Australian Broker Call

Citi rates ALL as Buy (1) -

Aristocrat Leisure's first half result missed Citi's expectations and the second half is considered highly challenging.

The broker observes, while digital second half profit growth of 40% is being driven by the early stages of the monetisation of Raid, this is more than offset by negative inputs across the land-based business.

The broker retains a Buy rating, assessing the liquidity position enables the company to invest, and investors can look through the heavily disrupted FY20 towards more normalised earnings FY22. Target is raised to $30.10 from $28.60.

Target price is $30.10 Current Price is $25.53 Difference: $4.57
If ALL meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates ALL as Outperform (1) -

Revenue from Raid surpassed Credit Suisse's expectations in the first half. Short-term estimates are downgraded as the impact of the pandemic on casino operators in North America, and hence the balance sheet becomes better understood.

Medium-term earnings estimates are largely unchanged. Raid is now 23% of sales and management believes it may improve further, although costs will remain high as investment continues.

Credit Suisse retains an Outperform rating and reduces the target to $28.00 from $28.50.

Target price is $28.00 Current Price is $25.53 Difference: $2.47
If ALL meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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 ALL as Outperform (1) -

First half net profit was down -13% to $368m but Macquarie envisages a path for net profit to exceed $1bn in FY22, supported by gains in market share, both in land-based games and digital.

Land-based casino revenues are generally resilient, the broker points out, and likely to rebound quickly. M&A would also accelerate an earnings recovery and the broker considers Aristocrat Leisure well placed in terms of liquidity.

Outperform rating maintained. Target is reduced to $29.50 from $32.00.

Target price is $29.50 Current Price is $25.53 Difference: $3.97
If ALL meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates ALL as Overweight (1) -

Morgan Stanley considers the first half result highlights the challenges of the pandemic over the short term but a strong balance sheet will allow investment in market share gains in the longer term.

Aristocrat Leisure provided no specific guidance because of the uncertainty. A gradual recovery is expected with a phased opening of the land-based business.

Morgan Stanley retains an Overweight rating. Target is $21. Industry view: Cautious.

Target price is $21.00 Current Price is $25.53 Difference: minus $4.53 (current price is over target).
If ALL meets the Morgan Stanley target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates ALL as Add (1) -

First half results were slightly below expectations with the land-based business affected by the shutdown of venues.

While there is uncertainty regarding earnings outcomes because of the pandemic, Morgans believes Aristocrat Leisure is likely to emerge in a stronger position from the current crisis.

Earnings assumptions are reduced over the short term and the broker assumes a slow ramp up through the second half and into FY21.

Morgans retains an Add rating and reduces the target to $31.31 from $31.88.

Target price is $31.31 Current Price is $25.53 Difference: $5.78
If ALL meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates ALL as Buy (1) -

Aristocrat Leisure’s first-half net profit was down -12.8% and below Ord Minnett’s forecast, driven by higher costs and provisions. The digital segment was strong but margins were compressed.

The counter-cyclical nature of the digital business is driving a better than expected performance, comments the broker, expecting double-digit growth. Casinos are not expected to pick up in the next six months.

Overall, earnings in the second half are expected to be worse than the first.

The broker retains its Buy recommendation with the target reduced to $28.50 from $30.30.

Target price is $28.50 Current Price is $25.53 Difference: $2.97
If ALL meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates ALL as Buy (1) -

Digital earnings were broadly in line with expectations in the first half but land-based earnings were weaker because of pandemic-related closures in North America.

UBS suggests the benign reaction in the share price implies the market is willing to look through what is likely to be a difficult trading period for Aristocrat Leisure.

The broker remains confident in the pipeline of products, noting game performance data remain very strong. Moreover, as casinos re-open in the US revenue is ahead of expectations.

The broker believes it will become evident in around a month whether this is just a short-term increase or something more sustainable.

Buy rating maintained. Target rises to $31.80 from $31.50.

Target price is $31.80 Current Price is $25.53 Difference: $6.27
If ALL meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $28.60, suggesting upside of 12.0% (ex-dividends)

The company's fiscal year ends in September.

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 ALX as Outperform (1) -

Macquarie observes the rebound in weekly traffic is getting stronger. Whether this is pent-up activity that will normalise is unclear but it remains a positive indicator for investors, the broker points out, particularly in France.

Moreover, the concerns over APRR covenants are dissipating. At this stage, Macquarie expects Atlas Arteria will miss dividends in 2020 as proceeds are used to repay holding company debt.

Outperform rating maintained. Target is raised to $7.26 from $6.90.

Target price is $7.26 Current Price is $6.55 Difference: $0.71
If ALX meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.48, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

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

The fact 99% of Australia's childcare centres have remained open throughout the pandemic is positive, in Morgan Stanley's view. Still, while increasing forecasts for earnings per share, the broker notes risks have not fully subsided.

The company has provided revised FY20 distribution guidance of 13.9-14c per security which compares with the prior guidance that was withdrawn of 14.3c.

Morgan Stanley assesses potential upside risk, given support from the government for the industry.

However, it is for this reason that an Equal-weight rating is maintained, because of the eventual cessation of interim government support and reversion to standard subsidy. Target is raised to $2.40 from $2.00. Industry view is In-Line.

Target price is $2.40 Current Price is $2.22 Difference: $0.18
If ARF meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.35, suggesting upside of 5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Ord Minnett rates BEN as Hold (3) -

Ord Minnett has updated forecasts for Bendigo and Adelaide Bank to incorporate the impact of covid-19 related provisions and margin developments.

Even though the bank will need to build collective provisions to cater to possible covid-19 related impact, what works in the bank’s favour is a high exposure to home and agricultural loans and low exposure to consumer unsecured loans.

Overall, the broker has reduced net profit forecasts by -17% and -21% for FY20 and FY21.

The broker maintains its Hold rating with target price lowered to $6 from $8.30.

Target price is $6.00 Current Price is $5.57 Difference: $0.43
If BEN meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.93, suggesting upside of 24.3% (ex-dividends)

The company's fiscal year ends in June.

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 CCX as Reinstates Coverage with Outperform (1) -

Macquarie reinstates coverage with an Outperform rating and $2.97 target. City Chic Collective has consistently delivered strong growth in its omni-channel, contributing to earnings (EBIT) margin expansion over time, given the cost-effective nature of this channel, the broker notes.

Meanwhile, there is support from the balance sheet, post the divestment of non-core brands, with materially reduced gearing. The broker expects the company will turn to the market and/or lenders for funding of compelling M&A, with the pandemic potentially offering some opportunities.

Target price is $2.97 Current Price is $2.45 Difference: $0.52
If CCX meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 11.8% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates CLV as Buy (1) -

Clover Corp upgraded second-half sales guidance driven by re-stocking from infant formula brands. With AUD on the lower side and gross margins increasing, Ord Minnett has increased FY20 earnings forecast by 17%.

These drivers are expected to be one-off driven by covid-19 but may persist into early FY21. EU sales are also expected to show a meaningful ramp up in FY21.

The broker retains its Buy rating with target increased to $3.07 from $2.66.

Target price is $3.07 Current Price is $2.34 Difference: $0.73
If CLV meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Credit Suisse rates FBU as Neutral (3) -

The company has indicated the outlook is difficult and plans to cut 1500 jobs. The prospect of breaking even on earnings (EBIT) in the fourth quarter, which usually represents 40-45% of annual EBIT, highlights the downside associated with any return to more restrictive lockdown measures, Credit Suisse asserts.

No update was available on construction provisioning. The broker envisages some potential for FY22 earnings to improve as the full benefits of cost reductions come through. Neutral maintained.

The broker remains confident in the company's ability to navigate its covenants. Target is reduced to NZ$3.78 from NZ$5.39.

Current Price is $2.99. Target price not assessed.

Current consensus price target is $3.59, suggesting upside of 20.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

UBS rates FSF as Neutral (3) -

UBS assesses the third quarter result was "respectable", underpinned by higher margins across all divisions and lower operating costs.

Still, earnings per share are well below previous peaks. FY20 guidance has been maintained. UBS maintains a Neutral rating and NZ$3.95 target.

Current Price is $3.33. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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 IVC as Hold (3) -

InvoCare removed the cap on its share purchase plan (SPP) leading to equity worth $274m being raised (original plan was to raise $150-200m) and added to equity dilution.

Ord Minnett notes a challenging business outlook in the near term especially due to a benign flu season.

The broker holds onto its Hold rating with target price trimmed to $12 from $12.50.

Target price is $12.00 Current Price is $10.99 Difference: $1.01
If IVC meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $12.42, suggesting upside of 13.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Macquarie rates KLL as Outperform (1) -

Kalium Lakes will raise $61m to provide funding for the completion of Beyondie. The capital raising and the six-month delay to the project are in line with Macquarie's expectations.

Despite cost over-runs and delays, the broker envisages value in the stock as the fundamentals of the project are unchanged.

Macquarie retains an Outperform rating and $0.45 target. Incorporating the first half result increases the loss per share in FY20 by 8%.

Target price is $0.45 Current Price is $0.49 Difference: minus $0.04 (current price is over target).
If KLL 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 June.

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

UBS rates NWH as Buy (1) -

NRW Holdings has indicated its performance is tracking at the lower end of guidance, despite difficult trading conditions.

The company notes a strong pipeline, with high bidding activity, expecting this will continue to improve amidst an acceleration in public infrastructure projects.

Given the strong performance in the year to date, the company has resolved to pay the previously deferred interim dividend.

UBS notes the position of the balance sheet is signalling a stronger free cash flow performance. Buy rating and $4 target maintained.

Target price is $4.00 Current Price is $2.01 Difference: $1.99
If NWH meets the UBS target it will return approximately 99% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

UBS rates ORA as Neutral (3) -

Orora has noted that US operations have been most affected by the lockdowns stemming from the pandemic, particularly California and Texas, with pressure on food/retail/automotive markets.

Meanwhile, in Australia, can volumes have benefited from stockpiling and domestic wine volumes have been stable. UBS suggests investment in can/glass beverage assets in Australasia is the most likely near-term option for growth.

Should no M&A opportunities be identified, the broker suggests there is scope for additional capital returns.

The company intends to return $600m to shareholders via special dividend and capital return out of the proceeds from the fibre divestment. Neutral maintained. Target is $2.67.

Target price is $2.67 Current Price is $2.54 Difference: $0.13
If ORA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Citi rates SDF as Buy (1) -

Citi upgrades estimates for earnings per share by 7-8% following a strong month in April where there was no impact observed from the pandemic.

The broker continues to allow for a slowing over May-June, given this is a key renewal period. Beyond FY20, relatively modest growth in premiums is expected.

Buy rating maintained. Target rises to $3.90 from $3.65.

Target price is $3.90 Current Price is $3.17 Difference: $0.73
If SDF meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.73, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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 provided an update on the year to date that indicated earnings have accelerated. The performance is supported by premium rate increases and acquisitions, which Macquarie assesses contribute half the growth.

The broker also notes the premium rates continue to rise and there is a very low take-up of the deferred premium offer available from some insurers.

Outperform rating maintained. Target rises to $3.60 from $3.30.

Target price is $3.60 Current Price is $3.17 Difference: $0.43
If SDF meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.73, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Ord Minnett rates SDF as Accumulate (2) -

Steadfast Group released an update stating operating income for the year till April rose 21.8%, more than Ord Minnett’s estimate. Working capital position notes no adverse impact.

The group has a debt capacity of $180m and expects strong organic growth, reports the broker and leaves its forecasts unchanged.

The broker maintains Accumulate on the stock with a target price of $3.90.

Target price is $3.90 Current Price is $3.17 Difference: $0.73
If SDF meets the Ord Minnett target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.73, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Macquarie rates SSM as Outperform (1) -

The impact of the pandemic has caused the company to reduce expected earnings in FY20, considered understandable in the current economic environment. Still, Macquarie notes relative earnings strength from the provision of services in essential networks.

NBN activations remain strong in the second half and the broker suspects the weakness from delays is related to some reluctance by clients to pursue projects and interrupt connections in both utility and telecommunications whilst a large portion of people work from home.

The broker retains an Outperform rating and reduces the target to $2.88 from $3.05.

Target price is $2.88 Current Price is $2.01 Difference: $0.87
If SSM meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Ord Minnett rates SSM as Buy (1) -

Service Stream has guided towards a reduced FY20 operating income of circa $108m from $116m due to additional occupational health and safety costs and a delay in commencement of individual projects.

The impact of the aforementioned factors will be felt into the early part of FY21, expects Ord Minnet and has reduced FY21 operating income forecast by -9% to $105m.

The broker notes the company has a progressive dividend policy along with a strong balance sheet.

Ord Minnett retains its Buy rating with the target price reduced to $2.65 from $2.85.

Target price is $2.65 Current Price is $2.01 Difference: $0.64
If SSM meets the Ord Minnett target it will return approximately 32% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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