Australian Broker Call

Citi rates 29M as Buy (1) -

Citi initiates a 90-day "catalyst watch" on 29Metals in the light of upgrades to the broker's zinc prices.

Citi notes zinc accounts of 27% of the company's forecast CY22 revenue; and says the zinc market appears tight and is likely to get tighter after the curtailment of the Auby smelter and likelihood of further European smelter disruptions as the power crunch worsens.

Buy rating and $3.20 target price retained.

Target price is $3.20 Current Price is $2.79 Difference: $0.41
If 29M meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.21, suggesting upside of 16.0% (ex-dividends)

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

Macquarie rates CHN as Outperform (1) -

Macquarie feels completion of the Falcon Metals ((FAL)) demerger enables Chalice Mining to focus its exploration management team entirely on Julimar and the exploration potential in the Yilgarn.

Falcon Metals will house the company's  gold exploration projects in Victoria and Western Australia, explains the analyst.

Outperform rating is maintained. Target price falls to $10.55 from $10.75.

Target price is $10.55 Current Price is $8.45 Difference: $2.1
If CHN meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates HLS as Neutral (3) -

Healius has bought bioanalytical laboratory Agilex for $301m in a deal Citi expects will prove dilutive to return on investment capital.

Struck at 20x CY22 earnings (EBITDA), Citi doubts the deal is sufficiently strategic to justify the price. Management estimates the acquisition will be low-single-digit EPS accretive (Citi estimates 2%) but discounted-cash-flow neutral. By comparison, Citi estimates the company's $300m buyback to be 8% accretive.

Citi observes no crossover between clinical diagnostic pathology and clinical trial markets and views Agilex as a standalone business. 

Neutral rating retained, the broker noting risk is to the upside. Target price is steady at $5.10.

Target price is $5.10 Current Price is $5.12 Difference: minus $0.02 (current price is over target).
If HLS meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.24, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Morgan Stanley rates MFG as Underweight (5) -

Morgan Stanley thinks Magellan Financial Group could de-rate and head towards the broker's $17.00 bear-case valuation. It is estimated about 75% of funds under management (FUM) is at risk of suffering lumpy institutional outflows.

This comes as the company entered a trading halt on Friday over a ‘termination of a material contract’, which implies to the analyst an earnings impact of at least -5%. Underweight rating and $29.30 target price are maintained. Industry view: In-line. 

Target price is $29.30 Current Price is $29.36 Difference: minus $0.06 (current price is over target).
If MFG meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $37.11, suggesting upside of 87.9% (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

Morgan Stanley rates MVF as Overweight (1) -

Morgan Stanley points out that while month-to-month variability can be observed in the October Medicare data, retention of elevated market volume on FY21 is seen as a positive for Monash IVF Group. 

Overweight rating and $1.10 target price are retained. Industry view is In-Line.

Target price is $1.10 Current Price is $0.98 Difference: $0.12
If MVF meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $1.11, suggesting upside of 14.8% (ex-dividends)

The company's fiscal year ends in June.

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 PAN as Outperform (1) -

Macquarie assesses a key de-risking event will be achieved by Panoramic Resources after the departure of the first concentrate shipment from Savannah on December 27.

In addition, the opening of the WA Border on February 5 should deliver improved operational flexibility, according to the analyst. Outperform rating and $0.30 target price are unchanged.

Target price is $0.30 Current Price is $0.26 Difference: $0.04
If PAN meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 PRN as Outperform (1) -

Perenti Global has announced the $43.6m sale of MinAnalytical, as well as $32.1m in sales of non-core properties. Macquarie likes the significant level of work in hand and large order book support, which should support cash flow and de-leveraging.

After management updated its capital management policy, the analyst shifts forecast cash flow from dividends to debt repayments, resulting in lower net debt and, thus, lower finance charges. Target price rises to $1.20 from $1.10.

Management has reaffirmed FY22 guidance. Outperform rating is unchanged.

Target price is $1.20 Current Price is $0.82 Difference: $0.38
If PRN meets the Macquarie target it will return approximately 46% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

UBS rates QAN as Buy (1) -

Qantas's first-half trading update proved a mixed bag, management guiding to the weakest trading period since Covid and forecasting a -$1.1bn earnings (EBITDA) loss, an increase of -$200m from previous guidance of -$900m. Management cited continuing Delta disruption and reopening costs.

On the flipside, freight was running at record levels, and Qantas Loyalty added material positive cash flow. 

Advance bookings outpaced UBS's estimates, contributing to an improvement in working capital, and net debt guidance fell to -$5.65bn, compared with UBS's estimate of -$5.8bn, the company expecting a further reduction in the second half.

UBS reiterates its Buy rating, believing risks are more than priced in, and attributing the guidance miss to liquidity, omicron fears and domestic competition. Target price falls to $6.20 from $6.40.

Target price is $6.20 Current Price is $4.78 Difference: $1.42
If QAN meets the UBS target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $6.01, suggesting upside of 26.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Macquarie rates RDY as Outperform (1) -

Macquarie expects a boost for tender win rates from an expanded product offering after ReadyTech Holdings acquired Open Windows Software for a maximum consideration of -$14.3m. The purchase price is considered attractive.

The analyst likes that Open Windows' founders will remain aligned and expects upside from revenue synergies. Target price rises to $4.10 from $3.98. Outperform rating retained.

Target price is $4.10 Current Price is $3.96 Difference: $0.14
If RDY meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Morgan Stanley rates SHL as Overweight (1) -

Morgan Stanley points out covid testing benefits hit another record high of $314m (as revealed by October Medicare data) surpassing the previous high of $266m observed in September 2021. Compared with October 2019, imaging benefits rose 4%.

Sonic Healthcare remains the broker's top preference for domestic health services. Overweight rating, target price of $46.10 and In-Line Industry view are unchanged.

Target price is $46.10 Current Price is $43.15 Difference: $2.95
If SHL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $45.13, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.5

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

Morgans rates STO as Add (1) -

After combining Santos and Oil Search into forecasts, Morgans arrives at an $8.65 price target, down from $8.85, and retains its Add rating. Further synergies in Alaska are envisaged, beyond management's company-wide guidance for US$90-$115m of synergies.

The analyst feels a wave of future investment will be largely determined by the company's ability to sell down equity in assets like PNG LNG, Alaska and Dorado. Upside risk is expected to be generated from any sell downs.

Target price is $8.65 Current Price is $6.42 Difference: $2.23
If STO meets the Morgans target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $8.55, suggesting upside of 40.0% (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

Citi rates TCL as Neutral (3) -

Transurban Group is making a -$2bn capital contribution to West Gate Tunnel project, citing cost overruns due to soil contamination, double Citi's forecasts of -$1bn, surprising the market. The amount is 50% more than Transurban's initial share of costs of $4bn says Citi.

Management plans to fund the contribution from corporate liquidity and capital releases, and expects the costs will be capitalised without affecting free cash flow. Completion will be pushed out to 2025 from 2023. This compares with Citi's estimate of 2024.

The D&C subcontractor and Victorian government are chipping in similar amounts, and the broker says the only consolation to be drawn from the situation is that a resolution was reached without expensive recourse to the courts.

Target price falls to $13.49 from $13.78. Neutral rating retained, reflecting toll affordability concerns and work-from-home risks to traffic numbers.

Target price is $13.49 Current Price is $13.53 Difference: minus $0.04 (current price is over target).
If TCL meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.78, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Macquarie rates TCL as Outperform (1) -

Macquarie prefers certainty on costs versus prolonged litigation and associated certainty, following Transurban's announcement of a -$2bn settlement for the Westgate Tunnel Project. Target price falls to $14.44 from $14.72.

Separately, management's traffic update confirms the analyst's expectation of a recovery. Outperform rating is maintained.

Target price is $14.44 Current Price is $13.53 Difference: $0.91
If TCL meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $14.78, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

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

Morgan Stanley assesses contributions of about -$1.5bn for the West Gate Tunnel Project were already reflected in Transurban's share price, following the announced requirement for additional funds of circa -$2bn. 

Management had previously flagged cost over-runs of at least -$3.8bn and a desire to settle.

Equal-weight rating and $14.28 target price are maintained. Industry View: Cautious.

Target price is $14.28 Current Price is $13.53 Difference: $0.75
If TCL meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $14.78, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Morgans rates TCL as Add (1) -

Morgans says resolution of Transurban Group's dispute over the West Gate Tunnel Project removes a major uncertainty though the size of the required financial contribution will disappoint some investors.

Separately, the analyst points out the latest weekly traffic performance offers hope of further improvement following the lifting of restrictions in October in NSW and Victoria. Add rating is retained. Target price falls to $14.57 from $14.79.

Target price is $14.57 Current Price is $13.53 Difference: $1.04
If TCL meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $14.78, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

Citi rates TWE as Buy (1) -

Citi attended the GFA industry fourth-quarter update, which indicated a recovery in high-margin on-premise and cellar-door wine sales in the United States, consistent with other vintner updates.

The broker says this represents a boost for Treasury Americas, given high-margin channels contribute 19% of the division's net sales realisation, and forecasts a 19% rise the division's first-half earnings (EBITS)

On the downside, the broker notes US demographics are unfavourable, given the numbers of people reaching drinking age are slowing and retailers are resisting price increases.

Buy rating and $13.80 target price are retained. 

Target price is $13.80 Current Price is $12.12 Difference: $1.68
If TWE meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $13.45, suggesting upside of 11.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates VRT as Underweight (5) -

Morgan Stanley points out that while month-to-month variability can be observed in the October Medicare data, retention of elevated market volume on FY21 is seen as a positive for Virtus Health. 

Underweight rating and $6.50 target price are retained. Industry view is In-Line.

Target price is $6.50 Current Price is $6.80 Difference: minus $0.3 (current price is over target).
If VRT meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.91, suggesting upside of 3.1% (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

Morgans rates VRT as Add (1) -

Morgans believes Virtus Health should continue focusing on its core value proposition of improving IVF outcomes and clinicians. Hence, the analyst is not disappointed about the terminated agreement with Healius (HLS) to acquire the Adora business.

The broker makes no changes to forecasts and retains its Add rating and $7.13 target price.

Target price is $7.13 Current Price is $6.80 Difference: $0.33
If VRT meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.91, suggesting upside of 3.1% (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