Australian Broker Call

Deutsche Bank rates ALQ as Sell (5) -

Management expects Alcontrol to provide an additional $8-10m in operating earnings in FY19, which would increase life sciences margins by around 90 basis points.

A life sciences earnings margin of 16-17% is expected in FY19 and 17-18% is expected in subsequent years. Deutsche Bank maintains a Sell rating. Target is $6.70.

Target price is $6.70 Current Price is $7.31 Difference: minus $0.61 (current price is over target).
If ALQ meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.46, suggesting upside of 2.1% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Ord Minnett rates AMC as Accumulate (2) -

Beverages data suggests volumes in North America have recovered in the latest month. Ord Minnett does not extrapolate the positive data at this stage but notes the balance of the year will provide easier comparable periods for Amcor.

While headwinds from input costs and the underperformance of a key customer weigh heavily, the broker notes both issues are firmly outside the company's control and likely to be temporary.

Accumulate rating maintained. Target is $15.50.

Target price is $15.50 Current Price is $14.02 Difference: $1.48
If AMC meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $15.23, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

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

The bank has sold its NZ life insurance business to Cigna for NZ$700m. Morgan Stanley notes ANZ had not publicly stated the business was for sale, although believes the decision is consistent with the strategy to exit low-return and non-core businesses.

This supports the broker's view that ANZ can undertake buybacks in FY19 as asset sale proceeds are received. Rating is Equal-weight. Target is $29. Sector view is In-Line.

Target price is $29.00 Current Price is $27.21 Difference: $1.79
If ANZ meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $29.59, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Ord Minnett rates ANZ as Accumulate (2) -

The bank will sell its NZ life insurance business to Cigna for NZ$700m. Ord Minnett updates its model to incorporate the proposed transaction. The broker continues to expect ANZ to deliver the best growth in earnings per share in the sector on a three-year view.

Accumulate maintained. Target is $31.20.

Target price is $31.20 Current Price is $27.21 Difference: $3.99
If ANZ meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $29.59, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates BHP as Outperform (1) -

Macquarie calculates that the company's WA iron ore business should account for 35% of group EBITDA and 50% of net profit over the next five years.

The development of the South Flank should provide a 12-20 year, stable production outlook and improve margins, the broker adds. Outperform rating and $36.20 target maintained.

Target price is $36.20 Current Price is $32.20 Difference: $4
If BHP meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $33.13, suggesting upside of 2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates CWY as Outperform (1) -

Macquarie reinstates coverage with an Outperform rating and $2.00 target. The broker believes the stock offers an attractive valuation and there are visible growth options that have been augmented by the acquisition of Toxfree.

Cleanaway is expected to benefit in the medium to longer term from broad fundamentals and the broker forecasts a three-year growth rate of 25%. The acquisition of Toxfree has repositioned the liquid waste portfolio and introduced a broader health sector offering.

Target price is $2.00 Current Price is $1.57 Difference: $0.43
If CWY meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $1.71, suggesting upside of 9.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

UBS rates DHG as Downgrade to Neutral from Buy (3) -

As the stock is trading near fundamental valuation, UBS downgrades to Neutral from Buy. The broker believes the company is on track to meet FY18 expectations.

Admittedly, since the May 1 update, there has been a softening of new listing volumes but the broker suggests there are offsets to manage the earnings impact. Target is raised to $3.30 from $3.20.

Target price is $3.30 Current Price is $3.31 Difference: minus $0.01 (current price is over target).
If DHG meets the UBS target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.30, suggesting downside of -0.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

UBS rates FMG as Buy (1) -

UBS believes it makes sense that Fortescue Metals is starting to explore alternative product strategies in order to receive better margins. The broker believes Eliwana, approved for development, should be a key enabler of this change.

The company is expected to maintain saleable production at 170mtpa and not require a material uplift in operating expenditure or a reduction in mine life. Buy rating maintained. Target is raised to $5.75 from $5.50.

Target price is $5.75 Current Price is $4.57 Difference: $1.18
If FMG meets the UBS target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $5.24, suggesting upside of 14.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates GXY as Upgrade to Outperform from Underperform (1) -

The company has entered a non-binding agreement with POSCO to sell 28% of its Sal de Vida resource for US$280m. This is a better outcome than Macquarie envisaged as the company is now able to sole fund the development.

In the longer term, the delivery of a substantial brine project, that has proved challenging for others, in an expansionary environment becomes a key catalyst for the stock.

Rating is upgraded to Outperform from Underperform. Target is raised to $3.90 from $3.00.

Target price is $3.90 Current Price is $3.34 Difference: $0.56
If GXY meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Deutsche Bank rates JHX as Buy (1) -

Given concerns regarding new housing construction, news that the renovation market growth is strong is a positive for James Hardie, Deutsche Bank asserts. Renovations represent 60% of the company's North American volumes.

The broker notes big-ticket renovations activity is growing at its fastest pace since 2014 and is expected to increase 5.1% in 2018. Target is $25.35. Buy rating retained.

Target price is $25.35 Current Price is $22.03 Difference: $3.32
If JHX meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 12.5% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

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

UBS rates NWS as Sell (5) -

UBS updates forecasts to reflect the third quarter result, updated REA Group ((REA)) forecasts and the Foxtel/Fox Sports transaction costs. FY18-19 forecasts are lowered by -7-15%.

UBS retains a Sell rating, largely driven by a view on REA Group, which it considers expensive. Nevertheless, the broker continues to envisage value in the News Corp "stub" and upside catalysts relating to potential consolidation in Australia, following changes to cross media ownership laws.

Cost reduction opportunities also exist from the proposed Foxtel/Fox Sports merger. Target is raised to $20.75 from $20.40.

Target price is $20.75 Current Price is $20.97 Difference: minus $0.22 (current price is over target).
If NWS meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $22.24, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

UBS rates OZL as Neutral (3) -

UBS considers the stock fairly priced for its core production and development base. Growth options could mean a positive re-rating but the broker does not believe this should occur until the company's plans have been proved up and/or Carrapateena is de-risked.

The strategy briefing provided no new information for the broker that would cause a change in view. Neutral rating and $11 target maintained.

Target price is $11.00 Current Price is $9.77 Difference: $1.23
If OZL meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $10.03, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Ord Minnett rates REA as Downgrade to Lighten from Hold (4) -

The company has received approval from the ACCC to proceed with its planned acquisition of Hometrack Australia. The acquisition is considered neutral to Ord Minnett's discounted cash flow valuation.

Nevertheless, the broker downgrades its rating to Lighten from Hold because of weaker real estate listings data, weaker third-quarter earnings and overall valuation. Target is $78.

Target price is $78.00 Current Price is $87.29 Difference: minus $9.29 (current price is over target).
If REA 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 $83.46, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Credit Suisse rates SDF as Outperform (1) -

The company's investor briefing focused on the internal technology strategy. Management remains optimistic around the earnings opportunity but is not yet confident enough to provide hard targets and timeframes.

Credit Suisse allows for some level of success in its forecasts and suggests that, for a company that is exploring numerous growth opportunities, the net outcome appears to be more positive than negative. Outperform rating and $3.15 target maintained.

Target price is $3.15 Current Price is $2.75 Difference: $0.4
If SDF meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.13, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Macquarie rates SDF as Outperform (1) -

The company demonstrated its client trading platform and provided details on the monetisation at its investor briefing. Macquarie believes network brokers should be attracted to the platform as a result of better operating efficiency and additional commissions paid by underwriters.

The outlook, market conditions and balance-sheet capacity for acquisition remains supportive and the broker maintains an Outperform rating and $3.30 target.

Target price is $3.30 Current Price is $2.75 Difference: $0.55
If SDF meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.13, suggesting upside of 13.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Morgans rates SIQ as Downgrade to Hold from Add (3) -

Morgans suggests Smartgroup has sufficient debt capacity to fund an acquisition, although given the remaining salary packaging businesses are small, it would likely have to be in a adjacent sector. This means lower synergies and greater capital investment, the broker notes.

The market is already pricing in growth through acquisition, but it would be more prudent to wait to see what and how it goes. Morgans pulls back to Hold from Add for now. Target unchanged at $11.60.

Target price is $11.60 Current Price is $11.28 Difference: $0.32
If SIQ meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $11.75, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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