

Net profit has been strong and like-for-like sales growth has accelerated significantly in the last five weeks of the second half.

Credit Suisse retains a view that domestic substitution of expenditure in recreational goods that would previously have been spent on international travel will support the company's FY21/22 performance.

Like-for-like sales growth was 26.5% in May and 27.7% in June, which compares with the decline of -26.2% in April. Supercheap Auto and BCF led the acceleration.

The company will report its FY20 results on August 24. Outperform retained. Target rises to $10.27 from $9.92.

Target price is $10.27 Current Price is $8.88 Difference: $1.39
If SUL meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $9.68, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgans rates SUL as Add (1) -

Super Retail Group delivered a FY20 trading update and guidance above Morgans forecasts. Sales growth accelerated strongly with most businesses benefiting from domestic consumption tailwinds, according to the broker.

Morgans estimates the forward guidance implies a FY20 earnings margin of 11.6%. This margin lift in the 2H likely reflects strong trading/operating expense leverage in June, a more stringent focus on costs, and rental waivers (which the broker doesn't expect to be material).

Morgans foresees the company is well placed to benefit from some key thematics including increased domestic tourism and leisure activities, home-based fitness and a general acceleration in online consumption.

The Add rating is maintained. The target price is increased to $10.27 from $9.25.

Target price is $10.27 Current Price is $8.88 Difference: $1.39
If SUL meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $9.68, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates SUL as Accumulate (2) -

The trading update has signalled sales and earnings are ahead of Ord Minnett's forecasts. Sales growth strengthened in June and provides potential upside to the start of FY21.

Ord Minnett assesses the business mix is anchored by resilient low-growth Supercheap Auto while Rebel Sport enjoys industry and market share.

BCF and Macpac are disappointing and the risk is elevated because of the patchy track record, the broker suggests.

Accumulate rating maintained. Target rises to $10.00 from $9.50.

Target price is $10.00 Current Price is $8.88 Difference: $1.12
If SUL meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $9.68, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates URW as Hold (3) -

A tough first half was expected. Adjusted recurring earnings per stapled share were down -28%, with 81% of the impact stemming from the pandemic.

The prospect of further portfolio write-downs in the second half is clear to Ord Minnett. The broker retains a Hold rating, despite potential upside to the target of $4.80, given the significant uncertainty surrounding the retail trading environment and asset values.

Target price is $4.80 Current Price is $3.62 Difference: $1.18
If URW meets the Ord Minnett target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $4.45, suggesting upside of 22.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

This company reports in EUR. 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