Australian Broker Call

Citi rates A2M as Buy (1) -

After reviewing management commentary around FY21 results for Netherlands-based dairy company Ausnutria, Credit Suisse agrees on the prospect for improving birth rates in China. The broker estimates negative birth rate trends will reverse from the 2H of 2022.

That reversal may be driven by lower tier cities, where foreign infant milk formula (IMF) companies like a2 Milk Co don't have a strong presence, bemoans the analyst. 

While the dominance of domestic IMF brands in China is a risk, the analyst notes a2 Milk Co was the only multi-national player that took share in FY21. The Neutral rating and $7.02 target are retained.

Target price is $7.02 Current Price is $5.27 Difference: $1.75
If A2M meets the Citi target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $6.19, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in June.

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: 0.2

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

Morgan Stanley rates ALD as Overweight (1) -

As retail fuel margins have started the year weaker, given the run-up in oil prices, Morgan Stanley expects a slightly softer 1Q performance from Ampol.

Nonetheless, the broker feels the share price already captures the weaker margins and optimism around the 2Q is building as March retail fuel margins are increasing. 

The Overweight rating and $35 target price are retained.

Target price is $35.00 Current Price is $30.73 Difference: $4.27
If ALD meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $33.31, suggesting upside of 8.2% (ex-dividends)

The company's fiscal year ends in December.

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 ANZ as Overweight (1) -

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

ANZ Bank is one of the banks preferred under Morgan Stanley's coverage and the Overweight rating and $30.30 target are retained. Industry view: Attractive.

Target price is $30.30 Current Price is $27.88 Difference: $2.42
If ANZ meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $30.05, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Credit Suisse rates APE as Neutral (3) -

In a related party transaction, Eagers Automotive has acquired (subject to approval) a portfolio of dealerships and associated properties for -$205m. This follows last week's divestment of Bill Buckle Auto Group for $92m.

Credit Suisse makes no changes to forecasts due to a lack of available detail and the size of the transactions are deemed immaterial compared to the size of the company.

The analyst sees the supply of new vehicles to the Australian market as key to near-term earnings. The Neutral rating and $14.60 target price are maintained. 

Target price is $14.60 Current Price is $14.50 Difference: $0.1
If APE meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $17.32, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgans rates APE as Add (1) -

Eagers Automotive has purchased WFM Motors Canberra dealerships and properties for $205m and has sold the Bill Buckle dealerships for $92m.

The Canberra dealerships are owned by Eagers Automotive director Nick Politis so will require shareholder approval.

Morgans estimates the deal is roughly 3% accretive and says it provides an instant presence and scale in the Canberra market.

Vehicle supply remains the spanner in the works but in the meantime, Morgans says Eagers is busy building a sustainably higher earnings base via consolidation.

Add rating and $16.70 taret price retained.

Target price is $16.70 Current Price is $14.50 Difference: $2.2
If APE meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $17.32, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Ord Minnett rates APE as Buy (1) -

Ord Minnett points to the potential longer-term creation of a true national footprint from the potential -$205m acquisition of a group of dealerships (WFM Motors) and properties in Canberra. The size of the transaction is thought to be relatively immaterial.

The broker continues to believe the delivery of a strong order bank should see a beat versus the consensus forecast. The Buy rating and $17.50 target price are retained.

Target price is $17.50 Current Price is $14.50 Difference: $3
If APE meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $17.32, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

UBS rates APE as Buy (1) -

Eagers Automotive has purchased WFM Motors' ACT dealerships for $205m, after divesting Bill Buckle Auto Group for $92m.

UBS says ACT was the last remaining region for Eagers Automotive to enter and says the Bill  Buckle divestment frees capital to enable the company to consolidate its position and expand easyauto 123 into the territory.

The broker believes a return to normalisation of value will depend on supply constraints easing but in the meantime, the acquisition, rationalisation of the property portfolio, M&A prospects and potential contribution from easyauto 123 all count as positives.

FY22-FY24 EPS rise 1% and 3%. Buy rating and $18.35 target price retained.

Target price is $18.35 Current Price is $14.50 Difference: $3.85
If APE meets the UBS target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $17.32, suggesting upside of 21.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

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

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

The Equal-weight rating and $9.60 target are retained for Bendigo & Adelaide Bank. Industry view: Attractive.

Target price is $9.60 Current Price is $10.30 Difference: minus $0.7 (current price is over target).
If BEN 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 $10.31, suggesting upside of 0.0% (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

Macquarie rates BHP as Outperform (1) -

Elevated iron-ore and coking coal spot prices look to support earnings growth for BHP Group in the coming years according to Macquarie. The broker notes heightened pricing could drive a 64% and 147% increase to earnings forecasts for FY23 and FY24. 

Elsewhere, further near-term cash outflow may be required for the Samarco project, with a proposal to cap repair costs at -US$2.4bn likely requiring additional capital from BHP Group and its joint venture partner. BHP Group has contributed -US$2.2bn in cash to date.

The Outperform rating and target price of $61.00 are retained.

Target price is $61.00 Current Price is $50.58 Difference: $10.42
If BHP meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $49.56, suggesting downside of -4.2% (ex-dividends)

The company's fiscal year ends in June.

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: 0.4

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

Morgan Stanley rates BOQ as Overweight (1) -

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

Bank of Queensland is one of the banks preferred under Morgan Stanley's coverage and the Overweight rating and $10.20 target are retained. Industry view: Attractive.

Target price is $10.20 Current Price is $8.63 Difference: $1.57
If BOQ meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $10.36, suggesting upside of 19.1% (ex-dividends)

The company's fiscal year ends in August.

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

Citi rates BUB as Buy (1) -

After reviewing management commentary around FY21 results for Netherlands-based dairy company Ausnutria, Credit Suisse agrees on the prospect for improving birth rates in China. The broker estimates negative birth rate trends will reverse from the 2H of 2022.

That reversal may be driven by lower tier cities, where foreign infant milk formula (IMF) company's like Bubs Australia don't have a strong presence, bemoans the analyst. 

While the dominance of domestic IMF brands in China is a risk, the analyst notes the potential exit of smaller brands during 2022/2023 due to new SAMR regulations. The Buy rating and $0.73 target for Bubs Australia are retained.

Target price is $0.73 Current Price is $0.49 Difference: $0.24
If BUB meets the Citi target it will return approximately 49% (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 CBA as Underweight (5) -

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

The Underweight rating and $92 target are retained for CommBank. Industry view: Attractive.

Target price is $92.00 Current Price is $107.07 Difference: minus $15.07 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $92.45, suggesting downside of -12.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.6

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

Credit Suisse rates CGC as Outperform (1) -

Credit Suisse came away from a site visit to Costa Group's new glasshouse installation very positive on the outlook for tomatoes. 

While every 1% of tomato price growth relative to the broker's forecast adds 1% to profit, the analyst prefers to remain conservative in forecasts due to the unpredictable agricultural environment. The Outperform rating and $3.70 target are retained.

Target price is $3.70 Current Price is $3.18 Difference: $0.52
If CGC meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.64, suggesting upside of 14.7% (ex-dividends)

The company's fiscal year ends in December.

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 CHC as Outperform (1) -

Charter Hall has made a bid to acquire Irongate Group ((IAP)) in partnership with PGGM. Macquarie notes the proposal offers $1.90 cash per Irongate stapled security. 

The broker notes Charter Hall will hold a 12% interest in the partnership, and PGGM the remaining 88%. The partnership will fund the purchase, and intends to sell three Irongate properties to 360 Capital ((TGP)) following the acquisition for $256.7m, retaining $1.6bn in assets. 

The Outperform rating and target price of $23.10 are retained.

Target price is $23.10 Current Price is $16.37 Difference: $6.73
If CHC meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $21.76, suggesting upside of 31.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

Morgan Stanley rates EHE as No Rating (-1) -

Morgan Stanley discontinues coverage of Estia Health.

Current Price is $2.32. Target price not assessed.

Market Sentiment: 0.0

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

Macquarie rates FMG as Neutral (3) -

Fortescue Metals has signed a memorandum of understanding to supply up to 5m tonnes of green hydrogen to energy company E.ON annually by 2030, which Macquarie notes could enable Germany to replace around one third of its Russian gas imports.

With the company's Fortescue Future Industries subsidiary investing in green energy projects to supply 15m tonnes of green hydrogen anually by 2030, the E.ON memorandum equates to one-third of targeted production capacity. 

The company reiterates a 10% capital allocation to Future Industries, and commentary has suggest hydrogen projects would have separate funding, but Macquarie notes increased competition for Future Industries' capital could weigh on shareholder returns. 

The Neutral rating and target price of $20.00 are retained.

Target price is $20.00 Current Price is $19.80 Difference: $0.2
If FMG meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $17.59, suggesting downside of -15.0% (ex-dividends)

The company's fiscal year ends in June.

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: -0.4

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

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

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

National Australia Bank is one of the banks preferred under Morgan Stanley's coverage and the Equal-weight rating and $31.50 target are retained. Industry view: Attractive.

Target price is $31.50 Current Price is $32.37 Difference: minus $0.87 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $31.99, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates S32 as Outperform (1) -

Elevated spot pricing on coking coal, alumina and nickel look to support earnings upgrades for South32 in the coming year. Macquarie notes spot prices suggest a US$1.3bn earnings upside at Illawarra, US$480m at Carro Matoso, and US$550 from manganese operations.

South32's acquisition of Mozal continues to progress, with completion now expected mid-year. The acquisition delay drives a -1% decline to the broker's earnings per share forecast for FY22.

The Outperform rating and target price of $7.00 are retained.

Target price is $7.00 Current Price is $4.98 Difference: $2.02
If S32 meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $5.72, suggesting upside of 14.0% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates SGP as Overweight (1) -

As Stockland increases its commercial development and joint venture profits, Morgan Stanley feels the company's trading multiple is set to decouple from its historical linkage to the residential market.

Such a decoupling occurred for Mirvac Group ((MGR)) in 2017-2019, point out the analysts. Hence, the investment thesis for Stockland remains attractive even in the face of potential house price falls and rising interest rates, explain the analysts.

The Overweight rating and $5.05 target are retained. Industry View: In Line.

Target price is $5.05 Current Price is $4.30 Difference: $0.75
If SGP meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.90, suggesting upside of 14.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.6

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

Macquarie rates STO as Outperform (1) -

Santo's 2022 Climate Change Report has suggested a significant increase in new energies expenditure to support accelerated emissions reduction targets, with Macquarie noting the company aims for a -30% reduction by 2030 and net-zero emissions by 2040. 

Investment in carbon capture and storage (CCS) and hydrogen projects is necessary to targets, and the company suggested a potential US$5bn, up to 30% of the company's 2030 expenditure, could be committed to this based on the company's equity levels in projects. 

According to the broker, the Bayu Undan and Reindeer CCS projects look more likely to proceed following the company's recommitment to credible decarbonisation. 

The Outperform rating and target price of $10.50 are retained.

Target price is $10.50 Current Price is $7.87 Difference: $2.63
If STO meets the Macquarie target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $9.47, suggesting upside of 21.8% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Morgan Stanley rates VEA as Overweight (1) -

As retail fuel margins have started the year weaker, given the run-up in oil prices, Morgan Stanley expects a slightly softer 1Q performance from Viva Energy.

Nonetheless, the broker feels the share price already captures the weaker margins and optimism around the 2Q is building as March retail fuel margins are increasing. 

The Overweight rating and $2.70 target price are retained.

Target price is $2.70 Current Price is $2.41 Difference: $0.29
If VEA meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.8

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

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

Morgan Stanley believes net interest margin benefits for Australian banks from RBA rate hikes will be partly offset by higher funding costs, more intense mortgage competition and modestly higher loan losses.

Buybacks will continue, dividends are growing, and relative P/E multiples remain supportive, points out  the broker. An outperformance versus the ASX200 in 2022 is expected.

The Equal-weight rating and $22.40 target are retained for Westpac. Industry view: Attractive.

Target price is $22.40 Current Price is $24.51 Difference: minus $2.11 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.16, suggesting upside of 3.4% (ex-dividends)

The company's fiscal year ends in September.

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