Australian Broker Call

Macquarie rates AGL as No Rating (-1) -

AGL Energy is seeing opportunities to work with customers ahead of the energy transition. A major customer, Tomago, is aiming to be a green aluminium smelter by 2030 and a further opportunity may exist with Portland, explains Macquarie.

The company can provide scope for Tomago through contract modification, providing renewables from Bowman in NSW.

More widely, the transition threatens oversupply in the back half of the decade until coal retires, notes the broker.

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

Current Price is $5.24. Target price not assessed.

Current consensus price target is $6.94, suggesting upside of 30.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.2

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

Ord Minnett rates AMP as Hold (3) -

Following AMP Wholesale Office Fund's (AWOF) decision to maintain AMP Capital as its manager, Ord Minnett retains its Hold rating and $1.20 target price for AMP. The analyst points out that an opposite decision would have placed the real estate assets business at risk.

The broker keeps its Hold rating due to the earnings uncertainty from the ongoing restructuring. The target price remains at $1.20. The analyst awaits a company strategy update next week.

Target price is $1.20 Current Price is $1.17 Difference: $0.03
If AMP meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting upside of 5.1% (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

Credit Suisse rates BHP as Neutral (3) -

The commodities team at Credit Suisse can see a December trough for the iron ore price, while China's 2022 budget may be a catalyst for a price recovery, when released next March.

The Neutral rating remains unchanged for BHP Group and the analyst sees more benefits for Rio Tinto ((RIO)), given a larger exposure to iron ore. The $39.50 target price is retained.

Target price is $39.50 Current Price is $36.58 Difference: $2.92
If BHP meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $43.89, suggesting upside of 15.4% (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: 0.5

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

Citi rates BSL as Buy (1) -

Citi's US steel analysts point to a potential multi-year bull cycle in long steel with demand to benefit from infrastructure spending. With a sharp reduction in historic steel spreads expected in FY23-24, the broker sees a strong valuation case for BlueScope Steel.

Buy retained. But Citi has lowered its target PE multiple to 17x from 20x, which leads to a target price decrease to $25.50 from $27.50.

Target price is $25.50 Current Price is $20.82 Difference: $4.68
If BSL meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $27.01, suggesting upside of 26.6% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates FMG as Neutral (3) -

The commodities team at Credit Suisse can see a December trough for the iron ore price, while China's 2022 budget may be a catalyst for a price recovery, when released next March.

Despite Fortescue Metals Group having a high estimated dividend yield, the analyst points to downside risks from low-grade discounts. The Neutral rating and $13.50 target are retained.

Target price is $13.50 Current Price is $15.80 Difference: minus $2.3 (current price is over target).
If FMG meets the Credit Suisse target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.50, suggesting downside of -5.2% (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: 0.1

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

Macquarie rates IAG as Outperform (1) -

In the lead-up to Insurance Australia Group's investor day on December 7, Macquarie looks at the group's ability to continue outperforming industry profitability. The ability to achieve insurance profit greater than $250m in the Intermediated Division is part of investors' focus.

While achieving greater than 10% margins (implied by the $250m) in the Intermediated Division may be difficult, the analyst believes the market is already pricing in a significant discount for earnings risks.

The broker acknowledges short-term risk yet believes the stock is cheap. The Outperform rating and $5.40 target are unchanged.

Target price is $5.40 Current Price is $4.55 Difference: $0.85
If IAG meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.35, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates ING as Buy (1) -

Australian poultry production grew 10% year on year in the September quarter which provides a positive read-through for Inghams Group in terms of first half volumes, Citi notes. But despite rising feed costs, retail chicken prices fell slightly.

While this suggests an incapacity to pass wholesale inflation through to the consumer, Citi points out there is a 3-6 month lag in higher feed costs flowing through to prices (while the chooks grow, presumably).

Hence while softer pricing is expected in the first half, the broker expects increasing fast food demand in the second half will partially offset in the second. Buy and $4.55 target retained.

Target price is $4.55 Current Price is $3.47 Difference: $1.08
If ING meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates IPL as Overweight (1) -

Following a reported US$165 per tonne increase to the December contract price for ammonia, Morgan Stanley notes the current US$990 per tonne price exceeds previous highs and is a 47% beat on the brokers forecast for FY22 pricing, with Incitec Pivot to benefit. 

The company suggests the December price increase implies a $147m earnings before tax benefit, equating to 13% of Morgan Stanley's full-year earnings before tax forecast. Spot pricing would imply a 47% upgrade to the broker's FY22 earnings before tax forecast. 

The Overweight rating and target price of $4.30 are retained. Industry view is In-Line.

Target price is $4.30 Current Price is $3.24 Difference: $1.06
If IPL meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $3.60, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates JDO as Initiation of coverage with Neutral (3) -

Judo Capital Holdings is a "unique" bank in an Australian context, Citi suggests, as it is entirely focused on SME lending, with minimal exposure to the outsized mortgage market.

Judo offers a "unique" proposition that is gaining share in a market with growing volumes and healthy asset spreads, free of stubborn cost pressures faced by peers.

With little profit currently, the share price implies investors will need to consider the value of a scaled-up franchise. Citi initiates coverage with Neutral and a $2.60 target.

Target price is $2.60 Current Price is $2.27 Difference: $0.33
If JDO meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Credit Suisse rates JDO as Initiation of coverage with Outperform (1) -

Credit Suisse initiates coverage of Judo Capital Holdings, Australia's only bank dedicated exclusively to lending to Small and Medium Enterprises (SMEs), with an Outperform rating and $2.75 target price. Lending products are distributed via direct and third party channels.

The analyst likes the legacy-free, digital, cloud-based technology architecture that is scalable and sees significant growth opportunities within a large addressable market.

Given the focus upon SMEs, one risk is a lack of earnings diversification compared to other banks, which could lead to greater earnings volatility, explains the broker.

Target price is $2.75 Current Price is $2.27 Difference: $0.48
If JDO meets the Credit Suisse target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Citi rates LOV as Neutral (3) -

Lovisa Holdings' AGM trading update revealed positive but slowing sales momentum, with its store rollout impacted by supply chain issues and labour shortages.

Citi remains Neutral on the stock, seeing risks around a new covid wave in Europe, the rollout facing aforementioned challenges, consumers increasily buying online, and reopened borders switching consumer demand back to travel.

While cutting earnings forecasts, the broker has lifted market multiple (PE) forecast which leads to a target price increase to $22.31 from $19.30.

Target price is $22.31 Current Price is $22.07 Difference: $0.24
If LOV meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $22.64, suggesting upside of 7.7% (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 LOV as Overweight (1) -

While comparable growth and store-roll out momentum appears to have slowed for Lovisa Holdings, Morgan Stanley notes FY23 earnings guidance continues to look achievable given expanding new store pipeline. 

After open stores recorded 38% comparable growth in global sales in the first eight weeks of FY22, comparable growth slowed to an estimated 17% in the following twelve weeks, which the broker notes may put pressure on FY22 earnings forecasts of $70m. 

The Overweight rating and target price of $21 are retained. Industry view: In-line.

Target price is $21.00 Current Price is $22.07 Difference: minus $1.07 (current price is over target).
If LOV meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $22.64, suggesting upside of 7.7% (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

Morgans rates MGH as Add (1) -

In a review of the Real Estate business of MAAS Group Holdings prior to the company's upcoming investor day, Morgans sees potential earnings and valuation upside over time.

The analyst sees scope for settlement of around 500 residential lots in FY24, which would represent circa 18% upside to the broker's existing forecast of 425 lots. Moreover, underlying returns on land sales may be stronger than anticipated.

As a result, the overall earnings (EBITDA) forecast for FY24 may be 30-54% above Morgans existing forecast. Despite the potential for an upside earnings surprise, the broker retains its $5.65 target price. The Add rating is unchanged.

Target price is $5.65 Current Price is $4.40 Difference: $1.25
If MGH meets the Morgans target it will return approximately 28% (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

Macquarie rates MMS as Neutral (3) -

McMillan Shakespeare's AGM trading update revealed ongoing benefits for the Asset Management businesses in both Australia and New Zealand from the strong second-hand vehicle market, points out Macquarie. Supply constraints are expected until the end of 2022.

Meanwhile, management continues to flag the potential for M&A following the acquisition of Plan Trackers. The broker retains its Neutral rating and $12.76 target price.

Target price is $12.76 Current Price is $13.18 Difference: minus $0.42 (current price is over target).
If MMS meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.81, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates MMS as Overweight (1) -

Continuing supply constraints for McMillan Shakespeare have not impacted demand, with the company reporting demand was up 114% on pre-covid levels in the first quarter. However, Morgan Stanley highlights despite an elevated backlog, earnings rely on production. 

The broker expects headwinds will persist into 2022, and that supply constraints will ease in the second half of FY22. 

Overweight rating and target price of $14.30 are retained. Industry view: In-line.

Target price is $14.30 Current Price is $13.18 Difference: $1.12
If MMS meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $13.81, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates NIC as Buy (1) -

Nickel Mines has signed memorandum of understanding with Shanghai Decent Investment to acquire a 70% interest in four next-generation rotary kiln electric furnace lines currently under construction within the Morowali Industrial Park in Indonesia.

Citi notes this is Nickel Mines' fourth deal with SDI and third in Morowali. The deal offers a sizeable increase in production scale and earnings accretion, but the broker asks when will the compnay's spending on expansion stop?

It will probably not, Citi concludes. Nickel Mines is en route to be a global top ten nickel miner. Target rises to $1.55 from $1.40, Buy (High Risk) retained.

Target price is $1.55 Current Price is $1.29 Difference: $0.26
If NIC meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $1.38, suggesting upside of 4.2% (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: 0.9

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

Credit Suisse rates NIC as Outperform (1) -

Credit Suisse sees Nickel Mine's attributable nickel nameplate production capacity increasing 48% to 78ktpa as the company secures the rights to a 70% interest in the Oracle Nickel Project for -US$525m. This is expected to be funded via a mixture of cash, debt and equity.

Factoring in a US$200m equity raise assumption, the analyst sees 31% value accretion. However, no change is made to the $1.40 target price, given future expansion was already allowed for. The Outperform rating is unchanged.

Target price is $1.40 Current Price is $1.29 Difference: $0.11
If NIC meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.38, suggesting upside of 4.2% (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: 0.9

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

Macquarie rates NIC as Upgrade to Outperform from Neutral (1) -

Macquarie estimates Nickel Mines' share of contained nickel production will rise to circa 87ktpa by 2024. This comes as the company secures the rights to acquire a 70% interest in the Oracle Nickel Project. The broker increases its rating to Outperform from Neutral.

The 70% interest will be acquired for -US$525m. The analyst upgrades production by 32% for 2024-2026, as full production rates for Oracle are expected from 2024. The broker lifts its price target to $1.45 from $1.10.

Target price is $1.45 Current Price is $1.29 Difference: $0.16
If NIC meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $1.38, suggesting upside of 4.2% (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: 0.9

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

Morgans rates PTB as Add (1) -

PTB Group's FY22 net profit guidance beat Morgans forecast by 2%. After lifting the target price to $1.21 from $1.18, the broker still sees significant upside potential. The Add rating is unchanged.

While not incorporating any potentially value-accretive acquisition in forecasts, the analyst would not be surprised by such a transaction later in the year. Management sees tailwinds across all of the company's divisions, which is useful for any aircraft-related adventures.

Target price is $1.21 Current Price is $1.03 Difference: $0.18
If PTB meets the Morgans target it will return approximately 17% (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

Credit Suisse rates RIO as Outperform (1) -

The commodities team at Credit Suisse can see a December trough for the iron ore price, while China's 2022 budget may be a catalyst for a price recovery, when released next March.

Given a larger exposure to iron ore, the analyst sees more benefits for Rio Tinto compared to BHP Group ((BHP)). Moreover, aluminium is the broker's top commodity pick and the company continues to increase its exposure by ongoing investment on new AP60 cells.

The Outperform rating and $106 target price are maintained.

Target price is $106.00 Current Price is $91.82 Difference: $14.18
If RIO meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $108.43, suggesting upside of 14.0% (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

Morgans rates SHL as Add (1) -

Following Sonic Healthcare's trading update for the first four months of FY22, Morgans increases its target price to $47.05 from $45.98. There was continued growth in covid testing revenue and the base business was considered to exhibit ongoing resilience. 

As the Northern hemisphere enters winter, the analyst sees upside risks from covid testing and retains the Add rating. It's thought greater scale-efficiencies around covid testing are accelerating profitability.

Target price is $47.05 Current Price is $41.00 Difference: $6.05
If SHL meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $44.88, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in June.

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 SLR as Outperform (1) -

As Canadian gold miner Harte Gold has committed various events of default under its US$65.6m credit facility, Silver Lake Resources will acquire the debt facilities with existing cash.

This appears to provide a pathway for Silver Lake Resources to acquire the Sugar Zone gold mine in Ontario, Canada, notes the analyst. The target price of $2.10 is unchanged. Outperform rated.

Target price is $2.10 Current Price is $1.79 Difference: $0.31
If SLR meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.95, suggesting upside of 15.4% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates TGR as Outperform (1) -

A first quarter trading update by Tassal Group was largely in-line with Credit Suisse's expectations. The broker makes modest earnings revisions and retains its Outperform rating and $3.85 target price.

Management pointed to a ‘positive start’ to FY22 with 1Q salmon sales up by 25%, with stable domestic wholesale pricing and strong
export sales. These positives are thought to overwhelm lower covid-related domestic wholesale sales.

Target price is $3.85 Current Price is $3.39 Difference: $0.46
If TGR meets the Credit Suisse target it will return approximately 14% (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

Credit Suisse rates TWE as Neutral (3) -

Following Treasury Wine Estates' acquisition of Frank Family Vineyards, Credit Suisse raises its target price to $12.45 from $12.20.

It's thought the transaction will further assist the deployment of A-grade grapes into a high value wine with high-growth potential.

The Neutral rating is maintained and the analyst suggests investors should look to acquire shares should better value arise.

Target price is $12.45 Current Price is $12.02 Difference: $0.43
If TWE meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $12.57, suggesting upside of 6.3% (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