Australian Broker Call

Citi rates ARB as Neutral (3) -

ARB Corp is considered well-placed to benefit from the shift in consumer preferences towards sports utility vehicles and four-wheel-drive cars. However, Citi finds the peer multiple demanding amid short-term headwinds stemming from a decline in first half Australian 4x4 sales.

FX pressure also suggests the near-term upside is limited. Citi expects sales growth to slow over the second quarter and margin pressure to continue over the first half. The company will report its results on February 18.

The broker reduces FY20-22 estimates for net profit by -5-9%. Neutral rating maintained. Target is raised to $19.45 from $18.43 after a change in valuation methodology and following the transfer of coverage to another analyst.

Target price is $19.45 Current Price is $18.98 Difference: $0.47
If ARB meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $17.69, suggesting downside of -6.8% (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

Morgan Stanley rates COL as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley observes supermarket industry margins have re-based and this has paid off for the major operators. The broker believes execution will be a differentiator in supermarkets in 2020 and Woolworths has a margin advantage, partially reflecting its scale advantage. This is considered unlikely to be eroded over the medium term.

While acknowledging a benign backdrop, the broker still struggles to find meaningful valuation upside for Coles and downgrades to Underweight from Equal-weight. Target is raised to $13.50 from $13.00. Industry view: Cautious.

Target price is $13.50 Current Price is $15.42 Difference: minus $1.92 (current price is over target).
If COL meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.70, suggesting downside of -11.2% (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

Citi rates EVN as Buy (1) -

December quarter production was weak, Citi observes, because of reconciliation issues at Mount Carlton. This is expected to mean FY20 guidance will be at the lower end of the range.

Still, given the share prices has fallen -33% since the September 2019 high, and with one of the lowest all-in sustaining cost bases, Citi maintains a Buy rating and $4.40 target. The broker is awaiting the news flow expected from exploration at Cowal.

Target price is $4.40 Current Price is $3.69 Difference: $0.71
If EVN meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 12.5% (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

Credit Suisse rates EVN as Upgrade to Outperform from Underperform (1) -

Preliminary operating results for the December quarter reveal Mount Carlton production is expected to be at the bottom end of the guidance range. Credit Suisse suspects, while cost guidance is unchanged, achieving the target may be at risk.

FY20 guidance for Mount Carlton of 70-75,000 ounces reflects 10% of group production. While a small component, this mine has been an historical outperformer and strong generator of cash for the company.

Credit Suisse believes the water risk is moderating at Cowal as the company's strategy to secure more water from alternative sources such as bores is progressing well. Rating is upgraded to Outperform from Underperform on share price weakness. Target is $4.30.

Target price is $4.30 Current Price is $3.69 Difference: $0.61
If EVN meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 12.5% (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 EVN as Downgrade to Neutral from Outperform (3) -

The company has experienced a soft December quarter with Mount Carlton the main area of weakness. A geological review has reduced FY20 production expectations. Given a narrowing of the ore lode is also being noted in the underground mine, Macquarie assesses there will be an impact on longer-term production.

The company is also taking steps to mitigate the effects of an escalation of water restrictions at Cowal. An increase in the salinity of processing water will affect near-term costs at the mine. Macquarie downgrades to Neutral from Outperform and reduces the target by -10% to to $3.80.

Target price is $3.80 Current Price is $3.69 Difference: $0.11
If EVN meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 12.5% (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 EVN as Equal-weight (3) -

The company has suffered more operating issues at Mount Carlton and downgraded production guidance. Morgan Stanley suspects the narrowing of the lodes could reduce gold production into FY21.

December quarter production of 171,000 ounces was -10% below the broker's forecasts. Gold production is expected to be at the bottom of the 725-770,000 ounces guidance range. Cost guidance of $940-990/oz remains unchanged.

Equal-weight rating maintained. Target is $3.80. Industry view: In-Line.

Target price is $3.80 Current Price is $3.69 Difference: $0.11
If EVN meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 12.5% (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 EVN as Hold (3) -

Both production and costs were below guidance in the December quarter. The company has also flagged a potential downgrade to the resource at Mount Carlton and water security issues at Cowal.

Recent drilling at Mount Carlton has led to a revised interpretation of the mineralisation, with ore tapering more quickly than previously envisaged. Ord Minnett had assumed a nine-year mine life, producing around 1m ounces but this may turn out to be optimistic.

Moreover, if drought conditions continue in NSW, Cowal, which is already under stage 3 restrictions, may face further reduced access to water, Ord Minnett notes. The broker maintains a Hold rating and $4 target.

Target price is $4.00 Current Price is $3.69 Difference: $0.31
If EVN meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.15, suggesting upside of 12.5% (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 MTS as Overweight (1) -

Structural concerns are heightened, Morgan Stanley acknowledges, although these are being conflated with cyclical issues, which are reversing.

Greater diversity of earnings and conservative leverage warrant valuation support and the broker maintains an Overweight rating.

Industry view: Cautious. Target is raised to $2.95 from $2.90.

Target price is $2.95 Current Price is $2.59 Difference: $0.36
If MTS meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.77, suggesting upside of 6.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Morgan Stanley rates WOW as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley believes Woolworths is now better positioned, as industry margins have re-based and there is scope for operating leverage. Deflationary pressures are easing, and valuation now reflects this as well as a range of supply chain initiatives and improving online profitability.

Hence, the broker upgrades to Equal-weight from Underweight and raises the target to $36.50 from $28.00. Adjusted earnings estimates are raised by 1-3% over the forecast period. Industry view: Cautious.

Target price is $36.50 Current Price is $37.42 Difference: minus $0.92 (current price is over target).
If WOW meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.36, suggesting downside of -2.8% (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

Citi rates WPL as Neutral (3) -

Citi observes stock performance in the energy sector has varied considerably over the past year and companies that did not progress growth projects, or were less leveraged to the oil price, have underperformed peers. Notably, this includes Woodside Petroleum.

The broker still believes the sector can outperform in 2020 and this view is not based on oil prices, which are forecast to be flat in Australian dollar terms. Rather it is due to the de-risking of growth projects, and price deflation for new LNG contracts.

Citi maintains a Neutral rating and raises the target to $34.97 from $32.36.

Target price is $34.97 Current Price is $35.35 Difference: minus $0.38 (current price is over target).
If WPL meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.22, suggesting upside of 2.5% (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: 0.4

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