Australian Broker Call

Credit Suisse rates AMC as Neutral (3) -

Developed markets continue to show elevated trends in food purchasing in the supermarket channels which Credit Suisse assesses is positive for the flexibles packaging business.

Meanwhile, soft volume in the June quarter is expected in rigid plastics. Credit Suisse downgrades estimates marginally, reflecting tax rate modelling.

Amcor is likely to announce June quarter results in the second week of August. Neutral rating and $15.65 target maintained.

Target price is $15.65 Current Price is $15.14 Difference: $0.51
If AMC meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $16.08, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in June.

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: 0.6

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

Macquarie rates AZJ as Outperform (1) -

Macquarie notes coal volumes were soft in June, reflecting lower Asian power demand and mine specific issues.

The broker believes the stock offers value as it has limited earnings growth in a mature or even shrinking industry.

A focus on cost restructuring and improvement in non-coal haulage services should flatten growth. Cash flow remains strong.

The broker retains an Outperform rating and reduces the target to $5.31 from $5.33.

Target price is $5.31 Current Price is $4.72 Difference: $0.59
If AZJ meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.49, suggesting upside of 18.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

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

Morgan Stanley looks at potential M&A options for Beach Energy but admits the options entail more risk than the Lattice deal.

One of them is Bass Strait but the broker points out the risk in terms of its location that will increase costs along with a harsh environment, making things challenging to operate.

The North West Shelf may have some JV parties looking to exit and presents another opportunity. The fact that Woodside Petroleum ((WPL)) operates the project reduces the risk, adds the broker.

Morgan Stanley retains its Equal-weight rating with a target price of $1.35. Industry view: Cautious.

Target price is $1.35 Current Price is $1.47 Difference: minus $0.12 (current price is over target).
If BPT 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 $1.77, suggesting upside of 21.0% (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

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

Morgans believes the Beach Energy share price represents significant value at the current level. The recent sideways drift in oil prices has contributed to demand uncertainty.

Additionally, there has been speculation that future spot price falls could influence negotiations for price resets on Beach Energy legacy contracts. However, the broker expects a clear difference in price between long-term contracts and the spot market.

Morgans expects the next major catalyst will be the upcoming full year result, which will incorporate an updated five year outlook for asset development and revised reserve estimates.

The rating is increased to Add from Hold. The target price is $1.66.

Target price is $1.66 Current Price is $1.47 Difference: $0.19
If BPT meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $1.77, suggesting upside of 21.0% (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 BRG as Initiation of coverage with Overweight (1) -

Breville Group is a premium small kitchen appliance brand based in Australia and operates in the cooking, food preparation and beverage categories. The group’s markets are in ANZ, North America and EU.

The group has a track record of expansion in markets (North America and EU), notes Morgan Stanley, and is highly focused on R&D. Another point highlighted is the group’s scalable business model which can support rapid growth.

Morgan Stanley estimates the group’s serviceable market to be $10bn per annum.

An update by the company showed minimal covid-19 impact to sales and the broker feels the kitchen appliance segment could benefit from more people working from home.

Morgan Stanley highlights the group’s global expansion gives it a long runway for growth and initiates coverage on Breville Group with an Overweight rating and a target price of $28. Industry: In-line.

Target price is $28.00 Current Price is $22.97 Difference: $5.03
If BRG meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $22.88, suggesting downside of -5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Morgans rates CCP as Add (1) -

Credit Corp provided guidance for FY20 reported NPAT of $10-15m and underlying (pre impairment/provisioning) NPAT of $75-80m.

The company expects a recovery toward pre-covid levels. However, around $90m of provisions were required for when government support/stimulus is withdrawn and collections fall and arrears increase.

Despite the company ending FY20 with no debt and $375m of debt funding capacity, Morgans does not expect a 2H20 dividend, as capital was previously raised in the expectation of growth opportunities.

Formal FY21 guidance is expected when the company releases its results on July 28.

The broker believes that long-term earnings potential outweighs near-term risks and forecasts FY21 NPAT of $66.2m.

The Add rating is maintained. The target price is raised to $19.10 from $18.50.

Target price is $19.10 Current Price is $15.27 Difference: $3.83
If CCP meets the Morgans target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $19.20, suggesting upside of 17.9% (ex-dividends)

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 EHE as Hold (3) -

The company will book a non-cash impairment related to goodwill from historical acquisitions.

The company has reported 13 resident infections of coronavirus at one of its aged care homes in Victoria and reintroduce rigid visitor restrictions across Melbourne.

Meanwhile, Ord Minnett is hopeful the Royal Commission will offer a new funding framework, although there may be little time to implement recommendations ahead of the Commonwealth budget next year.

The broker envisages a cash squeeze if refundable accommodation deposits decline in popularity because of a weak economic environment.

Hold rating retained. Target is lowered to $1.65 from $1.75.

Target price is $1.65 Current Price is $1.45 Difference: $0.2
If EHE meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.63, suggesting upside of 11.8% (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

UBS rates EHE as Neutral (3) -

The FY20 update was in line with UBS expectations, with a non-cash impairment charge of -$124-148m to be taken in the results.

Spot occupancy has improved to 92.7% as of June 30 as restrictions are eased.

While the company has shown strong execution, UBS expects occupancy pressures will build again as coronavirus cases re-escalate within Victoria, and potentially other states.

Neutral rating and $1.55 target maintained.

Target price is $1.55 Current Price is $1.45 Difference: $0.1
If EHE meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.63, suggesting upside of 11.8% (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

Citi rates IFL as Neutral (3) -

IOOF Holdings will release its June funds under management, advice and administration (FuMA) on July 30^th and Citi expects core FuMA to decline by -5% to $138bn in the second-half (on a half-yearly basis).

The broker notes the company’s businesses face major issues in the form of platform competition and restructuring needed by the advice business.

The ANZ Wealth Pensions and Investments (P&I) business is also expected to see material net outflows due to legacy products and the impact of the Early Super Release scheme.

While IOOF Platform net flows are expected to be resilient, Citi points out these are lower margin flows and will only partly offset lost revenue from the advice segment. Gross margins for the second half are likely to contract by -6bps year on year.

Citi retains its Neutral rating with the target price increasing to $5.15 from $4.50.

Target price is $5.15 Current Price is $4.95 Difference: $0.2
If IFL meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.81, suggesting downside of -7.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

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

While Morgan Stanley does not expect any major surprises in the National Australia Bank’s third quarter update, it expects a difficult year ahead. 

The bank is expected to incur higher cumulative losses than other major banks in this cycle due to its business mix, industry exposure and current provisioning.

The broker notes the bank’s collective provisioning coverage of credit risk-weighted assets is below average and a top-up of -$400m could lift coverage to about 1.3%.

A dividend of $0.30 is expected in the second half but the broker also thinks the bank may defer dividends. Housing loan growth forecast has downside risks and the broker expects business loan growth to fall short of the guidance by about -13-16%.

Morgan Stanley reiterates its Equal-weight rating with the target price decreasing slightly to $18 from $18.50. Industry view: In-line.

Target price is $18.00 Current Price is $18.17 Difference: minus $0.17 (current price is over target).
If NAB 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 $20.25, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

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

Northern Star Resources released production results on July 8 and Morgan Stanley notes a weaker than expected result for the quarter on account of broad-based underperformance, leading to a miss on FY20 guidance by -3%.

This has led the broker to update production numbers for FY20 and change its production assumptions for the coming years. Earnings forecasts reduced for FY20-22. 

Morgan Stanley reaffirms its Equal-weight rating with the target price falling to $11.95 from $12.20. Industry view: Attractive.

Target price is $11.95 Current Price is $14.85 Difference: minus $2.9 (current price is over target).
If NST meets the Morgan Stanley target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.88, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Macquarie rates OSH as Outperform (1) -

Oil Search has announced impairments of -US$250-300m. The impairments relate to PNG exploration acreage, the Hides GTE project, as well as the non-core exploration acreage relinquished in Alaska.

Macquarie suspects oil price assumptions are behind carrying values in the first half result. The broker considers the stock offers superior exposure to the oil price recovery through high-quality projects.

Balance-sheet concerns should diminish once a sell-down of the interest in Nanushuk is achieved, suggests Macquarie.

Outperform rating retained. Target is reduced to $3.80 from $3.85.

Target price is $3.80 Current Price is $2.94 Difference: $0.86
If OSH meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $3.40, suggesting upside of 13.7% (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: 0.4

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

Ord Minnett rates OSH as Accumulate (2) -

Oil Search has announced a non-cash impairment of -US$250-300m to be recognised at the first half result on August 25.

This primarily relates to exploration and evaluation assets that have sub-optimal economics.

Ord Minnett does not expect further sizeable impairments in the Australian energy sector unless companies begin to lower assumptions for long-term commodity prices.

Accumulate rating and $3.80 target retained.

Target price is $3.80 Current Price is $2.94 Difference: $0.86
If OSH meets the Ord Minnett target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $3.40, suggesting upside of 13.7% (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: 0.4

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

UBS rates OSH as Buy (1) -

Oil Search will recognise a non-cash-pre-tax impairment charge of -US$360-400m in its interim result on August 25. The possibility of asset impairments by Australian companies should not be unexpected, UBS asserts.

However, in this case the impairment relates largely to PNG exploration licences rather than any producing assets.

UBS understands the market has been opposed to the level of exploration expenditure by Oil Search and believes the announcement is a sign the company is shifting capital allocation away from exploration, and likely to be interpreted positively.

Buy rating and $4.30 target maintained.

Target price is $4.30 Current Price is $2.94 Difference: $1.36
If OSH meets the UBS target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $3.40, suggesting upside of 13.7% (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: 0.4

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

Morgans rates RIO as Add (1) -

Morgans has previewed upcoming June quarter and half year earnings, along with the overall investment appeal for Rio Tinto.

For the quarterly results due on July 17, the broker expects an ongoing strong performance from Western Australian iron ore.

On July 29, Morgans expects strong 1H20 NPAT of US$3,680m (vs consensus US$4,183m) and an interim dividend of US$1.59 per share (vs consensus US$1.45). EPS forecasts are reduced for CY20-22 by -27%, -13% and -6%, respectively.

Overall, Morgans sees a compelling investment case resulting from robust earnings and forecasts the company will sustain dividend yields of 5-7% over the next three years. The key risk remains metal prices.

Add rating retained for Rio Tinto with price target lifted to $111 from $105.

Target price is $111.00 Current Price is $99.84 Difference: $11.16
If RIO meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $101.64, suggesting upside of 0.5% (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: 0.2

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

Macquarie rates SDF as Outperform (1) -

Premium rate increases have not moderated and support the outlook, Macquarie suggests.

A lower interest-rate environment, assuming claims are unchanged, emphasises the need for higher premiums to support insurance underwriting profitability.

Policy cancellations and refunds in response to the pandemic do not appear to have been material in the June quarter.

Macquarie retains an Outperform rating and $3.70 target. The company will report its FY20 result on August 25.

Target price is $3.70 Current Price is $3.35 Difference: $0.35
If SDF meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Citi rates SGR as Buy (1) -

The Queensland government will be ending the expression of interest process for a second Gold Coast casino license.

Citi is pleased with the decision, believing a second casino would not only be sub-economic but also put pressure on an industry already reeling from the pandemic.

Citi notes Star Entertainment Group will proceed with its Broadbeach masterplan to develop five mixed-use towers while expecting the group to reduce capital expenditure to $135m by FY22 from $328m in FY19.

Citi reaffirms its Buy rating with a target price of $3.50.

Target price is $3.50 Current Price is $2.69 Difference: $0.81
If SGR meets the Citi target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.38, suggesting upside of 28.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Ord Minnett rates TYR as Accumulate (2) -

Tyro Payments recorded a 22% rise in transaction value for the year to July 10. Although this includes only one week of data in FY21, Ord Minnett likes the positive trend.

However, the comparable figures are expected to be weighed down by the lockdown in Melbourne and the risk of a second wave of coronavirus cases. Accumulate rating and $4.15 target retained.

Target price is $4.15 Current Price is $3.80 Difference: $0.35
If TYR meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.55, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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