Australian Broker Call

UBS rates AMP as Sell (5) -

UBS models scenarios for an AMP demerger and concludes the company's tight capital position, weak profitability and structural decline reduce the odds of a successful solution.

The broker notes demerger-contender PrivatMarketsCo's revenues and margins have been falling in the past 18 months and the near-term outlook is poor, raising demerger and transformation costs and accentuating dis-synergy risks. Meanwhile, the AMP business will be heavily reliant on cost-cutting.

The broker downgrades forecasts -7% in FY21 and -17% in FY22.

Target price falls to 90c. Sell rating retained.

Target price is $0.90 Current Price is $0.98 Difference: minus $0.08 (current price is over target).
If AMP meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.11, suggesting upside of 17.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.3

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

Ord Minnett rates BSL as Buy (1) -

Bluescope Steel has reported a -16% decline in steel spread from its North Star division since early October as input prices rise, with Ord Minnett noting scrap is up 3% and pig iron is up 6%. The broker forecasts full-year pre-tax earnings of $4.2bn, 14% higher than consensus.

Despite US and East Asia hot rolled coil prices dropping -10% and -23% below 2021 highs respectively, the broker notes prices still remain strong. 

The Buy rating and target price of $33.00 are retained.

Target price is $33.00 Current Price is $19.68 Difference: $13.32
If BSL meets the Ord Minnett target it will return approximately 68% (excluding dividends, fees and charges).

Current consensus price target is $27.01, suggesting upside of 35.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Ord Minnett rates CAR as Hold (3) -

Ahead of Carsales.com's investor day next week, Ord Minnett has noted it sees more risk than reward with the company's current valuation.

While strong top-line growth, high margins and free cash flow have previously driven a premium on the company's share price, the broker notes the SELECT platform is yet to demonstrate if it can match operating metrics of the traditional business. 

The Hold rating and target price of $22.00 are retained.

Target price is $22.00 Current Price is $25.21 Difference: minus $3.21 (current price is over target).
If CAR meets the Ord Minnett target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.32, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in June.

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 CGC as Neutral (3) -

UBS reinstates coverage of Costa Group with a Neutral rating and $3 target price, following a change in the covering analyst. This compares with a $4.60 target price when the broker ceased coverage last February.

UBS spies near-term earnings pressure from avocados, citrus and the high-margin Arana blueberry line, which it expects will translate to a -2% fall in 2021 earnings, but says near-term risks are priced in.

But the broker says the international segment is the bright spot and expects continued growth, underpinned by strong berry production in China.

Target price is $3.00 Current Price is $2.80 Difference: $0.2
If CGC meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $3.60, suggesting upside of 31.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.4

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

Credit Suisse rates CQR as Outperform (1) -

Credit Suisse makes minor changes to forecasts following an upgrade to FY22 funds from operations (FFO) guidance by Charter Hall Retail REIT. The Outperform rating and $4.28 target price are unchanged.

FFO Guidance is now for not less than 28.2c from 27.8-28.2c, and dividend guidance moves to no less than 24.3c from 23.9-24.3c, with a stronger 2H distribution.

Separately, the REIT announced the acquisition of a 49% stake in 20 Ampol ((ALD)) Fuel & Convenience assets for circa $51m.

Target price is $4.28 Current Price is $4.09 Difference: $0.19
If CQR meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates CQR as Outperform (1) -

Charter Hall Retail REIT has announced the acquisition of a 49% stake in 20 Ampol ((ALD)) Fuel & Convenience assets for circa $51m. Management also upgraded FY22 earnings and dividend guidance to 28.2cps and 24.3cps, respectively.

The broker lifts funds from operations (FFO) estimates marginally and raises its target price to $4.50 from $4.41. The Outperform rating is unchanged.

Target price is $4.50 Current Price is $4.09 Difference: $0.41
If CQR meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates CQR as Accumulate (2) -

Charter Hall Retail REIT has announced the acquisition of a 49% stake in twenty Ampol ((ALD)) service stations for a total cost of $50.5m, marking the company's first Ampol acquisition as noted by Ord Minnett. Ampol will retain the remaining 51% stake.

A combination of the purchase and underlying portfolio performance has driven an upgrade to company guidance for FY22 operating earnings per share of no less than 28.2 cents and distribution guidance of no less than 24.3 cents. 

Accumulate rating is retained and the target price increases to $4.22 from $4.20.

Target price is $4.22 Current Price is $4.09 Difference: $0.13
If CQR meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in June.

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 DHG as Upgrade to Buy from Neutral (1) -

UBS upgrades Domain Holdings to Buy from Neutral after CoreLogic reported a 34% jump in November listings, compared with a 25% jump in September; and in response to the company's share-price retreat.

The broker believes the CoreLogic data signals an acceleration in volumes heading into year-end and upgrades Domain's FY22 earnings forecasts 2%.

UBS spies room to grow revenue above the rate of listing and potential upside from stamp duty reforms.

Target price is steady at $5.80, the broker doubting the uptick will last.

Target price is $5.80 Current Price is $5.20 Difference: $0.6
If DHG meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.49, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Citi rates GUD as Buy (1) -

Citi views GUD Holdings' acquisition of APG as strategically sound, noting it provides exposure to the 4x4 growth sector, reduces reliance on internal combustion vehicles, diversifies the customer base and offers manufacturing country diversification.

The broker estimates the price tag to be about 119% above the 2019 sale price, but this includes three acquisitions, increased capital expenditure and improved working capital, all of which have doubled earnings.

FY22 earnings forecasts rise 1%. FY23 and FY24 earnings forecasts rise 15% and 18%. 

Buy rating retained. Target price rises to $15.70 from $13.14.

Target price is $15.70 Current Price is $10.78 Difference: $4.92
If GUD meets the Citi target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $14.71, suggesting upside of 32.8% (ex-dividends)

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 GUD as Outperform (1) -

Credit Suisse describes GUD Holdings' acquisition of AutoPacific Group for $744.6m as transformational on both a financial and strategic level. The broker lifts its FY22-24 EPS estimates by 6.4-12.9% and raises its target price to $14.30 from $13.90.

The analyst cautions the key risk to the stock in the near and medium term is the integration of the acquisition and the sustainability
of the earnings base of the assets acquired. 

Target price is $14.30 Current Price is $10.78 Difference: $3.52
If GUD meets the Credit Suisse target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $14.71, suggesting upside of 32.8% (ex-dividends)

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 LTR as No Rating (-1) -

Liontown Resources will raise funds primarily to maintain optionality during the offtake negotiations to accelerate the development of Kathleen Valley, explains Macquarie. The company announced a fully underwritten institutional placement to raise $450m at $1.65/share.

A further share purchase plane aims to raise another $40m.

Due to research restrictions, Macquarie cannot advise its rating or target price.

Current Price is $1.92. Target price not assessed.

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

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

Macquarie rates NST as Outperform (1) -

In what Macquarie considers is a natural progression for the growth strategy in North America, Northern Star Resources has secured an option to acquire a 50% interest in the Windfall Gold Project in Canada.

This analyst notes the Windfall project has similar production metrics to the company’s existing Pogo operation in Alaska. The Outperform rating and $13 target price are unchanged.

Target price is $13.00 Current Price is $9.44 Difference: $3.56
If NST meets the Macquarie target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $11.86, suggesting upside of 30.6% (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

UBS rates NWS as Buy (1) -

UBS upgrades News Corp's target price to $45 from $42 as part of its monthly mark to market report, and following the company's strong September-quarter beat.

The broker marks News Corp's (voting shares) and REA Group (61.4% News Corp stake) to market.

Earnings forecasts rise 33% for FY22 and 28% for FY23. The estimates also include the broker's recent increase in REA Group's ((REA)) price target to $170 from $160.

Buy rating retained.

Target price is $45.00 Current Price is $30.22 Difference: $14.78
If NWS meets the UBS target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $41.50, suggesting upside of 37.1% (ex-dividends)

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: 1.0

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

Credit Suisse rates QAN as Underperform (5) -

Credit Suisse thinks reopening may be delayed due to the omicron variant and factors-in a three to four month delay for Qantas Airways' metrics. The broker is cautious on taking a more positive stance and retains its Underperform rating.

The target price of $4.10 is unchanged, despite the analyst increasing the estimated loss for FY22  to -$1.6bn from -$1.2bn.

Target price is $4.10 Current Price is $4.95 Difference: minus $0.85 (current price is over target).
If QAN meets the Credit Suisse target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.01, suggesting upside of 22.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

UBS rates REA as Upgrade to Neutral from Sell (3) -

UBS upgrades REA Group to Neutral from Sell after CoreLogic reported a 34% jump in November listings, compared with a 25% jump in September; and in response to the company's share-price retreat.

The broker believes the CoreLogic data signals an acceleration in volumes heading into year-end and raises REA's FY22 volume estimates to 6.5% from 5%.

But UBS's long-term view is unchanged. Outside of stamp duty reforms, the broker finds it hard to discern which mechanism outside of price increases, the company can use to increase revenue.

Target price is steady at $170.

Target price is $170.00 Current Price is $161.57 Difference: $8.43
If REA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $171.31, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates REP as Initiation of coverage with Outperform (1) -

Credit Suisse initiates coverage on RAM Essential Services Property Fund with an Outperform rating and $1.05 target price. The REIT, externally managed by RAM Property Funds Management, offers exposure to medical and essential retail real estate in Australia.

The analyst highlights there is no performance fee structure though otherwise the fee structure is consistent with Australian REIT peers. The portfolio comprises 33 properties (20 medical-anchored and 13 essential retail properties) valued at $706.3m.

The portfolio is underpinned by national supermarket and private hospital tenants and the current occupancy is 99.1% with a weighted average lease expiry of 7.1 years, notes the broker. Credit Suisse sees upside to earnings and capital value from developments.

Target price is $1.05 Current Price is $1.00 Difference: $0.05
If REP meets the Credit Suisse target it will return approximately 5% (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 WOR as Buy (1) -

Worley's management has guided to disappointing first-half earnings but Citi expects a recovery in the second half.

The company's investment day flagged an increase in sustainability-driven revenue to 75% within five years (currently 32%).

Citi expects the strategy will boost margins given sustainability work within the project backlog and factored-sales pipelines have risen 9% and 12% so far this half. Progress has also been struck on carbon capture & storage.

Given the sustainability profile, Citi forecasts higher than consensus earnings margins from FY23 onward.

Buy rating is retained but target price eases to $11.28 from $11.31 to reflect the weaker-than-forecast half.

Target price is $11.28 Current Price is $9.50 Difference: $1.78
If WOR meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $11.61, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Macquarie rates WOR as Outperform (1) -

At a sustainability presentation, Worley guided to improved FY22 profit on the previous corresponding period. Management is targeting sustainability to be 75% of revenue in five years versus the current 32%.

Overall, the analyst forecasts 19% earnings growth in FY22 with the key driver being ongoing margin improvement/cost-out. The broker maintains its Outperform rating and $12.25 target price.

Target price is $12.25 Current Price is $9.50 Difference: $2.75
If WOR meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $11.61, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Morgan Stanley rates WOR as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley believes Worley will be a beneficiary of the complexity of the energy transition and feels macroeconomic indicators of activity may be improving. The broker lifts its target to $12 from $11 and upgrades its rating to Overweight from Equal-weight. Industry view: In-Line.

The analyst feels the company is close to its last earnings downgrade, after being under pressure in 2021.

Target price is $12.00 Current Price is $9.50 Difference: $2.5
If WOR meets the Morgan Stanley target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $11.61, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Ord Minnett rates WOR as Hold (3) -

A focus on its shift to sustainability projects at Worley's investor day couldn't distract from the 47% of revenue still tied to hydrocarbons; with debt financing for large-scale oil and gas projects becoming harder to obtain. Ord Minnett expects a drag on long-term growth.

Worley has indicated a target for sustainability revenue to make up 75% of aggregate revenue by FY26, expecting the segment to grow at a faster rate than traditional business.

The Hold rating is retained and the target price decreases to $10.50 from $11.30.

Target price is $10.50 Current Price is $9.50 Difference: $1
If WOR meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $11.61, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

UBS rates WOR as Buy (1) -

Worley's annual investor day focused on its energy transition and sustainability strategy, saying it plans to draw 75% of its sales from sustainability projects in the next five years, up from 32% now, says UBS.

UBS expects sustainability will drive a compound annual earnings growth rate of 10% for Worley, after assuming 11% growth in transition investment, and a 3% fall in fossil-fuel investment.

Worley will focus on nine sustainability growth markets: industrial hubs, decarbonising existing assets, green hydrogen, carbon capture storage, offshore wind, power networks, water, sustainability, advisory and environmental consulting.

These areas match the company's existing skills, client base and project experience.

UBS retains its Buy rating, which is based on Worley's leverage to a potential four-fold increase in global energy investment and decarbonisation projects, and attractive valuation. Target price steady at $13.20.

Target price is $13.20 Current Price is $9.50 Difference: $3.7
If WOR meets the UBS target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $11.61, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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