Australian Broker Call

Ord Minnett rates ASB as Hold (3) -

Austal has been awarded a US$128m contract from the US Navy to design and construct an auxiliary floating dock. Ord Minnett considers this news a positive for sentiment,, although the contract is relatively small in size and margins are uncertain.

The contract award was somewhat of a surprise to the broker given the company's limited history in designing and constructing this type of equipment.

Meanwhile, the broker also notes a recent media report that the US Coast Guard is planning to announce a construction contract for up to 11 medium-endurance Heritage-class offshore patrol cutters in the next two weeks.

Austal has been flagged as one of the "leading contenders" for the contract. Ord Minnett maintains a Hold rating with a $2.10 target.

Target price is $2.10 Current Price is $1.86 Difference: $0.24
If ASB meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.19, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

UBS rates BGA as Downgrade to Neutral from Buy (3) -

Higher input costs are expected to weigh on the FY23 recovery, mainly relating to increased milk supply costs but also packaging, freight, labour and electricity. As a result, UBS now sits -7% below consensus forecasts for FY23 EBITDA, at $214m.

The broker acknowledges the valuation of Bega Cheese is relatively undemanding and broadly in line with the long-term average.

Although one-offs related to the pandemic, floods and China's lockdowns will not be repeated in FY23, the broker believes cost inflation will still be a significant headwind. Neutral maintained. Target is reduced to $4.75 from $5.40.

Target price is $4.75 Current Price is $4.35 Difference: $0.4
If BGA meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 24.0% (ex-dividends)

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

Citi rates BUB as Buy (1) -

Citi upgrades estimates and believes there is still further upside potential should Bubs Australia receive a follow-on US order and/or permanent market access.

The initial US order is one of two key factors, along with a better-than-expected performance in China, that drives the company's guidance upgrade for FY22. Yet the majority of the order is expected to be recognised in revenue in the first half of FY23, the broker asserts, and factors this into earnings forecast.

Citi upgrades FY22 sales by 35% to incorporate the guidance for FY22 and also upgrades FY23 sales estimates by 43% to reflect the phasing of the initial US order and the bottom end of the corporate daigou incentive plan.

The High Risk tag is removed from the from Buy rating while the target is raised to $0.76 from $0.59.

Target price is $0.76 Current Price is $0.66 Difference: $0.1
If BUB meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates BXB as Outperform (1) -

Brambles is facing a decision on the US$450-700m plastic pallet investment for the Costco supply chain and Credit Suisse estimates an 81% price premium is required for the plastic pallet issue fee compared to wooden pallets, in order to hit the returns target.

Hence, for Brambles to proceed it requires a commitment from Costco to cover the cost, in the broker's view.

While it may be possible the price premium is overestimated, Credit Suisse suspects Brambles will be unlikely to proceed with the investment. Outperform rating and $13.45 target maintained.

Target price is $13.45 Current Price is $10.34 Difference: $3.11
If BXB meets the Credit Suisse target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $12.11, suggesting upside of 15.2% (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: 0.4

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

Ord Minnett rates BXB as Buy (1) -

Ord Minnett's analysis of Brambles' share price implies a free option on CHEP Americas and the market is being "overly punitive".

As CHEP EMEA and APAC are experiencing high returns on invested capital, margins and cash flow, the broker finds strategic merit in sidelining the Americas division. Moreover, a combination of first half price growth in CHEP Americas and a moderation of lumber prices could boost cash flows in the second half of FY22 and into the first half of FY23.

The broker remains positive on the stock and a Buy rating is maintained. Target is $13.50.

Target price is $13.50 Current Price is $10.34 Difference: $3.16
If BXB meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $12.11, suggesting upside of 15.2% (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: 0.4

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

Ord Minnett rates COL as Hold (3) -

Ord Minnett asserts the first two Ocado customer fulfilment centres, to be launched in 2023, should drive a step change in the efficiency of fulfilling online orders.

The broker observes Kroger, which is the US partner to Ocado, is two years ahead of Coles Group in its roll-out and provides insight into the potential for better delivery solutions.

The broker does not expect capacity will be fully utilised for at least 12 months after opening and expects the benefits will flow in FY25 and FY26. Hold rating and $18.20 target maintained.

Target price is $18.20 Current Price is $16.76 Difference: $1.44
If COL meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $19.11, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Macquarie rates CVN as Upgrade to Outperform from Neutral (1) -

Macquarie observes the stock has materially underperformed peers because of the dry holes at Buffalo and Apus as well as delays to Dorado.

Carnarvon Energy is expected to navigate the remaining risks at Dorado and full value should be recognised between now and soon after the final investment decision, either via a re-rating or acquisitions, the broker asserts.

Value is now better recognised, Macquarie suspects and upgrades to Outperform from Neutral. Target is raised to $0.30 from $0.25.

Target price is $0.30 Current Price is $0.21 Difference: $0.09
If CVN meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Macquarie rates DCN as Underperform (5) -

Open pit operations at Mount Morgans will be suspended by the end of June owing to rising mining costs. The underground will continue until developed stopes have been mined in the first quarter of FY23.

Macquarie now assumes Mount Morgans closes in two years. The suspension is a negative for the company and, while drilling below Jupiter appears interesting, a pivot towards exploration will depend on the balance sheet and the ability to meet liabilities, the broker suggests.

Macquarie expects cash flows from the stockpile processing will be sufficient to meet obligations. Importantly, the company's mill is a valuable strategic asset. Underperform maintained. Target is reduced to $0.09 from $0.23.

Target price is $0.09 Current Price is $0.12 Difference: minus $0.03 (current price is over target).
If DCN meets the Macquarie target it will return approximately minus 25% (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: -1.0

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

Ord Minnett rates GUD as Buy (1) -

G.U.D. Holdings has downgraded FY22 guidance for EBITA to $147m from the previous range of $155-160m. The timing and size of the downgrade is a surprise to Ord Minnett as guidance was reiterated in early April.

Management has signalled the delay in new vehicle deliveries is the main reason sales have been pushed out.

The broker believes there is underlying value on a re-based share price, although suspects the market will be sceptical about the deferred sales until actual delivery occurs. Buy rating retained. Target is reduced to $12.50 from $14.40.

Target price is $12.50 Current Price is $7.73 Difference: $4.77
If GUD meets the Ord Minnett target it will return approximately 62% (excluding dividends, fees and charges).

Current consensus price target is $13.34, suggesting upside of 67.6% (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

Morgan Stanley rates HT1 as Underweight (5) -

Morgan Stanley, in its first update since August 2021, has reviewed its investment thesis for HT&E. Contrary to the consensus view, the broker sees a more vulnerable risk profile resulting from last January's acquisition of regional radio business Grant Broadcasters.

The analyst feels both structural and cyclical challenges have been increased by HT&E becoming a larger radio broadcaster. One example cited of a structural problem is the decline in time spent listening to AM/FM radio, particularly by the youth audience.

Additionally, the probability of an acquirer in M&A being a target is generally reduced, a situation the broker feels applies to HT&E. The target price is reduced to $1.00 from $1.55, while the Underweight rating is retained. Industry view: Attractive.

Target price is $1.00 Current Price is $1.15 Difference: minus $0.15 (current price is over target).
If HT1 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 $1.93, suggesting upside of 65.9% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates IFM as Buy (1) -

Infomedia has received a conditional non-binding indicative bid from Solera Holdings, a portfolio company of US based technology focussed investment firm Vista Equity Partners, for a price of $1.70, payable in cash.

UBS, in an initial response, notes this is suitor number three with TA Consortium and Battery Ventures already in a bidding contest for $1.70 and $1.75 cash, respectively.

The broker highlights, apart from firm interest from corporate suitors, it believes Infomedia continues to benefit from strong top-line growth and operating leverage.

Target price steady at $2.15. Buy rating retained.

Target price is $2.15 Current Price is $1.49 Difference: $0.66
If IFM meets the UBS target it will return approximately 44% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

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

Latitude Group's acquisition of the Humm Group ((HUM)) consumer finance business has been terminated. Further to this, amid a risk of rising impairments, Macquarie shifts its preference within the non-bank lenders to those with a higher skew to secured lending.

The broker had assumed the consumer finance business would be double-digit accretive in FY23.  Yet there is an increased risk of earnings impacts from reduced consumer discretionary expenditure and higher impairments as rates rise.

As a result the broker lowers its rating to Neutral from Outperform and reduces the target to $1.30 from $2.25.

Target price is $1.30 Current Price is $1.40 Difference: minus $0.1 (current price is over target).
If LFS meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in December.

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

Macquarie rates MAH as Outperform (1) -

Macmahon has lost the Mount Morgans contract yet Macquarie considers this fairly immaterial as it coincides with the contract expiring.  The loss of the contract will not affect guidance, set for $1.6-1.7bn in revenue and EBIT of $95-105m.

Open pit operations at Mount Morgans will be suspended by the end of June owing to inflation pressures, the owner Dacian Gold ((DCN)) has announced. The underground will continue until developed stopes have been mined in the first quarter of FY23.

Macquarie believes there are positives in this announcement as it could free up personnel and equipment to be directed to the remainder of the portfolio. Outperform rating and $0.30 target maintained.

Target price is $0.30 Current Price is $0.14 Difference: $0.16
If MAH meets the Macquarie target it will return approximately 114% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Citi rates PME as Neutral (3) -

Pro Medicus has communicated contract renewals, Sutter Health for seven years and Wellspan Health for five years. Minimum revenue is $47m.

Citi considers the new deals a good outcome, as these have been negotiated at a higher price per transaction than the original contracts, and the industry norm is for renewals generally to be shorter duration and at a similar or lower price.

Over the longer term, the broker suggests earnings growth will be driven by the ability to grow market share outside academic hospitals in the US as well as maintaining its technological edge. Neutral rating and $46 target maintained.

Target price is $46.00 Current Price is $37.86 Difference: $8.14
If PME meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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