Australian Broker Call

Citi rates AGL as Neutral (3) -

After an incident at the Liddell power station, AGL Energy has downgraded its FY21 net profit guidance to $500-$580m from $560-$660m. The downgrade is a mix of the financial impact of the Liddell incident (estimated at $25m) along with soft demand and continued weakness in electricity prices.

Citi expects AGL's guidance to narrow at the half-year result in February and expects net profit to be $504m for FY21.

Target is reduced to $12.16 from $14.49. Neutral retained.

Target price is $12.16 Current Price is $12.54 Difference: minus $0.38 (current price is over target).
If AGL meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.99, suggesting upside of 8.2% (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

Morgans rates AGL as Hold (3) -

AGL Energy has downgraded its FY21 underlying profit guidance by -$70m (-11%). A unit at the Liddell plant is offline until March following an incident.

In addition, the company highlighted ongoing weakness in the electricity market will cause a material impact to wholesale earnings this year and in FY22.

Morgans is not optimistic in the short term and believes an electricity price recovery requires both coal closures to accelerate and gas prices to rise.

The Hold rating is maintained and the target price is decreased to $11.18 from $14.74.

Target price is $11.18 Current Price is $12.54 Difference: minus $1.36 (current price is over target).
If AGL meets the Morgans target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.99, suggesting upside of 8.2% (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

Morgan Stanley rates BEN as Underweight (5) -

Morgan Stanley observes housing loan growth for Bendigo and Adelaide is tracking at around 14% in the first half, significantly ahead of prior forecasts.

Amid a better economic outlook and low-risk business mix, Morgan Stanley reduces FY21 loan loss estimates by around -30% and upgrades cash earnings estimates by 7.5%.

The proposed changes from APRA could lift the CET1 ratio by around 70 basis points, and there is more scope for the bank to pursue its growth strategy without compromising capital generation and a recovery in the dividend, in the broker's view.

Underweight retained. Target is raised to $7.70 from $6.10. Industry View: In-line.

Target price is $7.70 Current Price is $9.45 Difference: minus $1.75 (current price is over target).
If BEN meets the Morgan Stanley target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.12, suggesting downside of -13.6% (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

Citi rates CCX as Buy (1) -

City Chic has acquired Evans, a UK plus-sized clothing retailer, for $41m. Citi estimates earnings accretion of 16% in FY22. In the medium term the broker envisages the margins reaching 20%.

The broker reiterates a Buy rating and raises the target to $4.00 from $3.20.

Target price is $4.00 Current Price is $3.52 Difference: $0.48
If CCX meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.95, suggesting upside of 10.3% (ex-dividends)

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

Morgan Stanley rates CCX as Overweight (1) -

City Chic has acquired UK plus-size brand, Evans, for $41m. This includes the e-commerce and wholesale businesses.

Morgan Stanley believes the acquisition is strategically and financially sensible, providing expansion in the UK and a foothold to access the broader EU market. The company remains well-positioned for further M&A.

Overweight rating. Target is $3.55. Industry view is In-line.

Target price is $3.55 Current Price is $3.52 Difference: $0.03
If CCX meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.95, suggesting upside of 10.3% (ex-dividends)

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

UBS rates FMG as Buy (1) -

UBS notes the report of a landside at Vale's Corrego do Feijao mine in Brazil on Friday, with one fatality. This was a mine that was under maintenance and so should not affect production.

Nevertheless, UBS believes this highlights the risk of mining in Brazil as the wet season unfolds. The news, coupled with low inventory in China, sent the iron ore price up 7.3%, according to reports.

UBS retains a Buy rating and raises the Fortescue Metals target to $24 from $22.

Target price is $24.00 Current Price is $24.04 Difference: minus $0.04 (current price is over target).
If FMG meets the UBS target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.19, suggesting downside of -9.6% (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: 0.2

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

Morgan Stanley rates MPL as Overweight (1) -

The federal government has approved private health insurance premium increases, to take effect from April 1 2021.

Medibank Private's premiums will rise by an average of 3.25%.

Morgan Stanley considers the announcement positive for the insurer but acknowledges a higher-than-expected premium increase could pressure participation.

Overweight rating with a target price of $3.15. Industry view: In-line.

Target price is $3.15 Current Price is $3.04 Difference: $0.11
If MPL meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.88, suggesting downside of -3.1% (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

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

The federal government has approved private health insurance premium increases, to take effect from April 1 2021.

Nib's premiums will rise by an average of 4.36% versus 3.55% average over the past three years.

Morgan Stanley considers the announcement positive for the insurer but acknowledges a higher-than-expected premium increase could pressure participation.

Equal-weight rating. Target is $5. Industry view: In-line.

Target price is $5.00 Current Price is $5.80 Difference: minus $0.8 (current price is over target).
If NHF meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.24, suggesting downside of -10.2% (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 QBE as Buy (1) -

Citi is disappointed by QBE Insurance Group's latest profit warning as reserving continues to prove inadequate despite several strengthening attempts.

Even so, the broker considers the stock relatively inexpensive against the "strongest" premium rate backdrop in nearly twenty years. Citi believes the insurer will benefit from the strong premium rates in time through both growth and margin expansion.

Buy rating is maintained. The target price falls to $10.60 from $12.55.

Target price is $10.60 Current Price is $8.75 Difference: $1.85
If QBE meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $10.95, suggesting upside of 25.8% (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

Morgans rates SM1 as Hold (3) -

Synlait Milk has received a reduced demand forecast from its only finished infant formula (IFC) customer, The a2 Milk Co ((A2M)).

Synlait Milk now expects FY21 IFC volumes to be down -35% on the previous corresponding period and FY21 profit (NPAT) is expected to fall around -50%.

Morgans reduces FY21-23 profit forecasts by -48%, -32% and -21/%, respectively. This results from a combination of lower IFC volumes and weaker margins driven by reduced fixed overhead recovery.

There remains too much earnings uncertainty for the broker and consequently the Hold rating is maintained and the target price is decreased to $4.18 from $5.87.

Target price is $4.18 Current Price is $4.60 Difference: minus $0.42 (current price is over target).
If SM1 meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.18, suggesting downside of -7.3% (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: 0.5

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

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

Suncorp considers its reserve strategy is adequate despite the latest business interruption ruling in Victoria.

Nevertheless, Morgan Stanley suspects, as there is potential for further legal challenges and lockdowns, modest increases in business interruption reserves could be experienced.

While the business is well capitalised to handle a modest increase the uncertainty could weigh, the broker adds.

Moreover, Suncorp has also stated that the reserve strategy does not take into account potential for further lockdowns, as well as any unexpected outcomes from future litigation.

Equal-weight. Target is $9.90. Industry view: In-line.

Target price is $9.90 Current Price is $9.88 Difference: $0.02
If SUN meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $10.72, suggesting upside of 9.7% (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