Australian Broker Call

Morgan Stanley rates BHP as Overweight (1) -

BHP Group has provided more detail regarding its target to be net zero emissions by 2050. Management remuneration is also being aligned with climate objectives. The short-term target is to maintain operational emissions at or below FY17 levels using carbon offsets if required.

The company estimates that around 40% of production through to 2050 will be derived from switching to renewable electricity sources and another 40% by the replacement of diesel usage with cleaner alternatives. The latter will be contingent on the pace of technological developments.

Morgan Stanley retains its Overweight rating and $39.45 target. Industry view: Attractive.

Target price is $39.45 Current Price is $36.55 Difference: $2.9
If BHP meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $40.36, suggesting upside of 8.4% (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: 0.5

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

UBS rates BHP as Buy (1) -

BHP Group published its 2020 Climate Report, which sets out new targets and actions to reduce greenhouse gas (GHG) emissions.

The company plans to cut Scope 1 & 2 emissions by greater than -30% by 2030 and reach net zero by 2050. The company is also working with customers/suppliers to reduce Scope 3 emissions.

When reviewing certain specific actions by management, UBS believes management is accelerating action overall.

Another takeaway for the broker is the link to remuneration. Additionally, it is considered demand for most of the company's commodities will grow over the next 30 years in a decarbonising world. Finally, oil is still seen as needed in the 2020's.

The Buy rating is unchanged. The target price is $40.50.

Target price is $40.50 Current Price is $36.55 Difference: $3.95
If BHP meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $40.36, suggesting upside of 8.4% (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: 0.5

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

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

Citi recently upgraded to Buy from Neutral and raises the target to $325 from $320.

The broker assumes plasma collections are depressed in the second half of 2020 and first half of 2021, with a return to normal in FY22.

The broker assesses demand for plasma product is robust and current levels of growth should likely continue for several years.

Target price is $325.00 Current Price is $283.50 Difference: $41.5
If CSL meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $310.39, suggesting upside 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: 0.4

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

Credit Suisse rates EVN as Upgrade to Outperform from Neutral (1) -

Credit Suisse is increasing its 2021 gold price forecasts to US$2500/oz and 2022 to US$2200/oz, amid a number of supportive macroeconomic factors.

Across the broker's gold coverage this bullish gold price outlook produces company valuations that are above current equity prices.

The broker likes Evolution Mining for several reasons, not the least because it is the low-cost and high-margin operator among peers, which is partly driven by conservative reserve gold pricing.

Rating is upgraded to Outperform from Neutral with the target raised to $6.55 from $6.00.

Target price is $6.55 Current Price is $5.62 Difference: $0.93
If EVN meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.24, suggesting downside of -11.2% (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

Ord Minnett rates GXY as Downgrade to Sell from Hold (5) -

As part of an overall mining sector review, Ord Minnett downgrades the recommendation to Sell from Hold for Galaxy Resources. 

The broker sees a significant part of the lithium recovery already priced in. Despite, this lithium markets are considered to have bottomed and the analyst continues to model higher prices from here. However, the spodumene part of the supply chain is seen as well supplied.

The target price is unchanged at $0.90. 

Target price is $0.90 Current Price is $1.37 Difference: minus $0.47 (current price is over target).
If GXY meets the Ord Minnett target it will return approximately minus 34% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.87, suggesting downside of -35.3% (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

Macquarie rates IGO as Outperform (1) -

The company has commenced a strategic review of its 30% interest in the Tropicana gold mine. In Macquarie's view a sale is the likely outcome, with the main risk being securing a gold premium in any potential transaction.

The strategic review will include a detailed technical analysis of options to enhance value through underground development and exploration as well as a full or partial sale.

Macquarie assesses earnings upside momentum continues apace and retains an Outperform rating with a $5.30 target.

Target price is $5.30 Current Price is $4.49 Difference: $0.81
If IGO meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.81, suggesting upside of 3.4% (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

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

IGO has commenced a strategic review of the options surrounding its 30% interest in the Tropicana gold mine, following several unsolicited approaches for the asset. The review will take 3-6 months.

Morgan Stanley considers a sale unlikely at this juncture, given the company owns only one other mine and has limited project options. This is at least until further underground potential at Tropicana is proven.

Rather, the broker considers this a move to promote appreciation of the asset and its underground potential. Equal-weight. Target price is $4.80. Industry view: Attractive.

Target price is $4.80 Current Price is $4.49 Difference: $0.31
If IGO meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.81, suggesting upside of 3.4% (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

Ord Minnett rates IGO as Sell (5) -

IGO continues to be priced for perfection and Ord Minnett reiterates a Sell rating, which reflects declining asset quality and capital allocation risk. Target is reduced to $3.50 from $3.70.

The broker believes the weak outlook serves as a timely reminder that investors should reassess valuation assumptions, particularly those extrapolating recent grades at Nova and/or a mine life greater than seven years.

Target price is $3.40 Current Price is $4.49 Difference: minus $1.09 (current price is over target).
If IGO meets the Ord Minnett target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.81, suggesting upside of 3.4% (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

Ord Minnett rates IGO as Sell (5) -

IGO's chairman intends to retire on or before the November 2021 AGM. Ord Minnett welcomes the news with cautious optimism, as it is a possible indication that long-awaited change could be underway. 

The broker also welcomes the sale of the NCZ stake, but the debacle only reaffirms the broker's thesis of capital allocation and merger and acquisition risk.

Additionally, the analyst is bemused by the continuation of speculative exploration investment continuing in recent months.

Ord Minnett reiterates the Sell rating and reminds investors that the company remains expensive on valuation due to its declining asset quality.

The target price is decreased to $3.40 from $3.50.

Target price is $3.40 Current Price is $4.49 Difference: minus $1.09 (current price is over target).
If IGO meets the Ord Minnett target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.81, suggesting upside of 3.4% (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

Macquarie rates ILU as No Rating (-1) -

Iluka Resources has indicated the Deterra demerger will be recognised as a gain and booked as profit at the full year results.

In an implied scenario where the market capitalisation is $1.5bn, the company would retain a $300m value for its 20% interest and book a $1.2bn gain. The first dividend is expected in 2021.

Due to research restrictions, Macquarie cannot advise its rating or valuation.

Current Price is $9.60. Target price not assessed.

Current consensus price target is $9.94, suggesting upside of 2.6% (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

UBS rates IPL as Upgrade to Buy from Neutral (1) -

UBS raises the rating for Incitec Pivot to Buy from Neutral, given recent relative share price underperformance, a recovery in global fertiliser pricing and an attractive valuation.

The broker estimates that the improved fertiliser pricing outlook, particularly DAP, can underpin 13% earnings (EBIT) growth into FY21. Additionally, free cash flow generation of circa $300m supports an attractive dividend yield of 8% (long run average 6%).

The analyst thinks the current share price assumes a DAP/ammonia price in FY21 of US$330/230t versus the broker's forecast of US$350/250t.

UBS lowers EPS forecasts for FY20, FY21 and FY22 by -10%, -10% and -12%, respectively, due to a higher Australian dollar assumption.

The target price is increased to $2.40 from 2.25.

Target price is $2.40 Current Price is $2.09 Difference: $0.31
If IPL meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.56, suggesting upside of 19.1% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates NCM as Upgrade to Outperform from Neutral (1) -

Credit Suisse is increasing its 2021 gold price forecasts to US$2500/oz and 2022 to US$2200/oz, amid a number of supportive macroeconomic factors.

Across the broker's gold coverage this bullish gold price outlook produces company valuations that are above current equity prices.

Newcrest Mining is the preferred exposure on valuation grounds. The broker upgrades to Outperform from Neutral and raises the target to $37.70 from $35.30.

Target price is $37.70 Current Price is $31.25 Difference: $6.45
If NCM meets the Credit Suisse target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $35.17, suggesting upside of 8.9% (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: 0.4

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

Citi rates NEA as Buy (1) -

Citi queries whether growth is getting harder to accomplish and whether a step up in investment can deliver adequate returns but assesses patience is properly required.

While execution risk is high and weak macro conditions could affect growth in the short term, the recent capital raising should remove any concerns about the balance sheet, suggests the analyst.

Importantly, the broker considers the transition to an insights/analytics provider is the right strategic step, although there is potential this could negatively affect partner relationships in the US. Buy rating retained. Target rises to $3.15 from $3.00.

Target price is $3.15 Current Price is $2.46 Difference: $0.69
If NEA meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.12, suggesting upside of 35.5% (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 NEC as Overweight (1) -

Morgan Stanley retains a bearish view on traditional media stocks but believes the value of of 9Now plus Stan is under-appreciated by the market.

The broker assesses it is rare globally for an FTA TV broadcaster to have a fast-growing and already meaningfully profitable SVOD and AVOD business running parallel.

Moreover, post the pandemic, the earnings leverage to any improvement in advertising appears high. Nine Entertainment also has an underappreciated balance sheet, according to the broker.

Hence, Overweight rating retained. Target price is increased to $2.40 from $2.10. Industry view: Attractive.

Target price is $2.40 Current Price is $1.69 Difference: $0.71
If NEC meets the Morgan Stanley target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $2.11, suggesting upside of 24.1% (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

Credit Suisse rates PRU as Upgrade to Outperform from Underperform (1) -

Credit Suisse is increasing its 2021 gold price forecasts to US$2500/oz and 2022 to US$2200/oz, amid a number of supportive macroeconomic factors.

Across the broker's gold coverage this bullish gold price outlook produces company valuations that are above current equity prices.

All mid-cap gold miners are priced at a discount, which suggests an intrinsic value opportunity to Credit Suisse.

Perseus Mining is upgraded to Outperform from Underperform on valuation grounds. Target is raised to $1.60 from $1.30.

Target price is $1.60 Current Price is $1.37 Difference: $0.23
If PRU meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.53, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.0

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

Macquarie rates RIO as Outperform (1) -

The departure of certain executives is, in Macquarie's view, a key step in regaining stakeholder trust after the Juukan Gorge incident. A search for a replacement to the outgoing CEO is the catalyst for the stock in the short term.

In operating terms, Rio Tinto continues to benefit from buoyant iron ore prices, with the broker noting that 90% of earnings in the first half were from this division. Outperform rating and $114 target retained.

Target price is $114.00 Current Price is $99.86 Difference: $14.14
If RIO meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $106.79, suggesting upside of 3.0% (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: 0.2

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

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

Turquoise Hill has signed a Memorandum of Understanding with Rio Tinto in relation to the funding of the Oyu Tolgoi project. This addresses the re-profiling and the extended maturity of existing debt amid an understanding to raise supplementary senior debt.

Capital requirements total US$3.6bn out of which US$1.9bn is expected to be fulfilled via debt rescheduling and a supplementary senior debt facility. Morgan Stanley notes this leaves a -US$1.7bn shortfall to be fulfilled either via hybrid debt or an equity raising.

Equal-weight rating. Target is $99.50. Industry view: Attractive.

Target price is $99.50 Current Price is $99.86 Difference: minus $0.36 (current price is over target).
If RIO 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 $106.79, suggesting upside of 3.0% (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: 0.2

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

Ord Minnett rates RIO as Accumulate (2) -

The board of Rio Tinto has made significant changes to the executive committee, in response to the Juukan Gorge rock shelter destruction in May. The CEO, iron ore chief and the head of corporate relations will leave the company.

An external appointment for CEO appears likely to Ord Minnett, given there isn't an obvious internal successor.

Overall, the broker sees it as an opportunity to benefit from the cultural change that would derive from an external appointment. Additionally, the analyst notes some significant market frustration at the iron ore division performance, Oyu Tolgoi project delivery and other issues.

The Accumulate rating is unchanged and the price target is increased to $122 from $121, due to an overall sector revision.

Target price is $122.00 Current Price is $99.86 Difference: $22.14
If RIO meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $106.79, suggesting upside of 3.0% (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: 0.2

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

Credit Suisse rates RRL as Upgrade to Outperform from Neutral (1) -

Credit Suisse is increasing its 2021 gold price forecasts to US$2500/oz and 2022 to US$2200/oz, amid a number of supportive macroeconomic factors.

Across the broker's gold coverage this bullish gold price outlook produces company valuations that are above current equity prices.

All mid-cap gold miners are priced at a discount, which suggests an intrinsic value opportunity to Credit Suisse.

Regis Resources is upgraded to Outperform from Neutral with a target raised to $6.45 from $5.90.

Target price is $6.45 Current Price is $5.25 Difference: $1.2
If RRL meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $5.64, suggesting upside of 6.0% (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