Australian Broker Call

Morgan Stanley rates 360 as Overweight (1) -

The main positive Morgan Stanley derived from the recent results is the conversion to paying circles has improved. This implies faster payback or the ability to sustain existing payback periods at scale.

The broker believes the next catalyst is longer-term user acquisition at scale and acceptance of a broader product offering.

The broker does not believe the monetisation of Indirect is in consensus forecasts, although management has indicated this has potential to be bigger than the subscription-based business.

Overweight rating and $9.80 target price retained. Industry view: In-line.

Target price is $9.80 Current Price is $9.30 Difference: $0.5
If 360 meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

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: 1.0

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

Ord Minnett rates ABB as Buy (1) -

Aussie Broadband has executed a $114m share placement and a share purchase plan for a minimum $10m will follow. This will fund several acquisitions.

Ord Minnett envisages scope for the company to borrow around 2x EBITDA which provides a theoretical capacity of more than $250m and widens the range of options significantly.

The company has also signed a 10-year fibre capacity swap agreement with VicTrack, and while the economics are neutral for the short term, the broker considers the agreement will substantially widen the opportunity in the business market.

Buy rating retained. Target rises to $5.35 from $4.32.

Target price is $5.35 Current Price is $4.95 Difference: $0.4
If ABB meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Credit Suisse rates ALL as Outperform (1) -

Credit Suisse expects, in FY21, Aristocrat Leisure will pay a commission of around $700m to mobile platforms such as Google Play or the Apple App Store.

A -5% reduction in mobile platform fees over time from the current 28% is calculated to lift valuation by $6.  Also contributing to reduced platform fees, albeit a smaller component, Microsoft is cutting commissions to 12% from 30% and Aristocrat Leisure is already a beneficiary.

Global regulatory pressure on fees is a tailwind yet Credit Suisse only incorporates the prospect into its target, leaving earnings estimates unchanged at this point. Outperform rating maintained. Target rises to $50.30 from $44.25.

Target price is $50.30 Current Price is $46.84 Difference: $3.46
If ALL meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $44.39, suggesting downside of -7.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.6

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

UBS rates AMA as Neutral (3) -

AMA Group has raised $150m to permanently repay $73m in debt facilities and provide $69m in working capital. The intentions are to reduce net debt, lengthen debt duration and improve liquidity.

Bank debt facilities are being restructured with no facility maturing before October 2024 and the first covenant test to be June 2022. The company has outlined a medium-term target of 180 sites and $1bn or more in turnover. UBS retains a Neutral rating and $0.45 target.

Target price is $0.45 Current Price is $0.42 Difference: $0.03
If AMA meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.0

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

Citi rates ANZ as Sell (5) -

Citi notes recent data from APRA signals a sharp contraction in the mortgage book of ANZ Bank despite strong market conditions. The broker observes below-system growth has been a feature of the past four years.

This is attributed to several issues, namely an over reliance on manual systems, restrictive credit policies, a reduced physical network and poor service to the broker channel. Going forward Citi believes there are better prospects for peers and retains a Sell rating and $28 target.

Target price is $28.00 Current Price is $27.59 Difference: $0.41
If ANZ meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $29.60, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in September.

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

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

Morgans upgrades to Add from Hold, assessing returns are improving at current prices. Beyond FY22 the broker expects a slight decline in earnings through FY23-24 because of falling interest rates.

This will affect the re-set of the network pricing in FY24 and pressure on coal earnings is anticipated amid a decline in contracted capacity and pricing.

The long-dated nature of the assets makes earnings less correlated with the business cycle and this provides a defensive element, the broker suggests. There is also the flexibility to pursue growth investments and/or capital management. Target is raised to $4.14 from $4.06.

Target price is $4.14 Current Price is $3.82 Difference: $0.32
If AZJ meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.52, suggesting upside of 17.1% (ex-dividends)

The company's fiscal year ends in June.

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 BST as Initiation of coverage with Outperform (1) -

Macquarie initiates coverage on Best & Less Group Holdings with an Outperform rating and a price target of $3.40.

The group is a value retailer which the broker believes has market share expansion opportunities due to Discount Department Store competitors shrinking store networks and internal initiatives.

The broker expects the group to open 7 new stores in each of FY22, FY23, and FY24, supporting its forecast for top-line growth. This is in line with the company’s ambitions to open 15 to 25 new stores over the coming years.

Macquarie believes resilient demand in the baby category should provide support, but is forecasting 50bp gross margin percentage moderation over FY21-FY23, skewed to FY23, following considerable expansion.

Target price is $3.40 Current Price is $2.91 Difference: $0.49
If BST meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Morgan Stanley rates CCX as Overweight (1) -

Morgan Stanley believes City Chic is well-placed to take share from incumbents with its specialty offering.

A competitor in the US, Torrid, has provided quarterly results which also validate the attractiveness of the plus-size category, being high-growth.

Overweight rating and $6.65 target maintained. Industry view: In-line.

Target price is $6.65 Current Price is $6.42 Difference: $0.23
If CCX meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.76, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.9

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

Macquarie rates CSR as Outperform (1) -

While covid lockdowns have not materially influenced CSR Ltd's trading, Macquarie believes general constraints are pushing activity to the right, which the broker suspects could become more evident for the company early in second half FY22, with product demand following commencements by a larger lag.

The broker thinks CSR is strongly levered to this improving (and extending) demand curve and has revised FY22, FY23, and FY24 earnings per share (EPS) estimates by -7%, 18%, and 25%, respectively.

The broker also thinks operating leverage is under-appreciated and remains 9% and 18% ahead of consensus in FY22 and FY23, respectively.

The Outperform rating is maintained and the target price is lowered to $6.45 from $6.50.

Target price is $6.45 Current Price is $5.65 Difference: $0.8
If CSR meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $6.34, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.7

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

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

The NSW government has announced just four priority infrastructure areas, all in regional NSW, permitted for developing new thermal energy from waste. This does not include the Cleanaway Waste project at Eastern Creek.

The company has indicated it would re-evaluate the project and look for alternative locations. Morgan Stanley does not believe investors specifically valued the Eastern Creek project in view of the long development and construction time, and does not include it in the base case.

Morgan Stanley retains the Equal-Weight rating and $2.78 target price. Industry view: Cautious. 

Target price is $2.78 Current Price is $2.68 Difference: $0.1
If CWY meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Ord Minnett rates FMG as Buy (1) -

Ord Minnett now factors in lower iron ore prices. Earnings forecasts have been lowered by -10-35% given the drop in iron ore prices.

The broker retains a Buy rating and reduces the target to $26 from $28.

Target price is $26.00 Current Price is $18.27 Difference: $7.73
If FMG meets the Ord Minnett target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $20.89, suggesting upside of 13.7% (ex-dividends)

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: 0.1

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

UBS rates IPL as Buy (1) -

UBS observes the stock is highly leveraged to global agricultural conditions in fertiliser pricing, which are favourable. Manufacturing performance has improved and the explosives market remains resilient.

EBIT growth of 30% is anticipated in FY22, and UBS also forecasts free cash flow of around $400m which supports an attractive yield of 8%.

Diammonium phosphate and ammonia prices have rallied strongly, with the former in Asia up 70% in the year to date and the Tampa ammonia contract price up 140%. UBS retains a Buy rating and raises the target to $3.10 from $2.91.

Target price is $3.10 Current Price is $2.72 Difference: $0.38
If IPL meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates MFG as Downgrade to Sell from Neutral (5) -

Retail funds under management are experiencing outflows and UBS anticipates there would have been around -$255m of retail net outflows during August. Meanwhile pressure on fees is elevated.

The higher-than-average fees and below-average performance is likely to put pressure on the company to lower base management fees, in the broker's opinion, and the rating is downgraded to Sell from Neutral.

Earnings estimates are lowered by -3% for FY22 to reflect these assumptions. Target is reduced to $35.00 from $52.70.

Target price is $35.00 Current Price is $40.50 Difference: minus $5.5 (current price is over target).
If MFG meets the UBS target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $44.27, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.2

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

Ord Minnett rates MIN as Downgrade to Hold from Buy (3) -

Ord Minnett now factors in lower iron ore prices and reviews its forecasts for base metals and coal. Earnings forecasts have been lowered by -10-35% given the drop in iron ore prices.

As a result the broker downgrades Mineral Resources to Hold from Buy. Target is reduced to $57 from $68.

Target price is $57.00 Current Price is $53.16 Difference: $3.84
If MIN meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $57.92, suggesting upside of 10.3% (ex-dividends)

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.4

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

Credit Suisse rates NAB as Downgrade to Neutral from Outperform (3) -

Credit Suisse downgrades to Neutral from Outperform, noting the stock has rallied 5% over the reporting season and is up 64% on a rolling year basis.

While the bank has restored operating momentum, the broker believes this is now captured in the share price.

National Australia Bank has historically traded at a -5% PE discount to the major banks compared to its current level of parity, the broker adds. Target is steady at $28.50.

Target price is $28.50 Current Price is $28.45 Difference: $0.05
If NAB meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $28.19, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates ORI as Hold (3) -

The trading update has highlighted there have been no material changes in the business and Morgans assumes Orica is comfortable with consensus estimates for FY21. Some markets continue to be affected by the pandemic and Latin America by unrest.

Morgans maintains FY21 forecasts but reduces FY22 and FY23 forecasts because of the cyclical and structural issues that are impacting the business. Nevertheless, solid earnings growth is anticipated.

The business is considered well-positioned over the medium term and a Hold rating is maintained. Target is reduced to $13.65 from $14.56.

Target price is $13.65 Current Price is $12.47 Difference: $1.18
If ORI meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $13.76, suggesting upside of 11.2% (ex-dividends)

The company's fiscal year ends in September.

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 RIO as Buy (1) -

Ord Minnett now factors in lower iron ore prices and reviews estimates for base metals and coal. Earnings forecasts across the sector have been lowered by -10-35% given the drop in iron ore prices.

The broker retains a Buy rating and reduces the target to $150 from $161.

Target price is $150.00 Current Price is $106.22 Difference: $43.78
If RIO meets the Ord Minnett target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $130.43, suggesting upside of 23.0% (ex-dividends)

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

Macquarie rates RMS as Outperform (1) -

Ramelius Resources'  overall resource estimate at June 30 2021 was 110Mt at 1.6g/t for 5.4Moz which Macquarie notes is up 15% despite -0.29Moz of mining depletion over FY21.

The larger resource base is due to exploration drilling and additions to the Eridanus and Galaxy areas at Mt Magnet and growth at Edna May. The company notes that reserves are estimated using varying gold price assumptions between $1,800-2,300/oz (spot $2,435/oz).

The resource and reserve update results in Macquarie making minor changes to earnings per share (EPS) estimates in FY22-FY24
with a -4% reduction and 3% lift seen in FY25 and FY26, respectively.

Outperform rating is maintained and the price target is increased to $1.90 from $1.80.

Target price is $1.90 Current Price is $1.43 Difference: $0.47
If RMS meets the Macquarie target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $2.11, suggesting upside of 44.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Morgan Stanley rates RMS as Overweight (1) -

Morgan Stanley notes a material increase to resources, up 23%. Reserves are flat, net of depletion, yet upcoming studies at Galaxy underground and Edna May have the potential for sizeable increases.

The broker retains an Outperform rating and $2.35 target. Industry View: Attractive.

Target price is $2.35 Current Price is $1.43 Difference: $0.92
If RMS meets the Morgan Stanley target it will return approximately 64% (excluding dividends, fees and charges).

Current consensus price target is $2.11, suggesting upside of 44.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 1.0

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

Ord Minnett rates S32 as Buy (1) -

Strength in aluminium and the alumina price and a bounce in metallurgical coal have meant a 38% increase in FY22 earnings estimates for South32.

The stock remains one of Ord Minnett's top picks despite the share price strength. Buy rating retained. Target is raised to $3.90 from $3.60.

Target price is $3.90 Current Price is $3.42 Difference: $0.48
If S32 meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.61, suggesting upside of 5.1% (ex-dividends)

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: 1.0

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

Macquarie rates STO as No Rating (-1) -

Moomba CCS project is likely to reach final investment decision shortly and is expected to reduce Santos Ltd's direct net
emissions by -20%-plus while earning US$50m-plus in Australian Carbon Credit Units (ACCU) annually from 2024.

Macquarie expects the Moomba CCS project to be lower risk, given it targets CO2 injection into depleted high permeability O&G
reservoirs.

Macquarie values Moomba CCS at 7cps, but notes it is immaterial to the company's overall valuation on the broker's projections but a critical step in the company's emissions reduction plan (the next of which will be blue hydrogen).

Due to research restrictions, Macquarie cannot advise on either a target price or rating for Santos at present.

Current Price is $6.06. Target price not assessed.

Current consensus price target is $8.00, suggesting upside of 29.4% (ex-dividends)

The company's fiscal year ends in May.

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: 0.7

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

Ord Minnett rates WOR as Hold (3) -

Ord Minnett observes the leading indicators for Worley continue to improve. The broker had previously been concerned about overly optimistic estimates but consensus net profit forecasts are now significantly lower and more in line with its expectations.

Ord Minnett assesses capital expenditure forecasts imply revenue growth of 9% in FY22 and 5% in FY23. Despite the improving conditions the broker believes the stock is fairly valued and retains a Hold rating and $11.30 target.

Target price is $11.30 Current Price is $10.28 Difference: $1.02
If WOR meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $11.53, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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