Australian Broker Call

Morgan Stanley rates AD8 as Overweight (1) -

The investor briefing has reinforced Morgan Stanley's conviction about the company's competitive resilience and growth longevity.

The broker welcomes the initiatives in the training part of the business, noting certifications create industry expertise and lifetime value in the Dante ecosystem. The broker is also more bullish about the video potential.

Overweight rating. Target is $10.30. Industry view is In-Line.

Target price is $10.30 Current Price is $8.61 Difference: $1.69
If AD8 meets the Morgan Stanley target it will return approximately 20% (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 BLD as Neutral (3) -

Boral has identified financial irregularities in its North American windows business. Operating earnings (EBITDA) are estimated to be overstated by US$20-30m for the 14-month period to October 2019.

Management is confident this will be contained within the windows business and the period. For Credit Suisse, the unanswered question is whether there was a dramatic deterioration in FY19 and why, or was past profitability overstated.

The broker retains a Neutral rating and $4.50 target.

Target price is $4.50 Current Price is $4.56 Difference: minus $0.06 (current price is over target).
If BLD meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

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 BLD as No Rating (-1) -

Macquarie remains on research restriction but has trimmed earnings forecasts by around -7% based on uncertainty surrounding financial irregularities in Boral's North American windows business.

Current Price is $4.56. Target price not assessed.

Current consensus price target is $4.59, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

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

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

Morgan Stanley updates forecasts to account for the announcement regarding financial irregularities in the North American windows business. This reflects an expected impact to EBITDA of -US$20-30m.

The broker's adjustment also reduces underlying margin assumptions for the North American business. The announcement is expected to prompt a further focus on the US operations.

Equal-weight rating and target is reduced to $4.50 from $5.00. Industry view is Cautious.

Target price is $4.50 Current Price is $4.56 Difference: minus $0.06 (current price is over target).
If BLD meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

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 BLD as Downgrade to Lighten from Hold (4) -

Ord Minnett is increasingly concerned about the outlook for the North American division, including the fact that recent financial irregularities have been uncovered in the windows business.

The return on funds employed in North America now appear to be shy of 5% in FY19, which raises the risk of impairments at some point, the broker assesses.

Meanwhile, Boral Australia is a better quality business but the cycle is working against it and a full balance sheet increases the risk for shareholders. Hence, Ord Minnett downgrades to Lighten from Hold and lowers the target to $4.25 from $4.80.

Target price is $4.25 Current Price is $4.56 Difference: minus $0.31 (current price is over target).
If BLD meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates BLD as Neutral (3) -

Boral has identified financial irregularities in its North American windows business relating to the mis-reporting of inventory, raw materials and labour costs.

The windows business was a late addition to Headwaters ahead of Boral's acquisition in early 2017 and was one of three divisions that did not have any overlap with the existing US business.

This has resulted in it operating outside of US shared services. UBS understands Boral did not integrate windows as it was deemed non-core. The main issue for UBS is why was this allowed to happen for so long (14 months).

Ultimately, the broker suggests this will weigh on an already poor market perception of the Headwaters acquisition and keep the stock from re-rating higher. Neutral rating and $4.90 target maintained.

Target price is $4.90 Current Price is $4.56 Difference: $0.34
If BLD meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

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 RIO as Outperform (1) -

Macquarie has tweaked its iron ore shipment expectations for Rio Tinto, lifting 2019 slightly but reducing 2020 slightly on a slower ramp-up at Koodaideri. The completion of Rio's new iron ore developments should reduce costs in the medium term, the broker suggests, but for now expected costs rise 10%.

The net is a slight lift to near term earnings forecasts and a slight trimming thereafter. As always, the broker points out that were spot iron ore prices to be used in valuation, this would imply 20% upside to 2020 forecasts and 60% to 2021.

Outperform and $102 target retained.

Target price is $102.00 Current Price is $97.49 Difference: $4.51
If RIO meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $97.02, suggesting downside of -0.5% (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: 0.3

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

Citi rates SCG as Sell (5) -

Scentre Group has announced the acquisition of 50% of Garden City, Booragoon, Perth, for $570m. Citi understands the expansion of Westfield Stirling, also in Perth, is deferred and the buyback will continue.

The positive aspects, in the broker's view, include the acquisition of an interest in a very high-quality asset and marginal accretion in 2020, as well as increased likelihood of some project income.

The negatives include a reduction in maximum project income potential as well as an increase in gearing and the deferral of Stirling. Sell rating and $3.60 target maintained.

Target price is $3.60 Current Price is $3.89 Difference: minus $0.29 (current price is over target).
If SCG 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 $3.87, suggesting downside of -0.6% (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 SCG as Outperform (1) -

The company has acquired 50% of the Perth shopping centre, Garden City Booragoon, for $570m. The current passing yield is 4.7%, in part because of the impact of pre-development works.

While understanding the strategic reasons behind the acquisition, Credit Suisse suspects investors will remain somewhat cautious on the stock and retail asset valuations in Australia. Outperform rating and $4.27 target maintained.

Target price is $4.27 Current Price is $3.89 Difference: $0.38
If SCG meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting downside of -0.6% (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

Morgan Stanley rates SCG as Underweight (5) -

The company has acquired 50% of a shopping centre in Booragoon, Perth, for $570m. Investing so much money in retail despite the structural and cyclical headwinds remains of concern to Morgan Stanley, although the 50% stake somewhat proves the company's capital partnering ability.

The company had been responsible for the design and construction of the shopping centre redevelopment so, in theory, it knows the asset well. Morgan Stanley notes the development will now be downsized, with the exact timing and scale to be advised by the February results.

The broker also notes the vendors had planned on divesting 100% but, obviously, this changed. The broker suspects this could be because of a lack of interest by potential buyers. Underweight rating, $3.60 target and In-Line industry view maintained.

Target price is $3.60 Current Price is $3.89 Difference: minus $0.29 (current price is over target).
If SCG meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.87, suggesting downside of -0.6% (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 SCG as Accumulate (2) -

Scentre Group has acquired a 50% share of Garden City, Booragoon, Perth, for $570m including full management rights. In Ord Minnett's view, this is the best shopping centre in Perth, with a highly affluent catchment, limited competition and good redevelopment opportunities.

The broker believes the mall has been acquired at a fair price and relatively opportune time, given current negative retail sentiment. Accumulate rating maintained. Target is raised to $4.30 from $4.20.

Target price is $4.30 Current Price is $3.89 Difference: $0.41
If SCG meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting downside of -0.6% (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

UBS rates SCG as Neutral (3) -

The company has acquired a 50% share of a shopping centre in Booragoon, Perth for $570m, an acquisition which makes strategic sense to UBS given the quality of the catchment and development potential.

As income is depressed, because of re-development, the passing yield is 4.7%. Based on the broker's estimates, after adjusting for management income, the underlying cap rate is closer to 5.2%.

Management expects its buyback to continue, which fully executed will add 2% to the last stated gearing ratio of 30.6%.

Given the acquisition will be funded by debt, other trade-offs are required, in the broker's view, such as the deferral of the Westfield Stirling project at nearby Innaloo. Neutral and $3.90 target retained.

Target price is $3.90 Current Price is $3.89 Difference: $0.01
If SCG meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting downside of -0.6% (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

Morgans rates SYD as Hold (3) -

Morgans continues to be impressed by the company's asset quality, management strength and financial discipline. Guidance was unchanged at the investor briefing. Sydney Airport intends to introduce greater competition into airport fuel supply while a greater "REIT-like focus" is being brought to commercial activities, the broker observes.

The company considers the Qantas ((QAN)) jet base one of the most valuable properties at the airport, given its close proximity to the CBD and terminals. However, Morgans assesses the revenue from the lease is very small.

The broker speculates a potential use of the property could be the proposed terminal 4. In any case, development could mean a significant capital investment and generate material earnings growth vs the current lease.

Hold rating maintained. Target rises to $8.98 from $8.75.

Target price is $8.98 Current Price is $9.10 Difference: minus $0.12 (current price is over target).
If SYD meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.34, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Ord Minnett rates SYD as Downgrade to Lighten from Hold (4) -

Ord Minnett notes Sydney Airport has been a strong performer, with a 36% total return in 2019 to date. The company has benefited from a low interest-rate environment as well as a positive report from the Productivity Commission.

The broker expects slow passenger numbers in both international and domestic segments will put pressure on operating earnings and dividend growth, as the business builds up a buffer ahead of becoming a tax-paying entity in 2021. The target is raised to $8.20 from $7.80.

Target price is $8.20 Current Price is $9.10 Difference: minus $0.9 (current price is over target).
If SYD meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.34, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

UBS rates SYD as Neutral (3) -

Sydney Airport has highlighted growth opportunities in the aeronautical and commercial parts of the business. In the face of sluggish domestic and international traffic, UBS suggests these opportunities serve to underpin, if not offer, some upside to medium-term growth forecasts.

The main uncertainty is the renewal of the international airline agreements from mid 2020. Neutral rating and $8.50 target maintained.

Target price is $8.50 Current Price is $9.10 Difference: minus $0.6 (current price is over target).
If SYD meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.34, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Citi rates TWE as Sell (5) -

Citi observes, on the basis of US Nielsen data, Treasury Wine appears to be losing share in the US. The value growth is stronger in California and Florida, which on the surface appears encouraging, but the broker notes significant price investment in those states, which have seen changes to distribution arrangements.

The US market is the company's largest by revenue and a significant source of potential margin expansion, but it remains competitive and Citi points out recent retail scan data indicates top-line growth is tracking at 1%. Citi retains a Sell rating and $15.60 target.

Target price is $15.60 Current Price is $17.09 Difference: minus $1.49 (current price is over target).
If TWE meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.00, suggesting upside of 11.2% (ex-dividends)

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