Australian Broker Call

Macquarie rates ALX as Neutral (3) -

As next year's French presidential election approaches, one of candidate Marie Le Pen's policies is to nationalise all toll roads and drop tolls -10-15%. History suggests, the broker notes, such moves lead to concession holder compensation.

While Macron remains clear favourite, the chance of concession extensions pre-election are less likely if toll roads draw political focus, the broker notes. Neutral and $6.52 target retained.

Target price is $6.52 Current Price is $6.73 Difference: minus $0.21 (current price is over target).
If ALX 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 $6.72, suggesting upside of 1.0% (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

Morgan Stanley rates ALX as Overweight (1) -

Morgan Stanley regards Atlas Arteria's recent share price underperformance as an understandable reaction to uncertainty following revelations that a French presidential candidate, if elected at the April 2022 election, would attempt to nationalise French motorways.

In any event, the broker notes the APRR concession allows for the French State to purchase that motorway concession "for reasons of public interest "at a DCF fair value, thus protecting investor capital.

Morgan Stanley believes there is no cause for concern and reiterates an Overweight rating while the price target increases to $6.66 from $6.55. Industry view: Cautious.

Target price is $6.66 Current Price is $6.73 Difference: minus $0.07 (current price is over target).
If ALX meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.72, suggesting upside of 1.0% (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

Macquarie rates BHP as Outperform (1) -

Macquarie has upgraded its nearer term oil and gas price assumptions, lifting its Brent forecast by 4% and 9% in 2021-22, on an expected "lengthening of the [economic] cycle" as the world gradually reopens. The broker's average Brent forecast for the next four quarters is US$66/bbl.

BHP Group is exiting its Petroleum business by merging it with Woodside Petroleum ((WPL)), but BHP shareholders will retain 48% of the entity and the broker is yet to factor this in to valuation. Outperform and $54 target retained.

Target price is $54.00 Current Price is $40.92 Difference: $13.08
If BHP meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $46.98, suggesting upside of 14.1% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Citi rates CCX as Buy (1) -

Citi's update on City Chic Collective is related to US peer Torrid's better-than-expected Q2 result, as well as a positive guidance that came with it.

The broker believes Torrid's positive market update bodes well for City Chic, which derives some 39% of its sales from the US.

In addition, Citi believes City Chic is "impressively" making the transition to becoming a global digital retailer. The rating was recently upgraded to Buy from Neutral rating with a target price of $7.20.

Target price is $7.20 Current Price is $6.26 Difference: $0.94
If CCX meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $6.66, suggesting upside of 3.9% (ex-dividends)

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.9

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

Macquarie rates CCX as Outperform (1) -

City Chic's US rival Torrid reported quarterly earnings and the company's result commentary reconfirmed to the broker that the female plus-size market is underpenetrated [no comment], which is its long-term investment thesis on City Chic Collective.

Torrid's (ticker CURV) second quarter sales rose 26% over the same period in 2019.

The broker retains Outperform and a $6.50 target for City Chic.

Target price is $6.50 Current Price is $6.26 Difference: $0.24
If CCX meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.66, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.9

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

Credit Suisse rates COF as Neutral (3) -

Centuria Office REIT has announced a $201m equity raising at $2.50 per unit, in order to fund the $273m acquisition of two office buildings. 

While the company reiterated previous FY22 guidance, Credit Suisse notes the transaction is dilutive to the broker's funds from operations forecasts. These are updated by -1.3%, -2.6% and -2.6% through to FY24, based on an incremental cost of debt of 2.4%.

While the buildings have a combined 99.8% occupancy rate, Credit Suisse highlights Healius is unlikely to renew its lease following expiry in September 2022, accounting for 30% of the asset's income.

The Neutral rating and target price of $2.48 are retained. 

Target price is $2.48 Current Price is $2.48 Difference: $0
If COF meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.48, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Macquarie rates GOR as Outperform (1) -

Gold Road's first half earnings were solid, the broker suggests, largely driven by hedging gains. The dividend of 0.5c missed the broker's 1c forecast but the broker assumed a payout above company policy.

Delivering on Gruyere’s processing projects and optimisations to expand mill capacity is key to the broker's outlook.

Outperform and $1.50 target retained.

Target price is $1.50 Current Price is $1.27 Difference: $0.23
If GOR meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Credit Suisse rates IGO as Neutral (3) -

Lithium and nickel prices have both seen pricing momentum recently, and it is Credit Suisse's view that lithium pricing can continue this trend in the near term, implying upside for IGO. 

The broker has modeled a production increase at Greenbushes to 2.7m tonnes per annum by FY27, and with Kwinana trains delivering around 800,000 tonnes per annum by FY30, which could present 14% net present value upside for the company.

Credit Suisse considers IGO to offer unique exposure to low-cost, future-facing metals.

The Neutral rating and target price of $9.20 are retained.

Target price is $9.20 Current Price is $9.18 Difference: $0.02
If IGO meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $7.92, suggesting downside of -17.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Macquarie rates JMS as Downgrade to Underperform from Neutral (5) -

Jupiter Mine's 49.9%-owned Tshipi manganese mine in South Africa has announced a dividend well below Macquarie's expectation.

The lower distribution is due to Tshipi being cautious on depressed lower-grade manganese prices and higher shipping and transport costs, while also maintaining cash to fund FY22 capital expenditure, the broker notes.

While this leads to only a -2% downgrade to the broker's FY22 earnings forecast, increased risk has the broker increasing its weighted cost of capital assumption and lowering its forecast enterprise multiple. Target falls to 22c from 30c,

Downgrade to Underperform from Neutral.

Target price is $0.22 Current Price is $0.24 Difference: minus $0.02 (current price is over target).
If JMS 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 February.

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 NIC as Neutral (3) -

Nickel Mines has issued a further US$150m of debt, leaving the company well funded to complete the final acquisition of Angel Nickel, the broker notes, which will lift its interest to 80% from 50%.

Nickel Mines is set to grow its equity share of contained nickel in pig iron produced from 33kt in 2021 to over 62kt in 2024, the broker notes, implying an impressive three year production compound annual growth rate of 24%.

The stock is trading on free cash flow yields of 7-11% over the next two years on the broker's forecasts. Neutral and $1.10 target retained.

Target price is $1.10 Current Price is $1.00 Difference: $0.1
If NIC meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.25, suggesting upside of 15.7% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates NVX as Downgrade to Hold from Add (3) -

It is Morgans' view that while the company looks promising, much of its future success is already reflected in the share price and the rating is therefore downgraded until further detail on the Samsung quality audit and gross margin expectations are confirmed. 

The rating is downgraded to Hold from Speculative Buy and the target price increases to $5.68 from $4.49.

Target price is $5.68 Current Price is $5.54 Difference: $0.14
If NVX meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Macquarie rates ORG as Outperform (1) -

The broker has upgraded its oil price assumptions for 2021-22, leading to a flow-through to higher APLNG forecast earnings, further boosted by the lower A$. This provides Origin Energy with additional cash flow to offset the electricity market cyclical low.

The broker expects upside to emerge as confidence grows in the outlook for FY23-24 electricity market earnings, thus allowing for further debt reduction, notwithstanding the risk of government policy constraint.

Outperform retained, target rises to $5.32 from $5.15.

Target price is $5.32 Current Price is $4.34 Difference: $0.98
If ORG meets the Macquarie target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Macquarie rates ORI as Neutral (3) -

Orica has provided a conference presentation on its website that suggests no material changes in the business since the first half, with second half volumes in line with expectations. Australian volumes are recovering, but not yet back to pre-China coal ban levels.

The broker now awaits the outcome of the company's strategic review to be outlaid at the November result release. Neutral retained, target falls to $13.90 from $14.00.

Target price is $13.90 Current Price is $12.72 Difference: $1.18
If ORI meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $13.89, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in September.

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

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

Morgan Stanley expects Orica Ltd's rebound to earnings to take longer than the broker previously forecast. 

Looking forward, the broker believes an understanding of a new strategy and greater clarity on what is cyclical, structural, and covid related is the key to determining a "new normal" level of earnings.

Due to previously unexpected headwinds continuing well into the second half, the broker has reduced the FY21 earnings forecast by -11% to $387m.

Morgan Stanley would look for confidence that headwinds are abating, volumes have stabilised, and prices have upside momentum before considering adopting a more positive stance.

Equal-weight rating is retained and the target price is lowered to $12.60 from $13.20. Industry view: Cautious.

Target price is $12.60 Current Price is $12.72 Difference: minus $0.12 (current price is over target).
If ORI meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.89, suggesting upside of 11.0% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates QUB as Downgrade to Neutral from Outperform (3) -

Qube Holdings has announced the acquisition of the Newcastle Agri Terminal for -$90m. Credit Suisse notes that although this is a small deal for the company, it allows Qube to provide grain export services through the Port of Newcastle.

The broker also notes that Qube is set to receive $1.3bn in initial proceeds from the Moorebank sale, which is likely to generate $200-300m in tax payments and $600m in capital management.

Accounting for the acquisition, Credit Suisse upgrades earnings per share forecasts by 0.5% and 2.0% for FY22 and FY23, respectively. 

The rating is downgraded to Neutral from Outperform and the target price increases to $3.55 from $3.30.

Target price is $3.55 Current Price is $3.27 Difference: $0.28
If QUB meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.25, suggesting downside of -1.6% (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

Citi rates RMD as Neutral (3) -

While Citi has made no changes to estimates following ResMed's recently hosted Investor Day presentation, the broker's primary takeaway is that the company has well-defined long-term strategic plans to enable it to continue to grow the market and its market share within that.

As previously included in forecasts, Citi believes the launch of the AirSense 11 this year, alongside the recall of the Philips DreamStation
device will enable ResMed to increase its long-term market share by 10%.

Management reiterated that production capacity is relatively unconstrained.

Citi notes the compound annual growth rate (CAGR) of masks has been 2% higher over the last 4 years than the previous 4 (from 8% to 10%), but more importantly this growth has been multifactorial.

Citi maintains its Neutral rating, and the target price increases to $39.57 from $36.50.

Target price is $39.57 Current Price is $40.30 Difference: minus $0.73 (current price is over target).
If RMD meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $38.59, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Credit Suisse rates RMD as Outperform (1) -

ResMed Inc has outlined a strong competitive advantage at its 2021 investor day, as well as confirming an expected US$300-350m benefit from incremental device sales in FY22 as a result of the Philips product recall. 

Credit Suisse notes that the company aims to continue growing the market to expand patient reach, and the company outlined a new partnership with CVS Health. The broker expects by entering new channels such as these ResMed will be able to sustain long-term device growth above market rate. 

It is Credit Suisse's view that the market is underestimating ongoing market share gains ResMed will benefit from post recall. 

The Outperform rating is retained and the target price increases to $44.00 from 40.50. 

Target price is $44.00 Current Price is $40.30 Difference: $3.7
If RMD meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $38.59, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Ord Minnett rates RMD as Hold (3) -

A key takeaway of ResMed's investor day for Ord Minnett was the confirmation of increased production to meet demand following the Philips recall. While output is currently impacted by key technology constraints, the company expects this to improve by year end.

The broker also noted pleasant surprise in the lift in mask share, which it attributes to competitor distraction. ResMed's market growth guidance, which it aims to meet or beat, proved in line with Ord Minnett's forecasts and reflects a near-term boost from the competitor recall, the broker suggests.

The Hold rating and target price of $35.20 are retained.

Target price is $35.20 Current Price is $40.30 Difference: minus $5.1 (current price is over target).
If RMD 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 $38.59, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Citi rates WPL as Neutral (3) -

Assuming 50%-plus of the expected synergies are realised, Citi models the proposed Woodside acquisition of BHP Petroleum’s ((BHP)) assets as value accretive.

Citi values Woodside excluding the BHP transaction at US$14.7bn and BHP Petroleum at US$12.4bn (including abandonment liabilities). 

Citi notes, this suggests a no premium/discount merger should transact at 54% Woodside and 46% BHP, hence the broker sees the proposed merger ratio of 52% Woodside and 48% BHP as fairly balanced, with a slight advantage to BHP shareholders.

The Neutral rating is retained and the target price decreases to $20.80 from $21.55.

Target price is $20.80 Current Price is $19.20 Difference: $1.6
If WPL meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $25.93, suggesting upside of 34.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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