Australian Broker Call

Citi rates APT as Neutral (3) -

Citi observes accelerating trends for Afterpay in the US and UK in May, while growth rates in Australasia moderated.

While expecting the rate of growth to slow in June as social distancing measures are eased, a benign credit environment is expected to remain supportive.

Neutral/High Risk. Target is $27.10.

Target price is $27.10 Current Price is $52.10 Difference: minus $25 (current price is over target).
If APT meets the Citi target it will return approximately minus 48% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.18, suggesting downside of -38.0% (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

Credit Suisse rates AQZ as Outperform (1) -

Credit Suisse assesses the equity raising is well timed and allows the company to capitalise on opportunities. The broker points out Alliance Aviation has made its most value accretive moves during periods of extreme market dislocation.

The company will raise up to $122m via a placement and share purchase plan to fund the purchase of new aircraft but also to take advantage of the structural changes resulting from the pandemic.

Outperform rating maintained. Target is raised to $3.75 from $3.20.

Target price is $3.75 Current Price is $3.10 Difference: $0.65
If AQZ meets the Credit Suisse target it will return approximately 21% (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

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

Steel spreads in Asia appear to have bottomed and while this is positive, Morgan Stanley notes the equities have rebounded to reflect the situation.

In contrast to Asian steel prices, the US hot rolled coil price has dropped since April and spreads have compressed.

Incorporating the latest commodity prices into forecasts, Morgan Stanley increases earnings estimates for BlueScope Steel, expecting EBIT of $529m in FY20 and $560m in FY21.

Equal-weight maintained. Target is raised to $13.50 from $10.50. Industry view: Cautious.

Target price is $13.50 Current Price is $12.62 Difference: $0.88
If BSL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.97, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates CMW as Lighten (4) -

Cromwell Property Group has the highest gearing as well as dividend yield among all Australian REITs covered by Ord Minnett. The broker points out a decline of -10-20% in the book value could cause gearing to increase to 50-56%, considered too high for some equity investors.

The broker advises the group to go for a capital raising which could see gearing reduce to 35%, still high as per the industry average. Overall, the broker suggests a move away from the group.

Ord Minnett maintains its Lighten rating with target price increased to $0.6 from $0.5.

Target price is $0.60 Current Price is $0.87 Difference: minus $0.27 (current price is over target).
If CMW meets the Ord Minnett target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.01, suggesting upside of 17.1% (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

Morgans rates HRL as Add (1) -

The company has reinstated FY20 guidance, expecting revenue of $32-32.7m, up 4-6%. Underlying operating earnings (EBITDA) is expected to be $5.5-5.8m, up 24-30%. This is higher than Morgans' previous forecasts.

While the company's entire NZ operations resumed in mid May, and trading is improving, volumes remain below pre-pandemic levels. Analytica dairy and honey services continued to trade through the restrictions and have delivered strong growth.

Australian operations continue to trade without interruption. Morgans suggests investors will need to look through a challenging FY21 but management has done a good job in managing factors within its control. Add rating. Target is raised to $0.14 from $0.12.

Target price is $0.14 Current Price is $0.11 Difference: $0.03
If HRL meets the Morgans target it will return approximately 27% (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 INR as Buy (1) -

Ioneer’s Rhyolite Ridge lithium/boron project (in Nevada) recently finished its Definitive Feasibility Study (DFS) and Ord Minnett notes improved project economics and an overall viable project.

The study places Rhyolite Ridge right at the bottom of the lithium cost curve, as expected by the broker. Ord Minnett expects Rio Tinto ((RIO)) to acquire Ioneer and believes there could be merit in the move. 

Ord Minnett reaffirms its Speculative Buy recommendation with target price increased to $0.5 from $0.4.

Target price is $0.50 Current Price is $0.12 Difference: $0.38
If INR meets the Ord Minnett target it will return approximately 317% (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

Citi rates JBH as Neutral (3) -

JB Hi-Fi sales growth over the April and May period appears broadly in line with Harvey Norman ((HVN)), on Citi's observation.

Earnings growth, however, has surprised to the upside with the company's guidance now suggesting underlying net profit growth in the second half of 68-74%.

Given the highly unusual market conditions as FY20 ends, Citi remains cautious about the outlook for FY21.

Earnings are expected to normalise in the second half and net profit to drop -34% from the very high prior comparable half.

Citi retains a Neutral rating and raises the target to $42.10 from $37.30.

Target price is $42.10 Current Price is $40.22 Difference: $1.88
If JBH meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

Credit Suisse rates JBH as Downgrade to Underperform from Neutral (5) -

Credit Suisse suggests taking some profits after the company has benefited significantly from the restrictions, amid the likelihood consumer expenditure will be lower once government support packages end.

While acknowledging the "quality" argument, the broker observes the stock is trading at a significant premium to peers.

Sales for JB Hi-Fi Australia are up 20% and The Good Guys up 24% year-on-year, which suggests a market share loss to Harvey Norman ((HVN)) in electrical. Location factors are likely to be the main cause, in the broker's view.

Rating is downgraded to Underperform from Neutral and the target is raised to $34.52 from $32.87.

Target price is $34.52 Current Price is $40.22 Difference: minus $5.7 (current price is over target).
If JBH meets the Credit Suisse target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

Macquarie rates JBH as Outperform (1) -

A trading update from JB Hi-Fi revealed Australian sales up 20% in the half to June so far, and 23.5% for the Good Guys thanks to strong demand for kitchen appliances.

JB Hi-Fi NZ did not fare as well, the broker notes, due to stores closures (in Australia stores remained "essential"), thus the group is taking a -$25m impairment charge.

The broker has lifted forecast FY20 earnings by 10.5% but had already flagged a likely "beat" from the company, hence target unchanged at $41. Outperform retained.

Target price is $41.00 Current Price is $40.22 Difference: $0.78
If JBH meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

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

JB Hi-Fi has provided a trading update to the end of May and guided to net profit in FY20 of $325-330m.

This is ahead of Morgan Stanley's estimates and the trading update implies like-for-like sales growth of around 33% across April and May for JB Hi-Fi Australia and around 38% for The Good Guys.

Equal-weight. Target is $38.50. Industry view: Cautious.

Target price is $38.50 Current Price is $40.22 Difference: minus $1.72 (current price is over target).
If JBH 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 $40.53, suggesting upside of 1.3% (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

Morgans rates JBH as Hold (3) -

Morgans observes demand for the company's products was at extraordinary levels over April and May.

The broker finds little to dislike about the investment case but highlights the group will now face an exceptionally strong comparable being cycled in the second half of FY21.

Moreover, the question now centres on how much demand has been pulled forward by the stimulus measures. The broker retains a Hold rating and raises the target to $39.62 from $35.67.

Target price is $39.62 Current Price is $40.22 Difference: minus $0.6 (current price is over target).
If JBH meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

Ord Minnett rates JBH as Upgrade to Accumulate from Hold (2) -

JB Hi-Fi’s trading update reports strong sales growth for JB Australia and The Good Guys for the five months to May. Ord Minnett considers JB Hi-Fi a winner in the retail sector with an attractive product mix, diversified channel and location mix.

Earnings forecasts have been revised by the broker for FY20-22 with FY20 growth expected to be driven by JB Australia and The Good Guys.

The broker is also confident about FY21 with the ongoing momentum to continue into the first half while the combination of product and channel/location mix is expected to support the second half.

Ord Minnett upgrades its rating to Accumulate from Hold with target increased to $44 from $37.

Target price is $44.00 Current Price is $40.22 Difference: $3.78
If JBH meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

UBS rates JBH as Neutral (3) -

The fourth quarter update was strong, UBS observes, with net profit guidance of $325-330m, around 2-3% ahead of estimates.

Guidance implies earnings leverage is almost entirely driven via costs, with gross margin likely to be flat as the mix offsets reduced promotional intensity.

UBS assesses estimates for FY21 need to be upgraded to justify further upside, and there are risks post the end of government relief packages in September.

Neutral rating and $44 target maintained.

Target price is $44.00 Current Price is $40.22 Difference: $3.78
If JBH meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $40.53, suggesting upside of 1.3% (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

Ord Minnett rates NCM as Hold (3) -

Newcrest Mining's exploration update reports increasing value of its Havieron and Red Chris projects. Ord Minnett expects the Telfer operations (containing the Havieron project) to ramp up production by 50%, while noting the Red Chris project has confirmed high-grade pods.

The broker considers the company to represent good value for a large-capitalisation gold producer, suggesting Telfer is undervalued and is worth more.

Ord Minnett reiterates its Hold rating with its target increased to $31 from $29 on account of higher production expected.

Target price is $31.00 Current Price is $30.04 Difference: $0.96
If NCM meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $31.94, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

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: 0.4

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

UBS rates NCM as Buy (1) -

Newcrest has released results of drilling at Red Chris and Havieron which reinforce the emerging value in these projects. UBS is of the view the results from Havieron increase the likelihood it will be mined, which could change the economics of Telfer.

The broker suggests the potential is not well understood and not priced in, but this could change over the next 12 months as a maiden resource is declared. Buy rating and $35 target maintained.

Target price is $35.00 Current Price is $30.04 Difference: $4.96
If NCM meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $31.94, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

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: 0.4

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

Macquarie rates OZL as Outperform (1) -

Despite restrictions in South Australia, OZ Minerals has continued to operate as normal at its mines. Hence the Carrapateena expansion study is due in the next few weeks and the Prominent Hill expansion next year.

The confirmation of the economics of a block cave at Carrapateena is a key potential catalyst, the broker suggests, offering upside risk to forecasts.

Meanwhile, copper prices have rallied to suggest FY20 earnings 20% above the broker's forecast if the spot price is used. Target rises to $11.50 from $10.00, Outperform retained.

Target price is $11.50 Current Price is $10.26 Difference: $1.24
If OZL meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $10.71, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

UBS rates QAN as Buy (1) -

As leave entitlements continue to grow and Australians have saved during the course of the pandemic, UBS assesses they are likely to want to travel, expecting pent-up demand over the next 12 months will be released once border restrictions are lifted.

The broker is also more confident that people will feel safe enough to fly again, given strong improvements to domestic travel already occurring in offshore markets.

Qantas is expected to exit the pandemic in a stronger position, without raising equity and picking up market share from Virgin Australia.

The broker upgrades earnings assumptions to allow for an earlier domestic recovery. Buy rating maintained. Target rises to $5.50 from $4.65.

Target price is $5.50 Current Price is $4.63 Difference: $0.87
If QAN meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting downside of -10.4% (ex-dividends)

The company's fiscal year ends in June.

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 SGM as Equal-weight (3) -

Steel spreads in Asia appear to have bottomed and while this is positive, Morgan Stanley notes Sims Metal equities have rebounded to reflect the situation.

In contrast to Asian steel prices, the US hot rolled coil price has dropped since April and spreads have compressed.

Morgan Stanley decreases forecasts for earnings in FY20, now expecting an EBIT loss of -$54m. The FY21 EBIT forecast falls -42% to $95m.

Equal-weight rating retained. Target is reduced to $9 from $10. Industry view is Cautious.

Target price is $9.00 Current Price is $8.44 Difference: $0.56
If SGM meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.58, suggesting upside of 6.9% (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

Morgan Stanley rates WEB as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley downgrades to Underweight from Equal-weight, preferring Corporate Travel ((CTD)) to Webjet.

Since January Corporate Travel has materially outperformed in terms of the share price, yet when valuing the business Webjet's market cap and valuation have increased 30% and 1%, respectively, because of a highly dilutive capital raising.

Corporate Travel on the other hand has not experienced the same level of business stress and has not needed to raise capital, with its market cap and valuation down -31% and -32%, respectively.

The broker believes this divergence in relative value is not warranted by fundamentals. Target is raised to $3.30 from $2.50. Industry View is In-Line.

Target price is $3.30 Current Price is $4.18 Difference: minus $0.88 (current price is over target).
If WEB meets the Morgan Stanley target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.92, suggesting downside of -0.7% (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