Australian Broker Call

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

Credit Suisse assesses Bingo Industries is a quality waste management business with industry-leading margins. A proportion of earnings come from defensive post-collections activity. There is also a structural growth opportunity.

The broker values the shares based on a 25x PE multiple, 19x EBIT and 12x EBITDA basis and initiates coverage with an Outperform rating and $3.40 target.

Target price is $3.40 Current Price is $2.79 Difference: $0.61
If BIN meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $2.93, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Citi rates BUB as Initiation of coverage with Buy (1) -

Citi observes Bubs Australia is a promising brand in a fast-growing infant formula category (goat milk), with well-connected strategic partners and potential for positive catalysts. The broker initiates coverage with a Buy/High Risk rating and $1.40 target.

The risk evaluation is high because the company is at an early stage and currently making a loss. The stock has exhibited substantial share price momentum during 2019 amid a number of strategic announcements.

The broker estimates a further $38m in sales above its estimates of $171m in FY22 would be required to justify an a2 Milk-style ((A2M)) multiple.

Target price is $1.40 Current Price is $1.07 Difference: $0.33
If BUB meets the Citi target it will return approximately 31% (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 BVS as Outperform (1) -

The UK regulator has thrown a spanner in the works of Bravura Solutions' competitor FNZ's acquisition of GBST, declaring the two entities must continue to operate separately.

Macquarie believes this will provide an impediment to prospective FNZ clients given lack of clarity and thus an advantage for Bravura, which has reaffirmed guidance for organic operations and greater contribution from acquisitions.

This implies no real impact from Brexit uncertainty at this stage, the broker suggests, as the company continues to enjoy a healthy sales pipeline from new and existing clients. Target rises to $5.80 from $5.55, Outperform retained.

Target price is $5.80 Current Price is $4.94 Difference: $0.86
If BVS meets the Macquarie target it will return approximately 17% (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 CGC as Outperform (1) -

Credit Suisse asserts Morocco is the next catalyst for the company. It remains early days for the northern 2019-20 blueberry growing season although, as Morocco is about 20% of 2020 growth estimates for operating earnings, the broker makes an early assessment of the weather patterns.

November 2016 preceded a strong 2017 harvest, while November 2017 and 2018 preceded weak or poorly-timed harvests. Hence, although Credit Suisse urges caution as it is too early in the season to be conclusive, the outlook based on November 2019 data appears positive.

The broker maintains an Outperform rating and $3.40 target.

Target price is $3.40 Current Price is $2.47 Difference: $0.93
If CGC meets the Credit Suisse target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $2.90, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.2

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

Ord Minnett rates CTX as Hold (3) -

Caltex Australia has rejected the latest takeover bid ($34.50 a share plus a special dividend) from Canadian convenience retailer Alimentation Couche-Tard on the basis that it undervalues the company.

Non-exclusive access to selected information has been offered to enable the suitor to formulate a revised proposal.

Ord Minnett notes the absence of fundamental valuation support and uncertainty regarding a higher bid, and maintains a Hold rating. Target rises to $34 from $32.

Target price is $34.00 Current Price is $34.29 Difference: minus $0.29 (current price is over target).
If CTX meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.11, suggesting downside of -3.4% (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

Ord Minnett rates CVN as Buy (1) -

The scale of the Dorado project has increased to initial oil production of 75-100,000 bbl/d. Additionally, Santos ((STO)), the operator of Carnarvon Petroleum's key asset, has indicated capital expenditure of US$1.9-2.2bn.

The extra details have had a negative impact on the valuation, Ord Minnett assesses, and, more importantly, the higher capital expenditure means increased pressure on the balance sheet.

To that end, Carnarvon Petroleum has indicated strong interest from financial institutions to fund its share of growth via senior debt. Buy rating maintained. Target is reduced to $0.50 from $0.54.

Target price is $0.50 Current Price is $0.33 Difference: $0.17
If CVN meets the Ord Minnett target it will return approximately 52% (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

Morgans rates KSL as Add (1) -

Asia Development Bank will invest US$10m in Kina Securities by way of a placement at $1.37 a share. Morgans assesses the deal will strengthen the company's banking relationships and provide access to ADB expertise.

A significant investment by an AAA-rated bank provides investors with greater comfort on the overall risk profile, the broker adds.

2019 and 2020 estimates for earnings per share are lowered by -3% and -7% respectively because of the dilution from the capital raising.

Add rating maintained. Target rises to $1.65 from $1.51.

Target price is $1.65 Current Price is $1.50 Difference: $0.15
If KSL meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in PGK. 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 MTS as Underperform (5) -

Metcash has taken a -$237m impairment to goodwill in light of the loss of the 7-Eleven contract. Macquarie is forecasting a more material loss to earnings, and has cut its FY20 forecast by -34%.

Underperform and $2.70 target retained.

Target price is $2.70 Current Price is $2.76 Difference: minus $0.06 (current price is over target).
If MTS meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.82, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Ord Minnett rates MTS as Hold (3) -

Metcash has now quantified the earnings (EBIT) impact, net of cost savings, from the loss of part of the 7-Eleven contract at around -$15m.

Ord Minnett reduces estimates to allow for this impairment in FY20 with no change to earnings estimates. Hold rating and $3 target maintained.

Target price is $3.00 Current Price is $2.76 Difference: $0.24
If MTS meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.82, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Macquarie rates NUF as Outperform (1) -

Nufarm has first mover and cost advantage over peers in what is a substantial market opportunity in Omega-3, the broker notes. An investor update has led the broker to downgrade earnings forecasts and its target to $5.83 from $5.92 on more clarity provided on the timing of cost, scale benefits and regulatory approvals for the ramp-up.

The broker forecasts the potential of $0.90-1.00 of additional value longer term. Outperform retained.

Target price is $5.83 Current Price is $5.05 Difference: $0.78
If NUF meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $6.24, suggesting upside of 23.5% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates OML as Outperform (1) -

Having downgraded guidance with its August result due to weaker conditions, oOh!media has now upgraded on the back of improvement in the Sep-Dec period to date. Macquarie believes the company has gained market share from its Out of Home competitors, and that Out of Home has gained market share from TV and radio.

The upgrade provides relief on the balance sheet front, and kills off any notion of a capital raising being required. The broker continues to see long term structural growth for the industry. Outperform retained, target rises to $4.65 from $4.35.

Target price is $4.65 Current Price is $3.72 Difference: $0.93
If OML meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 8.6% (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

Ord Minnett rates OML as Accumulate (2) -

oOh!media has raised 2019 guidance for operating earnings (EBITDA) to $138-143m, an 8% upgrade at the mid point. Ord Minnett notes the stock rose in recent weeks as the risk of a further downgrade to guidance eased off, so the upgrade is a positive surprise.

The broker, however, continues to highlight the increased uncertainty and the shortening of the revenue profile in the industry. Ord Minnett maintains an Accumulate rating and raises the target to $3.90 from $3.70.

Target price is $3.90 Current Price is $3.72 Difference: $0.18
If OML meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 8.6% (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 ORE as Outperform (1) -

The company has downgraded guidance for the December quarter lithium carbonate sale price to US$5400/t, -13-17% below prior guidance. This material decline in a short space of time signals to Credit Suisse the supply/demand imbalance is being exacerbated in global markets.

Orocobre is making the decision to drop the sales price in order to ensure full clearance of production volumes rather than cede volume for price. No indication was provided regarding the primary vs battery grade mix, which will influence price.

The broker assumes a minimum of 10% battery grade sales based on historical sales and customer mix.

Nevertheless, Credit Suisse remains constructive on lithium and believes the company is well-positioned, differentiated by its low spot on the cost curve. Outperform rating maintained. Target is reduced to $4.45 from $4.50.

Target price is $4.45 Current Price is $2.34 Difference: $2.11
If ORE meets the Credit Suisse target it will return approximately 90% (excluding dividends, fees and charges).

Current consensus price target is $3.21, suggesting upside of 37.4% (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

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

The company has indicated that the average price of lithium carbonate sales for the December quarter is likely to be around US$5400/t.

This highlights for Morgan Stanley the deteriorating pricing of unpurified product, as Orocobre's production in the current half-year was expected to have around 90% unpurified product.

Although prices for purified product have stabilised somewhat, the introductory overhang continues to weigh on volumes and prices in the market, the broker observes.

Morgan Stanley agrees with the company's strategy of maintaining market share, as the loss of economies of scale could put further pressure on margins.

Equal-weight rating, $2.80 target and Attractive industry view maintained.

Target price is $2.80 Current Price is $2.34 Difference: $0.46
If ORE meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.21, suggesting upside of 37.4% (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

Ord Minnett rates ORE as Hold (3) -

Orocobre now expects lithium carbonate pricing for the December quarter of US$5400/t, significantly below the September quarter's realised price of US$7111/t.

The broker reduces price and cost expectations for the remainder of FY20 and FY21 and makes no changes to long-term assumptions. Hold rating maintained. Target is reduced to $2.25 from $2.30.

Target price is $2.25 Current Price is $2.34 Difference: minus $0.09 (current price is over target).
If ORE meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.21, suggesting upside of 37.4% (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 SAR as Outperform (1) -

Newmont, which owns the other 50% of the Super Pit that Saracen Minerals has just acquired, has issued stronger than expected 2020 production and cost guidance for the mine.

Newmont is expecting a steady performance ahead, suggesting to the broker Saracen can produce andextra 100kt-plus of gold over the next three years.

Target rises to $4.50 from $4.40, Outperform retained.

Target price is $4.50 Current Price is $2.98 Difference: $1.52
If SAR meets the Macquarie target it will return approximately 51% (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 SM1 as No Rating (-1) -

Credit Suisse understands the company's desire to diversify from dependency on A2-type milk but believes it important the risk/return is made clear as it invests beyond the core ingredients and nutritionals business.

The broker's review of the New Zealand 'every day nutrition' category suggests scale players operate at relatively low margins. Credit Suisse is restricted on providing a rating and target at present.

Current Price is $8.72. Target price not assessed.

Current consensus price target is $9.19, suggesting upside of 5.4% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Citi rates STO as Upgrade to Buy from Neutral (1) -

Following changes to modelling, Citi upgrades to Buy from Neutral and raises the target to $8.90 from $8.47. The broker assesses the implied oil price to justify the current share price is an undemanding US$53/bbl.

Looking towards 2025 production is expected to grow more than 50%. Santos is the only large cap stock with the balance sheet to comfortably execute on growth expenditure aspirations while still paying a 5% dividend yield.

While the broker acknowledges the view that the stock is already a crowded trade, near-term catalysts are expected to help it outperform.

Target price is $8.90 Current Price is $7.83 Difference: $1.07
If STO meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $8.50, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

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

Morgan Stanley wonders whether the stock is now pricing in success. While further outperformance in the near term is possible it will depend on cost initiatives, commodity prices or progress at Narrabri.

Santos has increased its medium-term production target to 120mmboe by 2025. This reflects increased production at Dorado, increased ownership in Darwin and slightly higher GLNG production.

The company has also guided to higher capital expenditure at its investor briefing. The main downside risk is lower oil prices, Morgan Stanley suggests, should global macro concerns persist. LNG market sentiment is also weak.

Equal-weight maintained. Target is $8.00. Industry view: In-Line.

Target price is $8.00 Current Price is $7.83 Difference: $0.17
If STO meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.50, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates STO as Hold (3) -

Ord Minnett remains positive on the outlook for Santos but considers the share price full. The broker acknowledges the company has moved to a situation where production is expected to grow at around 8% per annum and existing assets are yielding more than US$1bn in annual free cash flow.

Management has focused on the continued performance of existing operations and key growth opportunities at its investor briefing, in particular Dorado and Barossa. Ord Minnett maintains a Hold rating and $8.60 target.

Target price is $8.60 Current Price is $7.83 Difference: $0.77
If STO meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $8.50, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates VEA as Accumulate (2) -

Ord Minnett updates estimates to incorporate accounting changes. As a result estimates for earnings per share are reduced by -28% in 2019 and -25% in 2020.

The broker notes a valuation support and the strong industry position and maintains an Accumulate rating, raising the target to $2.40 from $2.30.

Target price is $2.40 Current Price is $2.17 Difference: $0.23
If VEA meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 6.1% (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

Morgan Stanley rates XRO as Overweight (1) -

Morgan Stanley suspects leverage for Xero is coming through the fact the underlying long-term value is under appreciated by investors. The share prices doubled over the past 12 months amid more than 30% growth in revenue and strong subscriber gains.

The main question the broker is asked is: will this business ever make bottom-line money? Morgan Stanley assesses the company spends above its peers on R&D and sales & marketing as a percentage of sales.

However, the first half result has highlighted margin expansion, with international contribution margins breaking even for the first time.

Overweight rating maintained. Industry view is Attractive. Target is raised to $90 from $65.

Target price is $90.00 Current Price is $81.08 Difference: $8.92
If XRO meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $70.49, suggesting downside of -13.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.2

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