Australian Broker Call

Citi rates ANZ as Buy (1) -

In the wake of the ACCC's report from its independent expert on the competition impact of the proposed acquisition of Suncorp's ((SUN)) bank by ANZ Bank, Citi continues to envisage an "oppose" decision as more likely at the end of July.

The independent expert was not convinced that the recent competition between the major banks in the home loan market would last and concluded the acquisition has a substantial chance of lessening competition. The broker retains a Buy rating and $27 target.

Target price is $27.00 Current Price is $23.43 Difference: $3.57
If ANZ meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $26.49, suggesting upside of 11.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.4

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

Morgans rates BGA as Downgrade to Hold from Add (3) -

Dairy farmers are winning out at the expense of Bega Cheese shareholders, explains Morgans, as the company's Bulk business becomes structurally challenged. At the same time, the higher-quality Branded business is considered to be performing strongly.

The broker explains there has been a material fall in global dairy prices and Australian processors are overpaying for milk given fierce competition. The challenging operating environment will result in the company impairing assets.

Management has announced a -$21m cost-out program though Morgans fears the majority of these savings will flow to the dairy farmers, in the form of higher farmgate milk prices.

The analysts make material downgrades to FY24 and FY25 EPS forecasts and the target falls to $3.45 from $4.05, while the rating is downgraded to Hold from Add.

Target price is $3.45 Current Price is $3.11 Difference: $0.34
If BGA meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.39, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.3

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

Ord Minnett rates BGA as Downgrade to Lighten from Hold (4) -

Ord Minnett expects continued pressure on FY24 and FY25 earnings, particularly for Bega Cheese's bulk dairy ingredients business. The company has confirmed FY23 guidance with EBITDA to be at the lower end of the $160-190m range.

The broker points out significant price rises in FY23 were required to offset higher input costs and this took time to take effect. Moreover, further declines in milk production and strong competition for milk supply could mean increased upward pressure on farmgate milk prices.

Ord Minnett downgrades to Lighten from Hold and reduces the target to $3.10 from $3.50.

Target price is $3.10 Current Price is $3.11 Difference: minus $0.01 (current price is over target).
If BGA meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.39, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.3

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

Macquarie rates CAJ as Outperform (1) -

Capitol Health's underlying EBITDA guidance for FY23 is around -8% below Macquarie's estimates amid higher operating expenditure. Revenue, largely in line with forecasts, is expected to exceed $208m.

The broker expects a recovery in diagnostic imaging volumes in FY24 with growth supported by indexation of 3.6% from July 1. A recovery in face-to-face GP consultations will be a catalyst for improving volumes as well.

The Outperform rating is maintained. Target is reduced to $0.30 from $0.34.

Target price is $0.30 Current Price is $0.26 Difference: $0.04
If CAJ meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $0.34, suggesting upside of 24.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Ord Minnett rates CAJ as Buy (1) -

Capitol Health provided a trading update that was weaker than Ord Minnett expected, guiding to $39.3-40.0m in EBITDA for FY23. Importantly, top-line growth accelerated in the fourth quarter and this sets up FY24 to remain positive.

The broker expects 10% organic revenue growth, driving operating leverage and an EBITDA margin recovery to 21%.

As margins are likely to have bottomed in the second half and the outlook is improving, Ord Minnett retains a Buy rating, with the target edging down to $0.32 from $0.33.

Target price is $0.32 Current Price is $0.26 Difference: $0.06
If CAJ meets the Ord Minnett target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $0.34, suggesting upside of 24.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Bell Potter rates CMM as Buy (1) -

Bell Potter observes that, after closing out forward sales of gold position, Capricorn Metals is unhedged until roughly September 30, 2024, leaving it exposed to the spot gold price.

The closure price of $2,260oz included the roughly $120m purchase of put options for the same value, volume and maturity as the hedge contracts, with a strike price of $2,810oz, below the spot price of $2,860oz.

The broker believes this suggests the company is expecting the gold price to rise and that Capricorn Metals should prove an attractive prospect to investors seeking exposure to gold. 

EPS forecasts rise 19% in FY24.

Buy rating retained. Target price edges up to $4.95 from $4.90.

Target price is $4.95 Current Price is $4.06 Difference: $0.89
If CMM meets the Bell Potter target it will return approximately 22% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Bell Potter rates CSR as Initiation of coverage with Hold (3) -

Bell Potter initiates coverage of diversified manufacturer CSR with a Hold rating and a $5.60 target price, sitting below consensus.

The broker observes that roughly 70% of CSR's property value is located in suburbs surrounding Badgery's Creek airport.

Market rents there jumped 40% in the year to March 31, notes the broker, as local infrastructure development and changing structural demand for inventory space underpinned demand. 

Bell Potter believes CSR therefore offers an avenue for investors to participate from rising land values in the area. Holding as much operational land as surplus land, the broker says the company carries strong long-term development option value.

On the flip side, strength in Building Products is likely to have peaked but the broker remains drawn to the long-term market-share prospects for Hebel in Australia.

Target price is $5.60 Current Price is $5.19 Difference: $0.41
If CSR meets the Bell Potter target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.51, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.0

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

Macquarie rates FBU as Outperform (1) -

Macquarie estimates that the output gap in the NZ construction sector is likely to be materially larger than the broader economy and calculates a sustainable NZ residential building rate is -8% lower than sector capacity.

The broker points out this is in contrast to the GFC when there was clear evidence of over-building and Fletcher Building underperformed over FY13-20, during a period characterised by high construction volume growth and a supportive rate and inflation environment.

Yet, the broker concludes the business is materially better structurally now than at any time since it has been analysing the stock. Outperform rating and NZ$7.70 target.

Current Price is $4.88. Target price not assessed.

Current consensus price target is $5.30, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

This company reports in NZD. 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

Citi rates HVN as Neutral (3) -

Harvey Norman has indicated pre-tax profit is likely to be within 5% either side of $670m. As a result Citi reduces its FY23 EBIT estimate by -6% and lowers FY24 by -8%.

Industry feedback is signalling a further decline in the sale of large appliances and furniture during May and June.

Despite weak earnings momentum the broker believes there is strong valuation support and when combined with a strong balance sheet envisages minimal further downside to the stock. Target is reduced to $3.70 from $4.10 and a Neutral rating is maintained.

Target price is $3.70 Current Price is $3.41 Difference: $0.29
If HVN meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Macquarie rates HVN as Neutral (3) -

Harvey Norman has guided to a pre-tax profit in a range of $636.5-703.5m, which Macquarie assesses is a downgrade driven by a slowdown in consumer spending and rising cost pressures.

Despite the slowdown in sales, the broker observes the share price is probably being supported by significant property holdings.

Management expects net property revaluations for the year to June 30 to total $119m, which implies revaluations were only $12m in the second half versus $107m in the first half.

The broker retains a Neutral rating and $3.60 target.

Target price is $3.60 Current Price is $3.41 Difference: $0.19
If HVN meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Morgan Stanley rates HVN as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley expects the upcoming results season will not be pleasant for discretionary goods retailers for a number of reasons including demand weakness and margin pressure.

Within the category, the broker highlights a valuation differential has opened up in favour of JB Hi-Fi over Harvey Norman. The former is downgraded to Underweight from Equal-weight while the latter is upgraded to Equal-weight from Underweight.

Since management called out category weakness (outdoor furniture) at 1H results, the Harvey Norman share price has significantly underperformed discretionary goods retail peers, notes Morgan Stanley. The $3.50 target price is unchanged.

Target price is $3.50 Current Price is $3.41 Difference: $0.09
If HVN meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Ord Minnett rates HVN as Accumulate (2) -

In the wake of the trading update Ord Minnett observes earnings for Harvey Norman are deteriorating faster than previously expected. Discretionary expenditure, particularly on household goods, has come under significant pressure, having boomed during the pandemic.

The broker observes the sector is now in the middle of a reversion towards long-term trends. That said, the broker is more optimistic than the market on the medium-term earnings outlook for the company and expects FY24 will prove the trough for margins and earnings.

Accumulate rating and $3.90 target price retained.

Target price is $3.90 Current Price is $3.41 Difference: $0.49
If HVN meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

UBS rates HVN as Sell (5) -

Harvey Norman's FY23 pre-tax guidance for profit ex property revaluations and non-controlling interests is expected to be a 5% either side of $670m, ahead of UBS' prior estimates.

Property revaluations of $119m reveal only a modest uplift in the second half as higher inflation is largely offset by higher capitalisation rates.

Going forward the broker expects weaker sales amid pressure on big-ticket items, with market share losses in Australasia and downside risk to margins because of rising tactical support and operating de-leverage. Sell rating and $3.10 target maintained.

Target price is $3.10 Current Price is $3.41 Difference: minus $0.31 (current price is over target).
If HVN meets the UBS target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.56, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.1

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

Macquarie rates IEL as Neutral (3) -

Australian student visas granted for the first five months of 2023 were up 79% and this is in line with Macquarie's estimate for the growth of Australian student placement volumes of 29% for the second half of 2023 versus the second half of 2019.

The broker also observes multi-destination student placement remains challenged in the jurisdictions of Canada and the UK relative to Australia as pent-up demand post-pandemic has largely dissipated and markets have reverted to more normal growth trends.

Still, the broker remains concerned about competition in English language testing and group margins more broadly, retaining a Neutral rating for IDP Education and reducing the target to $21 from $22.

Target price is $21.00 Current Price is $21.94 Difference: minus $0.94 (current price is over target).
If IEL meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.83, suggesting upside of 22.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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

Morgan Stanley rates JBH as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley expects the upcoming results season will not be pleasant for discretionary goods retailers for a number of reasons including demand weakness and margin pressure.

Within the category, the broker highlights a valuation differential has opened up in favour of JB Hi-Fi over Harvey Norman. The former is downgraded to Underweight from Equal-weight while the latter is upgraded to Equal-weight from Underweight.

The target for JB Hi-Fi falls to $38.90 from $44.30 as the analysts feel FY24 consensus estimates are underestimating the additional downside risk created by a weaker consumer.

Target price is $38.90 Current Price is $43.19 Difference: minus $4.29 (current price is over target).
If JBH meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $43.50, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.3

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

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

As key management initiatives are gaining momentum and Morgans sees early signs of easing cost pressures, the rating for MLG Oz is upgraded to Add from Hold.

Proactive steps by the company to counter cost pressures and tight labor market conditions have included Designated Area Migration Agreements and new programs for training/in-house recruitment.

Moreover, around $17m in proceeds from the sale of a crusher helps de-gear the balance sheet, explains the analyst. The target rises to $1.01 from 90c in the expectation of improved earnings.

Target price is $1.01 Current Price is $0.59 Difference: $0.42
If MLG meets the Morgans target it will return approximately 71% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Bell Potter rates PBH as Speculative Buy (1) -

Fanatics Betting and Gaming has raised its bid for PointsBet Holdings' US business by 50% to US$225m from US$150m, representing between $1.39 and $1.44 a share.

Meanwhile, DraftKings could not complete a binding offer by the deadline and PointsBet Holdings's board now recommends the Fanatics bid to shareholders, who vote on the bid this Friday at an extraordinary general meeting.

Speculative Buy rating retained. Target price rises 12.5% to $2.25 from $2, representing a 30% premium to the share price.

Target price is $2.25 Current Price is $1.64 Difference: $0.61
If PBH meets the Bell Potter target it will return approximately 37% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 1.0

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

Macquarie rates PDN as Outperform (1) -

Paladin Energy has indicated work is over 50% complete on the Langer Heinrich re-start and production continues to be planned for the first quarter of 2024. The company will provide FY24 guidance prior to first production and FY25 guidance in the fourth quarter of FY24.

Macquarie notes the current six offtake agreements account for 18mlb or 48% of production to 2030, a critical positive, and envisages uranium price tailwinds, driven by forecasts for demand exceeding mine supply over the longer term.

Outperform rating and $1.10 target maintained.

Target price is $1.10 Current Price is $0.70 Difference: $0.4
If PDN meets the Macquarie target it will return approximately 57% (excluding dividends, fees and charges).

Current consensus price target is $1.08, suggesting upside of 47.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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 RHC as Neutral (3) -

Ramsay Health Care is exploring the potential sale of Ramsay Sime Darby Health Care, a joint venture with Sime Darby Berhad. Macquarie calculates net proceeds could be $765-945m. This would support reducing net debt and address recent concerns relating to the balance sheet.

In aggregate, the broker eases back revenue growth estimates for Australia and increases cost growth, which implies a more gradual recovery in margins. Growth assumptions for Elysium are also tempered.

Neutral rating retained. Target price falls to $62.50 from $64.50.

Target price is $62.50 Current Price is $57.31 Difference: $5.19
If RHC meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $66.33, suggesting upside of 18.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Morgan Stanley rates RHC as Underweight (5) -

Morgan Stanley estimates $705m of net proceeds to Ramsay Health Care from a potential sale of its 50% holding in the Ramsay Sime Darby Health Care joint venture.

This approximation by the analyst follows "receipt of significant inbound interest at values that are in shareholders' interests".

The broker arrived at this valuation by using metrics from a bid to acquire the joint venture by IHH Berhad last year.

The $57.60 target and Underweight rating are unchanged. Industry view: In-Line.

Target price is $57.60 Current Price is $57.31 Difference: $0.29
If RHC meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $66.33, suggesting upside of 18.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

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

Citi rates SKO as Buy (1) -

Citi upgrades FY24 revenue forecasts by 3% towards the top of the current guidance range and reiterates a Buy/High Risk rating for Serko. The broker assesses an increase in conversion and repeat bookings in Booking.com for Business was the driver of the strong start to the year.

The CWT partnership with Booking.com for Business went live last week and there is potential for an acceleration in active customer growth, both new customers signed up as well as activating existing customers. Citi raises the target to $4.35 from $4.10.

Target price is $4.35 Current Price is $3.11 Difference: $1.24
If SKO meets the Citi target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $4.68, suggesting upside of 39.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

This company reports in NZD. 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

Ord Minnett rates SKT as Accumulate (2) -

Ord Minnett asserts SKY Network Television's FY23 normalised EBITDA must land within the guidance range of NZ$150-160m as achieving this guidance, reiterated three months ago, would establish a solid earnings foundations from which investors can make future projections.

Moreover, the company needs to show a firmer grasp on costs while it remains imperative that the recently launched new set-top box and the SKY pod for transitioned Vodafone TV customers show early success in stabilising pay-TV subscribers. Accumulate rating and $2.80 target maintained.

Target price is $2.80 Current Price is $2.20 Difference: $0.6
If SKT meets the Ord Minnett target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

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

Market Sentiment: 0.8

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

Ord Minnett rates TWE as Hold (3) -

Ord Minnett assesses Treasury Wine Estates is well able to capitalise on the shift in consumer preferences towards premium brands. Luxury brands, such as Penfolds and Frank Family Vineyards, and premium brands such as 19 Crimes and Squealing Pig, now represent more than 80% of group sales.

The broker expects the strategic shift to high-end wines and increased geographic diversity will mean long-term revenue growth and profitability. Underlying earnings are expected to grow around 10% annually over the next decade. Hold maintained. Target is $11.50.

Target price is $11.50 Current Price is $11.37 Difference: $0.13
If TWE meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $13.23, suggesting upside of 16.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

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