Australian Broker Call

Morgan Stanley rates APT as Overweight (1) -

Afterpay's US app downloads in January 2021 were up 100% versus last year. With the number of first-time app downloads acting as a forward indicator of future revenue growth, Morgan Stanley highlights upside risk for Afterpay's revenue growth prospects.

Overweight and $136 target retained. Industry view: In-Line.

Target price is $136.00 Current Price is $151.30 Difference: minus $15.3 (current price is over target).
If APT meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $110.09, suggesting downside of -28.3% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates AZJ as Outperform (1) -

Macquarie calculates rising bond yields are a headwind for Aurizon Holdings, due to the low-growth nature of the business. Typically, the offset is Network discount rate resets (next is June 23), which mitigates adverse movements, explains the broker.

However, with 4-yr bonds currently at 0.25%, the company's earnings don’t benefit from the first 1.65% increase, notes the analyst, who reduces the target price to $4.31 from $4.52.

Despite this, the shares have a very attractive yield and the company has a conservatively leveraged balance sheet, notes the analyst. This is considered to provide flexibility for additional capital management in the absence of growth opportunities.

Outperform retained. Target price is decreased to $4.31 from $4.52.

Target price is $4.31 Current Price is $3.89 Difference: $0.42
If AZJ meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $5.06, suggesting upside of 28.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

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

Challenger is acquiring MyLife MyFinance bank to expand its retirement offering. Morgan Stanley believes this acquisition would lead to a more flexible model, stabilizing earnings and leading to higher distribution efficiencies.  

Equal-weight. Target rises to $6.45 from $4.25. Industry view: In-line.

Target price is $6.45 Current Price is $7.29 Difference: minus $0.84 (current price is over target).
If CGF meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.44, suggesting downside of -11.1% (ex-dividends)

The company's fiscal year ends in June.

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

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

Citi raises benchmark iron ore forecasts to US$140 and US$110 per tonne for 2020 and 2021, respectively. The broker believes the higher-for-longer iron ore prices will benefit Champion Iron and upgrades to Neutral from Sell.

On Citi's modelling the share price is implying a long-term benchmark iron ore price of US$65/t versus its forecast of US$60/t.

Target price is $5.30 Current Price is $5.11 Difference: $0.19
If CIA meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

This company reports in CAD. 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

Morgans rates COF as Add (1) -

Centuria Office REIT provided funds from operations (FFO) guidance above Morgans expectations, largely due to the Foxtel lease surrender payment landing in the first half.

DPS guidance is unchanged at 16.5 cents.

Despite acknowledging near-term leasing risk, the broker notes a -19% discount to net tangible assets (NTA) and a very attractive yield.

The Add rating is unchanged and the target rises to $2.31 from $2.29. 

Target price is $2.31 Current Price is $1.98 Difference: $0.33
If COF meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.15, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates COH as Sell (5) -

First half results are to be reported on February 19. UBS forecasts a decline in cochlear implant revenue of -13% and sales of -21%. The broker notes a sizeable headwind from FX because of Australian dollar appreciation.

As coronavirus infections are high, particularly in the US and Western Europe, a unit sales recovery is likely to be an FY22 or beyond proposition.

The Sell rating and target price of $175 are unchanged.

Target price is $175.00 Current Price is $208.11 Difference: minus $33.11 (current price is over target).
If COH meets the UBS target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $203.19, suggesting downside of -1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: -0.1

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

Macquarie rates CPU as Outperform (1) -

An independent report on the US Mortgage Servicing market for the second quarter shows Computershare’s unpaid principal balance (UPB) declined -1.0% sequentially (versus 1.5% market growth).  This poses downside risk to short-term earnings, explains Macquarie.

Despite this short-term weakness, the broker notes the US Mortgage Servicing segment provides upside risk to consensus forecasts over the long term.

The Outperform rating and $15.95 target are unchanged.

Target price is $15.95 Current Price is $14.84 Difference: $1.11
If CPU meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $14.19, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Market Sentiment: 0.1

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

Macquarie rates JHG as Outperform (1) -

Janus Henderson Group released a fourth quarter operating result ahead of Macquarie's expectations, primarily driven by performance fees, as well as higher management fees from higher assets under management (AUM).

The broker increases EPS forecasts for FY20-22 by 15%, 30% and 29%, due to the mark-to-market impact on AUM, reduced outflows, increased performance fees, lower compensation ratio and a US$230m share purchase.

The Outperform rating is unchanged and, as adjusted by Macquarie' (and FNArena's) Friday note, the target price moved to $53 from $40. 

Target price is $53.00 Current Price is $40.19 Difference: $12.81
If JHG meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $45.03, suggesting upside of 9.9% (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: 0.5

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

Macquarie rates KMD as Neutral (3) -

The US-listed Columbia Sportswear released results that support Macquarie's expectation for 93% online sales growth for Kathmandu Holdings in the first half.

The broker maintains a Neutral rating as headwinds remain for the company’s exposure to travel related purchases. Target price of $1.35 maintained.

Target price is $1.35 Current Price is $1.25 Difference: $0.1
If KMD meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.40, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY21:

Forecast for FY22:

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 MGX as Upgrade to Buy from Neutral (1) -

Citi raises 2020 and 2021 benchmark iron ore price forecasts to US$140 and US$110 per tonne. Since the beginning of the year the Mount Gibson share price has fallen -15%.

Along with large earnings revisions this causes the broker to upgrade the rating to Buy/High Risk from Neutral/High Risk. Target is raised to $1.20 from $1.10.

Target price is $1.20 Current Price is $0.85 Difference: $0.35
If MGX meets the Citi target it will return approximately 41% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 1.0

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

Macquarie rates MPL as Underperform (5) -

Medibank Private has announced the acquisition of a non-controlling economic interest in the Myhealth Medical Group.

Macquarie observes the initial financial implications for the company are small, though strategically it gives GPs access to surgical data (thus improving patient outcomes) and could lower claims costs. It may also lower private health insurance pricing for customers long-term.

The Underperform rating and $2.70 target are unchanged.

Target price is $2.70 Current Price is $3.02 Difference: minus $0.32 (current price is over target).
If MPL meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.98, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.1

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

Morgan Stanley rates NWS as Underweight (5) -

Upon initial assessment it looks like News Corp had a very good December quarter, observes Morgan Stanley with the operating income up 33% at US$747m. The positive surprise was mostly from cost-outs from all segments except newspapers.

No guidance was provided but the company expects costs to increase >in the second half.

Underweight rating and US$15 target maintained. Industry view: Attractive.

Current Price is $28.41. Target price not assessed.

Current consensus price target is $27.52, suggesting upside of 0.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

UBS rates NWS as Buy (1) -

Second quarter results were materially ahead of UBS estimates. No guidance was provided. Highlights include the performance of Move, helped by higher referral & traditional lead revenue.

High revenue also occurred with book publishing. News media continues to benefit from cost savings. UBS plans to review its forecasts and retains its Buy rating and $29 target.

Target price is $29.00 Current Price is $28.41 Difference: $0.59
If NWS meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $27.52, suggesting upside of 0.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

UBS rates ORG as Buy (1) -

Origin Energy has downgraded FY21 energy markets guidance by -13% at the mid point. This stems from further margin pressure as a result of lower wholesale electricity prices and higher gas procurement costs.

UBS expects mild summer weather will lower earnings from the peaking generation fleet. The broker retains a Buy rating based on valuation and reduces the target to $5.75 from $6.65.

The broker believes the company has a means of reducing its exposure to lower average wholesale prices by augmenting its Eraring coal-fired power station with batteries, and potentially gas turbines, over the next few years.

Target price is $5.75 Current Price is $4.53 Difference: $1.22
If ORG meets the UBS target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $5.41, suggesting upside of 23.5% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates REA as Neutral (3) -

While revenue was in line with Macquarie's estimates in the first half, cost reductions meant earnings per share were better than expected. The outlook for listings remains positive and a resumption in Melbourne should benefit the mix.

Macquarie increases second half listings volume forecast to growth of 10%, reflecting an improving residential market.

Meanwhile, the US online business Move, in which REA Group has a 20% stake, increased revenue by 20%, representing the first period of profitability since acquisition.

Macquarie retains a Neutral rating and raises the target to $158 from $110.

Target price is $158.00 Current Price is $157.00 Difference: $1
If REA meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $146.12, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Morgan Stanley rates REA as Overweight (1) -

At first glance, the first half results are ahead of Morgan Stanley's expectations and the broker is increasingly convinced about its positive investment thesis on REA Group.

The broker's investment thesis rests on the potential for a "supercycle" in 2021-22 from drivers including margin expansion with flat costs, a strong cyclical rebound in listings in Sydney and Melbourne and rethinking of work and living locations post-pandemic.

Morgan Stanley calculates the group needs only 14% growth in its operating income in the second half to achieve its full year guidance.

Overweight rating. Target is $150. Industry view: Attractive.

Target price is $150.00 Current Price is $157.00 Difference: minus $7 (current price is over target).
If REA meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $146.12, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Morgans rates REA as Hold (3) -

REA Group's first half result beat Morgans expectations with domestic cost containment and a strong result from associate MOVE Inc. The latter's result was considered driven by 20% revenue growth and further cost containment.

The broker highlights an in-line group revenue result masked some large movements, with the developer market faring much better than expected and Asia much weaker.

The analyst sees strong growth in FY22, punctuated by above average price increases, a return to a more normal domestic listings environment and rebounds in other covid impacted regions. 

The Hold rating is unchanged and the target is increased to $131 from $114.8.

Target price is $131.00 Current Price is $157.00 Difference: minus $26 (current price is over target).
If REA meets the Morgans target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $146.12, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Ord Minnett rates REA as Hold (3) -

First half results signal the listings outlook is positive. Ord Minnett observes marketing and travel costs will return but REA Group can continue pushing depth.

While audiences are engaged, the offer strong and the backdrop supportive the main issue for the broker is the valuation. Hold rating retained. Target rises to $145 from $110.

Ord Minnett notes PE and enterprise value/EBITDA multiples are stretched relative to historical averages and the S&P ASX 100 index.

Target price is $145.00 Current Price is $157.00 Difference: minus $12 (current price is over target).
If REA meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $146.12, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

UBS rates REA as Neutral (3) -

First half results beat UBS estimates although revenue was broadly in line. The broker lowers forecasts for price increases slightly, to 7-8% for FY22, to factor in the phasing of a price catch-up over two years.

Listing assumptions have increased from FY23 onwards. UBS retains a Neutral rating and raises the target to $155 from $130.

Target price is $155.00 Current Price is $157.00 Difference: minus $2 (current price is over target).
If REA meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $146.12, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.2

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

Macquarie rates S32 as Neutral (3) -

The NSW Independent Planning Commission has rejected South32’s Dendrobium Next Domain project.

Macquarie removes the project from forecasts, which drives cuts to production forecasts for Illawarra, though this only has a modest impact with lower capex improving near-term cash flow.

The Neutral rating and $2.70 target are unchanged.

Target price is $2.70 Current Price is $2.65 Difference: $0.05
If S32 meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.94, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Morgan Stanley rates S32 as Overweight (1) -

South32 announced the NSW Independent Planning Commission (IPC) has recommended against approval of the Dendrobium Next Domain (DND) project citing long-term risks and irreversible damage to Greater Sydney and the Illawarra’s drinking water catchment.

At full production, Morgan Stanley expected the project to have an operating income contribution of circa US$200m by FY25, removing which reduces earnings forecast for FY25 by circa -6%.

Overweight rating and target price of $3. Industry view: Attractive.

Target price is $3.00 Current Price is $2.65 Difference: $0.35
If S32 meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.94, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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

Ord Minnett rates S32 as Buy (1) -

The NSW Independent Planning Commission has recommended against the extension of the Dendrobium mine at Illawarra Coal. Approval was sought for Area 5 and Area 6 which would have extended the mine life to 2048 at a rate of 3.0-3.5mtpa.

While the headlines appear negative, Ord Minnett had always questioned the economics of the Dendrobium extension. Removing this and running higher costs at Appin leaves value estimates unchanged. Buy rating and $3.30 target maintained.

Target price is $3.30 Current Price is $2.65 Difference: $0.65
If S32 meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $2.94, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

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