Australian Broker Call

Macquarie rates APT as Initiation of coverage with Outperform (1) -

Macquarie initiates coverage with an Outperform rating and $38 target. The main opportunity the broker envisages is in the US market as it is 18-20 times the size of Australia.

The competitive backdrop is rapidly evolving and the company needs to leverage its early advantage to drive growth and protect margins, in the broker's view.

That said, Macquarie does expect Afterpay Touch will be able to differentiate its offering for merchants and consumers and hold its strong market position.

Target price is $38.00 Current Price is $28.77 Difference: $9.23
If APT meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $33.84, 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 AST as Reinstate Coverage with Buy (1) -

UBS reinstates coverage with a Buy rating and $1.85 target. The broker assesses the company's regulated electricity and gas networks face a reduction in the rates of return at the forthcoming regulatory re-sets.

However, the first re-set does not commence until FY22. Despite lower regulatory returns driving flat regulated earnings over FY20-24, UBS forecasts 2.3% compound growth in group earnings that will support a distribution growth rate of 1.5% over the same period.

Target price is $1.85 Current Price is $1.77 Difference: $0.08
If AST meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $1.81, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates CMA as Hold (3) -

The company has announced the acquisition of an A-grade property in Canberra for $256m. This will be funded by a capital raising and new debt. Guidance is unchanged. The portfolio is now valued at $2.1bn across 23 assets, Morgans assesses.

The broker retains a Hold rating and upgrades the target to $2.98 from $2.90, highlighting an attractive distribution yield of around 6%.

Target price is $2.98 Current Price is $2.91 Difference: $0.07
If CMA meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.97, suggesting upside of 2.2% (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

Macquarie rates CMM as Outperform (1) -

The company has executed a $100m debt facility that completes the funding requirements for Karlawinda. A 25% lift in the processing capacity base case has also been confirmed.

An updated reserve estimate is expected in the third quarter of FY20. Macquarie maintains an Outperform rating and $1.50 target.

Target price is $1.50 Current Price is $1.19 Difference: $0.31
If CMM meets the Macquarie target it will return approximately 26% (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 IAP as Initiation of coverage with Outperform (1) -

Macquarie initiates coverage with a $1.76 target and Outperform rating. The broker finds the distribution yield for FY21 of 6.0%, with 3% per annum sustainable growth, is attractive in the current environment.

Investec Australia Property is a metro office/industrial rent-collecting A-REIT. While a low probability scenario, Macquarie believes internalisation of management is a medium-term way of extracting value for unit holders.

Target price is $1.76 Current Price is $1.51 Difference: $0.25
If IAP meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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 IDX as Initiation of coverage with Buy (1) -

Citi initiates coverage with a Buy rating and $4.30 target, forecasting 7.5% compound growth in earnings per share for FY19-22. The broker considers the stock attractively valued relative to healthcare peers and the overall market.

Integral Diagnostics is leveraged to the faster growth in the imaging market, supported by population growth, technology and an ageing population.

Target price is $4.30 Current Price is $3.61 Difference: $0.69
If IDX meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $3.63, suggesting upside of 0.5% (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

Ord Minnett rates INR as Buy (1) -

A boric acid offtake agreement with Dailian Jinma is considered incrementally positive and a key de-risking event as this covers more than half the company's boron output.

Ord Minnett removes a price discount which raises the target to $0.40 from $0.38. A Speculative Buy rating is reiterated.

Target price is $0.40 Current Price is $0.20 Difference: $0.2
If INR meets the Ord Minnett target it will return approximately 100% (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

Citi rates NEA as Buy (1) -

The share price of Nearmap has been affected by concerns about increasing competition and whether the step-up in investment will deliver adequate returns.

However, Citi considers the FY20 guidance positive and reiterates a Buy/High Risk rating. Increased investment in sales, marketing and product development should result in solid growth over the medium term, in the broker's view.

FY20-22 revenue estimates are increased by 1-18% although operating earnings forecasts are lowered materially to reflect the increased cost investment. Target is reduced to $4.05 from $4.59.

Target price is $4.05 Current Price is $2.74 Difference: $1.31
If NEA meets the Citi target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting upside of 42.3% (ex-dividends)

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

Ord Minnett rates NST as Buy (1) -

The company has acquired Newmont's 50% share of the Super Pit gold operation in Kalgoorlie for US$800m. The deal is considered accretive based on valuation, resource and production metrics and should be earnings accretive from FY21.

Ord Minnett, therefore, envisages potential for Northern Star to achieve a production rate of around 1.5m ounces per annum by FY24.

As the company's growth options clearly differentiate the stock from gold producer peers, the broker maintains a Buy rating. Target is raised to $11.90 from $11.50.

Target price is $11.90 Current Price is $10.50 Difference: $1.4
If NST meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $11.12, suggesting upside of 5.9% (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

Morgan Stanley rates OSH as Overweight (1) -

Oil Search has announced FEED approval for Alaska and an increase in the resource. The 2C resource has increased to 728mmbbl and 3C to 907mmbbl.

Importantly, Morgan Stanley points out these numbers are based off the Pikka unit development plan and exclude several reservoirs. There are around 10 producing reservoirs in Alaska so it is likely the resource will increase further in 2020.

Morgan Stanley expects sentiment to improve over the next 12 months. As US shale growth continues to slow the broker suspects there will be considerable North American interest in the company's intention to divest 15% of the Alaskan project.

Overweight rating, In-Line industry view and $8 target.

Target price is $8.00 Current Price is $7.44 Difference: $0.56
If OSH meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $7.51, suggesting upside of 0.9% (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 OSH as Hold (3) -

The Pikka unit development in Alaska has now entered FEED with a final investment decision expected mid 2020.

This confirms a highly positive outlook on the Alaskan operations although Ord Minnett remains cautious about Oil Search because of ongoing delays in the PNG expansion project.

Hold rating maintained. Target rises to $7.60 from $7.40.

Target price is $7.60 Current Price is $7.44 Difference: $0.16
If OSH meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.51, suggesting upside of 0.9% (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

Credit Suisse rates OZL as Underperform (5) -

Credit Suisse expects 2020 cost guidance will disappoint, with consensus not understanding the extent of the expenditure likely to be incurred on only partial production.

The broker assesses 2020 is setting a new level of complexity in the company's accounting practices. In addition it is a ramp-up year for Carrapateena.

Underperform rating maintained. Target is $8.00.

Target price is $8.00 Current Price is $10.61 Difference: minus $2.61 (current price is over target).
If OZL meets the Credit Suisse target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.79, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in December.

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 QBE as Neutral (3) -

QBE expects the crop business combined operating ratio (COR) will be around 107-109% in 2019, weaker than previously anticipated. Credit Suisse asserts investors should be pressuring the company to disclose the reinsurance on crop so the risk can be assessed more easily.

As a result of this COR weakness, 2019 guidance appears to be too optimistic and the broker considers the constantly elevated consensus earnings forecasts gives a perception that the stock is cheaper than it really is.

Neutral and $12.55 target retained.

Target price is $12.55 Current Price is $13.14 Difference: minus $0.59 (current price is over target).
If QBE meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

Macquarie rates QBE as Neutral (3) -

QBE has downgraded 2019 crop expectations because of poor weather. Macquarie believes it is important to look through this one-off outcome and the poor performance in 2019 could be counterbalanced by lower reinsurance costs in 2020.

Macquarie re-bases 2019 and 2020 forecast to the more conservative end of guided ranges. Neutral rating maintained. Target is reduced to $12.60 from $13.00.

Target price is $12.60 Current Price is $13.14 Difference: minus $0.54 (current price is over target).
If QBE meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

Morgan Stanley rates QBE as Overweight (1) -

Adverse weather has driven a weaker result in the company's crop combined operating ratio in the US.

Morgan Stanley was previously aware of the weakness, given US data, and expects this to be largely offset by a benign level of global natural catastrophes in 2019.

2020 guidance is for a COR of 93.5-95.5%, which implies downside risk to Morgan Stanley's net profit estimates of -5% of the top end of the range and -15% at the mid point.

Overweight rating maintained. Target is $14. Industry view is In-Line.

Target price is $14.00 Current Price is $13.14 Difference: $0.86
If QBE meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

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

Late planting and low yields have affected the company's North American crop insurance business. While the miss on guidance for 2019 is disappointing, Morgans believes crop insurance risks were well flagged.

2020 guidance points to a further improvement in underlying profitability. The broker downgrades 2019 and 2020 estimates by -4-6%. Target is lowered to $12.37 from $12.61.

Since the recent rally in the share price Morgans envisages less upside at current levels and downgrades to Hold from Add.

Target price is $12.37 Current Price is $13.14 Difference: minus $0.77 (current price is over target).
If QBE meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

Ord Minnett rates QBE as Accumulate (2) -

Adverse trends in the crop insurance segment have caused the company to downgrade 2019 guidance for its combined operating ratio to 107-109%, which compares with a 10-year average of 90% and budget of 92%.

Ord Minnett reduces forecasts for earnings per share by -10% for 2019 as a result. After adjusting for the impact of the crop segment on the 2019 estimates, this suggests only a slight margin improvement into 2020.

However, the broker suspects this could be conservative, taking into account the strength of the premium cycle and no signs of claims inflation breaking out in the US or UK. Accumulate rating maintained. Target rises to $13.60 from $13.00.

Target price is $13.60 Current Price is $13.14 Difference: $0.46
If QBE meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

UBS rates QBE as Buy (1) -

Additional hail and frost damage in the US during the second half has resulted in a crop Combined Operating Ratio of 107-109% in 2019, well above the company's 90% 10-year average.

With elevated crop losses a one-off feature, new 2020 guidance is consistent with UBS forecasts for a 100 basis points improvement in the COR to 93.5-95.5%.

2019 estimates for earnings per share are reduced -17% while outer years are unchanged. Buy rating and $13.50 target maintained.

Target price is $13.50 Current Price is $13.14 Difference: $0.36
If QBE meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $13.15, suggesting upside of 0.1% (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: 0.4

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

UBS rates SKI as Reinstate coverage with Neutral (3) -

UBS reinstates coverage of Spark Infrastructure with a $2.05 target and Neutral rating. The company has a 49% equity interest in three Australian electricity distribution networks and the rights to develop the Bomen Solar Farm.

UBS expects distributions to decline -7% for FY19-22 as the networks undergo regulatory re-sets. With the share price reflecting a 6.9% FY19 yield, the broker assesses lower rates of return are priced into the stock.

Target price is $2.05 Current Price is $2.14 Difference: minus $0.09 (current price is over target).
If SKI meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.24, suggesting upside of 4.7% (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

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

Credit Suisse initiates coverage on Strike Energy with an Outperform rating and $0.28 target. The main asset is the recent gas discovery, West Erregulla, in the Perth Basin which may enable up to 250TJ/d for domestic gas development.

This presents one of the largest onshore gas discoveries in Australia with relatively low development costs as it is close to infrastructure.

Target price is $0.28 Current Price is $0.20 Difference: $0.08
If STX meets the Credit Suisse target it will return approximately 40% (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