Australian Broker Call

Citi rates BLD as Buy (1) -

Boral has experienced a drop in demand and found it difficult to extract costs. However, Citi assesses there is financial liquidity to deal with the challenging environment.

Debt facilities have accrued an extra $541m since April although liquidity is up just 14%. The company has also reiterated that covenants are not based on earnings and as a result the pressure on the balance sheet is not significant.

Target is $3.00. Buy/High Risk retained.

Target price is $3.00 Current Price is $2.46 Difference: $0.54
If BLD meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 31.3% (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

Macquarie rates BLD as No Rating (-1) -

Boral has expanded liquidity, increasing debt facilities via a new US$200m issuance amid approval for a new $365m bilateral bank loan.

The company has indicated that January-April Australian sales were down -6% while US dollar-based sales in North America were down -5%.

Macquarie lowers estimates for earnings per share by -30% in FY20 and -50% in FY21, to reflect weaker salesand margins because of the pandemic-related business disruptions.

Macquarie is currently restricted from making a recommendation.

Current Price is $2.46. Target price not assessed.

Current consensus price target is $3.23, suggesting upside of 31.3% (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

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

The trading update reminds Morgan Stanley of the fixed cost leverage and nature of the business. There is no clarity on the duration of the impact from the pandemic, or the future leadership.

There is likely to be a requirement for an equity injection at some point and the broker does not envisage a compelling risk/reward trade.

The impact of bushfires, floods and the pandemic have meant revenues declined -6% in Australia versus the prior comparable period.

Morgan Stanley struggles to reconcile the various revenue and earnings impacts, which makes assessment of the FY21 outlook difficult to ascertain.

Target is $3. Equal-weight rating. Industry view is Cautious.

Target price is $3.00 Current Price is $2.46 Difference: $0.54
If BLD meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 31.3% (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 BLD as Hold (3) -

Boral’s margin guidance fell short of Ord Minnett’s expectations and the broker has reduced FY20 group operating earnings estimate by -14% with net profit estimated to fall by -37%.

The broker believes share price reaction to further negative news will be limited but considers the group’s incongruous asset portfolio a challenge to manage.

Ord Minnett has lowered earnings forecast by an average -18% during the FY20-22 period, expecting margin deterioration, especially in North America.

Hold rating retained with target price reduced to $2.75 from $3.

Target price is $2.75 Current Price is $2.46 Difference: $0.29
If BLD meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 31.3% (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

UBS rates BLD as Buy (1) -

Activity levels during the pandemic are holding up better than UBS expected. Concrete volumes are down -16% over the year to date while asphalt, quarry and cement are largely flat.

The main disappointments for the broker in the trading update were the operating earnings (EBITDA) margins, with each division experiencing a -3-5% fall half on half.

Boral is cautious about the outlook, noting there is yet to be a bounce back in the amount of work forthcoming. Buy rating maintained. Target is reduced to $3.70 from $4.00.

Target price is $3.70 Current Price is $2.46 Difference: $1.24
If BLD meets the UBS target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 31.3% (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

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

Macquarie considers Breville an attractive long-term portfolio holding, given the extended growth potential for the business, but downgrades to Neutral from Outperform, given the strong re-rating of the stock.

The company's capital raising makes sense to the broker as it provides flexibility to continue investing for growth.

Entry into new markets is progressing and the current cost reductions will support the corporate structure in the event of volatility in demand stemming from the pandemic. Target is raised to $20 from $16.

Target price is $20.00 Current Price is $19.46 Difference: $0.54
If BRG meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $20.57, suggesting upside of 5.7% (ex-dividends)

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

Ord Minnett rates BRG as Hold (3) -

Breville Group highlighted continuous revenue growth in the global product segment in March and April, albeit at a slower rate, with strong sales in Australia and the UK while Europe and the US lagged.

The group announced a fully underwritten $94m placement along with a private placement of $10m to shore up liquidity.

Ord Minnett considers the group to be in a better position than competitors due to higher than normal inventory levels.

Hold rating retained with target price reduced slightly to $19.50 from $20.

Target price is $19.50 Current Price is $19.46 Difference: $0.04
If BRG meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $20.57, suggesting upside of 5.7% (ex-dividends)

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

UBS rates BRG as Buy (1) -

Breville revenue grew 32% over January to April. However, UBS remains cautious about the extent of purchases being pulled forward in a working-from-home environment.

Conservatively, the broker lifts FY20-21 earnings estimates by 5-7%. A Buy rating is retained, given the global expansion potential. Target is raised to $22.50 from $20.55.

Target price is $22.50 Current Price is $19.46 Difference: $3.04
If BRG meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $20.57, suggesting upside of 5.7% (ex-dividends)

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

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

The company has reaffirmed FY20 guidance. Credit Suisse observes commentary on retail values was lacking and all fund assets will be revalued as of June 30, 2020.

Funds under management growth has moderated in the quarter, to $39.2bn, but Credit Suisse assesses capacity for growth remains. The outlook for FY21 was always going to be lower because of elevated performance fees in FY20.

Despite investor concern over the growth outlook in the current environment, the company has noted its capital partner demand remains robust.

FY21-22 estimates for earnings per share are downgraded and the target is lowered to $9.17 from $13.58. Rating is upgraded to Outperform from Neutral.

Target price is $9.17 Current Price is $8.14 Difference: $1.03
If CHC meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $10.64, suggesting upside of 30.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

UBS rates CHC as Upgrade to Buy from Neutral (1) -

UBS upgrades to Buy from Neutral. The broker having reviewed assumptions regarding growth, transaction/performance fees and property investments revises estimates for earnings in FY21-24 down by -11%, but expects growth of 6% from FY21.

UBS observes concerns regarding real estate valuations, capital raisings and fund flows have meant the stock underperformed the A-REIT market over the past three months. Target is reduced to $9.80 from $13.80.

Target price is $9.80 Current Price is $8.14 Difference: $1.66
If CHC meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $10.64, suggesting upside of 30.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Macquarie rates EHE as Neutral (3) -

Macquarie observes multiple challenges resulting from the Royal Commission into aged care and the pandemic. Still, Estia Health remains the broker's preferred exposure to the sector as it has the least gearing.

Moreover, current events have created an opportunity to grow the number of beds from M&A. This was always considered an impediment for the business as it had fewer bed licences to develop.

Target is reduced to $1.83 from $2.25. Neutral maintained.

Target price is $1.83 Current Price is $1.46 Difference: $0.37
If EHE meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $1.95, suggesting upside of 33.2% (ex-dividends)

The company's fiscal year ends in June.

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 JHX as Buy (1) -

Citi expects James Hardie will reveal a net profit of US$354m when it reports on May 19. The company has suspended the payment of dividends and the broker removes this from forecasts, expecting dividends will resume in FY22.

Net profit estimates are downgraded by -34% and -25% for FY21 and FY22 respectively. Target is reduced to $25.15 from $36.00. Buy rating maintained, as Citi assesses the recent pull back is an attractive entry point.

Target price is $25.15 Current Price is $21.49 Difference: $3.66
If JHX meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $28.47, suggesting upside of 32.5% (ex-dividends)

The company's fiscal year ends in March.

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: 1.0

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

Credit Suisse rates KGN as Neutral (3) -

Kogan.com has acquired the intellectual property and goodwill assets of Matt Blatt, an Australian furniture and homewares business. The acquisition represents an opportunity to expand into this category

 Around 20-25% of Matt Blatt sales in FY19 were online, which Credit Suisse suggests was likely skewed towards the smaller items in the product range.

The 12 showrooms were closed because of the impact of the pandemic on sales and the website has now been relaunched by Kogan.com as a purely online business. Neutral rating and $8.36 target retained.

Target price is $8.36 Current Price is $8.77 Difference: minus $0.41 (current price is over target).
If KGN meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Macquarie rates KLL as Outperform (1) -

Macquarie updates forecasts, assuming a rights issue will be used to get Beyondie back on track. Beyondie stage I and stage II are now likely to cost an additional -$50m and -$25m, respectively, being delayed by six months.

Outperform rating maintained. Target cut to 45c from 95c.

Target price is $0.45 Current Price is $0.49 Difference: minus $0.04 (current price is over target).
If KLL meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Morgans rates M7T as Add (1) -

Mach7 Technologies has received a $4.8m purchase order from the Hospital Authority of Hong Kong, which will be recognised as revenue in FY20.

The order is part of a $15m five-year contract which commenced in October 2018, the broker notes, with potential for additional work above the existing contract.

The broker has increased forecasts to recognise the order and lifts its target to $1.17 from $1.16. Add retained.

Target price is $1.17 Current Price is $0.63 Difference: $0.54
If M7T meets the Morgans target it will return approximately 86% (excluding dividends, fees and charges).

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

Credit Suisse rates OGC as Neutral (3) -

FY20 production guidance is unchanged, although expected to be at the lower end of the prior range of 360-380,000 ounces.

Liquidity concerns have moderated, with the company's position bolstered by forward gold sales and the sale of an equity holding in GSV. Growth projects continue to advance.

Credit Suisse retains a Neutral rating and raises the target to $2.70 from $1.72.

Target price is $2.70 Current Price is $3.08 Difference: minus $0.38 (current price is over target).
If OGC meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.36, suggesting upside of 9.1% (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: 0.4

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

Morgans rates OPC as Hold (3) -

OptiComm boasts a strong development pipeline that continues to perform well, hence the broker still expects a small beat of prospectus forecasts in FY20.

For FY21, the broker forecasts a -20% decline in new dwelling construction. Construction earnings lag construction commencements, hence the broker sees a dip in FY21 before a rebound.

Forecast FY21 earnings fall -15%, but the broker notes a key attraction of OptiComm's unique business model is recurring network earnings. Target falls to $4.54 from $4.56, Hold retained.

Target price is $4.54 Current Price is $4.68 Difference: minus $0.14 (current price is over target).
If OPC meets the Morgans 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 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

Macquarie rates OSH as Resume coverage with Outperform (1) -

Macquarie resumes coverage with an Outperform rating and $3.80 target. The broker envisages the most upside in Oil Search among the large energy stocks, given it has already raised equity.

Moreover, there is a strong growth profile in Alaska and PNG, which should move ahead when the oil market returns to equilibrium.

Target price is $3.80 Current Price is $2.99 Difference: $0.81
If OSH meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $3.07, suggesting upside of 2.6% (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: 0.4

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

Credit Suisse rates PPT as Neutral (3) -

Improving fund flows in April indicates to Credit Suisse that assumptions were too conservative. The broker now upgrades FY20 estimates by 2% and FY21-22 by 9-12%.

Ongoing uncertainty is expected to affect the investment management division. The broker retains a Neutral rating and raises the target to $27 from $26.

Target price is $27.00 Current Price is $28.80 Difference: minus $1.8 (current price is over target).
If PPT meets the Credit Suisse target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.63, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

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 RHC as Accumulate (2) -

Ramsay Health Care may not opt for viability funding anymore, believes Ord Minnett, with the National Cabinet announcing a three-stage resumption in elective surgery.

Although the broker waits for more information, given the backlog of cases, Ord Minnett is confident the company will see a rapid return to profitability.

The ‘extended arm’ agreement with the NSW government could become an important revenue source for the healthcare provider, comments the broker.

Accumulate rating reiterated with target price unchanged at $66.

Target price is $66.00 Current Price is $66.14 Difference: minus $0.14 (current price is over target).
If RHC 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 $64.20, suggesting downside of -2.9% (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

Credit Suisse rates TAH as Neutral (3) -

Credit Suisse observes trends in lotteries are running close to expectations. Digital was around 27% of turnover as of December 2019 and the broker now estimates this to be in the low to mid-30% range under current conditions.

Tabcorp has relaxed some of the digital commission-sharing conditions with agents. However, the broker considers it unlikely that the recent offering of trailing commissions to agents had generated significant signing up prior to the pandemic.

Neutral rating maintained. Target is $3.20.

Target price is $3.20 Current Price is $3.17 Difference: $0.03
If TAH meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.17, suggesting upside of 1.4% (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

Morgans rates UMG as Hold (3) -

United Malt Group ((UMG)) saw sales increase 9% in the first half but earnings were down -2.1% from a year ago. This disappointed the broker, given the result was weak a year ago and FY20 has benefited from a lower A$.

The company noted a government-enforced lockdown impacted on March, and has announced a $165m capital raising.

The raising is highly dilutionary, and conditions remain tough, leading the broker to downgrade forecast earnings by -39% and -36% in FY20-21. Target falls to $4.13 from $4.65, Hold retained.

Target price is $4.13 Current Price is $4.01 Difference: $0.12
If UMG meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.39, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates UMG as Buy (1) -

The maiden result missed UBS estimates. The broker was surprised by the elevated costs in the first half and the extent of volume declines through April.

Nevertheless, UBS remains positive regarding the underlying business because of the strong market position and long-term customer contracts.

The $165m equity raising also de-risks the balance sheet. Buy rating maintained. Target is reduced to $4.65 from $5.10.

Target price is $4.65 Current Price is $4.01 Difference: $0.64
If UMG meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.39, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in September.

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

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

Macquarie believes growth projects remain challenging. Woodside has been preparing for a major decision on Scarborough mid-2020 but this is now deferred to 2021.

The shares are down -37% during the bear market for oil but have significantly outperformed both Santos ((STO)) and Oil Search ((OSH)).

Macquarie suggests Woodside investors rotate into these two ahead of an oil market recovery and downgrades to Neutral from Outperform. Target is raised to $23.50 from $23.00.

Target price is $23.50 Current Price is $21.67 Difference: $1.83
If WPL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $23.86, suggesting upside of 10.1% (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: 0.4

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

Morgans rates Z1P as Add (1) -

April saw growth rates slow for Zip Co but transaction and revenue levels have held up well, the broker suggests, in the face of virus headwinds. Bad debts ticked up from March to 1.99% but remain well below the company's 3.75% provisioning.

On that basis, the broker upgrades forecast earnings by 17% and 24% in FY20-21. Target rises to $3.40 from $2.57, Add retained.

Target price is $3.40 Current Price is $3.09 Difference: $0.31
If Z1P meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.47, suggesting upside of 12.2% (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