Australian Broker Call
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September 07, 2020
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1).
Last Updated: 05:00 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
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Overnight Price: $85.90
Ord Minnett rates ASX as Lighten (4) -
Over the month of August there was some weakness in derivatives volumes and an easing of the cash market and capital raising revenue.
While no changes are made thus far, if these trends continue Ord Minnett anticipates there could be some downward pressure on the stock.
August was the fourth consecutive month with net negative change in total listings. Capital raisings in August were very much lower than the average monthly amount raised over the past 12 months.
Lighten rating maintained. Target is $78.07.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $78.07 Current Price is $85.90 Difference: minus $7.83 (current price is over target).
If ASX meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $72.52, suggesting downside of -14.0% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Ord Minnett forecasts a full year FY21 dividend of 230.00 cents and EPS of 255.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 250.0, implying annual growth of -3.0%. Current consensus DPS estimate is 226.9, implying a prospective dividend yield of 2.7%. Current consensus EPS estimate suggests the PER is 33.7. |
Forecast for FY22:
Ord Minnett forecasts a full year FY22 dividend of 242.00 cents and EPS of 268.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 257.0, implying annual growth of 2.8%. Current consensus DPS estimate is 233.8, implying a prospective dividend yield of 2.8%. Current consensus EPS estimate suggests the PER is 32.8. |
Market Sentiment: -1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $17.52
Macquarie rates FMG as Outperform (1) -
Fortescue Metals has secured an increase in its port export capacity and this now presents upside risk to Macquarie's forecasts. As iron ore prices have risen above US$130/t this could mean FY21 earnings are 40% higher.
The additional port capacity was not expected to be a major issue for the company and materials handling at the Herb Elliott facility at Port Hedland will rise to 210mtpa from 175mtpa on a staged basis.
The broker assesses the dividend pay-out target is now at the upper end of the 50-80% range. Outperform rating and $20 target unchanged.
Target price is $20.00 Current Price is $17.52 Difference: $2.48
If FMG meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).
Current consensus price target is $16.59, suggesting downside of -7.2% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Macquarie forecasts a full year FY21 dividend of 235.10 cents and EPS of 294.69 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 208.5, implying annual growth of N/A. Current consensus DPS estimate is 238.6, implying a prospective dividend yield of 13.3%. Current consensus EPS estimate suggests the PER is 8.6. |
Forecast for FY22:
Macquarie forecasts a full year FY22 dividend of 168.56 cents and EPS of 211.45 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 138.7, implying annual growth of -33.5%. Current consensus DPS estimate is 188.6, implying a prospective dividend yield of 10.5%. Current consensus EPS estimate suggests the PER is 12.9. |
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
Overnight Price: $17.35
Morgan Stanley rates NAB as Equal-weight (3) -
While there are long-term benefits in the transformation, Morgan Stanley considers the short-term is challenging for National Australia Bank. Housing loan growth is tracking below the broker's estimates and front book competition in the mortgage market is ratcheting up.
The broker suspects the bank will incur the highest cumulative three-year loss rates of the major banks, given a relatively low level of collective provisions and higher share of small-medium enterprise/business loans.
Nevertheless, the capital position is strong as the bank should benefit from the sale of MLC Wealth. The pro forma ex-dividend CET1 ratio of 11.9% is also the highest of the major banks.
Equal-weight rating. Target is $17.50. Industry view: In-line.
Target price is $17.50 Current Price is $17.35 Difference: $0.15
If NAB meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).
Current consensus price target is $20.24, suggesting upside of 15.1% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 60.00 cents and EPS of 114.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 118.0, implying annual growth of -34.0%. Current consensus DPS estimate is 62.1, implying a prospective dividend yield of 3.5%. Current consensus EPS estimate suggests the PER is 14.9. |
Forecast for FY21:
Morgan Stanley forecasts a full year FY21 dividend of 85.00 cents and EPS of 120.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 137.4, implying annual growth of 16.4%. Current consensus DPS estimate is 81.4, implying a prospective dividend yield of 4.6%. Current consensus EPS estimate suggests the PER is 12.8. |
Market Sentiment: 0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $1.38
Macquarie rates PRU as Underperform (5) -
Perseus Mining is confident in the development of Yaoure and first gold is timed for December. The company also intends to accelerate a valuation of resources acquired as a result of the takeover of Exore Resources ((ERX)).
Incorporating a notional inventory for the latter and the extension of Sissingue's mine life by 2.5 years, Macquarie reduces estimates for earnings per share by -5% in FY24 and lifts estimates in subsequent years. Meanwhile, recoveries at Edikan are improving.
The broker retains an Underperform rating and raises the target to $1.40 from $1.30.
Target price is $1.40 Current Price is $1.38 Difference: $0.02
If PRU meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).
Current consensus price target is $1.43, suggesting upside of 6.2% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Macquarie forecasts a full year FY21 dividend of 0.00 cents and EPS of 3.80 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 7.2, implying annual growth of -10.9%. Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A. Current consensus EPS estimate suggests the PER is 18.8. |
Forecast for FY22:
Macquarie forecasts a full year FY22 dividend of 0.00 cents and EPS of 8.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 15.9, implying annual growth of 120.8%. Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A. Current consensus EPS estimate suggests the PER is 8.5. |
Market Sentiment: -0.7
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $2.12
Morgans rates RMS as Add (1) -
Ramelius Resources has released more detail on the company's September quarter forecast.
Morgans updates estimates to also reflect the strong run in the gold price since the last update. The company's extra detail is considered conservative but overall the increased estimated production should leave room for a mine life extension.
Morgans sees upside for the share price, based on the gold price in Australian dollars and modest exploration success. The analyst expects good news as exploration activities and feasibility studies in the current year progress.
The Add rating is unchanged and the target price is increased to $2.49 from $2.12.
Target price is $2.49 Current Price is $2.12 Difference: $0.37
If RMS meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY21:
Morgans forecasts a full year FY21 dividend of 2.00 cents and EPS of 26.00 cents. |
Forecast for FY22:
Morgans forecasts a full year FY22 dividend of 2.00 cents and EPS of 25.00 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Morgan Stanley rates SCG as Overweight (1) -
Morgan Stanley notes media speculation Scentre Group may launch a $1.8bn equity raising, even though the CEO at the results rejected any plans to raise equity in order to alleviate tight gearing.
At present gearing is 38.4% and on 2021 calculations, debt/operating earnings is at 8.2x, tighter than peers the broker covers.
On the broker's calculations, an equity raising of that magnitude at the current share price will potentially dilute free funds from operations in FY21 to 17c per security from the current forecast of 20.6c.
Overweight rating. Target is $2.70. Industry view: In-line.
Target price is $2.70 Current Price is $2.18 Difference: $0.52
If SCG meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).
Current consensus price target is $2.34, suggesting upside of 7.7% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 10.00 cents and EPS of 14.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 15.4, implying annual growth of -30.9%. Current consensus DPS estimate is 7.3, implying a prospective dividend yield of 3.4%. Current consensus EPS estimate suggests the PER is 14.1. |
Forecast for FY21:
Morgan Stanley forecasts a full year FY21 dividend of 16.40 cents and EPS of 20.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 20.6, implying annual growth of 33.8%. Current consensus DPS estimate is 17.1, implying a prospective dividend yield of 7.9%. Current consensus EPS estimate suggests the PER is 10.5. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $17.06
Citi rates WBC as Buy (1) -
As Australia's banks offload their contentious wealth investments this is largely considered by the market to be a positive development, comments Citi. Yet Westpac still holds the BT business, and Citi highlights this is the "jewel in the crown".
The BT business represents the only asset likely to be held for scale and its strategic value is growing as these types of opportunities become scarce. It has $150bn of funds under administration.
There are options to improve the business and Citi suspects BT is best compared to Commonwealth Bank's ((CBA)) CFS transaction or the transactions undertaken recently by ANZ Bank ((ANZ)).
While the broker acknowledges timing is crucial, the latent potential for asset sales, including general insurance and the life business, could realise up to 120 basis points of CET1 for Westpac. The bank remains the broker's top pick in the sector.
Buy rating maintained. The target price is $23.50.
Target price is $23.50 Current Price is $17.06 Difference: $6.44
If WBC meets the Citi target it will return approximately 38% (excluding dividends, fees and charges).
Current consensus price target is $20.03, suggesting upside of 15.6% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 35.00 cents and EPS of 112.10 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 102.6, implying annual growth of -55.6%. Current consensus DPS estimate is 34.0, implying a prospective dividend yield of 2.0%. Current consensus EPS estimate suggests the PER is 16.9. |
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 90.00 cents and EPS of 201.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 157.5, implying annual growth of 53.5%. Current consensus DPS estimate is 83.5, implying a prospective dividend yield of 4.8%. Current consensus EPS estimate suggests the PER is 11.0. |
Market Sentiment: 0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Today's Price Target Changes
| Company | Last Price | Broker | New Target | Prev Target | Change | |
| GPT | GPT Group | $3.78 | Macquarie | 4.48 | 4.84 | -7.44% |
| NAB | National Australia Bank | $17.59 | Morgan Stanley | 17.50 | 17.70 | -1.13% |
| PRU | Perseus Mining | $1.35 | Macquarie | 1.40 | 1.30 | 7.69% |
| RMS | Ramelius Resources | $2.26 | Morgans | 2.49 | 2.31 | 7.79% |
Summaries
| ASX | ASX Ltd | Lighten - Ord Minnett | Overnight Price $85.90 |
| FMG | Fortescue | Outperform - Macquarie | Overnight Price $17.52 |
| NAB | National Australia Bank | Equal-weight - Morgan Stanley | Overnight Price $17.35 |
| PRU | Perseus Mining | Underperform - Macquarie | Overnight Price $1.38 |
| RMS | Ramelius Resources | Add - Morgans | Overnight Price $2.12 |
| SCG | Scentre Group | Overweight - Morgan Stanley | Overnight Price $2.18 |
| WBC | Westpac Banking | Buy - Citi | Overnight Price $17.06 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 4 |
| 3. Hold | 1 |
| 4. Reduce | 1 |
| 5. Sell | 1 |
Monday 07 September 2020
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