Australian Broker Call

Credit Suisse rates AGL as Underperform (5) -

AGL Energy has provided an update on the separation of its assets and also indicated FY21 EBITDA will be at the lower end of the guidance range of $1585-1845m and net profit at the mid point of the $500-580m range.

AGL Energy expects to realise $400-500 in specials and underwritten dividend reinvestment plans from the separation. Credit Suisse also notes the 15-20% retained holding in "new AGL" by Accel (the core entity) is financial more than strategic and destined to be sold.

Credit Suisse retains an Underperform rating and reduces the target to $6.80 from $7.00.

Target price is $6.80 Current Price is $8.20 Difference: minus $1.4 (current price is over target).
If AGL meets the Credit Suisse target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.78, suggesting upside of 8.4% (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 AGL as No Rating (-1) -

AGL Energy has reiterated its EBITDA guidance for FY21 of $1585-1845m, although indicated the outcome is likely to be at the lower end of the range.

The second half of FY21 and first half FY22 dividend have been reduced to 75% of net profit down from 100%, along with a full underwriting of the dividend.

There were also more details around the demerger. Macquarie suggests the FY22 outlook is challenged, with around $115m as favourable one-off items are no longer in the profit and loss statement and this is playing out in cash flow.

Due to research restrictions, Macquarie cannot advise its valuation on AGL at present.

Current Price is $8.20. Target price not assessed.

Current consensus price target is $8.78, suggesting upside of 8.4% (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

Morgan Stanley rates AGL as Underweight (5) -

As with many demergers, the upside for investors is difficult to quantify Morgan Stanley asserts. The company has clarified its key leadership, offtake and capital structure settings ahead of implementation.

The broker assesses the "new AGL", the proposed short energy retailer, has attractive re-rating potential on financial grounds with exposure to renewables growth. On the other hand, the other part, named Accel, may be excluded from many institutional mandates in view of its carbon intensity.

Underweight rating. Target is $8.88. Industry view: Cautious.

Target price is $8.88 Current Price is $8.20 Difference: $0.68
If AGL meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.78, suggesting upside of 8.4% (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

Ord Minnett rates AGL as Hold (3) -

With the company expected to split by the June quarter of 2022, AGL Energy provided detailed separation plans. The existing entity will become Accel Energy. Accel will then spin off the retail assets into a new entity, AGL Australia.

AGL Australia will contain the electricity and gas retail business, the 20% stake in PowAR and the gas peaking assets. Accel will retain a 20% stake in AGL Australia.

A key negative, according to Ord Minnett, was the lowering of dividends for the next 12 months leading to the demerger. Meanwhile, AGL reiterated it expects a material step-down in earnings in FY22. The Hold rating and $8.80 target are retained.

Target price is $8.80 Current Price is $8.20 Difference: $0.6
If AGL meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.78, suggesting upside of 8.4% (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

UBS rates AGL as Sell (5) -

To support an investment grade rating of the two demerged companies (now rebranded Accel Energy and AGL Australia), AGL Energy will raise $400-500m of additional equity. This will be done via terminating the Special Dividend Program and underwriting both the FY21 final dividend and FY22 dividend.

Accel Energy is planned to own a 15-20% equity interest in AGL Australia. This is necessary to support its credit metrics, given it will
have a volatile, declining earnings outlook, in the broker's view.

The analyst continues to see downside risk, given material earnings headwinds into FY22, and both one-off and reoccurring dis-synergy costs associated with the demerger. The Sell rating and $7.60 target are maintained.

Target price is $7.60 Current Price is $8.20 Difference: minus $0.6 (current price is over target).
If AGL meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.78, suggesting upside of 8.4% (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

UBS rates ALL as Buy (1) -

UBS assesses Aristocrat Leisure's digital business grew at circa 5% over the first two months of the 2H. Whilst social casino appears to be tracking down -10%, data suggests this is being offset by growth in the social gaming portfolio, which is tracking up around 20%.

The broker expects digital growth in the 2H will moderate, given the period of elevated activity in the pcp, which benefitted from global lockdowns. Buy rating and $44.40 target retained.

Target price is $44.40 Current Price is $43.09 Difference: $1.31
If ALL meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $43.11, suggesting upside of 2.5% (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

Ord Minnett rates AMC as Accumulate (2) -

Recent data shows Ord Minnett that trends in beverages remain supportive, helped by an easy comparable period. It's thought Amcor’s rigids division volumes will be solid in the June quarter. However, tougher comparatives will be faced in the two subsequent quarters.

Packaged food trends are weaker, again due partly comparable-period effects, implying to the broker a more difficult volume growth figure for Amcor in the June quarter. The Accumulate rating and $17 target are retained.

Target price is $17.00 Current Price is $15.13 Difference: $1.87
If AMC meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $17.13, suggesting upside of 11.9% (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

Morgans rates AMS as Add (1) -

A trading update demonstrates to Morgans a significant pick-up in sales to close out the year. Sales and earnings (EBITDA) were estimated to be materially ahead of expectations, with a likely channel stocking benefit in late 2H, following the release of five new products.

The broker sees further upside to new product releases and improved gross margins, with a higher margin technology stack building and as the platform/software piece unfolds.

The Add rating is maintained and target rises to $1.54 from $1.38.

Target price is $1.54 Current Price is $1.07 Difference: $0.47
If AMS meets the Morgans target it will return approximately 44% (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 AMS as Buy (1) -

Ord Minnett's key takeaway from the recent trading update was that late 1H21 momentum has extended into the second half, leading to revenue growth of 35%, half-on-half. FY21 revenue of greater than $77m was 16.5% ahead of expectations.

This was driven by the operating leverage that benefits Atomos as sales expand, explains the broker. It's felt benefits will accrue from
the accelerated shift towards video content creation, and continued gross margin uplift is expected.

The target price is increased to $1.47 from $1.35. The Buy rating is unchanged.

Target price is $1.47 Current Price is $1.07 Difference: $0.4
If AMS meets the Ord Minnett target it will return approximately 37% (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 APT as Outperform (1) -

Macquarie envisages more catalysts beyond the US affiliate program will drive a re-rating, such as Afterpay Money, a new reward scheme, the roll-out in the EU and offshore investments.

The broker increases FY22-23 revenue estimates by 2-6%. While maintaining an Outperform rating Macquarie acknowledges the stock is no longer looking "cheap" versus peers in the segment, but is not overpriced either. Target is raised to $140 from $120.

Target price is $140.00 Current Price is $118.17 Difference: $21.83
If APT meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $124.47, suggesting upside of 4.6% (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

UBS rates AST as Neutral (3) -

The draft decision of the Australian Energy Regulator (AER) lowered the average post-tax nominal weighted average cost of capital (WACC) to apply over 2022-27 to 4.22%. This was in-line with UBS's estimate and considered already factored into the price.

The broker considers the result reflects a solid outcome for AusNet Services’ second largest asset (ELEC-T), given how closely the draft decision reflects the initial proposal. The Neutral rating and $1.80 target are retained.

Target price is $1.80 Current Price is $1.75 Difference: $0.05
If AST meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.82, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: -0.1

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

UBS rates CKF as Downgrade to Neutral from Buy (-1) -

A strong first half result by Collins Foods beat UBS's profit estimate by 8%, driven by impressive like-for-like sales in KFC Australia. However, the result was considered to not have benefited from as much potential 2H21 operating leverage, given the strong top line.

The broker considers KFC Europe was challenging, however, post the Dutch acquisitions (8 stores), the business is well placed for the recovery over the next 12-24 months.

The analyst continues to like the story though downgrades the rating to Neutral from Buy, given a few concerns including the recent share price rise and the current lockdowns during school holidays. The target price rises to $12.85 from $11.65.

Target price is $12.85 Current Price is $11.47 Difference: $1.38
If CKF meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in May.

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

Credit Suisse rates HUO as Neutral (3) -

Credit Suisse expect strong earnings growth for Huon Aquaculture in FY22 and FY23. The trend towards more normal salmon prices has begun with the company announcing price and volume in wholesale/food service is now back to pre-pandemic levels.

There has also been improvement in export markets. While this is a positive Credit Suisse does highlight a track record of volatility, and gearing remains elevated.

Neutral maintained, with the broker noting potential corporate interest and an associated strategic review that may have a bearing on the share price. Target raised to $3.20 from $2.70.

Target price is $3.20 Current Price is $3.25 Difference: minus $0.05 (current price is over target).
If HUO meets the Credit Suisse target it will return approximately minus 2% (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

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

While premium rates are strong Morgan Stanley anticipates the Insurance Australia Group underlying margin will drop to 14.0% in FY22, from 15.5% in FY21, because of higher input costs and fading savings from the pandemic.

The broker observes reinsurance pressure is increasing as rates harden globally, while a multi-year pricing arrangement shielded Insurance Australia Group in July 2020 when Suncorp ((SUN)) had a difficult time with renewals.

While the company is likely to be over-provisioned for business interruption the broker suspects it is too early for a capital release. Equal-weight retained. Target is reduced to $4.80 from $5.00. Industry view: In-line.

Target price is $4.80 Current Price is $5.16 Difference: minus $0.36 (current price is over target).
If IAG 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 $5.44, suggesting upside of 8.1% (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

Ord Minnett rates ILU as Hold (3) -

With news of the curtailment of mining at Rio Tinto’s ((RIO)) Richards Bay Minerals operation in South Africa, Ord Minnett has run a set of mineral sands pricing scenarios for Iluka Resources.

The broker concludes prices need to run 26% higher than base case forecasts over the next 2.5 years to reach the 12% uplift in the Iluka Resources share price achieved yesterday.

The Hold rating and $8.10 target are retained, and base case price forecasts are unchanged at this stage.

Target price is $8.10 Current Price is $9.15 Difference: minus $1.05 (current price is over target).
If ILU meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.25, suggesting downside of -16.9% (ex-dividends)

The company's fiscal year ends in December.

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 LLC as Neutral (3) -

Lendlease has today provided a market update, including FY21 core operating profit guidance of $375m-$410m after tax. Also, a general business review will be undertaken.

Macquarie, upon first glance, observes the fresh guidance appears some -10% below its own expectations. The company has referred to challenging conditions because of covid, point out the analysts.

In addition, even though the Engineering unit has been sold, there has been a need for additional provision relating to historical claims in the order of -$90m-$175m after tax in FY21. Macquarie explains this translates into -19cps at the midpoint.

Macquarie believes management commentary suggests ongoing downward risks for FY22, unless cost reduction can offset. Neutral. Target $12.99.

Target price is $12.99 Current Price is $11.46 Difference: $1.53
If LLC meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $13.84, suggesting upside of 24.2% (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 MFG as Neutral (3) -

Credit Suisse reviews earnings, taking into account negative flow momentum and the likelihood of higher performance fees in the High Conviction Fund. The broker upgrades estimates for earnings per share by 3% in FY21-22 and raises the target to $54 from $50.

The broker reiterates a Neutral rating. While acknowledging the potential upside from Barrenjoey, Credit Suisse is hesitant to include this too early in calculations, given the execution risk and the fact it will be several years before value is realised.

Target price is $54.00 Current Price is $53.86 Difference: $0.14
If MFG meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $50.91, suggesting downside of -6.7% (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

Credit Suisse rates MGR as Outperform (1) -

Credit Suisse revises its FY21-23 forecasts higher, the main driver being increased residential volume and price expectations. The target price is increased to $3.06 from $2.63, a function of earnings changes as well as the removal of discounts for the office and retail portfolios.

On balance, Credit Suisse does not believe the retail portfolio faces the same structural challenges experienced by other landlords.

In terms of the office portfolio, while not immune to falling effective rents because of rising incentives, the broker is not of the view Mirvac is subject to material short-term vacancy risk. Outperformed maintained.

Target price is $3.06 Current Price is $2.92 Difference: $0.14
If MGR meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.92, suggesting upside of 1.4% (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

UBS rates ORG as Buy (1) -

UBS expects higher realised prices to translate to higher revenues in the 2Q21 for Australian energy names. A tighter LNG market from a cooler northern hemisphere winter has seen spot JKM LNG prices in the 2Q21 almost four times higher than the pcp.

Meanwhile, the three-month lagged Japanese Customs Cleared (JCC) crude price averaged US$56/bbl, up 28% quarter-on-quarter. The broker expects a tightening LNG market throughout the year, and lifts 2021-25 JKM spot LNG prices by $0.4-3.4/mmbtu (5-69%).

The analyst lifts FY21 earnings forecasts for Origin Energy by 1% to reflect higher realised spot LNG prices. Higher cash distributions from APLNG result in lower interest income as subordinated debt issued by APLNG shareholders is repaid earlier than forecast.

The Buy rating and $5.15 target are unchanged.

Target price is $5.15 Current Price is $4.51 Difference: $0.64
If ORG meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.06, suggesting upside of 12.4% (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

UBS rates OSH as Buy (1) -

UBS expects higher realised prices to translate to higher revenues in the 2Q21 for Australian energy names. A tighter LNG market from a cooler northern hemisphere winter has seen spot JKM LNG prices in the 2Q21 almost four times higher than the pcp.

Meanwhile, the three-month lagged Japanese Customs Cleared (JCC) crude price averaged US$56/bbl, up 28% quarter-on-quarter. The broker expects a tightening LNG market throughout the year, and lifts 2021-25 JKM spot LNG prices by $0.4-3.4/mmbtu (5-69%).

The analyst lowers FY21 earnings forecasts for Oil Search by -9% and upgrades FY22-23 estimates to reflect higher spot price forecasts. The Buy rating is unchanged and the target price increases to $4.60 from $4.50.

Target price is $4.60 Current Price is $3.81 Difference: $0.79
If OSH meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $4.40, suggesting upside of 15.3% (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: 0.1

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

Morgans rates OTW as Hold (3) -

Over The Wire Holdings has provided a trading update which shows that FY21 earnings (EBITDA) are likely to come in around -10% below expectations. This, once again, is due to a slippage in the transactional side of the business, notes the broker.

Morgans decides to remove all transactional business (low value) from forecasts and it will now present potential upside risk to the new forecasts. This business is considered a distraction from the core, higher quality recurring business.

The Hold rating is unchanged and the target price increases to $4.66 from $4.25 after adjustments for lower earnings, offest by a change in valuation methodology.

Target price is $4.66 Current Price is $4.85 Difference: minus $0.19 (current price is over target).
If OTW meets the Morgans target it will return approximately minus 4% (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: 0.5

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

Ord Minnett rates RIO as Buy (1) -

Due to civil unrest, Rio Tinto announced the curtailment of mining at the Richards Bay Minerals operation in South Africa. Ord Minnett estimates the mine accounts for 12-15% of global zircon supply and produces 23% of high-grade titanium dioxide (TiO2) feedstock.

The broker believes an extended outage could have a material pricing impact on both zircon and TiO2. The Buy rating and $170 target price are maintained. The analyst questions Rio Tinto’s desire to continue operating the asset, given insubstantial earnings and the ESG impact.

Target price is $170.00 Current Price is $126.64 Difference: $43.36
If RIO meets the Ord Minnett target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $135.50, suggesting upside of 7.5% (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: 0.4

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

UBS rates STO as Buy (1) -

UBS expects higher realised prices to translate to higher revenues in the 2Q21 for Australian energy names. A tighter LNG market from a cooler northern hemisphere winter has seen spot JKM LNG prices in the 2Q21 almost four times higher than the pcp.

Meanwhile, the three-month lagged Japanese Customs Cleared (JCC) crude price averaged US$56/bbl, up 28% quarter-on-quarter. The broker expects a tightening LNG market throughout the year, and lifts 2021-25 JKM spot LNG prices by $0.4-3.4/mmbtu (5-69%).

The analyst lifts FY21 earnings forecasts for Santos by 2%, to reflect higher realised spot LNG prices. The Buy rating is maintained and the target rises to $8.35 from $8.30.

Target price is $8.35 Current Price is $7.09 Difference: $1.26
If STO meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $7.92, suggesting upside of 12.1% (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: 0.5

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

Credit Suisse rates TGR as Outperform (1) -

Credit Suisse continues to focus on the potential for more normal profitability conditions in FY22 and FY23. While reducing FY21 earnings expectations the broker expects strong double-digit growth across FY22-23, as prices recover back to approximate pre-pandemic levels.

Moreover, the potential corporate interest in Huon Aquaculture ((HUO)) could underpin the sector. The valuation remains undemanding and the broker retains an Outperform rating. Target is $3.90.

Target price is $3.90 Current Price is $3.58 Difference: $0.32
If TGR meets the Credit Suisse target it will return approximately 9% (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

Credit Suisse rates TLS as Outperform (1) -

Credit Suisse had expected the monetisation of Towers would be a positive catalyst but the sale price was well ahead of expectations. Telstra has indicated it will return 50% of the net proceeds of $2.8bn to shareholders.

Credit Suisse estimates the company could undertake a $1bn buyback and still maintain its $0.16 dividend in FY22.

While yet to incorporate the sale in estimates, the broker estimates the transaction will be earnings accretive by around 1%, consistent with management's guidance.

Target is raised to $4.15 from $3.85 and an Outperform rating is maintained.

Target price is $4.15 Current Price is $3.76 Difference: $0.39
If TLS meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 8.2% (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

Morgan Stanley rates TLS as Overweight (1) -

Telstra will sell 49% of its mobile towers and the value is higher than expected, with an implied $5.9bn price tag compared with Morgan Stanley's estimate of $3.6-4.8bn.

This demonstrates strong demand for telco infrastructure assets and the broker envisages potential for a further re-rating. Early agreement on the sale was enabled by the consortium backing Telstra retaining control.

While any options to unlock further value for infrastructure are likely to be more medium-term Morgan Stanley's envisages upside for Telstra nonetheless. The broker retains an Overweight rating and raises the target to $4.20 from $4.00. Industry view: In-Line.

Target price is $4.20 Current Price is $3.76 Difference: $0.44
If TLS meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 8.2% (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

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

Telstra surprised Morgans with the early divestment of a 49% stake in its InfraCo towers business. Bids were due by December 2021 but the deal will be consummated in 1H22. It's considered a good deal for shareholders as Telstra keeps control and a high price was attained.

It also shows management is serious about taking steps to continue releasing value, points out the broker. The rating is upgraded to Add from Hold and the target price rises to $4.19 from $3.33. 

The company will use roughly 50% of the proceeds to pay down debt. The balance (around 11cps) will be returned to shareholders.The analyst has consistently said shares are worth circa $4.50 per share if the sum of the parts is able to be realised.

Target price is $4.19 Current Price is $3.76 Difference: $0.43
If TLS meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 8.2% (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

Ord Minnett rates TLS as Buy (1) -

Ord Minnett maintains the Buy rating and $4.10 target after news a consortium will acquire a minority interest of 49% in InfraCo Towers
for $2.8bn. This represents an enterprise value to operating earnings (EV/EBITDA) multiple of 28 times.

Management announced 50% of proceeds would be returned to shareholders, which the broker expects to be in the form of share buybacks, with the balance to be used to reduce debt.

The analyst believes more assets may be sold by Telstra, with telecommunications infrastructure currently attracting high multiples.

Target price is $4.10 Current Price is $3.76 Difference: $0.34
If TLS meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.07, suggesting upside of 8.2% (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

UBS rates TLS as Buy (1) -

Telstra will sell a 49% stake in its InfraCo Towers business to a consortium for cash proceeds of $2.8bn. The transaction surprised UBS, as it came earlier and at a higher price than expected. The Buy rating and target of $3.70 are unchanged.

Telstra plans to return around 50% of the net proceeds to shareholders in FY22 (including potential share buybacks) and invest -$75m of the proceeds to “enhance connectivity in regional Australia”. The remainder is to be used for debt reduction.

Target price is $3.70 Current Price is $3.76 Difference: minus $0.06 (current price is over target).
If TLS meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.07, suggesting upside of 8.2% (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

Ord Minnett rates TRS as Hold (3) -

Ord Minnett notes covid restrictions have resulted in a stark contrast between The Reject Shop’s CBD and Shopping centre locations, compared to the balance of the portfolio. There's considered a near-term risk to revenue growth should restrictions be prolonged.

The broker highlights that of the company’s 47 CBD and large shopping centre stores, 35 leases expire in the next 18 months. This is considered to provide optionality to renegotiate or exit the stores.The Hold rating and $5.70 target are maintained.

Target price is $5.70 Current Price is $5.58 Difference: $0.12
If TRS meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.50, suggesting upside of 33.9% (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 WGX as Outperform (1) -

Westgold Resources has demonstrated Big Bell is continuing to ramp up and full production is expected by year end. Macquarie retains a conservative estimate of full production by end of FY22.

Big Bell remains the main component of Macquarie's forecasts for improved cash flows in FY22 amid a reduction in capital expenditure and improving production.

Westgold Resources assesses it is through the difficult phase of development with the Chevron cave front now established.

Outperform maintained. Target is $2.50.

Target price is $2.50 Current Price is $1.88 Difference: $0.62
If WGX meets the Macquarie 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

Credit Suisse rates WOW as Downgrade to Underperform from Neutral (5) -

Credit Suisse assesses Woolworths is trading at around a 36% fair value premium to Coles Group ((COL)). Furthermore, the combined market value of Woolworths and Endeavour Group ((EDV)) post demerger is around 4.5% higher than the June 23 closing price.

The broker downgrades Woolworths to Underperform from Neutral on the basis of valuation. Trends in supermarkets/grocery expenditure are yet to normalise and Credit Suisse is forecasting trend growth of 8% in the fourth quarter of FY21 from a 2019 base. Target is unchanged at $32.92.

Target price is $32.92 Current Price is $38.13 Difference: minus $5.21 (current price is over target).
If WOW meets the Credit Suisse target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $40.15, suggesting upside of 6.8% (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

UBS rates WPL as Buy (1) -

UBS expects higher realised prices to translate to higher revenues in the 2Q21 for Australian energy names. A tighter LNG market from a cooler northern hemisphere winter has seen spot JKM LNG prices in the 2Q21 almost four times higher than the pcp.

Meanwhile, the three-month lagged Japanese Customs Cleared (JCC) crude price averaged US$56/bbl, up 28% quarter-on-quarter. The broker expects a tightening LNG market throughout the year, and lifts 2021-25 JKM spot LNG prices by $0.4-3.4/mmbtu (5-69%).

The analyst lifts FY21-23 earnings forecasts for Woodside Petroleum by 1-10% to reflect the higher realised spot LNG prices. This is partly offset by additional costs related to the new industry offshore decommissioning levy through 2H21 to 1H24.

The Buy rating is unchanged and the target price falls to $26.20 from $26.40.

Target price is $26.20 Current Price is $22.21 Difference: $3.99
If WPL meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $27.52, suggesting upside of 23.3% (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: 0.7

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