Australian Broker Call

Citi rates A2M as Sell (5) -

Citi notes a2 Milk’s small but growing market share in China combined with its strong track record indicates a substantial runway for growth.

However, the broker considers the outlook increasingly risky due to the ongoing resurgence of Chinese brands and an evolving regulatory landscape. The biggest risk to Citi's investment thesis is a2 Milk using its cash balance for acquisitions and capital management. 

Sell rating and $17.20 target retained.

Target price is $17.20 Current Price is $16.33 Difference: $0.87
If A2M meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $18.08, suggesting upside of 10.1% (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: 0.0

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

Ord Minnett rates A2M as Lighten (4) -

Ord Minnett makes a number of observations after an investor presentation by the a2 Milk company.

The outlook commentary was more subdued and while covid-19 was a positive initially, the impact now is more mixed. Additionally, there is daigou channel weakness due to covid-19 restrictions and competition headwinds remain. Finally, valuation support is not compelling.

Ord Minnett reduces underlying EPS forecasts for FY21 and FY22 by -4% and -4.7%, respectively.

The lighten rating is unchanged and the target price is decreased to $15.50 from $17.03

Target price is $15.50 Current Price is $16.33 Difference: minus $0.83 (current price is over target).
If A2M meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.08, suggesting upside of 10.1% (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: 0.0

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

Credit Suisse rates APX as Upgrade to Neutral from Underperform (3) -

Credit Suisse has become more balanced in its view of the stock and upgrades to Neutral from Underperform. The rating change is more about the share price than any fundamental difference.

Valuation still appears stretched at 51x 2020 price/earnings, although the broker notes the industry structure remains healthy. Credit Suisse increases 2021 sales forecasts on higher productivity assumptions. Target is raised to $30 from $29.

At this stage, the broker believes guidance for 2020 is achievable and leaves its forecast for $125.5m in operating earnings unchanged.

Target price is $30.00 Current Price is $31.50 Difference: minus $1.5 (current price is over target).
If APX meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.58, suggesting upside of 12.6% (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

Citi rates BHP as Neutral (3) -

Citi expects a modest pullback in the iron ore price in the near-term but believes the price will be rangebound between US$100-US$120/t range for the rest of 2020. Iron ore price forecasts for 2021-23 have been lifted due to a more constructive Chinese steel demand outlook.

BHP Group's FY21-23 net profit forecasts have been increased and Citi assumes a 70% dividend payout ratio implying FY21-23 dividends of US$1.65, US$1.72 and US$1.80 per share.

While the group wants to recycle cash into higher returning assets with growth optionality, the broker notes returns for projects like Jansen, Trion and T&T North gas appear challenged even at recovered commodity prices.

Citi retains its Neutral rating and $40 target.

Target price is $40.00 Current Price is $36.78 Difference: $3.22
If BHP meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $39.92, suggesting upside of 8.0% (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 BXB as Neutral (3) -

UBS expects flat volume growth over the next year. CHEP's superior scale provided insurance during the pandemic but a combination of a weak macro backdrop and tough comparables are likely to make it difficult to grow in FY21, in the broker's view.

Moreover, customers that considered CHEP had a cost/price advantage have, in the broker's latest survey, almost halved to 35% and competition now rates higher on this metric. UBS reduces estimates by -2-3%. Neutral retained. Target is reduced to $10.80 from $11.00.

Target price is $10.80 Current Price is $10.40 Difference: $0.4
If BXB meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $12.23, suggesting upside of 17.1% (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: 0.7

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

Credit Suisse rates CRN as Outperform (1) -

Credit Suisse finds a few signs there may be a turnaround for metallurgical coal. Seaborne markets have been heavily impacted over the past several months as steel production outside of China was curtailed and China restricted imports.

Market commentary signals that while output is still lagging, Indian domestic demand is improving and crude steel output in August showed a 5% month-on-month improvement.

Meanwhile, the capital raising in August has removed balance sheet risk and lifted the free float to 44%. The broker reiterates an Outperform rating with a $1.60 target.

Target price is $1.60 Current Price is $0.69 Difference: $0.91
If CRN meets the Credit Suisse target it will return approximately 132% (excluding dividends, fees and charges).

Current consensus price target is $1.51, suggesting upside of 106.8% (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: 1.0

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

Citi rates FMG as Neutral (3) -

Citi expects a modest pullback in the iron ore price in the near-term but believes the price will be rangebound between US$100-US$120/t range for the rest of 2020. Iron ore price forecasts for 2021-23 have been lifted due to a more constructive Chinese steel demand outlook.

The broker notes pure-play iron ore names like Fortescue Metals stand to benefit most from higher prices with near term earnings almost doubling. FY21 dividend is expected to be $2.05 with the risk to the share price seen to the upside.

Citi maintains its Neutral rating with the target price rising to $18.50 from $17.50.

Target price is $18.50 Current Price is $18.00 Difference: $0.5
If FMG meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $16.90, suggesting downside of -5.5% (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

Citi rates ILU as Neutral (3) -

Citi expects a modest pullback in the iron ore price in the near-term but believes the price will be rangebound between US$100-US$120/t range for the rest of 2020. Iron ore price forecasts for 2021-23 have been lifted due to a more constructive Chinese steel demand outlook.

Iluka Resources' 2022-23 earnings forecasts have been raised on higher MAC royalty payments. The broker notes while it will benefit from rising iron ore prices, what Iluka Resources lacks is the dividend attraction of the larger iron ore companies.

Citi maintains its Neutral rating with the target price rising to $10.50 from $10.

Target price is $10.50 Current Price is $9.78 Difference: $0.72
If ILU meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $9.90, suggesting downside of -1.3% (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

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

Morgan Stanley notes, in discussions with management, that growth in the future will come primarily from explosives. This is likely to focus company management on lower capital, differentiated offerings.

New manufacturing, particularly bulk ammonium nitrate, is unlikely to be the focus, as markets are in oversupply around the world.

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

Target price is $2.25 Current Price is $2.11 Difference: $0.14
If IPL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.54, suggesting upside of 20.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Macquarie rates MCR as Outperform (1) -

Mincor Resources has confirmed the existence of ore grade mineralisation at Cassini North, considered encouraging by Macquarie who believes both Cassini North and Cassini offer upside risk through exploration success which could imply mine life extensions. 

The broker notes securing finance so as to approve the Kambalda re-start presents a near term catalyst.

The Outperform rating is maintained. The target price is raised to $1.05 from $1.00.

Target price is $1.05 Current Price is $0.89 Difference: $0.16
If MCR meets the Macquarie target it will return approximately 18% (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

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

Citi expects a modest pullback in the iron ore price in the near-term but believes the price will be rangebound between US$100-US$120/t range for the rest of 2020. Iron ore price forecasts for 2021-23 have been lifted due to a more constructive Chinese steel demand outlook.

The broker notes pure-play iron ore names like Mount Gibson Iron will benefit the most from higher prices with near term earnings almost doubling.

Citi upgrades its rating to Buy from Neutral given the expectation of strong free cash flow generation at the new iron ore price deck. The target price rises to $1 from $0.75.

Target price is $1.00 Current Price is $0.75 Difference: $0.25
If MGX meets the Citi target it will return approximately 33% (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

Citi rates MYR as Buy (1) -

In an initial assessment of today's FY20 release, Citi analysts zoom in on balance sheet strength, also emphasising this is why they rate the stock Buy/High Risk, hereby retained.

Online sales are seen as a highlight, doubling YoY in 2H20, but they are equally weighing on margins in the near term. Earnings are expected to remain under pressure in FY21.

No trading update or outlook was provided.

Target price is $0.32 Current Price is $0.26 Difference: $0.06
If MYR meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $0.29, suggesting upside of 39.7% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates PBH as Upgrade to Neutral from Underperform (3) -

The company, in its deal with NBCUniversal, is now placed to be a national operator in the US sports betting and internet gaming industry. While the company will be paying for national advertising, Credit Suisse understands the deal allows for flexibility in terms of where the expenditure on marketing occurs.

The broker increases its US sports betting market share assumptions for PointsBet to 10% in states where it becomes operational. FY23 estimates are upgraded by 38% as costs are offset by increased revenue forecasts.

Rating is upgraded to Neutral from Underperform and the target lifted to $10.50 from $6.50.

Target price is $10.50 Current Price is $11.04 Difference: minus $0.54 (current price is over target).
If PBH meets the Credit Suisse target it will return approximately minus 5% (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

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

Citi expects a modest pullback in the iron ore price in the near-term but believes the price will be rangebound between US$100-US$120/t range for the rest of 2020. Iron ore price forecasts for 2021-23 have been lifted due to a more constructive Chinese steel demand outlook.

The broker forecasts Rio Tinto to have the highest absolute increase in earnings given the size of its iron ore footprint. Rio is Citi's preferred pick for iron ore exposure given a very under-geared balance sheet presenting an opportunity for higher dividends over the next 3 years.

Citi upgrades its rating to Buy from Neutral with the target price increasing to $115 from $100.

Target price is $115.00 Current Price is $99.08 Difference: $15.92
If RIO meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $105.71, suggesting upside of 5.2% (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

Morgans rates TNE as Upgrade to Add from Hold (1) -

The FY20 result for TechnologyOne is due on November 24 and Morgans expects it to be in-line with guidance and to contain no major surprises.

The broker notes the share price has fallen around -20% in the last four months, despite nothing much changing for the business.

The analyst reiterates key strengths including a resilient business model, which comes from having long sales cycles and deeply embedded enterprise grade software. Additionally, the customer base is large, diversified and very well-funded.

Some concerns may have arisen over the company’s education vertical and weakness in international students. Morgans reminds investors that the company’s revenue stream is not linked to international students.

The rating is upgraded to Add from Hold and the target price is decreased to $8.76 from $9.16.

Target price is $8.76 Current Price is $7.60 Difference: $1.16
If TNE meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $8.44, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in September.

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 WPL as Upgrade to Add from Hold (1) -

Morgans views Woodside Petroleum’s share price as trading at a discount to the value of its existing operations. As a result the broker upgrades the rating to Add from Hold and maintains the target price of $23.40.

The pursuit of growth opportunities and maintenance of an elevated dividend payout ratio raises the spectre of the need for additional external capital, the broker acknowledges.

However, under various equity raise scenarios, Morgans shows the company’s value is more sensitive to an eventual recovery versus future dilution risk.

The analyst points out a key risk would be a more severe regional economic hit from covid-19, than currently assumed by the broker.

Target price is $23.40 Current Price is $18.36 Difference: $5.04
If WPL meets the Morgans target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $23.63, suggesting upside of 28.6% (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: 0.7

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