Australian Broker Call

Ord Minnett rates ALL as Accumulate (2) -

Ord Minnett ups Aristocrate Leisure's target price to $32 from $31.75 in response to its global research partner's annual slot-machine survey that points to another year of growth (of which Aristocrat will be the key beneficiary), and to account for the broker's upwardly revised margin forecast for the digital business.

Accumulate rating retained. 

Target price is $32.00 Current Price is $31.30 Difference: $0.7
If ALL meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $34.48, suggesting upside of 10.2% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates AMP as Outperform (1) -

Credit Suisse has marked-to-market for insurers in Australia. Underlying, the analysts believe global equity markets have provided a positive impact for earnings.

AMP has enjoyed a small increase to estimates. $4.80 price target and Outperform rating maintained.

Target price is $4.80 Current Price is $3.59 Difference: $1.21
If AMP meets the Credit Suisse target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Macquarie rates ASG as Outperform (1) -

The broker notes there is no overwhelming evidence to suggest a correlation between house prices and new vehicle purchases. Credit demand and availability do nevertheless have an impact. This, and income growth, are the most important determinants of consumption growth, including vehicle sales.

In the current environment, the broker believes diversification in revenue streams and market exposure underpin the resilience of Autosports' model, and this is being under-appreciated by the market. Outperform retained.

Target falls to $2.50 from $2.75.

Target price is $2.50 Current Price is $1.65 Difference: $0.85
If ASG meets the Macquarie target it will return approximately 52% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates BHP as Neutral (3) -

Credit Suisse has updated its model, observing plenty of moving factors are currently in play for investors preparing for the upcoming FY18 results in August to focus on.

Earnings estimates have fallen by -1-3%. Target price remains at $31. Neutral rating retained. Note that current projections imply a trend of lower EPS and DPS beyond FY18.

Target price is $31.00 Current Price is $32.76 Difference: minus $1.76 (current price is over target).
If BHP meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.48, suggesting upside of 5.2% (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 BHP as Outperform (1) -

BHP's board is ongoing a renewal process, with more changes expected over the next three years, the broker notes. There is no end-date, nonetheless, to the current CEO's tenure.

The current board believes BHP's asset portfolio is now ideal and given the number of organic growth options, the broker concludes M&A is off the table for now. Outperform and $38 target retained.

Target price is $38.00 Current Price is $32.76 Difference: $5.24
If BHP meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $34.48, suggesting upside of 5.2% (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

Credit Suisse rates CGF as Outperform (1) -

Credit Suisse has marked-to-market for insurers in Australia. Underlying, the analysts believe global equity markets have provided a positive impact for earnings.

For Challenger, minor increases have ensued for estimates. Target price of $13.20 and Outperform rating retained.

Target price is $13.20 Current Price is $11.87 Difference: $1.33
If CGF meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $12.23, suggesting upside of 3.0% (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 CL1 as Buy (1) -

Class Ltd posted a strong June quarter, gaining 5,000 Class Super accounts (not including the AMP migration), and the Class Portfolio now represents 3.6% of Class Super Accounts.

UBS expects the continued emigration of AMP ((AMP)) accounts from Class Super will be offset by faster inward industry migration arising from the ATO's regulatory changes. The broker forecasts a rise in the number of Class Super account to 286,000 from 163,000 between FY18-FY23, and Class Portfolio penetration to rise to 25% by FY27.

The broker notes strong competition but believes improved valuation and a potential faster-than-expected transition to cloud-based self-managed-superannuation-fund software will support the stock. The stock is trading on a price-earnings multiple of 14x FY19 earnings, compared with its peers, which are trading at 28x.

Buy rating and $2.95 target price retained.

Target price is $2.95 Current Price is $2.25 Difference: $0.7
If CL1 meets the UBS target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.07, suggesting upside of 36.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Citi rates DMP as Downgrade to Sell from Neutral (5) -

It was only three weeks ago that Citi upgraded to Neutral, which has been acknowledged in today's research update, but the analysts have nevertheless decided it's time to once again downgrade to Sell.

Two reasons for the reversal: a sharp rally in the share price plus the realisation operations in Japan are not meeting expectations. Citi believes market consensus forecasts are due for a downgrade. Price target lifts to $46.30 (was $44.60).

Target price is $46.30 Current Price is $49.91 Difference: minus $3.61 (current price is over target).
If DMP meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $48.13, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Credit Suisse rates DMP as Downgrade to Underperform from Neutral (5) -

Credit Suisse has downgraded Domino's Pizza Enterprises to Underperform from Neutral, citing structural risks.

The broker believes the negatives: the franchise industry inquiry, rising labour costs, aggregator expansion, franchisee attrition, huge growth needs in Europe and uncertainty in Japan; make it difficult to back the market's sentiment on the stock.

Credit Suisse lowers network forecasts yet again and observes organic store openings appear to be lagging guidance. Target Price falls to $36.76 from $42.47.

Target price is $36.76 Current Price is $49.91 Difference: minus $13.15 (current price is over target).
If DMP meets the Credit Suisse target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $48.13, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Macquarie rates EHL as Resume Coverage: Outperform (1) -

Emeco has completed its acquisition of Matilda Equipment, on which the broker was advising, and the broker is back with an Outperform rating and a 43c target.

The broker estimates upward of 10% earnings accretion in FY19 from the acquisition, which builds out Emeco's value chain and further leverages Force maintenance capability. Industry feedback continues a strengthening outlook for the industry.

Target price is $0.43 Current Price is $0.36 Difference: $0.07
If EHL meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates FMG as Outperform (1) -

Credit Suisse has reduced its net-present-value based target price to $5.50 from $5.75, while retaining an Outperform rating, noting the strong balance sheet and cost control.

The broker appears to be getting sore eyes looking for both catalysts (in particular around Eliwana) and price realisations (which heavily influence its estimates) and has pushed out its 85% price realisation assumption to FY23.

Target price is $5.50 Current Price is $4.28 Difference: $1.22
If FMG meets the Credit Suisse target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $5.28, suggesting upside of 23.2% (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

Credit Suisse rates IAG as Neutral (3) -

Credit Suisse has conducted its June-quarter overview of the Australian Insurance industry, and says the sector is on track for upgrades. Equities markets reversed their first-quarter performance, bonds were fairly steady and five-year corporate spreads expanded.

IAG outperformed the sector by 6.5%, and Suncorp by 1.8%. AMP underperformed by 35% while QBE and Medibank Private lagged a touch. 

Credit Suisse suggests IAG's valuation is looking a bit stretched but expects it will find support from benign weather conditions and firm equity markets.

The broker raises IAG's FY18 net profit forecast by 9.1% and earnings-per-share estimates rise 1% to 3% in outer years.

Target price rises to $8.30 from $7.50. Neutral rating retained, reflecting the 19.8x price-earnings multiple, a 20% premium to peers.

Target price is $8.30 Current Price is $8.31 Difference: minus $0.01 (current price is over target).
If IAG meets the Credit Suisse target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.77, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates JHG as Overweight (1) -

Morgan Stanley believes Q2 is shaping up as another "solid result". A buy back announcement is seen as likely. Plus there are more catalysts on the horizon later in FY18 and in FY19, say the analysts.

Morgan Stanley sees a "compelling" risk-reward proposition. Overweight rating retained. Price target falls slightly to $58 (was $60) following minor cuts to estimates. Industry view is In-Line.

Among future catalysts, the analysts cite a better investment performance, new strategies and inclusion for the stock in the US Russell 1000 index.

Target price is $58.00 Current Price is $41.69 Difference: $16.31
If JHG meets the Morgan Stanley target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $50.19, suggesting upside of 20.4% (ex-dividends)

The company's fiscal year ends in December.

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: 0.7

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

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

Nanosonics has hit Morgans target price so the broker downgrades to Hold from Add, remaining a long-term fan of the stock. The $3.12 target price is retained.

Meanwhile, Canadian and European clearances have been received for the second generation Trophon2 device and the broker expects a launch in early FY19, although a lag would drag on the share price.

Target price is $3.12 Current Price is $2.98 Difference: $0.14
If NAN meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Credit Suisse rates QBE as Neutral (3) -

Credit Suisse has marked-to-market for insurers in Australia. Underlying, the analysts believe global equity markets have provided a positive impact for earnings, but bond yields, so important for QBE, have done the exact opposite.

Shorter term, estimates have been reduced by -3.1%, but further out they have risen, albeit only a little bit. Target price retained at $10.20. Neutral.

Target price is $10.20 Current Price is $9.80 Difference: $0.4
If QBE meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.05, suggesting upside of 12.8% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates RIO as Outperform (1) -

Credit Suisse has increased earnings estimates by up to 5% over the forecast period to reflect modelling changes arising from new iron or prices, and mark-to-market.

The broker retains an Outperform rating and $89.00 target price and notes a Grasberg sale may be imminent, which could result in a shareholder return given the pleasing capital expenditure profile out to 2020.

Target price is $89.00 Current Price is $78.97 Difference: $10.03
If RIO meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $89.31, suggesting upside of 13.1% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates S32 as Neutral (3) -

Credit Suisse raises the net-present-value driven target price for South32 to $3.95 from $3.75, citing strong free cash flow generation and solid balance sheet.

Neutral rating retained, the broker maintaining a key eye to the flow through from the Arizona acquisition, the Illawarra ramp-up, South Africa Energy Coal and progress on Eagle Downs.

The broker tinkers with near-term earnings-per-share estimates and marks to market.

Target price is $3.95 Current Price is $3.51 Difference: $0.44
If S32 meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.82, 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: 0.3

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

Morgans rates SIV as Hold (3) -

Silver Chef has downgraded guidance for pre-tax profit by -20%, after posting a weak fourth quarter and raising provisioning on rental assets and arrears. Credit Suisse cuts its target price to $3.25 from $4.87.

The broker cites execution challenges in FY19 and likely share price volatility but expects the business can return to sustainable growth. Hold rating retained.

Target price is $3.25 Current Price is $3.23 Difference: $0.02
If SIV meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Credit Suisse rates SUN as Neutral (3) -

Credit Suisse has conducted its June-quarter overview of the Australian Insurance industry, and says the sector is on track for upgrades. Equity markets reversed their first-quarter performance, bonds were fairly steady and five-year corporate spreads expanded.

IAG outperformed the sector by 6.5%, and Suncorp by 1.8%. AMP underperformed by 35% while QBE and Medibank Private lagged a touch. 

Credit Suisse suggests Suncorp's valuation is looking a bit stretched but expects it will find support from benign weather conditions and firm equity markets.

The broker raises Suncorp's FY18 net profit forecast by 9.1% and earnings-per-share estimates rise 1% to 3% in outer years. Target price rises to $15.40 from $14.50. Neutral rating retained. The stock is seen trading at a 14.9x price-earnings multiple, a -9% discount to peers.

Target price is $15.40 Current Price is $14.82 Difference: $0.58
If SUN meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $14.39, suggesting downside of -2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates SVW as Accumulate (2) -

Ord Minnett bumps up the target price for Seven Group Holdings to $20.58 from $20.08 to account for strong performances from its investments in Beach Petroleum (of which it holds 25%) and Seven West Media (35%).

Strong earnings upgrades to Beach Petroleum forecasts also augured well for the stock.

Ords lifts Seven Group forecasts for earnings per share estimates by roughly 2%. The broker spies the likelihood of big consensus upgrades of 8% this year and 21% next year.

Accumulate rating retained; the stock having underperformed the ASX200 by roughly 10 percentage points in June. 

Target price is $20.58 Current Price is $18.71 Difference: $1.87
If SVW meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $21.66, suggesting upside of 15.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.9

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

UBS rates WOR as Neutral (3) -

UBS tinkers with WorleyParsons' net profit estimates to account for an extra A$20m tax charge relating to recent changes in US tax law. UBS has treated this, and the previous A$58m announced in the first-half result, as significant items so earnings-per-share figures are unchanged.

Meanwhile, WorleyParsons has been awarded a pre-FEED consulting contract by Borouge and a three-year contract to provide services for stage 3 of NOVA Chemicals' Corunna Cracker Expansion Project in Canada.

UBS retains a Neutral rating, awaiting a recovery in the global oil and gas capital expenditure cycle but lifts the price target to $18 from $17.50 to reflect the mark-to-market of global oil services trading multiples that have risen in line with the oil price.

Target price is $18.00 Current Price is $18.13 Difference: minus $0.13 (current price is over target).
If WOR 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 $17.21, suggesting downside of -5.1% (ex-dividends)

The company's fiscal year ends in June.

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