Australian Broker Call

Macquarie rates AFG as Neutral (3) -

Macquarie's view is summarised as: mortgage volumes remain weak. Neutral rating retained, with unchanged price target of $1.46.

As far as why the ongoing weakness, the broker offers rapid interest rate increases, a drop in cashback offers, supply constraints and cost of living pressures as direct influences.

No changes made to forecasts.

Target price is $1.46 Current Price is $1.51 Difference: minus $0.05 (current price is over target).
If AFG meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Bell Potter rates APE as Hold (3) -

Eagers Automotive has announced a non-binding agreement to acquire a portfolio of dealerships and key strategic properties located across Melbourne.

Bell Potter makes no change to forecasts at this stage given the acquisition is subject to various conditions and shareholder approval. If it does proceed there would be no impact on 2023 forecasts given the acquisition will not occur till 2024.

Assuming success, earnings upgrades of approximately 3% and 6% in 2024 and 2025 would follow, hence target rises to $15.50 from $15.25, Hold retained.

Target price is $15.50 Current Price is $14.58 Difference: $0.92
If APE meets the Bell Potter target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $15.75, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Citi rates APE as Buy (1) -

Eagers Automotive has entered into a non-binding agreement to buy 16 dealerships for -$245m, comprising $100m in property, $43m in net assets and $111m in goodwill to be funded through cash and debt, with $25m in shares to be paid to Nick Politis. Citi estimates the multiple at 3-5x

Citi considers Eagers Automotive's purchase of Victorian dealerships as positive, expecting it will help offset earnings and margin weakness as global challenges mount and industry-wide order write levels weaken, adding $1bn in revenue.

The acquisition also improves the company's underweight position in the state, and Citi says three of company's new properties could play into its automall strategy, contributing to higher profit before tax margins.

EPS forecasts rise 5% in FY24; and 6% in FY25; and the broker observes the company still has $550m to $600m in the kitty to fund more M&A.

Buy rating and $17.90 target retained (to reflect lower market multiples).

Target price is $17.90 Current Price is $14.58 Difference: $3.32
If APE meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $15.75, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

Morgans rates APE as Add (1) -

Subject to shareholder approval, Eagers Automotive has announced the -$245m purchase of a Victorian car dealership portfolio and associated properties from Nick Politis.

Morgans sees the transaction as evidence the company is executing on building a sustainably higher earnings base. The broker expects around 3.8% EPS accretion and raises its target to $15.95 from $15.50. Add.

Earnings details will follow upon the release of an independent expert's report. Morgans anticipates meaningful operating efficiencies and scale synergies from the 65% boost to the company's Victorian turnover.

Target price is $15.95 Current Price is $14.58 Difference: $1.37
If APE meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $15.75, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.6

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

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

Citi downgrades Baby Bunting's to Neutral from Buy following the company's weak trading update.

A sharp fall in sales surprised the broker, which had considered the sector to be non-discretionary.

But the broker retains the faith, observing its analysis of the company's website visits suggests a 9% jump in the September quarter, and advises the cost-out is running in line with guidance.

Target price falls to $2 from $2.20.

Target price is $2.00 Current Price is $2.01 Difference: minus $0.01 (current price is over target).
If BBN 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 $2.12, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

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

Citi rates BLX as Buy (1) -

Beacon Lighting at today's AGM has suggested sales have turned positive in September, signalling improving conditions. Citi, in a quick response, highlights July and August had been soft months.

The broker is now considering its -5% like-for-like sales forecast for FY24 might be too cautious.

Citi highlights Beacon Lighting and Nick Scali ((NCK)) are its Top Picks in small cap retail on the ASX.

Buy. Target $2.10.

Target price is $2.10 Current Price is $1.66 Difference: $0.44
If BLX meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 1.0

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

Shaw and Partners rates BOE as Downgrade to Sell from Hold (5) -

Boss Energy has started mining at the Honeymoon uranium project in South Australia and advises the operation is on time and on budget to hit first production this quarter.

Shaw and Partners sings the company's praises but spies better value elsewhere, given there are still risks ahead and uranium sales have yet to be announced.

Rating is downgraded to Sell from Hold to reflect the share price's strong rally. Target price rises to $3.60 from $3.40.

Target price is $3.60 Current Price is $4.62 Difference: minus $1.02 (current price is over target).
If BOE meets the Shaw and Partners target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.54, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Citi rates BOQ as Upgrade to Neutral from Sell (3) -

On closer exmaination of Bank of Queensland's FY23 result (which missed consensus earnings forecast by -1% to -5%) Citi has chosen to focus on management's guidance, which retains its longer-term return on equity target of 9.25% and CTI target of 50%.

The broker says there is no doubt the result reveals significant challenges with both revenues and the net interest margins disappointing forecasts and, by its calculations, can't see how the company will possibly meet the above targets.

But Citi believes that, given management has reset expectations for FY24 and given $200m in productivity savings, this builds confidence in management's forecasts and suggests FY24 could prove the nadir for core earnings.

While still doubting the company will meet its targets, Citi says progress and ongoing work on cost cutting is likely to put a floor under earnings.

EPS forecasts rise 1% in FY24; and 15% in FY25.

Rating is upgraded to Neutral from Sell. Target price rises to $5.20 from $5 (which assumes a 6.3% terminal return on equity).

Target price is $5.20 Current Price is $5.35 Difference: minus $0.15 (current price is over target).
If BOQ 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 $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Macquarie rates BOQ as Underperform (5) -

Macquarie saw Bank of Queensland releasing a "weak" FY23 result marked by a reduction in market share, downward pressure on margins and rising costs.

The challenges of margins and costs continue to overshadow the outlook for the year ahead, and there is execution risk, the broker assures.

On the conclusion FY23 has been a "disappointing" experience, Macquarie retains its Underperform rating. Target has lost -10 to $4.90. Estimates have been culled.

Target price is $4.90 Current Price is $5.35 Difference: minus $0.45 (current price is over target).
If BOQ meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Morgan Stanley rates BOQ as Underweight (5) -

Bank of Queensland's FY23 result disappointed Morgan Stanley and no specific guidance was provided.

PPP, revenue and margins all fell and costs crept up, mortgage discounting eased, the bank's housing loan portfolio shrunk -1.5% in the second half and the broker expects this will continue in FY24, along with continued margin pressure.

The company expects productivity benefits in the order of $200m between FY24 to FY25, and loan losses were less than the broker forecast.

While management said it had high conviction in its FY26 ROE and CTI targets, the broker considered these to be based on an optimistic view of the industry and competition.

Cash EPS forecasts fall -10% in FY24 and -1% in FY25. 

Underweight rating retained. Target price falls to $5.30 from $5.50. Industry view: In-line.

Target price is $5.30 Current Price is $5.35 Difference: minus $0.05 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Morgans rates BOQ as Hold (3) -

In the wake of Bank of Queensland's FY23 result, Morgans makes material downgrades to its EPS and DPS forecasts largely due to net interest margin (NIM) downgrades and higher assumed operating expenses.

These changes follow a significant earnings decline in the 2H of FY23, which the broker feels may make the bank's FY26 aspirational targets hard to achieve. If targets are met, there is thought to be considerable upside for both earnings and valuation.

The bank's 2H NIM fell by -21bps to 158bps, a -7% miss versus the consensus expectation, and management expects further margin pressure in FY24, notes the broker.

When reaffirming these FY26 targets, management revealed a significant cost-out program, in the analyst's view.

The Hold rating is unchanged and Morgans' target falls to $5.22 from $5.65.

Target price is $5.22 Current Price is $5.35 Difference: minus $0.13 (current price is over target).
If BOQ meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Ord Minnett rates BOQ as Buy (1) -

Ord Minnett's take-way conclusion from Bank of Queensland's underwhelming FY23 release yesterday is things will get worse before they can get better.

It is the broker's view the regional lender's funding cost disadvantage is showing up through downward pressure on margins, while also forcing the bank to hold back in chasing new mortgages.

The broker acknowledges it had underestimated the financial impact of it all. The reported $450m in cash profit still missed Ord Minnett's forecast by -6%.

Buy rating retained on the view margin pressures and rapidly rising costs won't be around forever, and the shares do look "cheap" in the meantime. Fair value assessment falls to $8 from $8.50 prior.

Target price is $8.00 Current Price is $5.35 Difference: $2.65
If BOQ meets the Ord Minnett target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

UBS rates BOQ as Sell (5) -

On closer examination, UBS retains its opinion that Bank of Queensland's FY23 performance was poor, the bank missing cash EPS targets (although the dividend outpaced as did impairments), and margins tightened.

While management has retained its 9.25% return on equity target, the broker doubts this is achievable, observing rising regulatory and strategic risks. The broker also doubts the company will meet its CTI target of 50% given cost mix changes.

Given the beat on bad debts and forecast cost-outs, EPS forecasts rise 1.4% in FY24; 4.5% in FY25; and 7.4% in FY25.

Sell rating retained. Target price is steady at $5.

Target price is $5.00 Current Price is $5.35 Difference: minus $0.35 (current price is over target).
If BOQ meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.3

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

Morgan Stanley rates BSL as Downgrade to Underweight from Overweight (5) -

Morgan Stanley spies downside risk to consensus forecasts for BlueScope Steel given Asian steel spreads are trading at decade lows and US spreads are falling. 

The broker also expects that weakness in residential construction will hit the company's high-margin Colorbond volumes.

EPS forecasts fall -25% for FY24 and -27% for FY25.

Rating is downgraded to Underweight from Overweight. Target price falls to $18 from $24. Industry view: In-line.

Target price is $18.00 Current Price is $19.53 Difference: minus $1.53 (current price is over target).
If BSL meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.80, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.4

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

Macquarie rates GQG as No Rating (-1) -

GQG Partners' Q3 update showed positive net flows of $1.8bn with Macquarie pointing out market movement for the period was largely immaterial.

The broker finds the shares are supported by strong yield support. Only minor amendments have been made to forecasts.

Macquarie is currently under research restriction, so no rating or price target.

Current Price is $1.46. Target price not assessed.

Current consensus price target is $2.11, suggesting upside of 45.7% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates IAG as Buy (1) -

At first glance, Citi has mixed views regarding Insurance Australia Group's AGM update.

The company is meeting top-line growth and margin guidance, but a $47m top-up to prior year (FY23) CAT reserves and a hike in its motor claims inflation estimates to double digits, compared with the 8% quoted for the end of June 30, unsettles the broker, who questions the accuracy of the company's forecasting going forward.

The broker observes home claims appeared to be the main source of the CAT overrun, with solar panels in particular surprising to the upside.

Given the broker still expects strong premiums to prevail through FY24, it holds the line.

Buy rating and $6.50 target price retained.

Target price is $6.50 Current Price is $5.53 Difference: $0.97
If IAG meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $5.85, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

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

Insurance Australia Group will need to take a forecast December-half reserving top-up for short-tail motor claims costs from FY23 as motor claims inflation resurfaces, advises Morgan Stanley.

The broker said the company broke with other insurers at the FY23 result by not topping up then.  Had it done so, the result would have been lower, says the broker.

On the flipside, CAT costs are travelling well below budget and Morgan Stanley considers insurance companies to be well positioned to "over-earn" during this El Nino.

Management is forecasting a stronger second half, as reflected in consensus estimates. Guidance is maintained.

Equal-weight rating and $5.45 target price are retained. Industry view: In-line.

Target price is $5.45 Current Price is $5.53 Difference: minus $0.08 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.85, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.2

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

Citi rates INA as Buy (1) -

Ingenia Communities's trading update reveled ongoing strength in its holiday parks, the company logging forward booking through to June 2024, up 9%, observes Citi.

The company reported 69 land lease settlements in the September quarter. Citi says the settlements suggest sales of 73 lots, outpacing its forecasts.

The company sold two assets valued at an $18.6m premium to June 30, 2023, book value, giving the company some capital with which to play.

The broker remains a fan of the land lease sector and considers Ingenia Communities to be well positioned to benefit from positive sector dynamics and earnings growth in its holiday parks division.

Buy rating and $4.80 target price retained.

Target price is $4.80 Current Price is $4.21 Difference: $0.59
If INA meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.54, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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

Macquarie rates NHF as Neutral (3) -

As nib Holdings lost their travel insurance relationship with Qantas Airways ((QAN)) in June, Macquarie estimates the loss represents circa one-third of the insurer's total travel policies.

nib Holdings contract for residents policies with Pacific Indemnity is up for renewal in November, the broker points out.

Estimates have been lowered by -4.8% in FY24, -7.5% in FY25 and -7.5% to -6.4% the following years. Price target has reduced to $7.70 from $8.65. Neutral.

Target price is $7.70 Current Price is $7.64 Difference: $0.06
If NHF meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $8.40, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

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

Bell Potter rates NIC as Buy (1) -

Nickel Industries has reached a positive final investment decision for the Excelsior Nickel-Cobalt high pressure acid leach project in Indonesia. The investment carries a capex guarantee, whereby the total construction costs will not exceed -US$2.3bn.

The company has also secured financing facilities totalling US$400m with a bank in Indonesia.

Bell Potter views this update as an excellent result that is in-line with management’s stated objectives, removes any perceived funding (equity raising) overhang in relation to the ENC and has been achieved on competitive terms with a well-regarded local partner.

Target rises to $1.73 from $1.64, Buy retained.

Target price is $1.73 Current Price is $0.76 Difference: $0.97
If NIC meets the Bell Potter target it will return approximately 128% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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: 0.7

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

Bell Potter rates PTM as Downgrade to Sell from Hold (5) -

Platinum Asset Management recorded another disappointing month of funds under management, Bell Potter notes, with further outflows of -$173m following -$912m of outflows in August.

Management fee growth is falling and expense growth is rising. Even being generous with assumptions, the broker's modelling implies a zero residual value for the equity. Bell Potter would expect management to reduce expenses to reflect lower revenue although to date this has not been the case.

"Without significant change, PTM is likely to continue to leach value, and ultimately become worthless."

The broker's 84c target, down from $1.45, reflects only the value of the business to a potential acquirer. Downgrade to Sell from Hold.

Target price is $0.84 Current Price is $1.21 Difference: minus $0.37 (current price is over target).
If PTM meets the Bell Potter target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.35, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.4

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

Morgans rates QAN as Add (1) -

Morgans materially lowers its FY24-26 earnings forecasts following management's September quarter update highlighting the need for increased investment to restore the company's brand and reputation. The update also noted higher fuel and currency costs.

The broker's target for Qantas Airways falls to $7.30 from $8.60. The Add rating is retained given the analyst feels shares are oversold due to near-term negative sentiment from increased government, regulatory and public scrutiny.

Target price is $7.30 Current Price is $5.03 Difference: $2.27
If QAN meets the Morgans target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $7.38, suggesting upside of 46.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.7

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