Australian Broker Call

Macquarie rates AMC as Outperform (1) -

A move by corporates towards sustainability has been weighing on Amcor's share price, Macquarie notes. Major customer Unilever has now announced a plan to make all its packaging reusable and recyclable by 2025, including a move toward a circular economy of collection and reprocessing.

Not only does Amcor's forward PE discount to the ASX200 make it the cheapest its been since the GFC, suggesting the impact is already priced in, Amcor is at the forefront of new product initiatives to help customers meet their 100% recycling targets, the broker points out.

Outperform and $17.19 target retained.

Target price is $17.19 Current Price is $13.80 Difference: $3.39
If AMC meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $15.93, suggesting upside of 15.4% (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: 0.5

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

Morgan Stanley rates APE as Overweight (1) -

Morgan Stanley believes the merger with Automotive Holdings has improved the competitive position and any rebound in volumes will provide earnings leverage. Forecasts are updated to incorporate the estimated synergies of $115m.

The broker reiterates an Overweight rating as the business is now the clear market leader and trading at a trough cycle. The main profit driver over the medium term will be execution across the combined network.

Target is raised to $16.00 from $12.80. Industry view: In-Line.

Target price is $16.00 Current Price is $13.59 Difference: $2.41
If APE meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $14.53, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

Credit Suisse rates CIP as Initiation of coverage with Neutral (3) -

Credit Suisse initiates coverage on Centuria Industrial with a Neutral rating and $3.20 target. The broker notes global demand for industrial real estate exposure is robust because of the rise of e-commerce.

The portfolio has a book value of around $1.3bn across 46 assets. Moreover, there is a high degree of predictability in earnings and distributions because of the geographically diversified portfolio and mix of tenants.

In addition to annual rental increases, Credit Suisse believes management will continue to grow the scale of the business through acquisitions.

Target price is $3.20 Current Price is $3.27 Difference: minus $0.07 (current price is over target).
If CIP meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Ord Minnett rates CWY as Accumulate (2) -

The company has now acquired the property, plant and equipment of SKM Recycling, for $66m. Assessing the earnings uplift from this capital deployment is difficult, Ord Minnett points out, as market dynamics are likely to change as this part of the waste value chain transitions to a fee-for-service model.

Cleanaway Waste has indicated the transaction will not be material to earnings in FY20. Ord Minnett maintains an Accumulate rating with a $2.30 target. The broker estimates the assets of SKM Recycling could generate operating earnings (EBITDA) of around $15m on a full-year basis.

Target price is $2.30 Current Price is $2.03 Difference: $0.27
If CWY meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.25, suggesting upside of 10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates DCN as Underperform (5) -

Dacian Gold has reported Sep Q production 25% ahead of expectation and ahead of the run-rate implied by first half guidance. Delivering on FY20 guidance and maintaining momentum is key to longer term de-risking for Dacian, the broker suggests.

Despite this result the broker remains cautious. An upgrade to guidance is a possibility, but Underperform retained. Target rises to $1.40 from $1.20.

Target price is $1.40 Current Price is $1.49 Difference: minus $0.09 (current price is over target).
If DCN meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.5

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

Citi rates FLT as Buy (1) -

Target price has come off a little on reduced forecasts -to $50.50 from the prior $52.60- as the company effectively issued a profit warning yesterday. Citi analysts, already in favour, stick with their Buy rating as they continue to forecast better times ahead.

The second half, the analysts suggest, should see one-off factors dissipate and the overall operational environment improve for Flight Centre. While corporate travel keeps trucking along, the bricks and mortar leisure business should stabilise on Citi's forecasts.

Having said so, guidance at the upcoming AGM is likely to remain cautious given yesterday's warning.

Target price is $50.50 Current Price is $41.74 Difference: $8.76
If FLT meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $49.07, suggesting upside of 17.6% (ex-dividends)

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

Credit Suisse rates FLT as Upgrade to Outperform from Neutral (1) -

Credit Suisse suspects the discussion regarding the sustainability of the shop network will only intensify. The broker disagrees with the bear case which suggests that the growth of online and home-based consulting will put pressure on the shops.

Flight Centre is considered well-placed to implement a transition and the cost base can be reduced with a manageable impact on profit. On the upside, Flight Centre now operates one of the largest online travel booking businesses in Australia.

The home channel is growing strongly as is corporate. The broker upgrades to Outperform from Neutral and raises the target to $49.91 from $47.76. Guidance will be provided at the AGM on November 9.

Target price is $49.91 Current Price is $41.74 Difference: $8.17
If FLT meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $49.07, suggesting upside of 17.6% (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

Morgan Stanley rates FLT as Overweight (1) -

The first quarter was challenging and the company has flagged a decline in first half earnings. While a second-half recovery is expected, Morgan Stanley observes the outlook is unclear.

The company stands to benefit as conditions improve in overseas markets and from any upside associated with recent interest rate reductions and tax refunds domestically.

The peak booking period, from late January, remains key to the outlook and Flight Centre is expected to provide more detail at the AGM in November.

Morgan Stanley maintains an Overweight rating and reduces the target to $45 from $46. Industry view: Cautious.

Target price is $45.00 Current Price is $41.74 Difference: $3.26
If FLT meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $49.07, suggesting upside of 17.6% (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

UBS rates FLT as Buy (1) -

UBS reduces estimates for earnings per share by -1% to reflect the first quarter trading update. Challenges remain in the UK and the US leisure market and the company has guided to an underlying first half decline in profit.

The broker now forecasts 8% growth in pre-tax profit in FY20. UBS believes there is a strong diversified outlook, and the market is not paying for the scaling up of the online offer in Australia. Buy rating maintained. Target is reduced to $54.10 from $55.00.

Target price is $54.10 Current Price is $41.74 Difference: $12.36
If FLT meets the UBS target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $49.07, suggesting upside of 17.6% (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 GDG as Add (1) -

The business sustained a record quarterly performance in September, with sales of $88m. Funds under management grew 7% on the prior quarter.

Morgans is encouraged by the business trajectory and maintains an Add rating. Target is 83c.

Target price is $0.83 Current Price is $0.72 Difference: $0.11
If GDG meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

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

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

Credit Suisse believes the price position and depth of the company's private-label range will continue to support revenue and there is an opportunity to leverage the growing and active customer base.

Almost 50% of gross profit is derived from private-label sales, with price leadership and expanding ranges crucial to driving growth.

The broker believes the first year of the marketplace performance will be important in setting expectations around the outlook and the potential impact on third-party brands. Credit Suisse initiates coverage with an Outperform rating and $7.18 target.

Target price is $7.18 Current Price is $6.17 Difference: $1.01
If KGN meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Citi rates LVT as Buy (1) -

The $50m capital raising was larger in size than Citi analysts had anticipated. The flip side of that is the company now has plenty of funds to deliver on its FY21 ARR target, the analysts surmise. The acronym stands for annualised recurring revenues.

Buy/High Risk rating retained, but the price target slumps to 75c on a combination of lowered ARR forecasts and dilution from the expanded capital base.

Citi analysts continue to assume management will beat its own ARR target handsomely -$125m versus $100m targeted- but the analysts are also cognisant of the fact that, right now, the attention goes out to the partner channel and enterprise customers.

LiveTiles is projected to generate positive cash flow from the second half onwards.

Target price is $0.75 Current Price is $0.35 Difference: $0.4
If LVT meets the Citi target it will return approximately 114% (excluding dividends, fees and charges).

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

Macquarie rates NST as Outperform (1) -

Having reviewed Pogo's geological potential, Macquarie increases Northern Star outer year earnings forecasts significantly. A 70% conversion of Pogo's existing resource is enough to extend mining to at least 2030, and recent exploration suggests longer still.

The company’s ability to add organic growth to inorganic sets it apart from its peers, the broker believes. Outperform retained, target rises to $16 from $15.

Target price is $16.00 Current Price is $11.98 Difference: $4.02
If NST meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $11.85, suggesting downside of -1.1% (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

Morgan Stanley rates PDL as Overweight (1) -

Morgan Stanley envisages downside risk to the September quarter update. The broker considers Brexit a greater headwind for Pendal Group compared with other Australian listed fund managers, with around 22% of assets under management from UK clients and a larger exposure to UK/EU equity strategies.

Another challenge is a lack of income strategies outside of Australia, in the broker's view. The issues are considered largely factored into the price and Morgan Stanley maintains an Overweight rating. Target is $9.60. Industry view: In-Line.

Target price is $9.60 Current Price is $6.89 Difference: $2.71
If PDL meets the Morgan Stanley target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $8.43, suggesting upside of 22.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.4

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

Credit Suisse rates PTM as Neutral (3) -

Funds under management as of September 30 were down -0.6%, driven by net outflows and partially offset by positive market movements. Credit Suisse notes the company has underperformed the market by -35% since the start of 2019.

In an Australian context, where every stock is facing either uncertainty in earnings or lofty valuations, Platinum Asset Management is beginning to look attractive to the broker.

However, with elevated outflows and uncertainty regarding offshore strategies the earnings risk is still to the downside and a Neutral rating is maintained. Target is reduced to $4.15 from $4.25.

Target price is $4.15 Current Price is $3.93 Difference: $0.22
If PTM meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.84, suggesting downside of -2.4% (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 SKI as Reduce (5) -

The draft decision on the South Australian Power Networks has confirmed Morgans' view that distribution revenue will fall. A lower capital expenditure budget also means a slowdown in regulated asset base growth.

The regulator has provided for a revenue allowance across 2020-21 to 2024-25 of $3.9bn, resulting in a -$90m decline in distribution revenue in 2020-21.

Morgans maintains a Reduce rating and lowers the target to $1.96 from $2.06.

Target price is $1.96 Current Price is $2.12 Difference: minus $0.16 (current price is over target).
If SKI meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.28, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.3

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

Credit Suisse rates VEA as Initiation of coverage with Neutral (3) -

Credit Suisse initiates coverage with a Neutral rating and $1.92 target. The rating is primarily influenced by near-term support from refining margins. In the long-term valuation risks appear to the downside, in the broker's view.

With significant sensitivity to changes in refiner and fuel retail margin assumptions, Credit Suisse believes the stock will remain influenced heavily by these variables.

Target price is $1.92 Current Price is $1.79 Difference: $0.13
If VEA meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.22, suggesting upside of 23.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.4

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

Ord Minnett rates WSP as Buy (1) -

The company has provided FY20 revenue guidance of $37.8m but it remains unclear to Ord Minnett as to how revenue will build throughout FY20.

Using quarterly forecasts, the broker suggests the first quarter of FY20 may be a turning point and build investor confidence in the next year or so.

Given the stock is trading below issue, this could present an opportunity for investors to take a second look. The broker reiterates a Buy rating and $2 target.

Target price is $2.00 Current Price is $1.46 Difference: $0.54
If WSP meets the Ord Minnett target it will return approximately 37% (excluding dividends, fees and charges).

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