Australian Broker Call

UBS rates AST as Neutral (3) -

The Australian energy regulator will give its final verdict on AusNet Services' Victorian electricity distribution (ELEC-D) network, the largest asset that contributes 48% of the group's operating income, on April 30.

UBS's forecast reflects higher ELEC-D revenue due to applying the regulator's new approach to estimate inflation which is offset by lower expected earnings from the electricity transmission (ELEC-T) asset having overspent its allowance in the 2019-20 regulatory year.

The broker maintains its preference for AusNet Services over Spark Infrastructure Group ((SKI)) since AusNet's Mondo business offers a pure-play on low-risk unregulated growth upside via the renewables and interconnector build-out in Victoria. 

UBS maintains its Neutral rating with the target price falling to $1.90 from $2.

Target price is $1.90 Current Price is $1.88 Difference: $0.02
If AST meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.88, suggesting upside of 0.5% (ex-dividends)

The company's fiscal year ends in March.

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

Ord Minnett rates BSL as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades its rating on BlueScope Steel to Buy from Accumulate with a target price of $26 from $23.

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and increases its steel price estimates. The broker notes BlueScope Steel’s spreads continue to grow and expects another guidance upgrade.

Target price is $26.00 Current Price is $20.27 Difference: $5.73
If BSL meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $21.03, suggesting upside of 3.5% (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 DXS as Outperform (1) -

Macquarie expects effective office rents to fall by -20-30% but believes its expectations about a decline in asset values of -5-10% may have been too conservative. The broker now expects asset valuations to fall by -2.5-7.5%.

Even so, looking at the potential for vacancy and incentives to rise, Macquarie does not want to become too positive at this point in the cycle. 

The broker increases Dexus's target price to $10.33 from $10.05. Outperform rating.

Target price is $10.33 Current Price is $9.96 Difference: $0.37
If DXS meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.32, suggesting downside of -6.2% (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

Ord Minnett rates FMG as Buy (1) -

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and kept iron ore price estimates steady.

The broker believes the fears of steel output cuts from China appear to be overblown and there is plenty of production capacity elsewhere to make up the difference with losses to electric arc furnaces likely to have a minimal impact on iron ore demand.

Iron ore has now recovered to above US$172/t and Ord Minnett believes the major iron ore producers are well-positioned to re-rate. Even so, Ord Minnett retains its Buy rating for Fortescue Metals Group with the target dropping slightly to $29 from $30.

Target price is $29.00 Current Price is $20.89 Difference: $8.11
If FMG meets the Ord Minnett target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $21.88, suggesting upside of 6.5% (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

Ord Minnett rates GOR as Buy (1) -

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and maintains its price estimate of gold. The broker concedes its US$1,700 near-term and US$1,600/oz long-term price forecasts are not overly optimistic.

Some key stock preferences are Northern Star Holdings ((NST)), Newcrest Mining ((NCM)) and Gold Road Resources.

Buy rating retained with the target falling to $2.05 from $2.

Target price is $2.05 Current Price is $1.24 Difference: $0.81
If GOR meets the Ord Minnett target it will return approximately 65% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 GPT as Neutral (3) -

Macquarie expects effective office rents to fall by -20-30% but believes its expectations about a decline in asset values of -5-10% may have been too conservative. The broker now expects asset valuations to fall by -2.5-7.5%.

Even so, looking at the potential for vacancy and incentives to rise, Macquarie does not want to become too positive at this point in the cycle. 

The broker increases GPT Group's target price to $4.69 from $4.61. Neutral rating.

Target price is $4.69 Current Price is $4.74 Difference: minus $0.05 (current price is over target).
If GPT meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.65, suggesting downside of -1.5% (ex-dividends)

The company's fiscal year ends in December.

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 IAP as Outperform (1) -

According to media reports, 360 Capital Group ((TGP)), with a 15.2% stake in Irongate Group, might be looking to acquire the group.

Macquarie notes on a dividend yield basis, Irongate's valuation is attractive and better than metro office/industrial peers like Growthpoint Properties Australia ((GOZ)) and APN Industria REIT ((ADI)). Further, the group has shown cashflow resilience in the face of covid. 

Outperform rating with a target of $1.38.

Target price is $1.38 Current Price is $1.36 Difference: $0.02
If IAP meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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 MFG as Neutral (3) -

Funds under management as of March were $106.1bn, up 5.4%. This was driven by positive market movements and small inflows. Credit Suisse suspects the buyback could begin to weigh on the business, as the discount to asset value is preventing options being exercised.

Meanwhile, performance fees are on track for lower levels in the second half and are not considered likely for the Global Fund or the Infrastructure Fund. Credit Suisse reiterates a Neutral rating, being cautious about short-term flows. Target is reduced to $50 from $53.

Target price is $50.00 Current Price is $47.98 Difference: $2.02
If MFG meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $50.41, suggesting upside of 4.2% (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

Morgan Stanley rates MFG as Underweight (5) -

Net inflows were below Morgan Stanley's forecasts in the March quarter. Investment performance remains soft. Magellan Financial is switching to quarterly flow reporting from monthly reporting, which the broker points out reduces disclosure but is consistent with peers.

The $726m Global Fund partnership raising drove the retail flows, hence the broker suggests it is not clear if a slowdown in performance has affected underlying retail flows.

Morgan Stanley believes the stock is expensive compared with peers and there is better value elsewhere, maintaining an Underweight rating and $39.60 target. Industry view: In-line. 

Target price is $39.60 Current Price is $47.98 Difference: minus $8.38 (current price is over target).
If MFG meets the Morgan Stanley target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $50.41, suggesting upside of 4.2% (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

UBS rates MFG as Neutral (3) -

Magellan Financial Group reported funds under management of $106.1bn, slightly ahead of UBS's estimate of $105.6bn and grew 5.4% over the month. The rise was driven by positive net inflows of $206m along with net market movements of 5.2%.

While institutional net flows went back to positive territory, the retail segment showed net outflows and remains distorted in the broker's view. The broker expects the retail flow trends to become clearer going forward.

UBS's key concern remains an extended period of investment underperformance that may translate to sustained net outflows. 

 The target remains unchanged at $52 with a Neutral rating.

Target price is $52.00 Current Price is $47.98 Difference: $4.02
If MFG meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $50.41, suggesting upside of 4.2% (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

Macquarie rates MGR as Outperform (1) -

Macquarie expects effective office rents to fall by -20-30% but believes its expectations about a decline in asset values of -5-10% may have been too conservative. The broker now expects asset valuations to fall by -2.5-7.5%.

Even so, looking at the potential for vacancy and incentives to rise, Macquarie does not want to become too positive at this point in the cycle. 

The broker increases Mirvac Group's target price to $2.91 from $2.88. Outperform rating.

Target price is $2.91 Current Price is $2.47 Difference: $0.44
If MGR meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting upside of 7.0% (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

Citi rates MQG as Sell (5) -

Citi suspects Macquarie Group will have little choice but to guide to an earnings decline in FY22.

While there was a large upgrade to FY21 earnings guidance in February, this only begs the question regarding the cycling of comparables.

Given abnormal events in the FY21 base, Citi believes management will need to be conservative. Sell rating reiterated. Target is $125.

Target price is $125.00 Current Price is $154.80 Difference: minus $29.8 (current price is over target).
If MQG meets the Citi target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $149.22, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in March.

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 NCM as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades its rating on Newcrest Mining to Buy from Accumulate with a target price of $36.50.

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and maintains its price estimate of gold. The broker concedes its US$1,700 near-term and US$1,600/oz long-term price forecasts are not overly optimistic.

Some key stock preferences are Northern Star Holdings ((NST)), Gold Road Resources ((GOR)) and Newcrest Mining. 

Target price is $36.50 Current Price is $26.70 Difference: $9.8
If NCM meets the Ord Minnett target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $31.35, suggesting upside of 20.5% (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: 1.0

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

Ord Minnett rates NST as Buy (1) -

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and maintains its price estimate of gold. The broker concedes its US$1,700 near-term and US$1,600/oz long-term price forecasts are not overly optimistic.

Some key stock preferences are Northern Star Holdings, Gold Road Resources ((GOR)) and Newcrest Mining ((NCM)).

Buy rating and the target rises to $13.50 from $13.40.

Target price is $13.50 Current Price is $10.90 Difference: $2.6
If NST meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $13.23, suggesting upside of 24.9% (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

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

Led by the recent strong run in the share price, Ord Minnett downgrades its rating on Orocobre to Hold from Buy with a target of $5.50.

The broker's lithium chemical price forecasts remain unchanged, although spodumene price forecasts have been increased by 5-10%. Further, with demand for electric vehicles (EV) taking off, supply has tightened quickly.

Target price is $5.50 Current Price is $5.55 Difference: minus $0.05 (current price is over target).
If ORE meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.16, suggesting downside of -5.4% (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

Morgans rates RCW as Hold (3) -

Rightcrowd has raised $12.5m at 33cps to deploy over the next 2-3 years to grow sales and technical support teams, predominately in the US. Hold rating retained and target increased to $0.39 from $0.37.

The broker highlights first half revenue grew 66% year-on-year while opex grew just 3%. Also 50 customers were added, which was the fastest rate of customer additions to-date.

Management expects FY21 revenue to grow by 40% year-on-year and the loss to halve. Also, around $30m of revenue is expected in FY23 and profitability should be reached in that year. 

Target price is $0.39 Current Price is $0.41 Difference: minus $0.02 (current price is over target).
If RCW meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Market Sentiment: 0.0

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

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

Rio Tinto has reached an agreement with Turquoise Hill on a financing plan for Oyu Tolgoi, to the tune of an estimated US$2.3 bn, in order to complete the underground project.

Rio Tinto has agreed to address any potential funding shortfalls up to US$750m on the same terms as the project financing. Rio Tinto has a 50% interest in Turquoise Hill and 34% economic interest in Oyu Tolgoi.

Equal-weight rating retained. Industry view is In-Line. Target price is $114.

Target price is $114.00 Current Price is $115.50 Difference: minus $1.5 (current price is over target).
If RIO meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $125.57, suggesting upside of 9.4% (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: 0.6

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

Ord Minnett rates SBM as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades its rating on St Barbara to Buy from Accumulate with the target price rising to $3 from $2.90.

Ord Minnett has marked to market its forward-curve-based commodity and currency forecasts and maintains its price estimate of gold. The broker concedes its US$1,700 near-term and US$1,600/oz long-term price forecasts are not overly optimistic.

Target price is $3.00 Current Price is $2.15 Difference: $0.85
If SBM meets the Ord Minnett target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $2.83, suggesting upside of 34.1% (ex-dividends)

The company's fiscal year ends in June.

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

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

Credit Suisse upgrades lottery earnings estimates by around 5% as revenue momentum throughout March has signalled growth is substantial. The broker also reflects the prospect of a de-merger in its valuation after the company announced a strategic review.

A de-merger of the lottery business, with no change in the control of wagering, would avoid the requirement for industry approvals and likely one-off payments to separate the two.

The broker also assumes Tabcorp exits gaming services, effectively divesting 10,000 slot machines back to venue operators or third parties. Rating is upgraded to Outperform from Neutral and the target increased to $5.70 from $4.60.

Target price is $5.70 Current Price is $4.94 Difference: $0.76
If TAH meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.55, suggesting downside of -7.4% (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 VCX as Underweight (5) -

Morgan Stanley believes conditions could not be more favourable for divestments. In 2018/19 the company launched a strategy to divest the non-core parts of its portfolio but only some sales were executed and the idea was canned eventually.

Morgan Stanley has evidence investor interest in retail assets worth less than $150m has improved, although hastens to add the company has not signalled any intention to renew its divestment strategy.

Still, the broker notes that establishing a fund/asset management business remains one of Vicinity Centres' core strategies.

Underweight rating. The target is $1.63. Industry view: In-line.

Target price is $1.63 Current Price is $1.70 Difference: minus $0.07 (current price is over target).
If VCX 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 $1.64, suggesting downside of -2.0% (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