Australian Broker Call

Morgan Stanley rates BHP as Overweight (1) -

Brazilian prosecutors and government authorities have filed a petition to re-open a lawsuit related to the accident at the Samarco dam. The lawsuit was suspended two years ago in accordance with a framework agreement, which has since failed on several fronts.

However, Morgan Stanley suspects this is an attempt to strengthen prosecutor positioning in potential negotiations and possibly indicates a deterioration in dealings with the other joint-venturer, Vale. The broker continues to believe a final settlement is the more sensible proposition.

Morgan Stanley retains its Overweight rating and $40.70 target for BHP Group. Industry view: Attractive.

Target price is $40.70 Current Price is $36.14 Difference: $4.56
If BHP meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $40.90, suggesting upside of 13.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.6

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

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

Credit Suisse upgrades earnings estimates, expecting food retailing will grow at a rate at least equivalent to the increase in the resident population, with holiday events likely to provide an additional boost.

Cost control and an improvement in gross margins are also likely to provide a basis for strong profit leverage. Meanwhile, a recent pull back provides an attractive entry point and the broker upgrades to Outperform from Neutral. Target is raised to $20.16 from $19.97.

Target price is $20.16 Current Price is $17.40 Difference: $2.76
If COL meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $19.50, suggesting upside of 11.9% (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 DMP as Underperform (5) -

Credit Suisse acknowledges missing the call on Domino's Pizza and assesses the stock is now running well ahead of valuation. Still, earnings estimates are upgraded.

The broker retains an Underperform rating because of valuation and envisages no catalysts for the short term that will correct this.

Takeaway food retailing is expected to grow at a rate at least equivalent to the increase in resident population and holiday events are likely to provide an additional boost.

Like-for-like sales growth of 15% is expected in Australasia, Europe and Japan in the first half. Target is raised to $61.32 from $60.21.

Target price is $61.32 Current Price is $81.51 Difference: minus $20.19 (current price is over target).
If DMP meets the Credit Suisse target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $71.00, suggesting downside of -13.2% (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

Macquarie rates GOZ as Neutral (3) -

Bunnings ((WES)) has leased 71% of the Growthpoint Properties Botanicca 3 asset for 10 years and seven months with rents and incentives in line with the market.

Macquarie notes Bunnings is now one of the company's top 10 tenants by income, strengthening the tenant base.

While Growthpoint continues to build its exposure to strong tenant covenants with limited exposure to small-medium enterprises, valuation is demanding and Macquarie retains a Neutral rating. Target is raised to $3.56 from $3.12.

Target price is $3.56 Current Price is $3.54 Difference: $0.02
If GOZ meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.49, suggesting downside of -1.4% (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

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

Mirvac is a high-quality company, Morgan Stanley assesses, with the pipeline of commercial development worth around $5.5bn. Office rent makes up 50% of the total earnings (EBIT) and the stock is the broker's preferred in office exposures.

An Equal-weight rating is based on a relatively less visible earnings profile compared with the past, which is brought about by lack of new developments and residential uncertainty.

Morgan Stanley raises the target to $2.30 from $2.20. Industry view is In-Line.

Target price is $2.30 Current Price is $2.32 Difference: minus $0.02 (current price is over target).
If MGR 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 $2.50, suggesting upside of 10.2% (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 MTS as Outperform (1) -

Credit Suisse notes the independent food retail sector has been a significant beneficiary of increased expenditure and more local shopping.

While some reversion to normal can be expected over time, independent retailers have indicated that market share changes may persist for some time.

Credit Suisse retains an Outperform rating for Metcash and raises the target to $3.62 from $3.55.

Target price is $3.62 Current Price is $2.77 Difference: $0.85
If MTS meets the Credit Suisse target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.40, suggesting upside of 22.4% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Ord Minnett rates NAN as Initiation of coverage with Lighten (4) -

Ord Minnett considers the high-level disinfection product, Trophon2, a leader in the market which addresses a large unmet need. Still, the growth in the installed base is likely to be more challenged than it seems at first glance.

The widely anticipated second infection control product is yet to be identified and there is little detail, despite being priced in by the market for a number of years. Ord Minnett initiates coverage with a Lighten rating and $5.05 target.

The broker also remains concerned that capital budgets in hospitals will be constrained well into FY22 following the financial impact of the pandemic and this may potentially reduce demand for new Trophon units and upgrades.

Target price is $5.05 Current Price is $5.75 Difference: minus $0.7 (current price is over target).
If NAN meets the Ord Minnett target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.85, suggesting upside of 6.6% (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

Morgan Stanley rates RWC as Downgrade to Underweight from Equal-weight (5) -

While the trading update has signalled a strong start to the financial year, Morgan Stanley believes this should not be extrapolated and growth into FY22 is likely to be limited. As a result, the rating is downgraded to Underweight from Equal-weight.

Morgan Stanley envisages a more benign growth environment with a real risk that revenues could decline in FY22. Target is raised to $4.00 from $3.50. Industry view is Cautious.

Target price is $4.00 Current Price is $4.28 Difference: minus $0.28 (current price is over target).
If RWC 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 $4.34, suggesting upside of 1.4% (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 SKO as Buy (1) -

Serko has a dominant online booking tool in the Australasian corporate travel market. In addition, a deal with Booking.com has potential to be transformational, Ord Minnett asserts, and represents the biggest single opportunity in the company's history.

The company will raise a minimum of NZ$57.5m to accelerate development of the platform, despite revenue in its existing business being in decline by around -70% on the prior corresponding period.

Ord Minnett suspects the company's approach could unlock material revenue once the current crisis has dissipated. Buy rating retained. Target rises to $6.42 from $5.51.

Target price is $6.42 Current Price is $4.46 Difference: $1.96
If SKO meets the Ord Minnett target it will return approximately 44% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY21:

Forecast for FY22:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 1.0

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

Credit Suisse rates SUL as Outperform (1) -

Credit Suisse believes Super Retail will benefit from a multi-year boost to domestic travel and recreational activity. A return to more normal sports programming should also benefit Rebel.

A lack of international travel is negative for Macpac but this division is cycling one of the most disrupted summers in memory, the broker notes. Outperform retained. Target is raised to $11.83 from $11.52.

Target price is $11.83 Current Price is $10.91 Difference: $0.92
If SUL meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $11.38, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY21:

Forecast for FY22:

Market Sentiment: 0.8

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

Credit Suisse rates WOW as Neutral (3) -

Credit Suisse upgrades earnings estimates, expecting food retailing will grow at a rate at least equivalent to the increase in the resident population, with holiday events likely to provide an additional boost.

The reopening of hotels will also provide some additional leverage in the second half. A Neutral rating is retained, driven by valuation. Target is raised to $40.43 from $40.31.

Target price is $40.43 Current Price is $37.13 Difference: $3.3
If WOW meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $41.29, suggesting upside of 11.5% (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