Australian Broker Call

Morgan Stanley rates ABC as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. While challenges remain in the short term, it's felt Adbri will be well positioned to benefit, once encouraging infrastructure lead indicators translate to materials demand.

The broker upgrades the rating to Equal-weight from Underweight and retains the $3.30 target. Industry view: Cautious.

The analyst's prior Underweight stance was more predicated on being the least preferred sector exposure rather than any meaningful issue with the valuation or demand drivers.

Target price is $3.30 Current Price is $3.45 Difference: minus $0.15 (current price is over target).
If ABC 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 $3.19, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in December.

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 ARB as Buy (1) -

ARB Corp has reported profits for FY21 15-17% above forecasts. Citi notes the result was driven by stonger-than-expected sales and profitability. 

Citi notes ARB's short-term outlook remains positive, driven by a strong order book and improving trading conditions in both the US and Australia. Despite this, the broker is guiding to only 1% sales growth for FY22, noting benefit from the Truckman acquisition is likely to be offset by potential international border openings in the second half of FY22. 

ARB remains Citi's top pick in the auto sector. The Buy rating is retained and the target price increases to $47.15 from $45.95. 

Target price is $47.15 Current Price is $41.39 Difference: $5.76
If ARB meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $42.31, suggesting downside of -4.7% (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

Macquarie rates ARB as Neutral (3) -

The trading update for FY21 was ahead of Macquarie's expectations as conditions remain buoyant and the order book is consistently strong, underpinning the first half of FY22. FY21 pre-tax profit is anticipated at $145-150m.

The broker suspects trading conditions in the Australian aftermarket will remain strong while the international border is shut, but there is some risk that sales activity in key export markets will decrease as travel restrictions, i.e. in the US, are unwound.

This could be a leading indicator for the Australian business when travel normalises. Neutral maintained. Target rises to $40.10 from $36.10.

Target price is $40.10 Current Price is $41.39 Difference: minus $1.29 (current price is over target).
If ARB meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.31, suggesting downside of -4.7% (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

Ord Minnett rates ARB as Accumulate (2) -

ARB Corp has indicated a 34% increase in FY21 sales, to $623m. The company has also guided to a pre-tax profit of $145-150m, up 86-92% on the previous year.

The main drivers include a marked uplift in new vehicle sales in Australia, strong export sales growth and higher operating margins. Ord Minnett expects demand will stay strong in the short term, particularly given the robust order book.

Future sales are likely to be driven by continued growth in demand in 4WD and SUV markets. Accumulate maintained. Target rises to $45.00 from $36.50.

Target price is $45.00 Current Price is $41.39 Difference: $3.61
If ARB meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $42.31, suggesting downside of -4.7% (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

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

Morgan Stanley reduces the price target to $72 from $75.80 as new revenue options (CHESS replacement & Sympli) remain a long way from fruition. Also the ASX is considered to be on high multiples, when compared to global exchange peers.

The company has one of the highest earnings (EBITDA) margins, and is one of the most expensive exchanges globally, yet its revenue and EPS growth outlook is bottom quartile, points out the broker.

The analyst stays Equal-weight, given the quality of the franchise though sees downside risks on execution and cost growth. Industry view: In-line.

Target price is $72.00 Current Price is $76.46 Difference: minus $4.46 (current price is over target).
If ASX meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $71.00, suggesting downside of -6.1% (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

Macquarie rates BGL as Outperform (1) -

Bellevue Gold has received 12 indicative debt proposals to fund the development of Bellevue. The offers range between $170-289m and the company intends to devise a shortlist.

Macquarie assumes $190m of debt for the development of Bellevue and believes the number of indicative proposals is a vote of confidence in the project and should provide plenty of funding options. Outperform rating and $1.30 target maintained.

Target price is $1.30 Current Price is $1.03 Difference: $0.27
If BGL meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

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 BLD as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. It's felt downside risks prevail for the Boral share price in the short term, with a cessation of the takeover offer coinciding with the completion of the buyback.

The broker expects the company's index weighting to reduce, given Seven Group Holding's increased stake and a reluctance from domestic investors, due to a lower free float and liquidity.

Morgan Stanley downgrades the rating to Underweight from Equal-weight and reduces the target price to $6.80 from $7.60. Industry view is in-line.

Target price is $6.80 Current Price is $7.35 Difference: minus $0.55 (current price is over target).
If BLD 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 $6.66, suggesting downside of -9.9% (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 BXB as Outperform (1) -

Macquarie expects Brambles will continue to deliver mid single-digit constant-FX underlying profit growth to FY23. The valuation is also undemanding as the stock is trading on a 20x FY23 PE.

The share price is being supported by the buyback and there is a return to operating leverage. Hence, the broker finds the growth outlook attractive and forecasts US$851m in actual FX underlying profit in FY21. Outperformed maintained. Target rises to $12.30 from $11.70.

Target price is $12.30 Current Price is $11.49 Difference: $0.81
If BXB meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $12.14, 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: 0.8

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

Morgan Stanley rates CSR as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. The rating for CSR is lifted to Overweight from Equal Weight, due to underperformance versus the ASX200 by -18% since the FY21 results in May.

This runs counter to the company's position of having the greatest exposure of peers to the detached housing market, the strongest
domestic end market, explains the broker. The target price of $6.30 is unchanged. The industry view is cautious.

With a net cash position and strong cash generation, the analyst expects special dividends will be a regular feature and sees CSR trading on an attractive 6% fully franked yield for FY22.

Target price is $6.30 Current Price is $5.33 Difference: $0.97
If CSR meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $6.36, suggesting upside of 14.8% (ex-dividends)

The company's fiscal year ends in March.

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

Macquarie rates DCN as Outperform (1) -

Today, Dacian Gold released its Q4 production update and Macquarie, upon initial assessment, notes production missed its forecast by -13% while all-in costs (AISC) proved 14% higher than forecast.

According to the company, "rainfall events" have been affecting access to open pit mining areas and this has weighed on production for the quarter.

Capital spending is also higher than previously forecast as per fresh FY22 guidance. Macquarie analysts don't seem too happy with all the negatives, but call it a "mixed" update.

Earnings estimates are now under review. Outperform. Price target 32c

Target price is $0.32 Current Price is $0.31 Difference: $0.01
If DCN meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

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

Ord Minnett rates DXS as Hold (3) -

Dexus has continued to grow funds management via acquisitions, having secured a partnership with Australian Unity Office Fund ((AOF)) via an investment in the Australian Unity Healthcare Property Trust.

There is also the proposed acquisition of APN Property ((APD)) which has $2.9bn in funds under management. Ord Minnett factors in stronger growth for assets as management works to offset the earnings impact of divestments.

There are headwinds in the office market amid tepid demand and the broker assumes lower peak incentives albeit an earlier recovery in rental growth because of modestly improving fundamentals. Hold rating maintained. Target rises to $10.80 from $9.80.

Target price is $10.80 Current Price is $10.25 Difference: $0.55
If DXS meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $10.59, suggesting upside of 4.4% (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 FBU as Overweight (1) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. The Overweight rating for Fletcher Building is unchanged, with the company well positioned to benefit from record strength in its key markets.

The target price of NZ$8.10 is maintained. Industry view is In-Line.

Current Price is $6.77. Target price not assessed.

Current consensus price target is $7.60, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in June.

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: 0.4

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

Morgans rates GDG as Add (1) -

After a funds under management (FUM) update for the June quarter, Morgans assesses an exceptionally strong performance overall, with record sales of $133m, which were up 48% on the pcp. 

The broker lifts FY21-FY23 EPS forecasts by around 2%-13% on an increase in sales assumptions, and the target price rises to $1.16 from $1.03.

The analyst believes the recent Lonsec acquisition and the development of the new lifetime annuity product have the potential to expedite and accelerate existing growth.

Target price is $1.16 Current Price is $1.00 Difference: $0.16
If GDG meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

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 JHX as Overweight (1) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. The Overweight rating for James Hardie Industries is maintained, based on business quality, improved execution and favourable end market dynamics.

The target price of $50 is unchanged. Industry view is In-Line.

Target price is $50.00 Current Price is $45.46 Difference: $4.54
If JHX meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $45.94, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.6

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

Macquarie rates LTR as Outperform (1) -

Liontown Resources has announced a $52m capital raising through a placement at $0.76 a share. Macquarie expects the funds will enable the company to complete its definitive feasibility study on the spodumene mine as well as accelerate the downstream study.

The broker's base case incorporates a two-stage development, the mine and fully integrated lithium hydroxide refinery. The main catalysts are working through the development phases and securing funding over the next two years. Outperform rating and $1.05 target maintained.

Target price is $1.05 Current Price is $0.80 Difference: $0.25
If LTR meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

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

Macquarie rates MVF as Reinstate coverage with Outperform (1) -

Macquarie reinstates coverage of Monash IVF with an Outperform rating and $1.00 target. The broker considers the outlook for assisted reproductive services in Australia attractive.

Increased volumes over the past year have been supported by a behavioural shift and this provides positive operating leverage.

The company has a strong balance sheet following a capital raising in May 2020 and is investing in technology to improve success rates.

Target price is $1.00 Current Price is $0.82 Difference: $0.18
If MVF meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $0.94, suggesting upside of 14.2% (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

Macquarie rates OGC as Upgrade to Neutral from Underperform (3) -

OceanaGold has received renewed approval from the Philippines government for its Didipio mine, allowing it to restart. This removes a key obstacle to the resumption of operations and the company is now prioritising the retraining and hiring of its workforce.

Meanwhile, news on Haile was less positive as re-handling and processing problems are weighing on costs and approval delays could affect the mine over the longer term.

Didipio, in Macquarie's view, remains the best asset and the rating is upgraded to Neutral from Underperform. Target is steady at $2.70.

Target price is $2.70 Current Price is $2.46 Difference: $0.24
If OGC meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.37, suggesting downside of -7.6% (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: 0.3

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

Ord Minnett rates PNV as Downgrade to Hold from Accumulate (3) -

Polynovo has announced FY21 revenue of around $25.5m, signalling 34% growth over FY20. All geographies grew, although from a low base.

Yet there is uncertainty regarding US hospitals re-engaging and a lack of formal guidance was a surprise to Ord Minnett, given robust commentary from US peers.

Ord Minnett suspects FY22 will be lumpy and there is a wide range of potential outcomes. The broker resets base projections and awaits evidence of a more stable and predictable environment, downgrading to Hold from Accumulate. Target is reduced to $2.54 from $3.10.

Target price is $2.54 Current Price is $2.30 Difference: $0.24
If PNV meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

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 PPS as Buy (1) -

Praemium had a record quarter of net flows and Ord Minnett observes strong momentum in all three businesses. While much depends on the price for the international business, the broker believes a successful sale will increase the attractiveness of the Australian business to a domestic suitor.

The broker values the international business at $120bn and the company has indicated there has been strong interest from a number of potential buyers. Ord Minnett reiterates a Buy rating and raises the target to $1.40 from $1.35.

Target price is $1.40 Current Price is $1.12 Difference: $0.28
If PPS meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

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 RWC as Equal-weight (3) -

Morgan Stanley makes revisions to the ratings and preferences for building materials companies. The Equal-weight rating for Reliance Worldwide Corp is unchanged, given a valuation that approximates fair value and muted end markets.

The target price of $4.40 is maintained. Industry view is Cautious. 

Target price is $4.40 Current Price is $5.38 Difference: minus $0.98 (current price is over target).
If RWC meets the Morgan Stanley target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.24, suggesting downside of -0.8% (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

Credit Suisse rates SFR as Outperform (1) -

Sandfire Resources finished the year strongly with copper and gold production at DeGrussa at, or above, the top end of guidance. DeGrussa will enter its final 15 months of planned copper production and the focus is shifting to Botswana.

Credit Suisse notes the coronavirus outbreak in Botswana is at its most severe and appears to be worsening and vaccine supply is yet to be secured. Hence, the current timeline to production in early 2023 is tight.

There are also border restrictions in Australia. Accordingly, modelling is altered to allow for production to commence mid 2023 and the broker applies a 15% escalation in capital expenditure. Outperform rating retained. Target is $8.55.

Target price is $8.55 Current Price is $6.83 Difference: $1.72
If SFR meets the Credit Suisse target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 12.7% (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

Macquarie rates SFR as Outperform (1) -

Preliminary production results were stronger than expected. The cash position of $574m at the end of FY21 is in line with Macquarie's expectations.

Earnings upgrade momentum remains strong, with a spot price scenario generating 22% higher earnings in FY22. The Outperform rating and $10 target are unchanged.

Target price is $10.00 Current Price is $6.83 Difference: $3.17
If SFR meets the Macquarie target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 12.7% (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

Macquarie rates SKI as Outperform (1) -

Spark Infrastructure is in a trading halt amid speculation that a bidder has emerged. Media reports suggests this has occurred at a price of $2.70 a share.

Macquarie notes a theme from the recent bid for Sydney Airport ((SYD)) centres on unlisted investors expecting bond rates will be lower for longer.

Moving bond rate expectations to a flat 2% signals to the broker a valuation closer to $2.48 versus its base value of $2.30. While Spark Infrastructure's leverage to bonds is a little more limited, Macquarie notes it is still positive.

Outperform rating and $2.30 target.

Target price is $2.30 Current Price is $2.48 Difference: minus $0.18 (current price is over target).
If SKI meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.30, suggesting downside of -12.6% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates TPW as Overweight (1) -

Ahead of August reporting season, seven small-mid-cap ideas with conviction into earnings, and on out/underperformance into the year ahead are highlighted by Morgan Stanley. Temple & Webster Group is the preferred online migration story.

The broker highlights strong near-term demand for Homewares & Furniture linked to rising house prices and online migration acceleration. It's thought long-term earnings (EBITDA)  margins of mid-teens are achievable, supported by highly profitable unit economics.

The Overweight rating and $15 target price are maintained. Industry view: In-Line.

Target price is $15.00 Current Price is $10.70 Difference: $4.3
If TPW meets the Morgan Stanley target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $12.81, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in June.

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 VRT as Reinstate coverage with Outperform (1) -

Macquarie reinstates coverage of Virtus Health with an Outperform rating and $7.15 target. The broker considers the outlook for assisted reproductive services in Australia attractive.

Increased volumes over the past year have been supported by a behavioural shift and this provides positive operating leverage.

The company is investing in technology to improve success rates and has also diversified its geographic exposure, largely through acquisition.

Target price is $7.15 Current Price is $6.42 Difference: $0.73
If VRT meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.51, suggesting upside of 1.4% (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

Macquarie rates XRO as Neutral (3) -

The roll-out of Analytics Plus should enhance revenue per unit for Xero, in Macquarie's view. The product uses artificial intelligence to predict future cash flows and the balance sheet outlook based on historical transactions.

It can allow businesses to make projections based on different time intervals. The product is being offered for free until January 31, 2022, from which time it will incur standard fees.

Yet the degree to which the product will be adopted is unclear, the broker points out. Neutral maintained. Target is $130.

Target price is $130.00 Current Price is $137.65 Difference: minus $7.65 (current price is over target).
If XRO meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $119.50, suggesting downside of -11.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

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