Australian Broker Call

Morgans rates AGL as Hold (3) -

The government is looking to extend the heads of agreement with LNG producers designed to increase gas supply to the domestic market.

Even if the government doesn’t follow through and invest in a gas plant, Morgans believes the rhetoric alone will mean negative sentiment towards electricity retailers will endure.

Electricity futures remain weak and the draft decision on default retail prices in Victoria points to tighter margins in the second half of 2021, notes the broker.

The analyst sees little potential for capital growth, despite balance sheet strength and the prospect of a special dividend lending support to the share price.

The Hold rating is unchanged and the target price is decreased to $14.74 from $15.44.

Target price is $14.74 Current Price is $14.42 Difference: $0.32
If AGL meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $14.94, suggesting upside of 4.4% (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

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

With the recent pullback in oil prices, Citi considers the $1.36 closing share price for Beach Energy affords investors a buying opportunity with a compelling margin of safety. This is based on an analysis of past metrics as compared to peers.

The broker also thinks the stock may be underperforming some peers due to a perceived lack of catalysts. While this may be true, the analyst believes the lack of balance sheet overhang as compared to peers is a positive.

The rating is increased to Buy from Neutral and the target price is unchanged at $1.94.

Target price is $1.94 Current Price is $1.39 Difference: $0.55
If BPT meets the Citi target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $1.90, suggesting upside of 36.8% (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

UBS rates BSL as Neutral (3) -

While the US steel spread is surging, UBS notes there are concerns around the sustainability of it. Currently, the demand seems to be outpacing supply, states UBS, lengthening lead times and leading to higher prices.

The broker thinks going ahead, any closures to balance the market could be slower than expected, leading to an oversupply of steel. 

Neutral rating with the target price raised to $13.10 from $12.30.

Target price is $13.10 Current Price is $12.79 Difference: $0.31
If BSL meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $13.80, suggesting upside of 7.1% (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 CCX as Neutral (3) -

City Chic Collective has announced the Catherines acquisition will not proceed, as a rival bidder succeeded.

Citi states this has implications for the company's growth outlook as competition may be stronger for other brands.

The broker lowers EPS estimates for FY21 and FY22 by -12% and -15%, respectively.

While noting the company trades on a high PE ratio and has had a weaker gross margin result in the past year, Citi highlights the substantial cash balance which may be used for value accretive acquisitions.

The Neutral rating is unchanged and the target price is decreased to $3.20 from $3.40.

Target price is $3.20 Current Price is $3.17 Difference: $0.03
If CCX meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Morgan Stanley rates CCX as Overweight (1) -

City Chic Collective has announced it was not successful in winning the auction for the ecommerce assets of Catherines.

This was a negative surprise to Morgan Stanley, however, the broker sees several positives. These include management exhibiting strong capital discipline and the winning bid highlights the underlying value already in the company. Additionally, the company is considered to have multiple alternative growth levers.

Looking at other negatives, the broker highlights there may be higher competition for mergers and acquisitions from here and management may have been distracted by the potential transaction.

The  Overweight rating is unchanged. Target is $3.85. Industry view is In-line.

Target price is $3.85 Current Price is $3.17 Difference: $0.68
If CCX meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.7

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

Macquarie rates CSR as Outperform (1) -

Macquarie is bullish on CSR's building products segment led by a more resilient detached market and has raised FY21 building products operating income forecast by 23%.

The broker notes CSR has been able to manage its costs proactively and has a pristine balance sheet, well-positioned to weather tougher markets and support M&A opportunities.

Macquarie reiterates its Outperform rating with the target price increasing to $4.60 from $4.35, driven by higher earnings expectations from building products.

Target price is $4.60 Current Price is $3.94 Difference: $0.66
If CSR meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates ICQ as Add (1) -

iCar Asia has updated on July to August trading. Malaysia and Indonesia are rebounding from pandemic lows in the second quarter, reports Morgans, however, Thailand is underperforming expectations.

The broker sees potential improved monetisation. This may arise from increased usage of the platform by dealers, price increases and new products.

The analyst stresses near-term funding needs to be arranged and now assumes the company will utilise the current debt facility provided by major shareholder Catcha Group.

The Add rating is unchanged and the target price is increased to $0.39 from $0.388.

Target price is $0.39 Current Price is $0.33 Difference: $0.06
If ICQ meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates MCR as Outperform (1) -

Mincor Resources has formally approved its Kambalda re-start plan. Macquarie notes this is post securing a $55m debt facility and the company will be focusing on exploration activities.

The broker highlights extension drilling at Cassini and Cassini North present key potential catalysts during the construction period. Nickel production is expected to occur in early 2022. 

The Outperform rating is maintained with a target price of $1.05.

Target price is $1.05 Current Price is $0.89 Difference: $0.16
If MCR meets the Macquarie target it will return approximately 18% (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

Credit Suisse rates NWL as Neutral (3) -

Netwealth Group has acquired Xeppo, a specialist fintech that provides data feeds between various technology systems in the wealth management, accounting and mortgage industries.

Credit Suisse notes the transaction is financially immaterial for Netwealth but is strategically beneficial due to cross-selling opportunities. The broker believes this acquisition will strengthen the group's competitive positioning over the long term.

Credit Suisse maintains its Neutral rating with a target price of $14.

Target price is $14.00 Current Price is $15.21 Difference: minus $1.21 (current price is over target).
If NWL meets the Credit Suisse target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.72, suggesting downside of -28.9% (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

Morgans rates ORG as Add (1) -

The government is looking to extend the heads of agreement with LNG producers designed to increase gas supply to the domestic market.

Even if the government doesn’t follow through and invest in a gas plant, Morgans believes the rhetoric alone will mean negative sentiment towards electricity retailers will endure.

Electricity futures remain weak and the draft decision on default retail prices in Victoria points to tighter margins in the second half of 2021, notes the broker.

However, the analyst believes a positive for Origin Energy is potential government assistance in getting its Beetaloo gas into the east coast market. Overall, this is considered to increase the likelihood that Beetaloo will be developed.

The Add rating is unchanged and the target price is increased to $6.34 from $6.12.

Target price is $6.34 Current Price is $4.59 Difference: $1.75
If ORG meets the Morgans target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $6.49, suggesting upside of 43.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.5

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

Macquarie rates OSH as Outperform (1) -

Macquarie reports the P’nyang LNG project expansion is facing delays due to government negotiations, leading to Exxon and Total demobilising development teams with PNG.

Due to the uncertain business climate, Macquarie does not expect the supermajors Exxon and Total to invest additional capital over the next 4-5 years. The broker admits the valuation impact of the delay is negative but considers this relatively modest on its commodity pricing assumptions.

The Outperform rating is maintained. The target price is decreased to $3.45 from $3.75.

Target price is $3.45 Current Price is $2.83 Difference: $0.62
If OSH meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $3.53, suggesting upside of 25.1% (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: 0.6

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

UBS rates RWC as Downgrade to Neutral from Buy (3) -

UBS downgrades Reliance Worldwide Corp to Neutral from Buy with the target price increasing to $3.85 from $3.65.

The downgrade is driven by a 40% share price rise after the company released its FY20 results. UBS notes the market is currently pricing in a long term US revenue growth rate of 7% (which was 0% before the results) and which is ahead of the broker's estimated 5%.

Target price is $3.85 Current Price is $3.98 Difference: minus $0.13 (current price is over target).
If RWC meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.81, suggesting downside of -0.6% (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 SCG as Neutral (3) -

Scentre Group issued US$3bn of debt hybrids and Macquarie notes the issue is about -5% dilutive to earnings but considers this better than raising equity.

Macquarie notes no change to the elevated gearing levels but admits this issue provides headroom against covenants.

Funds from operations forecast reduced for FY21-23. Neutral retained. Target is raised to $2.18 from $2.08.

Target price is $2.18 Current Price is $2.32 Difference: minus $0.14 (current price is over target).
If SCG meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.35, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Morgan Stanley rates SCG as Overweight (1) -

Scentre Group has confirmed the issue of US$3bn of subordinated-debt in two 60-year tranches: (1) a non-call 6-year note at 4.75% and (2) a non-call 10-year note at 5.125%.

Morgan Stanley notes this is despite costing more than the company's average cost of debt of around 4%.

The broker notes the company has flagged its intention to pay a distribution for the period ending December 2020 from surplus cash flows, but has not specified the payout ratio.

Overweight rating. Target is $2.70. Industry view: In-line.

Target price is $2.70 Current Price is $2.32 Difference: $0.38
If SCG meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.35, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Macquarie rates SDF as Outperform (1) -

Steadfast Group's Australia and New Zealand's premium rate increase was not as strong as in 2018-19, Macquarie observes. Organic growth in the first half was in low single-digit versus 7% in FY19.

With Australian restrictions remaining, the broker notes the economy has been slower to recover with new business trending a little below historical levels. The situation in New Zealand is better with new business and retention metrics improving.

Macquarie retains its Outperform rating with a target price of $3.90.

Target price is $3.90 Current Price is $3.26 Difference: $0.64
If SDF meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.96, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.9

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

Macquarie rates SHL as Neutral (3) -

Sonic Healthcare was awarded a US contract to increase its covid-19 PCR testing capacity. Macquarie expects a considerable contribution from covid-19 revenue in FY21 but considers the outlook for these volumes as uncertain.

Both Healius ((HLS)) and Integral Diagnostics ((IDX)) are preferred over Sonic Healthcare in the diagnostics sector. 

Retain a Neutral rating with the target price raised to $34.50 from $33.50.

Target price is $34.50 Current Price is $32.57 Difference: $1.93
If SHL meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $34.25, suggesting upside of 5.4% (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