Australian Broker Call

Citi rates ABC as Neutral (3) -

After decades of creeping up the register, the Barro Group has finally launched what appears to be the final takeover bid for Adbri, Citi notes in an initial response.

Given approximately 47.3% of the register is already controlled by the acquiring consortium Citi sees limited reason other than ACCC or FIRB to prevent the deal from going forward.

The broker's view is existing shareholders will likely take the premium given the size and risks around residential volumes in 2024. The 40% premium still represents a material discount on previous register creeps by the acquirer.

Neutral retained, target rises to $2.50 from $2.25.

Target price is $2.50 Current Price is $2.27 Difference: $0.23
If ABC meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.28, suggesting downside of -24.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

Macquarie rates ABC as Underperform (5) -

FY23 trading for Adbri is a little stronger than Macquarie was anticipating, suggestive of industry price discipline and cost tailwinds.

Management has adjusted its FY23 earnings (EBITDA) guidance to $310-315m from August's commentary for moderate expected 2H growth compared to the 1H.

Guidance for capex was also reduced to $310-320m from $330-350m.

Macquarie raises its target to $2.20 from $2.00. The Underperform rating is unchanged.

Target price is $2.20 Current Price is $2.27 Difference: minus $0.07 (current price is over target).
If ABC meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.28, suggesting downside of -24.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

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

Morgan Stanley suggests balance sheets risk have been a key overhang for the Adbri share price. It's now felt management's update on Kwinana and capex go some way to de-risking the project and reducing balance sheet risk.

Management also provided an earnings update for the company as a whole, which was broadly in line or slightly ahead of forecasts by the broker and consensus.

Kwinana should be completed within management's prior estimated range of $385m-420m, highlights the analyst, and commissioning is expected from the 2Q of 2024.

The Equal-weight rating and $2.30 target price are retained. Industry view: In Line.

Target price is $2.30 Current Price is $2.27 Difference: $0.03
If ABC meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.28, suggesting downside of -24.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

Ord Minnett rates ABC as Hold (3) -

Adbri has upgraded 2023 earnings (EBITDA) guidance to between $310-315m on strong product demand across all products and customer segments, explains Ord Minnett.

Management also lowered capex guidance to $310-320m from $330-350m, after lowering the capex estimate by around -7% for the Kwinana project in WA.

Given a share price lift in reaction to these updated guidance numbers, the broker stays with its Hold rating on valuation. The target rises by 5% to $2.00.

Target price is $2.00 Current Price is $2.27 Difference: minus $0.27 (current price is over target).
If ABC meets the Ord Minnett target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.28, suggesting downside of -24.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: -0.2

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

Citi rates AFG as Neutral (3) -

Citi highlights recent positive signs for non-bank financial institutions (NBFIs) including resilient system growth, a stabilising cost of funds and rising bank deposit costs. These positives have led to outperformance against the market over the December quarter.

On the whole, NBFIs are improving their share of system credit, note the analysts, who prefer Pepper Money in the sector from among stocks under research coverage.

However, Citi retains its Neutral rating for the sector as mortgage competition remains problematic, suggesting that volume growth is ex-mortgages, and will largely come from asset finance and property.

For Australian Finance Group, the target rises to $1.70 from $1.55 and the Neutral rating is unchanged.

Target price is $1.70 Current Price is $1.60 Difference: $0.1
If AFG meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

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 BGA as Buy (1) -

Bell Potter highlights Bega Cheese is trading at a meaningful discount to global dairy fast-moving consumer goods (FMCG) companies. It's believed the market is implying limited success for management achieving its target for greater than $250m in EBITDA by FY28.

The broker can see the target being achieved due to management's cost-out initiatives and the company's increasing exposure to high-margin milk beverages and yoghurt. Market share growth for the latter has been the strongest since FY20, explain the analysts.

Bell Potter also sees scope for a $10-20m earnings turnaround in FY25 for Bulks due to processor capacity reductions, a more static milk pool and current skim milk powder (SMP) forward rates.

The target rises to $4.10 from $3.35. Buy.

Target price is $4.10 Current Price is $3.31 Difference: $0.79
If BGA meets the Bell Potter target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $3.52, suggesting upside of 2.9% (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

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

Following a period of research restriction, Macquarie is now Outperform-rated on Boss Energy, up from Neutral, while the $5.00 target price is unchanged.

The company has acquired a 30% stake in the high-grade Alta Mesa in-situ recovery (ISR) project in South Texas, entering a 30/70 joint venture with Canadian-based enCore Energy for $60m.

The broker now describes Boss Energy as a more diversified multi-national and multi-asset uranium producer.

Management recently announced a $205m placement at $3.95/share along with a $10m share purchase plan (SPP). Funds will be partly used for the acquisition and for exploration and expansion studies at Honeymoon.

The analysts note the company has been included in the ASX200 Index and sees upcoming share price catalysts via imminent production and the expansion study.

Target price is $5.00 Current Price is $4.02 Difference: $0.98
If BOE meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting upside of 13.5% (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 BSL as Downgrade to Neutral from Buy (3) -

US HRC spot prices have lifted to US$1,200/tonne, notes Citi, and could rise by around US$100/t before imports provide a cap. Despite economic constraints, US steel consumption has been resilient, explain the analysts.

The broker raises its earnings forecasts largely due to higher estimates for North Star US HRC spreads, and increases its target for BlueScope Steel to $22.50 from $21.40.

As the share price has rallied by around 25% from lows in October, Citi downgrades its rating to Neutral from Buy.

Target price is $22.50 Current Price is $22.35 Difference: $0.15
If BSL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $21.00, suggesting downside of -6.7% (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 CAT as Downgrade to Hold from Buy (3) -

While Bell Potter raises its target for Catapult International to $1.43 from $1.35 on a higher assumed multiple, the rating is downgraded to Hold from Buy on valuation and a lack of upcoming share price catalysts.

As management appears focused on organic growth in the company's two key segments, the broker is also not anticipating any share price upside from accretive or strategic acquisitions.

Target price is $1.43 Current Price is $1.41 Difference: $0.025
If CAT meets the Bell Potter target it will return approximately 2% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.5

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 raises its target for Capricorn Metals to $5.70 from $5.50 following an updated mineral resource estimate (MRE) for the 100%-owned Mt Gibson Gold project.

Further scale has been added to an already substantial gold resource, in the broker's opinion, in what is a compelling organic growth
option for the company.

The MRE has increased by 18% to 3,244moz from 2,755moz, for a total resource of 121mt at 0.8g/t gold for 3,244moz.

The buy rating is maintained.

Target price is $5.70 Current Price is $4.55 Difference: $1.15
If CMM meets the Bell Potter target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.5

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

Macquarie rates FBU as Outperform (1) -

Macquarie expects the Pro-fit investigation by the Western Australian government's Department of Mines, Industry Regulation and Safety (DEMIRS) will conclude before the end of January next year.

The broker notes estimates for remediation costs range from the company's no-fault provision $16m to BGC IPLEX pipes' last public estimate of $1.8b pre-tax.

The analyst thinks Fletcher Building continues to monitor east-coast builder/plumbers Pro-fit homes on a daily basis.

The company also announced the replacement of its Australia CEO as well as new lead executive on special projects including the Pro-Fit legal issue.

The Outperform rating and NZ$6.20 target are retained.

Current Price is $4.33. Target price not assessed.

Current consensus price target is $5.37, suggesting upside of 20.6% (ex-dividends)

The company's fiscal year ends in June.

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: 0.7

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

Citi rates IMD as Upgrade to Buy from Neutral (1) -

Citi believes the worst is over for Imdex and upgrades its rating to Buy from Neutral and increases the target to $2.20 from $1.60.

The broker believes growth in average revenue per user (ARPU) and momentum in fluids should provide resilience in the 1H. Margin upside is expected in the 2H via stronger momentum in down hole survey instrumentation.

The analyst also highlights the trend upwards for junior raisings in November, marking a second consecutive month of over US$1bn in
funds raised.

Around 50% of revenue for Imdex derives from the Gold sector, and Citi notes gold financings from juniors surged in November.

Target price is $2.20 Current Price is $1.88 Difference: $0.32
If IMD meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.99, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

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

Citi rates LFG as Neutral (3) -

Citi highlights recent positive signs for non-bank financial institutions (NBFIs) including resilient system growth, a stabilising cost of funds and rising bank deposit costs. These positives have led to outperformance against the market over the December quarter.

On the whole, NBFIs are improving their share of system credit, note the analysts, who prefer Pepper Money in the sector from among stocks under research coverage.

However, Citi retains its Neutral rating for the sector as mortgage competition remains problematic, suggesting that volume growth is ex-mortgages, and will largely come from asset finance and property.

The broker retains its Neutral rating and $4.10 target for Liberty Financial.

Target price is $4.10 Current Price is $4.17 Difference: minus $0.07 (current price is over target).
If LFG meets the Citi target it will return approximately minus 2% (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

Morgan Stanley rates LFS as Underweight (5) -

Morgan Stanley believes both economic pressures and a difficult balance in restoring margins versus volumes will delay the recovery for Latitude Group.

Management recently noted the negative impact into FY24 of ongoing elevated borrowing costs and declining consumer spending plus lending demand. The broker's target is reduced to 99c from $1.06.

Given the company's earnings volatility and exposure to macroeconomic headwinds the analysts feel the valuation is too high and maintain an Underweight rating. Industry View: In-line.

Target price is $0.99 Current Price is $1.15 Difference: minus $0.16 (current price is over target).
If LFS meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.98, suggesting downside of -16.2% (ex-dividends)

The company's fiscal year ends in December.

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 MVF as Outperform (1) -

Driven by fresh cycle growth of 16.1% and frozen cycle growth of 18.6%, explains Macquarie, November Medicare statistics highlight total IVF cycles rose by 17.1% compared to the previous corresponding period.

In a positive for Monash IVF, the broker highlights these numbers represent the second-largest month of fresh cycles on record, and the largest outside the covid- impacted years.

The analyst forecasts further market share gains for the company of around 140bps in FY24.

The $1.50 target and Outperform rating are unchanged.

Target price is $1.50 Current Price is $1.38 Difference: $0.125
If MVF meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.39, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.9

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

Morgan Stanley rates ORA as Overweight (1) -

Morgan Stanley was comforted by Orora's trading update (and later management conference call), and also gained greater confidence that the Saverglass acquisition is being undervalued and not adequately reflected in the company's share price.

Volume softness for Saverglass is more moderate than some of the customer volumes reported, explains the broker, and is being offset by pricing and a focus on costs. It is felt the share price will re-rate as the market gains confidence in the Saverglass business.

The Overweight rating is unchanged and the target falls to $3.30 from $3.50 on a change to the broker's valuation methodology. Industry view: In Line.

Target price is $3.30 Current Price is $2.55 Difference: $0.75
If ORA meets the Morgan Stanley target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $3.17, suggesting upside of 24.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.6

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

Macquarie rates PDN as Outperform (1) -

Macquarie lifts its peak uranium price forecast to US$100/lb in 2025 and notes Paladin Energy's Langer Heinrich production restart is imminent. The project is now around 85% complete, observes the analyst.

From FY25 onwards, the broker's EPS forecasts rise for Paladin due to modest production upgrades and the higher forecast uranium price.

The Outperform rating is unchanged and the target rises to $1.40 from $1.30.

Target price is $1.40 Current Price is $0.99 Difference: $0.415
If PDN meets the Macquarie target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $1.19, suggesting upside of 21.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

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

Market Sentiment: 0.5

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

Citi rates PPM as Upgrade to Buy from Neutral (1) -

Citi highlights recent positive signs for non-bank financial institutions (NBFIs) including resilient system growth, a stabilising cost of funds and rising bank deposit costs. These positives have led to outperformance against the market over the December quarter.

On the whole, NBFIs are improving their share of system credit, note the analysts, who prefer Pepper Money in the sector from among stocks under research coverage.

However, Citi retains its Neutral rating for the sector as mortgage competition remains problematic, suggesting that volume growth is ex-mortgages, and will largely come from asset finance and property.

The broker upgrades Pepper Money to Buy from Neutral and the target falls to $1.40 from $1.45.

Target price is $1.40 Current Price is $1.19 Difference: $0.21
If PPM meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Citi rates RMC as Neutral (3) -

Citi highlights recent positive signs for non-bank financial institutions (NBFIs) including resilient system growth, a stabilising cost of funds and rising bank deposit costs. These positives have led to outperformance against the market over the December quarter.

On the whole, NBFIs are improving their share of system credit, note the analysts, who prefer Pepper Money in the sector from among stocks under research coverage.

However, Citi retains its Neutral rating for the sector as mortgage competition remains problematic, suggesting that volume growth is ex-mortgages, and will largely come from asset finance and property.

The broker's target for Resimac Group falls to 95c from $1.10 and the Neutral rating is unchanged.

Target price is $0.95 Current Price is $0.87 Difference: $0.085
If RMC meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.02, suggesting upside of 15.5% (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

Ord Minnett rates STX as Hold (3) -

Ord Minnett raises its target for Strike Energy to 50c from 45c largely due to an around 10% increase in the broker's expected gas price realisation over the next ten years.

A key attraction of Strike for the analyst is the potential for resource expansion and a healthy balance sheet with $75m in cash at September 30. It is also felt the company is a potential takeover target.

The Hold rating is unchanged.

Target price is $0.50 Current Price is $0.45 Difference: $0.05
If STX meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $0.52, suggesting upside of 15.6% (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