Australian Broker Call
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April 04, 2019
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1).
Last Updated: 05:00 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
Today's Upgrades and Downgrades
| VVR - | VIVA ENERGY REIT | Downgrade to Hold from Accumulate | Ord Minnett |
Ord Minnett rates AAD as Upgrade to Hold from Lighten (3) -
While Ardent Leisure still carries risk with respect to the execution of the Main Event roll out, Ord Minnett believes the company has appointed solid management and the shares are returning to enterprise value/operating earnings multiples of 10.8x in FY19 and 8.9x in FY20.
Ord Minnett reduces net profit forecasts by -21% for FY19 and by -29% for FY20, leading to a lower target, reduced to $1.07 from $1.35. The broker now considers the risk/reward ratio is more balanced and upgrades to Hold from Lighten.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $1.07 Current Price is $1.49 Difference: minus $0.42 (current price is over target).
If AAD meets the Ord Minnett target it will return approximately minus 28% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.
Forecast for FY19:
Ord Minnett forecasts a full year FY19 dividend of 1.00 cents and EPS of 1.00 cents. |
Forecast for FY20:
Ord Minnett forecasts a full year FY20 dividend of 1.00 cents and EPS of 3.00 cents. |
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $71.24
Credit Suisse rates ASX as Underperform (5) -
Credit Suisse upgrades forecasts by 1-2% for FY19-21 to reflect the better activity trends in the March quarter. Upgrades are driven by stronger than expected derivatives activity. Meanwhile, corporate actions were down -40% with only $7bn in equity being raised.
Credit Suisse suggests narrowing BBSW spreads and cash rate reductions could create some headwinds going forward.
The -25 basis points drop in the BBSW spread to the cash rate over the past month could negatively affect earnings by -3% from FY20. A -50 basis points reduction in the cash rate would impact earnings by -1%.
Underperform rating and $60 target maintained.
Target price is $60.00 Current Price is $71.24 Difference: minus $11.24 (current price is over target).
If ASX meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $60.10, suggesting downside of -15.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 233.00 cents and EPS of 259.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 254.1, implying annual growth of 5.7%. Current consensus DPS estimate is 227.7, implying a prospective dividend yield of 3.2%. Current consensus EPS estimate suggests the PER is 28.0. |
Forecast for FY20:
Credit Suisse forecasts a full year FY20 dividend of 238.00 cents and EPS of 265.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 262.7, implying annual growth of 3.4%. Current consensus DPS estimate is 234.7, implying a prospective dividend yield of 3.3%. Current consensus EPS estimate suggests the PER is 27.1. |
Market Sentiment: -0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Deutsche Bank rates ASX as Sell (5) -
The company posted a record month for derivatives in March, with volumes for both futures and options up by 21%. Cash market trades picked up as well. The average daily value traded on market of $5bn was up 14%.
On the other hand, Deutsche Bank observes capital raisings were much slower during the month as the impact of an election and volatile markets meant conditions worsened. Sell rating and $59.70 target maintained.
Target price is $59.70 Current Price is $71.24 Difference: minus $11.54 (current price is over target).
If ASX meets the Deutsche Bank target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $60.10, suggesting downside of -15.6% (ex-dividends)
Forecast for FY19:
Current consensus EPS estimate is 254.1, implying annual growth of 5.7%. Current consensus DPS estimate is 227.7, implying a prospective dividend yield of 3.2%. Current consensus EPS estimate suggests the PER is 28.0. |
Forecast for FY20:
Current consensus EPS estimate is 262.7, implying annual growth of 3.4%. Current consensus DPS estimate is 234.7, implying a prospective dividend yield of 3.3%. Current consensus EPS estimate suggests the PER is 27.1. |
Market Sentiment: -0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $93.95
Citi rates BKL as Sell (5) -
Citi incorporates a negative catalyst watch on Blackmores ahead of the third quarter results on April 16. Sales are expected to be negatively affected by fewer orders. This stems from the overhang of excess inventory in Chinese channels and a shift away from daigou towards Australian retailers.
Chinese consumer sentiment is also softer. Nevertheless, the broker considers the company's brand is strong and it is well-placed to benefit from increased health consciousness and a growing Asian middle class.
Citi maintains a Sell rating until there are improvements in execution in China and new product development, which is necessary to grow market share. Target is $89.50.
Target price is $89.50 Current Price is $93.95 Difference: minus $4.45 (current price is over target).
If BKL meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $90.92, suggesting downside of -3.2% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Citi forecasts a full year FY19 dividend of 290.00 cents and EPS of 384.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 378.4, implying annual growth of -6.9%. Current consensus DPS estimate is 284.6, implying a prospective dividend yield of 3.0%. Current consensus EPS estimate suggests the PER is 24.8. |
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 345.00 cents and EPS of 455.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 421.5, implying annual growth of 11.4%. Current consensus DPS estimate is 317.3, implying a prospective dividend yield of 3.4%. Current consensus EPS estimate suggests the PER is 22.3. |
Market Sentiment: -0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
CL1 CLASS LIMITED
Wealth Management & Investments
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Overnight Price: $1.70
UBS rates CL1 as Buy (1) -
The company reported a "reasonable" March quarter, UBS suggests, with 2,000 net Class Super accounts added. The rate of net additions was above the December quarter but well below prior periods. The company continues to highlight regulatory and political uncertainty.
Andrew Russell, the new CEO, will commence the job on May 14. UBS maintains a Buy rating and continues to believe there is structural growth and valuation support. Target is $2.15.
Target price is $2.15 Current Price is $1.70 Difference: $0.45
If CL1 meets the UBS target it will return approximately 26% (excluding dividends, fees and charges).
Current consensus price target is $1.59, suggesting downside of -6.7% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 5.00 cents and EPS of 7.10 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 7.1, implying annual growth of -3.9%. Current consensus DPS estimate is 5.0, implying a prospective dividend yield of 2.9%. Current consensus EPS estimate suggests the PER is 23.9. |
Forecast for FY20:
UBS forecasts a full year FY20 dividend of 6.00 cents and EPS of 7.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 7.1, implying annual growth of N/A. Current consensus DPS estimate is 5.3, implying a prospective dividend yield of 3.1%. Current consensus EPS estimate suggests the PER is 23.9. |
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
FNP FREEDOM FOODS GROUP LIMITED
Food, Beverages & Tobacco
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Overnight Price: $5.25
Deutsche Bank rates FNP as Initiation of coverage with Buy (1) -
Deutsche Bank initiates coverage of Freedom Foods with a Buy rating and $6.00 target. The broker's call is predicated on robust earnings growth, leveraged to domestic and offshore dairy demand.
The broker considers the stock is also a high-quality exposure to non-dairy and health food. Despite the high spot multiple, the broker lauds the stock, given the strong medium-term earnings.
Target price is $6.00 Current Price is $5.25 Difference: $0.75
If FNP meets the Deutsche Bank target it will return approximately 14% (excluding dividends, fees and charges).
Current consensus price target is $6.01, suggesting upside of 14.5% (ex-dividends)
Forecast for FY19:
Current consensus EPS estimate is 8.9, implying annual growth of 48.8%. Current consensus DPS estimate is 5.5, implying a prospective dividend yield of 1.0%. Current consensus EPS estimate suggests the PER is 59.0. |
Forecast for FY20:
Current consensus EPS estimate is 17.9, implying annual growth of 101.1%. Current consensus DPS estimate is 7.2, implying a prospective dividend yield of 1.4%. Current consensus EPS estimate suggests the PER is 29.3. |
Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $0.11
Morgans - Cessation of coverage
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 0.80 cents. |
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of 0.00 cents. |
This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $7.60
Macquarie rates IAG as Underperform (5) -
The stock multiple signals the market is expecting positive earnings revisions with limited downside risk, in Macquarie's view. The broker incorporates a peril allowance increase of 5.0% from FY20 and assesses there is a risk the company may breach its FY19 peril allowance.
While the company has fewer issues compared with its peers, the broker envisages downside risk to earnings multiples in the near term. Macquarie maintains an Underperform rating and raises the target to $6.90 from $6.85.
Target price is $6.90 Current Price is $7.60 Difference: minus $0.7 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $7.72, suggesting upside of 1.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 31.00 cents and EPS of 35.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 39.4, implying annual growth of -1.7%. Current consensus DPS estimate is 33.7, implying a prospective dividend yield of 4.4%. Current consensus EPS estimate suggests the PER is 19.3. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 35.00 cents and EPS of 41.50 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 43.8, implying annual growth of 11.2%. Current consensus DPS estimate is 35.3, implying a prospective dividend yield of 4.6%. Current consensus EPS estimate suggests the PER is 17.4. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $0.50
Macquarie rates KLL as Outperform (1) -
Kalium Lakes has secured $20.8m in an equity placement at $0.44 a share. The placement provides private equity fund Greenstone Resources with a 19.99% stake in the company and a seat on the board.
The placement will narrow the funding gap for Beyondie to around $64m, Macquarie assesses. The broker maintains an Outperform rating and $0.80 target.
Target price is $0.80 Current Price is $0.50 Difference: $0.3
If KLL meets the Macquarie target it will return approximately 60% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 5.50 cents. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 0.00 cents and EPS of minus 1.60 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $0.41
Morgans rates SEA as Add (1) -
Morgans reviews forecasts for Sundance Energy and continues to envisage an attractive value proposition, with the current market implying a 2020 FCF yield of 16% and leaving the stock trading on a sizeable discount.
The previous infrastructure bottleneck in Area 31 is expected to be removed in Apri 2019, which was a significant hurdle to resuming growth.
The broker maintains an Add rating and raises the target to $1.69 from $1.61.
Target price is $1.69 Current Price is $0.41 Difference: $1.28
If SEA meets the Morgans target it will return approximately 312% (excluding dividends, fees and charges).
The company's fiscal year ends in December.
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of 2.74 cents. |
Forecast for FY20:
Morgans forecasts a full year FY20 dividend of 0.00 cents and EPS of 8.23 cents. |
This company reports in USD. 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
Overnight Price: $2.48
Ord Minnett rates VVR as Downgrade to Hold from Accumulate (3) -
Ord Minnett considers the more-aligned partnership between Viva Energy ((VEA)) and Coles ((COL)) is a positive for Viva Energy REIT, as the new agreement provides certainty of retail operator until 2029, and lower bond yields should also be supportive in the near term.
Viva Energy REIT has a secure income stream from long-leased assets and the broker believes it is well-positioned to grow the portfolio through further acquisitions. Ord Minnett expects growth in earnings per share of 3.5% in 2019 and 3.1% in 2020.
The broker downgrades to Hold from Accumulate and maintains a $2.40 target.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $2.40 Current Price is $2.48 Difference: minus $0.08 (current price is over target).
If VVR meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $2.52, suggesting upside of 1.6% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Ord Minnett forecasts a full year FY19 dividend of 15.00 cents and EPS of 15.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 14.8, implying annual growth of -30.6%. Current consensus DPS estimate is 14.8, implying a prospective dividend yield of 6.0%. Current consensus EPS estimate suggests the PER is 16.8. |
Forecast for FY20:
Ord Minnett forecasts a full year FY20 dividend of 15.00 cents and EPS of 15.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 15.2, implying annual growth of 2.7%. Current consensus DPS estimate is 15.2, implying a prospective dividend yield of 6.1%. Current consensus EPS estimate suggests the PER is 16.3. |
Market Sentiment: 0.7
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $3.96
Deutsche Bank rates WHC as Buy (1) -
Deutsche Bank highlights the value in Whitehaven Coal. Now that coal and gas prices have re-set the broker believes contrarian, yield-seeking investors should be buying.
The broker reiterates the 30% upside envisaged in the stock, with the strong dividend & FCF yields and funded growth options that are not yet factored into the share price. Buy rating and $5.20 target maintained.
Target price is $5.20 Current Price is $3.96 Difference: $1.24
If WHC meets the Deutsche Bank target it will return approximately 31% (excluding dividends, fees and charges).
Current consensus price target is $5.18, suggesting upside of 30.8% (ex-dividends)
Forecast for FY19:
Current consensus EPS estimate is 60.4, implying annual growth of 13.5%. Current consensus DPS estimate is 42.9, implying a prospective dividend yield of 10.8%. Current consensus EPS estimate suggests the PER is 6.6. |
Forecast for FY20:
Current consensus EPS estimate is 44.0, implying annual growth of -27.2%. Current consensus DPS estimate is 25.9, implying a prospective dividend yield of 6.5%. Current consensus EPS estimate suggests the PER is 9.0. |
Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Today's Price Target Changes
| Company | Broker | New Target | Prev Target | Change | |
| ASX | ASX | Deutsche Bank | 59.70 | 58.20 | 2.58% |
| HIG | HIGHLANDS PACIFIC | Morgans | N/A | 0.11 | -100.00% |
| IAG | INSURANCE AUSTRALIA | Macquarie | 6.90 | 6.70 | 2.99% |
Summaries
| AAD | ARDENT LEISURE | Upgrade to Hold from Lighten - Ord Minnett | Overnight Price $1.49 |
| ASX | ASX | Underperform - Credit Suisse | Overnight Price $71.24 |
| Sell - Deutsche Bank | Overnight Price $71.24 | ||
| BKL | BLACKMORES | Sell - Citi | Overnight Price $93.95 |
| CL1 | CLASS | Buy - UBS | Overnight Price $1.70 |
| FNP | FREEDOM FOODS | Initiation of coverage with Buy - Deutsche Bank | Overnight Price $5.25 |
| HIG | HIGHLANDS PACIFIC | Cessation of coverage - Morgans | Overnight Price $0.11 |
| IAG | INSURANCE AUSTRALIA | Underperform - Macquarie | Overnight Price $7.60 |
| KLL | KALIUM LAKES | Outperform - Macquarie | Overnight Price $0.50 |
| SEA | SUNDANCE ENERGY | Add - Morgans | Overnight Price $0.41 |
| VVR | VIVA ENERGY REIT | Downgrade to Hold from Accumulate - Ord Minnett | Overnight Price $2.48 |
| WHC | WHITEHAVEN COAL | Buy - Deutsche Bank | Overnight Price $3.96 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 5 |
| 3. Hold | 2 |
| 5. Sell | 4 |
Thursday 04 April 2019
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