Australian Broker Call

Ord Minnett rates AMS as Buy (1) -

The company's supply chain has been affected by the restrictions related to the pandemic. Importantly, Ord Minnett suggests the impact is temporary and once the crisis has passed film content production should re-accelerate and sales rapidly bounce back.

The permanent cost base has been reduced by -30% and there is a further -30% in temporary savings. This will provide for higher long-term earnings margins, the broker assesses. Speculative Buy rating maintained. Target is reduced to $1.15 from $1.50.

Target price is $1.15 Current Price is $0.59 Difference: $0.56
If AMS meets the Ord Minnett target it will return approximately 95% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

UBS rates APT as Sell (5) -

Afterpay has indicated there are now more than 5m active customers in the US. No update on other markets was provided. Given the impressive US customer growth, UBS assumes the credit system is working well and lowers the magnitude of expected bad debts for FY21.

While expecting the pandemic may accentuate the positive structural changes for Afterpay, the broker is cautious about extrapolating recent growth in online, given the forced closure of many shops. Sell rating maintained. Target rises to $14 from $13.

Target price is $14.00 Current Price is $48.50 Difference: minus $34.5 (current price is over target).
If APT meets the UBS target it will return approximately minus 71% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.04, suggesting downside of -38.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Ord Minnett rates DOW as Hold (3) -

Downer EDI has settled the class action on the Spotless business, which will mean a -$35m reduction in the FY20 result. Ord Minnett includes the settlement and the impact from the pandemic in its modelling.

Net profit forecasts are reduced by -42% for FY20 and -31% for FY21. Hold rating maintained. Target is reduced to $4.50 from $7.70.

Target price is $4.50 Current Price is $4.27 Difference: $0.23
If DOW meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.40, suggesting upside of 26.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

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

The company has indicated that additional capital is unlikely and its liquidity position has improved in April. End-of-lease sales volumes are recovering quickly, Morgan Stanley notes.

Equal-weight rating. Industry view is In-Line. Target is $1.10.

Target price is $1.10 Current Price is $1.15 Difference: minus $0.05 (current price is over target).
If ECX 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 $1.17, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Morgans rates MME as Add (1) -

MoneyMe’s strategy to target credit risk reduction is paying off with the company noting a downward trend in payment deferral requests. Morgans notes the company has the flexibility to reduce exposure to sectors most at risk to covid-19 induced disruptions.

On the flip side, the new bank facility expected at FY20-end is now expected by the first quarter of FY21 due to covid-19.

Morgans has lowered earnings forecasts for FY20-22.

With a positive medium term outlook, the broker retains its Add rating with target price unchanged at $1.71.

Target price is $1.72 Current Price is $1.20 Difference: $0.52
If MME meets the Morgans target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Ord Minnett rates MND as Lighten (4) -

Ord Minnett updates its modelling to reflect the impact of the pandemic. Monadelphous has indicated that measures taken by governments to prevent the spread of the coronavirus have resulted in the delay, suspension or a reduction in services across a range of projects.

Margins in the second half are likely to be significantly challenged. Ord Minnett reduces estimates for operating earnings (EBITDA) by -30% in FY20 and -29% in FY21. Lighten maintained. Target is reduced to $10 from $15.

Target price is $10.00 Current Price is $10.58 Difference: minus $0.58 (current price is over target).
If MND meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.08, suggesting upside of 14.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Ord Minnett rates QBE as Accumulate (2) -

Ord Minnett makes changes to earnings forecasts to account for the losses from business interruption as well as a full allowance for the capital raising and purchase of reinsurance.

Despite most of the adjustments being negative, the broker notes the pricing environment should support future underwriting profits beyond FY20.

The broker retains an Accumulate rating and reduces the target to $10 from $15.

The low share price provides a buffer for investors, Ord Minnett asserts, implying a -30% discount to adjusted discounted cash flow valuation for losses.

Target price is $10.00 Current Price is $8.18 Difference: $1.82
If QBE meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $10.65, suggesting upside of 30.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

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

Morgans rates RMS as Add (1) -

Ramelius Resources is set to reap the benefits of mine development-related capital expenditure incurred in the previous years with the company ready to generate strong production. The company has guided towards 250koz in FY21.

Morgans notes a strong start to the third quarter and expects the updated life of mine (LOM) plan to include the high grade Penny West project.

Even though the share price seems to have priced the positives, Morgans believes there is room for more.

The broker retains its Add rating with target increased to $1.93 from $1.28.

Target price is $1.93 Current Price is $1.75 Difference: $0.18
If RMS meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

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

Boarding and seating policies will be the next catalyst to get passengers back into the skies, Morgan Stanley asserts. Daily passenger traffic by air in China has recovered to about half but the broker anticipates a slower trajectory in Oceania.

The "Trans-Tasman bubble" project will be the pilot and the broker anticipates a balanced risk-based approach involving new technologies and procedures.

On a 12-month view within regional infrastructure stock coverage, the broker favours toll roads and prefers Auckland Airport ((AIA)) over Sydney Airport.

Equal-weight. Target is reduced to $6.88 from $7.27. Industry view is Cautious.

Target price is $6.88 Current Price is $5.92 Difference: $0.96
If SYD meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $6.40, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Citi rates TAH as Reinstate Coverage with Sell (5) -

Tabcorp is facing a challenging year, cycling a fortunate run of lottery jackpots amid wagering retail venue closures and an uncertain outlook for sports betting.

Hence, Citi assesses an underlying decline in operating earnings (EBITDA) of -14% in FY20. Earnings are expected to recover by FY22 but the stock requires further industry consolidation for material upside.

Hence, the broker reinstates coverage with a Sell rating and $2.80 target.

Target price is $2.80 Current Price is $3.28 Difference: minus $0.48 (current price is over target).
If TAH meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.12, suggesting downside of -5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

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

Vodafone Australia is set to acquire a 50.1% stake in TPG Telecom on July 13, 2020, the largest telecom merger so far in Australia. Morgans believes the merger is all about combining cashflows to fund mobile capital expenditure and saving on costs.

The broker estimates all-in capital expenditure to be circa $1bn, about $0.7bn of which will come from TPG’s free cash flow. Limited guidance for now.

Morgans upgrades its rating to Add from Hold with target price increased to $9.14 from $8.37.

Target price is $9.14 Current Price is $8.11 Difference: $1.03
If TPM meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $8.17, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Citi rates WES as Sell (5) -

Wesfarmers will shrink the store network for Target to around 144 stores over the next 18 months, with around 77 converted to Kmart and around 64 closed. Citi considers this an appropriate first step towards a further rationalisation of Target.

The broker upgrades underlying earnings (EBIT) estimates by 18% for FY20 and around 12% for FY21-22 to reflect strong sales growth in Bunnings and Officeworks through March and April.

The target is raised to $36.60 from $30.90. A Sell rating is maintained as the stock appears fully valued.

Target price is $36.60 Current Price is $39.50 Difference: minus $2.9 (current price is over target).
If WES meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Credit Suisse rates WES as Neutral (3) -

Credit Suisse suggests the restructuring of Target is unlikely to shift investor views regarding Wesfarmers. The company will spend -$240-310m on the restructuring.

The broker, preferring to remain on the sidelines while the portfolio is reshaped, suspects most institutional investors value Wesfarmers in relation to Bunnings and would react negatively to any dilution of the weighting of that business.

Between 10 and 40 large-form Target stores will be converted to Kmart and 10-25 large Target stores will be closed. Target Country will cease, with 50 stores to close and 52 to be converted to Kmart.

The changes leave Wesfarmers with around 30% of invested capital in the Kmart group. Credit Suisse retains a Neutral rating and raises the target to $35.32 from $34.65.

Target price is $35.32 Current Price is $39.50 Difference: minus $4.18 (current price is over target).
If WES meets the Credit Suisse target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Macquarie rates WES as Outperform (1) -

Macquarie believes this is a good time to be replacing the pricier Target offering with Kmart. Wesfarmers has also taken a -$300m write-down on its industrial & safety business following more cautious assumptions for the next few years.

The conversion of Target stores to Kmart makes sense and, in reducing the Target store network by half, could mean around a $100m uplift in earnings (EBIT) at the group level, the broker assesses.

Macquarie envisages a significant growth opportunity for Catch, now that it is able to leverage the Kmart brand. Outperform rating maintained. Target is reduced to $39.40 from $40.90.

Target price is $39.40 Current Price is $39.50 Difference: minus $0.1 (current price is over target).
If WES meets the Macquarie target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

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

Wesfarmers has completed the first phase of its Target strategic review and will convert 62-92 Target stores to Kmart stores. Between 60-75 stores will be closed.

The conversion will increase the Kmart store count by 26-39%, Morgan Stanley notes, skewed towards Target Country stores.

Morgan Stanley retains an Equal-weight rating and $36.50 target. Cautious industry view.

Target price is $36.50 Current Price is $39.50 Difference: minus $3 (current price is over target).
If WES meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Morgans rates WES as Hold (3) -

Wesfarmers has announced some of its Target stores will be converted to Kmart stores while others will be shut down along with a notable decrease in store support costs.

Morgans estimates Kmart Group restructuring will incur one-off costs to the tune of -$550-650m in FY20 and -$120-140m in FY21. Wesfarmers will book a -$300m impairment of goodwill charge due to worsening economic conditions and an uncertain outlook.

Morgans has reduced operating income estimates for FY20-22.

The broker holds onto its Hold rating with target price slightly increased to $37 from $36.60.

Target price is $37.00 Current Price is $39.50 Difference: minus $2.5 (current price is over target).
If WES meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Ord Minnett rates WES as Lighten (4) -

More than half of the Target stores will be closed or converted to Kmart, with reductions in the support office along with restructuring & conversion costs.

Ord Minnett believes this is a decisive step to address the challenges in the Target business, which has arguably destroyed shareholder value under the Wesfarmers ownership.

The Target stores that will remain are unlikely to be suitable for a Kmart conversion so the broker suspects closure in the medium term is still possible.

Wesfarmers is taking a more judicious response to its lease tail rather than seeking to buy out leases. Lighten rating and $35 target.

Target price is $35.00 Current Price is $39.50 Difference: minus $4.5 (current price is over target).
If WES 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 $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

UBS rates WES as Neutral (3) -

Wesfarmers will close 60-75 Target stores over 2021 with a -$430-480m impairment. UBS suggests the strategy will allow the company to pivot more aggressively to online and leverage the Catch platform.

The closures imply a -12-14% reduction in the footprint. UBS considers the closures a positive move and retains a Neutral rating and $33.80 target.

Target price is $33.80 Current Price is $39.50 Difference: minus $5.7 (current price is over target).
If WES meets the UBS target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.23, suggesting downside of -8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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