Australian Broker Call

Macquarie rates AGL as No Rating (-1) -

AGL Energy has announced it will no longer pursue a demerger, with the withdrawal of the demerger coinciding with the departure of the company's CEO, Chairman and two board members. Macquarie notes the appointment of a new CEO will be key to new strategy.

The broker highlights demerger costs of -$160m, compared to a full -$260m, are retained, with the company avoiding completion and refinancing costs. Macquarie's earnings forecasts are updated -30% and 11% in FY23 and FY24.

The broker is currently on research restriction.

Current Price is $8.72. Target price not assessed.

Current consensus price target is $9.03, suggesting upside of 2.8% (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

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

With AGL Energy no longer pursuing its demerger plans Morgan Stanley notes the company is expected to provide a strategic update in September.

In line with the guidance downgrade issued by AGL Energy, the broker cut its earnings per share estimate for the current year -18%, but has lifted forecasts for FY23 and FY24 by 24% and 2% to reflect elevated pricing, but does warn fuel costs and the renewal of smelter contracts could impact. 

The Equal-weight rating is retained and the target price increases to $9.38 from $8.48. Industry view is Cautious.

Target price is $9.38 Current Price is $8.72 Difference: $0.66
If AGL meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $9.03, suggesting upside of 2.8% (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

Ord Minnett rates AGL as Hold (3) -

Ord Minnett believes establishing new debt facilities for the combined entity will be AGL Energy's key near-term focus given what had been arranged for the demerged entities will be cancelled. This may be difficult and more expensive considering the current interest rate environment and increased environmental focus.

The broker suggests the outlook is positive for the company given higher electricity forward prices, but notes instability is likely as it changes direction and reappoints management.

Hold and $8.70 target retained.

Target price is $8.70 Current Price is $8.72 Difference: minus $0.02 (current price is over target).
If AGL meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.03, suggesting upside of 2.8% (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

UBS rates AGL as Neutral (3) -

Having met with Cannon-Brookes' Grok Ventures, UBS believes that in addition to wanting a stronger decarbonisation pathway, Grok sees considerable value in AGL Energy's underlying business as a platform to develop a new Distributed Energy Resource product that orchestrates power behind-the-meter (BTM) and aggregates it onto a new scalable trading platform.

While the broker does not believe a scale product exists yet in Australia, the right tech could fundamentally change the future of energy generation & retailing.

With an uncertain future, AGL shares will likely remain range-bound around Grok/Brookfield's last bid price of $8.25, and the broker anticipates reinvigorated corporate interest. Neutral and $8.50 target retained.

Target price is $8.50 Current Price is $8.72 Difference: minus $0.22 (current price is over target).
If AGL meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.03, suggesting upside of 2.8% (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

Ord Minnett rates AOF as Hold (3) -

Australian Unity Office Fund has received an indicative proposal from Aliro Group to acquire all units for $2.45. The all-cash proposal is subject to all the usual conditions.

While Ord Minnett believes the offer is fair in light of current market conditions, it suggests the intention of Hume Partners to vote in favour  of the offer could instigate further bids from other parties.

Hold and $2.42 target retained.

Target price is $2.42 Current Price is $2.43 Difference: minus $0.01 (current price is over target).
If AOF meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Ord Minnett rates APE as Buy (1) -

Ord Minnett has strangely "initiated" coverage of Eagers Automotive, having updated on the stock only two weeks ago. This may reflect a change of analyst.

The broker sees upside risk to consensus earnings over the forecast period, expecting stronger margins for longer, and sees reasons for the structural change to the supply landscape to somewhat persist, benefiting margins in the longer term.

With valuation undemanding, Ord Minnett "initiates" with a Buy rating (no change) and a $13.25 target (down from $16.00 previously).

Target price is $13.25 Current Price is $11.09 Difference: $2.16
If APE meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $15.51, suggesting upside of 42.1% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates BHP as Buy (1) -

Following the divestment of BHP Petroleum, Citi notes further demergers could benefit BHP Group. The broker highlights while a diversified mining model has served the company well, it has modeled a split into Bulks, including iron ore and coal, and Metals.

Citi notes the iron ore and met coal segments are mature assets benefiting from peaking demand. In this demerger scenario, the broker expects BHP Bulks would decline to US$13bn by FY30, from US$29bn in FY23, as prices revert, while Metals could re-rate.

The Buy rating is retained and the target price increases to $50.00 from $49.86.

Target price is $50.00 Current Price is $44.91 Difference: $5.09
If BHP meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $48.66, suggesting upside of 9.1% (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: 0.6

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

Macquarie rates BRG as Outperform (1) -

While Macquarie has downgraded its full year earnings forecast for Breville Group to $156m from a previous $159.4m, in line with company commentary, the broker notes it expects company strategy will drive medium- to long-term growth that exceeds expectations.

The broker highlights the company's marketing, research and development strategy has already delivered 20% Global Products revenue annual compound growth rate since FY17, supported by wider market growth. The company has consistently increased spend in these areas, targeting a spend equal to 12.5% of total sales.

The Outperform rating is retained and the target price declines to $24.65 from $34.80.

Target price is $24.65 Current Price is $21.55 Difference: $3.1
If BRG meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $30.84, suggesting upside of 44.2% (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

Macquarie rates DHG as Neutral (3) -

Macquarie anticipates house prices will decline -10% from their peak, with an expected -5% decline in FY23 underpinning the broker's forecast for Domain Holdings Australia which is below consensus. 

The broker also notes the company's $180m Realbase acquisition is the final addition to Domain Holdings Australia's open-ended agent solutions ecosystem, and highlights the purchase looks positive. The broker lifts its earnings per share expectations 10% for FY22.

Macquarie resumes coverage with a Neutral rating and a target price of $2.70.

Target price is $2.70 Current Price is $3.28 Difference: minus $0.58 (current price is over target).
If DHG meets the Macquarie target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.84, suggesting upside of 49.4% (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

Morgans rates EDV as Hold (3) -

Morgans has returned from Endeavour Group's investor days with increased confidence in the long-term outlook with management at the company aiming for both market share gains and margin improvement.

In addition, Morgans highlights investment in digital and the innovation capability of Pinnacle Drinks. The challenge for management is to achieve the targeted minimum 15% ROI on renewals and growth capex, the broker adds.

The anticipation that Retail earnings will normalise leads to small reductions in FY23 and FY24 forecasts. Target price shifts to $7.30. Hold rating retained.

Target price is $7.30 Current Price is $7.27 Difference: $0.03
If EDV meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $7.46, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

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 ELD as Buy (1) -

Elders had released its interim financials last week, but UBS has taken its time to properly respond and update thoughts and projections. The bottom line beat the broker's estimate by no less than 30%.

The key surprise was delivered by the Rural Products division and UBS suspects market share gains. Management at the helm has now set a fresh 3-year target with EBIT CAGR between 5-10% on current FY22 earnings.

The share price, however, has fallen since and UBS suspects general fear this is the peak for Elders is probably responsible for this response. UBS thinks the market got this one wrong and Elders can surprise to the upside over the three years ahead.

Share price target lifts to $15 from $14.60 on increased forecasts. Buy.

Target price is $15.00 Current Price is $13.16 Difference: $1.84
If ELD meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $15.20, suggesting upside of 14.2% (ex-dividends)

The company's fiscal year ends in September.

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 GMG as Overweight (1) -

It is Morgan Stanley's view that rent growth has been the largest driver of Goodman Group's development outcomes, a fact being overlooked by a focus on margins and interest rates.

The broker highlighted the company has successfully expanded its average per square metre rent at an annual compound growth rate of 10% since FY14.

Morgan Stanley estimates the company has secured its development book beyond FY24, anticipating Goodman Group will commence $8.8bn of its work in hand in FY22, and with an average build time of 23 months could deliver the same amount in completions in FY24.

The Overweight rating is retained and the target price decreases to $25.98 from $27.88. Industry view: In-Line.

Target price is $25.98 Current Price is $20.38 Difference: $5.6
If GMG meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $25.78, suggesting upside of 25.3% (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

Macquarie rates GOR as Outperform (1) -

Gold Road Resources has increased its takeover bid for DGO Gold ((DGO)) by 4% to a best and final offer of $2.25 per share from $2.16 per share, with Macquarie noting the new offer reflects an equity value of $254m but remains subject to 80% acceptance by DGO Gold shareholders. 

The broker highlights DGO Gold's portfolio is currently valued at around $233m, with strategic investments in De Grey Mining ((DEG)), Dacian Gold ((DCN)) and Yandal Resources ((YRL)).

The Outperform rating and target price of $1.80 are retained.

Target price is $1.80 Current Price is $1.36 Difference: $0.44
If GOR meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $1.78, suggesting upside of 31.1% (ex-dividends)

The company's fiscal year ends in December.

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 GOZ as Outperform (1) -

Growthpoint Properties Australia has announced its acquisition of the Dandenong Government Service Office for $165m, with settlement expected in the coming weeks. Macquarie anticipates the purchase to be 1.8% accretive to annualised funds from operations. 

The acquisition is not expected to impact notably on FY22, but the broker notes a 99.7% occupancy, with a majority leased to the Victorian State Government, provides certainty of income growth.

The Outperform rating is retained and the target price decreases to $4.47 from $4.63.

Target price is $4.47 Current Price is $3.93 Difference: $0.54
If GOZ meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.31, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

Forecast for FY23:

Market Sentiment: 0.3

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

Citi rates HLS as Neutral (3) -

Year-to-date, Healius has underperformed the ASX200 by -15%, and Macquarie attributes this partly to the anticipated -65% decline in FY23 earnings as covid testing declines materially moving forward.

In Macquarie's opinion, better value could be unlocked through divesting the Day Hospital division and Agilex for a combined $500m, leaving only pathology and imaging assets, while a $50m investment in a new lab information system would improve margins and leave Healius the number two player in Australian pathology and number three in imaging.

The Neutral rating and target price of $4.70 are retained.

Target price is $4.70 Current Price is $4.30 Difference: $0.4
If HLS meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.82, suggesting upside of 12.0% (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

UBS rates HUM as Buy (1) -

Humm Group majority directors have defended the merits of selling the Humm Consumer Finance business to Latitude Group Holdings ((LFS)) and UBS highlights one of the arguments in favour is HCF has not been profitable in the four months to April.

Clearly, the challenging conditions for BNPL are making themselves felt, the broker suggests. Plus BNPL valuations have derated since the agreement was struck.

The broker believes the transaction makes sense for shareholders in Humm, which post-divestment will be a pure-play Commercial business.

Shareholders get their vote on June 23. UBS does not intend to make any changes until then.

Buy rating and target price of $1.45.

Target price is $1.45 Current Price is $0.76 Difference: $0.69
If HUM meets the UBS target it will return approximately 91% (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 JIN as Outperform (1) -

While Macquarie sees entry in the US's iLottery market as a logical expansion for Jumbo Interactive, the broker notes the challenge for the company will be gaining entry. To date fourteen jurisdictions in the US have legislated iLottery, with sales already exceeding US$5bn.

The broker notes a reseller agreement with an incumbent operator makes sense, but limits growth, while pursuing licenses is competitive. Macquarie does not rule out Jumbo Interactive entering the US market, but awaits further detail on its pathway. 

The Outperform rating and target price of $20.00 are retained.

Target price is $20.00 Current Price is $15.67 Difference: $4.33
If JIN meets the Macquarie target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $21.00, suggesting upside of 33.2% (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

Ord Minnett rates PX1 as Upgrade to Buy from Hold (1) -

Plexure  Group has delivered an FY result reflecting the completion of a major restructuring of the NZ business to prepare for near-term and more probable growth opportunities, Ord Minnett notes. The workforce is right-sized to facilitate global growth in key customer McDonalds and  capitalise on the  synergies from merging TASK with Plexure.

Combining Plexure’s loyalty and customer management technology with TASKS’s enterprise planning and management platform has yielded early cross-selling results with Pita Pit and TANK. The broker sees a much wider opportunity in FY23.

Plexure trades at a material discount to peers. The broker believes the return/risk equation has shifted positively and upgrades to Speculative Buy from Hold. Target falls to 36c from 50c.

Target price is $0.36 Current Price is $0.21 Difference: $0.15
If PX1 meets the Ord Minnett target it will return approximately 71% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY23:

Forecast for FY24:

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

Macquarie rates SQ2 as Outperform (1) -

Block's Investor Day had a focus on future growth, with Macquarie noting the company outlined a more than $190bn gross profit vision to be achieved through combined omni-channel tools and engagement growth, and deeper domestic penetration. 

Macquarie highlighted the integration of Afterpay, TIDAL, Spiral, and particularly TBD as supporting future growth, with the broker anticipating open banking and digital identity will offer leverage.

The Outperform rating is retained and the target price decreases to $180 from $210.

Target price is $180.00 Current Price is $129.85 Difference: $50.15
If SQ2 meets the Macquarie target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $180.00, suggesting upside of 42.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

UBS rates SSR as Re-initiation with Buy (1) -

Our last update dates from December 2021, but today UBS has returned - "initiation" - with a Buy rating and $30.50 price target. That's up from $28 back in 2021.

The broker sees SSR MIning as a positive stand-out in a sector that harbours old mines and needs to reinvest heavily. This company is lauded for its diverse base of mines with a long life and undersold organic growth optionality.

Target price is $30.50 Current Price is $27.61 Difference: $2.89
If SSR meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Morgan Stanley rates SWM as Underweight (5) -

While Seven West Media has made the most of post-covid advertising benefits, Morgan Stanley notes the company continues to face cyclical and structural challenges and remains dependent on television advertising which the broker sees as declining over the medium- to long-term.

Further, the broker noted while Seven West Media is considered a value stock in traditional media by consensus, Morgan Stanley highlights Nine Entertainment Co ((NEC)) offers a better structural outlook, supported by digital businesses Domain and Stan.

The broker resumes coverage with an Underweight rating and a target price of $0.50. Industry view: Attractive.

Target price is $0.50 Current Price is $0.55 Difference: minus $0.05 (current price is over target).
If SWM meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.81, suggesting upside of 58.8% (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

Morgans rates WDS as Add (1) -

Post merger of Woodside with BHP Petroleum, Morgans has updated its modeling, concluding as far as valuation goes, the merger is "broadly value neutral".

But there are plenty of benefits to be enjoyed, including a larger earnings platform, a more diverse portfolio and a stronger balance sheet.

Amidst a generally favourable environment for oil and gas, Morgans also reports its expectations for dividends have equally improved.

Add rating retained, while the target shifts to $32.90 from $33.60.

Target price is $32.90 Current Price is $30.14 Difference: $2.76
If WDS meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $31.68

The company's fiscal year ends in December.

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: 0.4

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