Australian Broker Call

UBS rates AGL as Sell (5) -

The company has made a non-binding indicative bid of $4.85 a share to acquire Vocus Group ((VOC)). UBS has had concerns that prevailing market and policy settings were stifling the company's ability to source new growth in its core business.

Should the transaction proceed and estimated synergies be realised, the broker expects incremental earnings (EBIT) could offset the $380m "gap" expected to emerge by FY23.

The company has also confirmed that unit 2 at the Loy Yang A power station will remain off-line until December because of mechanical issues. UBS reduces FY19-21 forecasts to reflect this.

Sell rating maintained. Target is reduced to $18.35 from $21.00.

Target price is $18.35 Current Price is $19.54 Difference: minus $1.19 (current price is over target).
If AGL meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.35, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.8

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

Morgans rates APA as Hold (3) -

Morgans notes the share price has surged 28% since a downturn in government yields commenced in early November. If clients expect interest rates to normalise upwards, the broker recommends taking profits.

The target is raised to $9.47 from $8.53 based on this scenario. However, the broker contends that, if the market believes in a lower-for-longer interest-rate scenario then there is still value at the current share price. Hold maintained.

Target price is $9.47 Current Price is $11.10 Difference: minus $1.63 (current price is over target).
If APA meets the Morgans target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.37, suggesting downside of -15.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.1

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

Credit Suisse rates AUB as Neutral (3) -

The company has provided a trading update, lowering growth expectations for net profit to 3-5% from 7-12%. Two specific items, risk services and IT project costs, are cited as the drivers of the downgrade.

No detail or numbers around the new initiatives were provided by the CEO, which implies clear downside risks for FY20, in Credit Suisse's view. The broker retains a Neutral rating and lowers the target to $11.45 from $13.45.

Target price is $11.45 Current Price is $10.32 Difference: $1.13
If AUB meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Macquarie rates AUB as Outperform (1) -

AUB has downgraded FY19 profit growth guidance to 3-5% growth from a prior 7-12%, citing substantially lower NSW workers comp case volumes and an over-run in the cost of a new underwriting agency IT system. The broker is disappointed by the downgrade but notes it is isolated to these two issues.

The core businesses of broking and underwriting continue to perform to expectation, although organic growth is modest. The broker believes AUB is now oversold after yesterday and retains Outperform. Target falls to $12.46 from $13.77.

Target price is $12.46 Current Price is $10.32 Difference: $2.14
If AUB meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Morgan Stanley rates BAP as Overweight (1) -

The company has reiterated earnings guidance for net profit of $94.3m. Morgan Stanley finds the message has been very consistent.

The acquisition of the truck parts business has revealed strong trading amid confidence in the sustainability of margins. While no further deterioration in comparable trade performance is expected the broker finds pressure on gross margins is still evident.

Overweight rating. Target is $7.60. Industry view: In-line.

Target price is $7.60 Current Price is $5.59 Difference: $2.01
If BAP meets the Morgan Stanley target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $6.98, suggesting upside of 24.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Ord Minnett rates CBA as Hold (3) -

Following the Reserve Bank's reduction to the cash rate and subsequent mortgage re-pricing, Ord Minnett makes small reductions to earnings forecasts for the major banks for FY20-21.

Changes are limited, given modest upgrades to the broker's housing growth forecasts and assumptions that the banks will hold back passing on the full extent of any future cash rate cuts to offset margin pressure.

Hold rating maintained. Target rises to $76.00 from $71.60.

Target price is $76.00 Current Price is $80.42 Difference: minus $4.42 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.38, suggesting downside of -12.5% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates CHC as Neutral (3) -

UBS transfers coverage of Charter Hall to another analyst. The target is upgraded to $11.05 from $8.60 and earnings estimates are increased by 10-20%.

This reflects an increasing conviction in the company's ability to continue raising third-party equity as well as an improved outlook for cap rate compression.

The broker also observes Charter Hall is more exposed to floating debt where base rates have fallen. Neutral rating maintained.

Target price is $11.05 Current Price is $11.33 Difference: minus $0.28 (current price is over target).
If CHC meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.17, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

Macquarie rates EHL as Outperform (1) -

Emeco Holdings has provided FY19 guidance which exceeds consensus forecasts. The operating update was positive across all regions and risk in FY20-21 remains to the upside, the broker suggests.

Emeco is well placed to leverage its asset base of heavy mining equipment where demand is strong in coal and iron ore in particular, and where miners are trying to be disciplined on capex hence hiring is the way to go, the broker notes.

The broker retains Outperform but has cut its target to $2.60 from $3.15 to reflect a broader de-rating of the sector to a lower enterprise value multiple.

Target price is $2.60 Current Price is $1.82 Difference: $0.78
If EHL meets the Macquarie target it will return approximately 43% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Morgans rates EHL as Add (1) -

The company has updated on its operations for FY19, with operating earnings (EBITDA) guidance of $211-230m, in line with Morgans' forecasts. The broker believes the update should improve market confidence.

Bidding activity appears to have increased in Western Australia and the company is now awaiting the potential award of additional contracts.

The broker's industry feedback continues to suggest that the contracting market, particularly in coal, remains tight. Add rating and $3.22 target maintained.

Target price is $3.22 Current Price is $1.82 Difference: $1.4
If EHL meets the Morgans target it will return approximately 77% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Deutsche Bank rates FLT as Hold (3) -

International returns declined by -1.4% in April, a significant step change to the recent trends over the last few months which have indicated growth of 4% or more, Deutsche Bank notes.

The data are difficult to interpret, given the position of Easter this year, and the broker suggests May data will be needed to provide further guidance.

Hold rating and $41 target unchanged.

Target price is $41.00 Current Price is $41.65 Difference: minus $0.65 (current price is over target).
If FLT meets the Deutsche Bank target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $45.31, suggesting upside of 8.8% (ex-dividends)

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

Morgans rates GNC as Hold (3) -

Morgans revises forecasts following the release of ABARES' 2019/20 winter crop forecast. Another below-average east coast grain crop is expected, although it should be better than last year.

While extremely low carry-over grain will also impact FY20, Morgans expects the new derivative instrument will help.

Morgans maintains a Hold rating and raises the target to $8.04 from $7.57. The broker expects shareholders will require patience to ride out the poor seasons but the de-merger proposal will provide some support.

Target price is $8.04 Current Price is $8.17 Difference: minus $0.13 (current price is over target).
If GNC meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.45, suggesting upside of 15.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Morgan Stanley rates JIN as Overweight (1) -

Morgan Stanley highlights new customer additions after the company's investor briefing, with second half additions set to exceed the record first half result.

Jackpots number 46, compared with guidance of 40, and the broker envisages earnings risk is clearly skewed to the upside.

Morgan Stanley reiterates an Overweight rating and $20 target. Industry view is In-Line.

Target price is $20.00 Current Price is $19.10 Difference: $0.9
If JIN meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

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

A review of domestic fine jewellery store footprints has indicated heightened clearance activity. Morgans expects this to lead to further gross margin pressure in the near term.

Cost reductions remain on track and this should provide earnings support. Nevertheless, given the current industry conditions, Morgans downgrades to Hold from Add and reduces the target to $0.60 from $0.78.

The broker assesses competitor store closures can affect sales/margins meaningfully, albeit a longer-term revenue opportunity exists.

Target price is $0.60 Current Price is $0.53 Difference: $0.07
If MHJ meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $0.69, suggesting upside of 30.8% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Macquarie rates VRL as Downgrade to Neutral from Outperform (3) -

Village Roadshow has provided a trading and strategy update and Macquarie has downgraded to Neutral in response. Turnaround momentum is evident but theme park and cinema earnings are expected to be similar to FY18 and FY20 looks like being a year of consolidation.

Target falls to $3.10 from $3.80.

Target price is $3.10 Current Price is $2.82 Difference: $0.28
If VRL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.42, suggesting upside of 21.2% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates WES as Sell (5) -

Wesfarmers will acquire Catch Group. Citi considers the $230m acquisition price is fair, noting this will be comfortably funded from existing debt.

The broker expects the acquisition will allow Kmart and Target to leverage the digital capability and investment in the supply chain.

The broker expects the acquisition will replace future capital expenditure that would be required to improve what is a rudimentary online offering by Wesfarmers at this point.

Sell rating and $29 target maintained.

Target price is $29.00 Current Price is $36.21 Difference: minus $7.21 (current price is over target).
If WES meets the Citi target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.25, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

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 WES as Neutral (3) -

The acquisition of Catch Group reflects a view on the capabilities that are required to succeed in the new retail environment, Credit Suisse asserts.

Positive indicators are an intention to maintain organisational independence and retain key management. A potential synergy is the Fly Buys membership. The price of $230m compares with FY18 revenue for Catch Group of $262m.

Neutral rating and $33.12 target maintained.

Target price is $33.12 Current Price is $36.21 Difference: minus $3.09 (current price is over target).
If WES meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.25, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates WES as Hold (3) -

Wesfarmers will purchase online retailer The Catch Group for $230m. The acquisition remains subject to conditions such as ACCC approval and will be funded by debt facilities.

The business is expected to operate as an independent unit, overseen by the managing director of Kmart. Hold rating and $32 target.

Target price is $32.00 Current Price is $36.21 Difference: minus $4.21 (current price is over target).
If WES meets the Deutsche Bank target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.25, suggesting downside of -10.9% (ex-dividends)

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 WES as Lighten (4) -

As part of its strategy briefing, Wesfarmers has provided a trading update for Kmart group, which includes Kmart and Target. Kmart like-for-like sales grew 0.2% in the second half, with growth negatively affected by the exit of the DVD category as well as on-shelf availability issues.

Like-for-like sales for Target fell -2.3% in the same period. Sales growth was below Ord Minnett's forecasts. Wesfarmers has noted increased price investment and high levels of promotional activity in the sector as well as cautious consumer sentiment.

Ord Minnett maintains a Lighten rating and $30 target.

Target price is $30.00 Current Price is $36.21 Difference: minus $6.21 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.25, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates WES as No Rating (-1) -

Wesfarmers will acquire Catch Group, to be funded by existing debt facilities. Catch Group is one of Australia's largest online retailers. The company also operates two highly automated distribution centres in Melbourne with significant capacity.

UBS considers the deal provides several benefits to Wesfarmers and estimates Catch Group should generate over $15m in earnings (EBIT) in FY20. UBS is restricted on providing a rating and target at present.

Current Price is $36.21. Target price not assessed.

Current consensus price target is $32.25, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates WPL as Add (1) -

Further delays have occurred in the re-start of the Pluto LNG project following the planned turnaround. Recommencement of production is now likely at the end of June. 2019 production is now expected to be at the lower end of prior guidance of 88-94 mmboe.

Morgans calculates, if Woodside maintains its dividend pay-out ratio at the top end of the guided range of 50-80%, then on current commodity forecasts this supports the fully-franked yield of around 6%.

Add rating maintained. Target is reduced to $38.04 for from $38.58.

Target price is $38.04 Current Price is $34.36 Difference: $3.68
If WPL meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $35.62, suggesting upside of 3.7% (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: 0.1

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

Ord Minnett rates WPL as Hold (3) -

The company has announced a delay to the turnaround of the Pluto LNG plant in order to address vibration problems in key liquefaction equipment.

Ord Minnett suspects the issue is likely to be short lived, as Pluto has performed reliably since start-up.

Hold rating maintained. Target is trimmed to $34.60 from $34.80. The broker now estimates 2019 net profit of US$1.51bn, reduced by -5% from the previous estimate.

Target price is $34.60 Current Price is $34.36 Difference: $0.24
If WPL meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $35.62, suggesting upside of 3.7% (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: 0.1

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