Australian Broker Call

Morgan Stanley rates AGL as Underweight (5) -

The Tomago Smelter is looking to renegotiate its electricity hedge contract with AGL Energy and AGL has ceased a joint plan for supplying electricity to the Portland Smelter in Victoria. Morgan Stanley estimates  AGL provides a total of circa 13TWh to these smelters and guesses the contract prices to be around $60-65/MWh.

The broker's least unfavourable scenario has AGL negotiating contract extensions with minimal price changes while the bear case scenario sees the closure of smelters followed by exit from the coal plants which will affect the net profit.

Noting downside risk skew to AGL from "smexit" uncertainty, Morgan Stanley reiterates its Underweight rating with a target price of $14.14. Industry view: Cautious.

Target price is $14.14 Current Price is $14.13 Difference: $0.01
If AGL meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $14.94, suggesting upside of 5.0% (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 BKW as Buy (1) -

Upon initial assessment, Citi finds today's FY20 release by Brickworks missed the mark by -7% as far as Citi's forecast goes, or by -2% versus market consensus.

Adjusted for lower investment returns, Citi finds the performance was more or less in-line.

The analysts flag they intend to retain the Buy rating. The company's outlook might still look uncertain (no guidance), Citi notes the order book is improving, boosted by Home Builder and pent up demand in the US.

Target price is $19.00 Current Price is $18.86 Difference: $0.14
If BKW meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $18.23, suggesting downside of -2.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgan Stanley rates DXS as Underweight (5) -

Morgan Stanley remains comfortable with its cautious view on Dexus Property despite some pushbacks over its call to downgrade Dexus to Underweight.

The broker highlights with increasing unemployment, rising vacancy and net effective rents going down, the company is not appealing on a 6-12 months view. This view is corroborated looking at a 4.2-year weighted average lease expiry (WALE).

Morgan Stanley would become more bullish when rental declines have flushed through the market from December 20 onwards.

The broker reaffirms its Underweight rating. The target price remains unchanged at $8.15. Industry View: In-line.

Target price is $8.15 Current Price is $8.80 Difference: minus $0.65 (current price is over target).
If DXS meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.35, suggesting upside of 5.6% (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

Ord Minnett rates FMG as Buy (1) -

Since the start of September, the price of iron ore has declined by -7% which in Ord Minnett’s view, could snap back higher due to the increasing steel production in China. The rising covid-19 levels will slowdown recovery in the world (ex-China steel) steel output and create price tension, the broker expects.

In a spot scenario, Ord Minnett expects Fortescue Metal Group's dividend yield for FY22 to rise with FY22 earnings more than double the consensus.

Buy recommendation maintained with a target price of $20.

Target price is $20.00 Current Price is $15.98 Difference: $4.02
If FMG meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $17.03, suggesting upside of 6.7% (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: 0.3

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

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

Glencore will extend the life of the Mount Isa copper smelter beyond 2022. The smelter supplies around 50% of Incitec Pivot's sulphuric acid requirements at Phosphate Hill.

Morgan Stanley assesses the announcement provides certainty of supply for at least three years to 2025 and removes a potential negative for the company, otherwise Incitec Pivot would need to source sulphuric acid externally with a substantial increase in costs.

Equal-weight rating. Target is $2.25. Industry view: Cautious.

Target price is $2.25 Current Price is $2.19 Difference: $0.06
If IPL meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $2.56, suggesting upside of 20.2% (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 KMD as Outperform (1) -

Operating earnings and net profit were ahead of Credit Suisse expectations in FY20 and also beat guidance. No dividend was declared but the company expects dividends will resume in FY21.

Based on current forward orders Kathmandu anticipates second half wholesale orders will be in line with pre-pandemic levels. Gross margins are also expected to improve by the second half.

Credit Suisse now expects Kathmandu will be net cash in FY21 and reiterates an Outperform rating because of the appealing valuation, earnings growth and dividend yield. Target is raised to NZ$1.70 from NZ$1.55.

Current Price is $1.08. Target price not assessed.

Current consensus price target is $1.18, suggesting upside of 4.9% (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: 0.7

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

Macquarie rates KMD as Neutral (3) -

FY20 results were ahead of expectations, supported by cost controls and government assistance. Wholesale order books for Rip Curl and Oboz are improving for the second half and the Kathmandu brand will resume offshore expansion post the pandemic.

Still, Macquarie is wary because of industry feedback regarding the highly competitive and brand-centric outdoor consumer segment offshore. Neutral retained. Target is raised to $1.15 from $1.09.

Target price is $1.15 Current Price is $1.08 Difference: $0.07
If KMD meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting upside of 4.9% (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: 0.7

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

Citi rates LVT as Neutral (3) -

LiveTiles’s FY20 result points to a slowdown in organic revenue growth in the second half, observes Citi. The decline, driven by the lower subscription revenue, was offset by an increase in services revenue driven by the Wizdom and CYCL acquisitions.

The broker notes LiveTiles’ June quarter was adversely impacted by enterprise customers but expects trading conditions to improve with economies opening up.

With IT budgets under pressure in the near term, Citi prefers to be cautious and has lowered its FY21-22 revenue forecasts to reflect a slower conversion of annual recurring revenue to revenue.

Citi maintains its Neutral rating with the target price reducing to $0.25 from $0.30.

Target price is $0.25 Current Price is $0.21 Difference: $0.04
If LVT meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

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

Citi rates NUF as Buy (1) -

Nufarm released FY20 profits in-line with its own guidance, meeting Citi's forecast albeit with the additional remark the underlying net loss from continuing operations turned out larger than expected; -$81m versus -$69m.

Operations in ANZ surprised on the upside and Citi notes operations in Europe are looking towards a better performance in FY21. Seed Technologies, on the other hand, proved a disappointment.

Citi lauds the balance sheet ("in good shape"). Buy rating retained. Target falls to $5.30 from $5.60.

Target price is $5.30 Current Price is $4.34 Difference: $0.96
If NUF meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates NUF as Outperform (1) -

Credit Suisse found no surprises in the FY20 result at an aggregate level as it was pre-guided. The broker considers the expansion of profit improvement initiatives incrementally positive.

These were expanded to include expenses reductions in Europe, North America and corporate business in addition to the previously-announced manufacturing plant closures.

While savings of $35-40m are guided, the broker points out there is likely to be some offsets such as increase in R&D expenditure. Outperform rating retained. Target rises to $5.07 from $5.04.

Target price is $5.07 Current Price is $4.34 Difference: $0.73
If NUF meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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 NUF as Neutral (3) -

After "messy" FY20 Macquarie forecasts $9m in reported net profit in FY21 amid the impact of higher depreciation & interest costs and despite an expected $95m increase in continuing business operating earnings.

To become more positive the broker requires delivery on the earnings potential, as the company has fallen short of expectations in recent years. Easing raw material costs should assist. Neutral retained. Target is raised to $4.50 from $4.26.

Target price is $4.50 Current Price is $4.34 Difference: $0.16
If NUF meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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 NUF as Overweight (1) -

Morgan Stanley expects earnings will improve from a difficult FY20. Results were in line with previous guidance. Europe was the key area of earnings weakness but management is confident that FY20 will be the trough.

Nufarm has also secured the first commercial sale of omega-3 canola oil to a global salmon producer and expects the initial contract will generate $30m in revenue. This brings the business a little closer to unlocking attractive potential, Morgan Stanley suggests.

Overweight. Target is $4.80. Industry view: Cautious.

Target price is $4.80 Current Price is $4.34 Difference: $0.46
If NUF meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates NUF as Add (1) -

Nufarm reported a weak FY20 result, which according to Morgans was partly due to poor seasons, increased competition and covid-19. It was also considered due to rising input and manufacturing costs. The broker notes Europe’s performance was disappointing.

Morgans continues to expect FY20 will prove to be the trough in the earnings cycle and forecasts strong earnings growth over FY21-FY23. The analyst believes this will be driven by improved seasonal conditions in Australia and Europe and a recovery in T&O sales as pandemic restrictions ease.

Other drivers are considered to be benefits from the performance improvement program (PIP), reduced supply constraints and cost pressures and a contribution from Omega-3 canola oil and carinata as they scale.

The Add rating is unchanged and the target price is increased to $5.10 from $$4.85.

Target price is $5.10 Current Price is $4.34 Difference: $0.76
If NUF meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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

Ord Minnett rates NUF as Hold (3) -

Nufarm's FY20 operating earnings were in line with Ord Minnett’s estimate with a higher tax expense leading to a higher than expected net loss. No dividend was announced.

Management’s outlook commentary highlights improved conditions across all regions in FY21 except for North America Turf and Ornamental.

Ord Minnett expects a recovery in FY21 performance assuming more normal weather patterns and estimates earnings before interest and tax of $212m by FY23. Cash generation is expected to improve materially over FY21–22.

The broker is not comfortable with Nufarm's exposure to Europe and retains its Hold recommendation with the target price increasing to $4.70 from $4.

Target price is $4.70 Current Price is $4.34 Difference: $0.36
If NUF meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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

UBS rates NUF as Buy (1) -

Nufarm's FY20 operating income beat UBS's estimate led by a strong second half from Nufarm's ANZ, North America and Asia businesses.

The broker thinks agriculture conditions in these regions are favourable and will help the recent earnings momentum to continue in FY21. The company's proprietary Omega-3 canola seed business, which recorded its first-ever sale in September, is expected to be operating income positive in FY21.

Buy rating retained with the target price increasing to $5.25 from $4.87.

Target price is $5.25 Current Price is $4.34 Difference: $0.91
If NUF meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates NVX as Hold (3) -

The FY20 result for Novonix was in-line with Morgans expectations.

The company also announced that managing director Phil StBaker is stepping aside and Dr Chris Burns has been appointed as group CEO.

The company has stated it has enough funding to expand its anode material production to 2,000tpa (the Phase 1 target) by the end of 2021. The analyst calculates additional funding will be required to pursue Phase 2 and 3 production plans.

Some were disappointed by the lack of a collaboration announcement between Tesla and the company on battery day, but technologies highlighted on the day could play to the company’s strengths, reassures the broker.

Morgans notes the recent strong share price, but sees potential for volatility until earnings grow and a baseline is established for margins.

The Hold rating is unchanged and the target price is increased to $1.33 from $1.09.

Target price is $1.33 Current Price is $1.52 Difference: minus $0.19 (current price is over target).
If NVX meets the Morgans target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Credit Suisse rates NWS as Outperform (1) -

The Dow Jones investor briefing highlighted areas where earnings growth is expected, including digital subscriptions and amid decreasing subscriber acquisition costs.

Credit Suisse is also impressed with the growth trajectory of the risk & compliance business where revenues are largely recurring.

The broker increases estimates to factor in longer term upside beyond FY22. Outperform retained. Target rises to $25.00 from $23.25.

Target price is $25.00 Current Price is $20.78 Difference: $4.22
If NWS meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $24.72, suggesting upside of 22.9% (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: 0.5

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

Morgans rates PAN as Add (1) -

Morgans reports Panoramic Resources is meeting or exceeding underground development targets in FY21 to date. An updated life of mine plan and reserves are considered conservative with room for management to deliver significant upside.

The plan shows a 16-year mine life producing an average 8kt of nickel in concentrate per year.

The broker explains the company, and the nickel sulphide market generally, is a battery metals story. Effectively the market is considered to have fragmented into either stainless steel or battery demand.

Recent corporate activity in Western Australia suggests to the analyst a growing interest in takeovers of nickel sulphide assets.

The Speculative Buy rating is unchanged.

The target price is decreased to $0.142 from $0.508. The broker values the company using a discounted cash flow methodology and a -10% discount rate, while the company is not in production.

Target price is $0.14 Current Price is $0.10 Difference: $0.042
If PAN meets the Morgans target it will return approximately 42% (excluding dividends, fees and charges).

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

Credit Suisse rates TLS as Outperform (1) -

Credit Suisse suspects the NBN investment to upgrade 6.0m premises to speeds close to 1.0GB per second at a cost of $3.5bn while significant should have a limited impact on service providers and higher access costs are likely to be passed through to end-users.

The broker also notes NBN has not increased revenue projections despite the higher investment and has, in fact, lowered short-term forecasts.

Credit Suisse retains an Outperform rating and reduces Telstra's target to $3.85 from $3.90. A potential return to growth in mobile is considered the key driver of the stock.

Target price is $3.85 Current Price is $2.87 Difference: $0.98
If TLS meets the Credit Suisse target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $3.44, suggesting upside of 21.2% (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

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

Credit Suisse upgrades to Outperform from Neutral given the recent weakness in the share price amid observations that signal the Penfolds brand equity among consumers is unaffected by the anti-dumping investigation in China.

The broker expects further improvement in shipments into the mid autumn festival/Golden Week as well as some pent-up demand from weddings as celebrations were likely moved to the upcoming holiday season from Chinese New Year. Target is $12.30.

Target price is $12.30 Current Price is $8.90 Difference: $3.4
If TWE meets the Credit Suisse target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $11.74, suggesting upside of 29.3% (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