Australian Broker Call

Citi rates ALQ as Buy (1) -

Citi analysts have a suspicion ALS Ltd might be losing market share to competitor Eurofins in the US, but add the latter's focus on improving margins might turn out beneficial for ALS.

All in all, Citi's attention has been awakened and no doubt the analysts will keep investors up to date on any shifts in momentum between these two companies. Buy rating and $8.60 price target remain intact.

Target price is $8.60 Current Price is $8.14 Difference: $0.46
If ALQ meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.16, suggesting upside of 0.2% (ex-dividends)

The company's fiscal year ends in March.

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 AMP as Hold (3) -

Ord Minnett adjust earnings, in total a 2.6% rise in forecasts for 2019 and 1.9% for 2020, to account for recently-flagged budget changes.

The broker expects 2019 to be a year a significant change. Overall, the stock will be cheap once it returns all of its surplus capital but this may take months or years to play out. Hold rating and $2.35 target maintained.

Target price is $2.35 Current Price is $2.36 Difference: minus $0.01 (current price is over target).
If AMP meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.29, suggesting downside of -3.0% (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 ANZ as Downgrade to Neutral from Buy (3) -

Citi analysts have used a general sector review to downgrade ANZ Bank to Neutral from Buy, with a slightly reduced price target of $30 (-50c). Earnings estimates have been lowered.

Citi's updated view is now that ANZ Bank is facing a prolonged period of revenue weakness. This, coupled with a likely pause in capital returns, implies the bank lacks positive catalysts on a 12 month view, explain the analysts.

Citi's sector pecking order is now Westpac ((WBC)) and National Australia Bank ((NAB)) on top as most preferred, followed by ANZ Bank and CommBank ((CBA)).

Target price is $30.00 Current Price is $27.69 Difference: $2.31
If ANZ meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $28.66, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates ASX as Sell (5) -

February is the first "real" month for equity trading in the calendar year in Australia. Deutsche Bank notes increased market volatility from December through to February has meant total value traded rose by 4% in February and, year-to-date, trading is up 13%

 However, capital raisings were much slower and conditions have worsened, because the impact of an upcoming election and volatile markets. Sell rating retained with a $58.20 target.

Target price is $58.20 Current Price is $70.27 Difference: minus $12.07 (current price is over target).
If ASX meets the Deutsche Bank target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $59.91, suggesting downside of -14.7% (ex-dividends)

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 ASX as Reduce (5) -

ASX has provided a mixed February trading report, the broker suggests, with a big drop from last year in listings and raisings offset by robust activity in stocks and futures. Morgans makes only slight adjustments to forecasts, and takes account of the Iress ((IRE)) stake sale.

ASX is delivering solid results but is still too rich for the broker at a 29x multiple. Reduce retained. Target falls to $57.10 from $57.11.

Target price is $57.10 Current Price is $70.27 Difference: minus $13.17 (current price is over target).
If ASX meets the Morgans target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $59.91, suggesting downside of -14.7% (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

Ord Minnett rates CHC as Upgrade to Accumulate from Hold (2) -

Ord Minnett raises estimates, expecting operating margins in funds management to increase to 53% over the next five years.

The broker believes the potential for increased economies of scale is strong and the company also enjoys a favourable portfolio composition.

Charter Hall is also becoming more capital efficient and there should be enough cash to sponsor the growth of the funds business.

Rating is upgraded to Accumulate from Hold and the target is raised to $9.75 from $9.00.

Target price is $9.75 Current Price is $9.34 Difference: $0.41
If CHC meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.51, suggesting upside of 1.8% (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

Citi rates COL as Buy (1) -

Coles has announced its exit from the Spirit Hotels business and will reap some $200m for it from Australian Venue Company. Having already exited the petrol industry, Citi points out management can now put the focus 100% on Food and Liquor.

Citi analysts believe Coles has managed to negotiate a premium valuation for the assets. EPS forecasts have been reduced by -0.5%. Price target remains unchanged at $13.40. Buy rating retained.

Target price is $13.40 Current Price is $11.36 Difference: $2.04
If COL meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $11.92, suggesting upside of 5.0% (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

Deutsche Bank rates COL as Hold (3) -

Deutsche Bank considers the deal regarding the company's hotels is positive, as it separates Coles from actual operation and this reduces the social and reputation risk.

It also removes the company's economic exposure to an industry with regulatory risk. The deal will provide $200m in capital that the broker assesses will help fund the supermarket investment.

The broker would like to be more positive about the stock, following its de-rating, but with costs growing faster than sales, margin dilution is difficult to avoid and cycling the boost from Little Shop will only make matters worse.

Hold rating and $12.50 target maintained.

Target price is $12.50 Current Price is $11.36 Difference: $1.14
If COL meets the Deutsche Bank target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $11.92, suggesting upside of 5.0% (ex-dividends)

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 COL as Hold (3) -

Coles has entered into a conditional 50/50 JV with Australian Venue Co which will see AVC take control of the Coles' pubs, and thus pokies, while Coles retains the bottle shops. The deal will reap $200m and still satisfy Queensland liquor laws.

As the deal remains conditional the broker is not making any changes to forecasts at this stage. Hold and $12.15 target retained.

Target price is $12.15 Current Price is $11.36 Difference: $0.79
If COL meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.92, suggesting upside of 5.0% (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 COL as Sell (5) -

Coles has entered into a joint venture with AVC. Coles will receive $200m in cash and profits from around 87 of its hotels will be delivered to AVC, while liquor store earnings will stay with Coles.

UBS finds the deal makes sense and the next question is: what will Coles do with the proceeds? The broker suspects capital management and acquisitions are unlikely.

Coles is expected to use the proceeds to fund expenditure in areas which have been under invested, such as digital, refurbishments and the distribution centre.

UBS retains a Sell rating and $11.30 target. While more positive on the grocery sector, expecting FY19/20 market growth to lift to 4% or more, UBS believes Coles will face company-specific pressures.

Target price is $11.30 Current Price is $11.36 Difference: minus $0.06 (current price is over target).
If COL meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.92, suggesting upside of 5.0% (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

Morgans rates DUB as Hold (3) -

Dubber Corp has released a first half result which is little changed in context from the quarterly update in January, Morgans notes. After years of technology build the company has turned the corner towards commercialisation and monetisation. Revenue was up 300% year on year.

The broker has rejigged its valuation model, aligning Dubber with SaaS peers that trade at higher multiples. This means a target increase to 75c from 46c, but a solid share price rally keeps the broker on Hold.

Investor confidence is the major swing factor, and the broker would like to see ongoing growth in recurring revenue and active users. As Dubber is not yet self-funding, access to capital is a key risk.

Target price is $0.75 Current Price is $0.81 Difference: minus $0.06 (current price is over target).
If DUB meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Market Sentiment: 0.0

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

Ord Minnett rates FMG as Buy (1) -

Ord Minnett reiterates a Buy rating and $7.30 target. The broker calculates, at spot prices, Fortescue Metals generates a FY20 free cash flow yield of 27%, which highlights the cash windfall occurring at present.

Discounts for the company's product are now at -20% overall, versus -30% prior to the Vale tailings dam failure in Brazil.

Target price is $7.30 Current Price is $6.60 Difference: $0.7
If FMG meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates MIN as Overweight (1) -

An upgrade to iron ore forecasts has substantially lifted Morgan Stanley's earnings estimates for Mineral Resources. The broker believes the stock continues to trade on an undemanding multiple and the lithium growth story is also intact.

The broker believes the iron ore leverage in the stock is being ignored by the market, probably because of a lack of detail in reporting of the mining services division.

However management did reiterate guidance and acknowledged the need to improve disclosure. Overweight. Target raised to $20.80 from $20.40. Industry view: Attractive.

Target price is $20.80 Current Price is $15.77 Difference: $5.03
If MIN meets the Morgan Stanley target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $19.10, suggesting upside of 21.1% (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

Macquarie rates PNL as Outperform (1) -

The company has achieved first production at Poplar Grove and this will ramp up over 2019. First sales of coal to a contracted buyer are slated for the end of the month.

Macquarie observes that current sales agreements have significantly more risk in the first two years of operations. The broker estimates that 90% of 2019 production is contracted for sale, with LG&E accounting for 70%.

A smooth ramp up is needed to satisfy the current contracted sales level. Outperform rating maintained. Target is $0.27.

Target price is $0.27 Current Price is $0.14 Difference: $0.13
If PNL meets the Macquarie target it will return approximately 93% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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: 1.0

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

UBS rates RIO as Downgrade to Neutral from Buy (3) -

Rio Tinto's balance sheet is in a strong position and the company is committed to returning free cash flow to shareholders.

In this regard, UBS believes increased dividends are more likely than share buybacks, given the 15% cap imposed on the Chinalco holding approaches as buybacks are undertaken.

The stock has rallied 23% in the year to date, supported by a strong iron ore price and a solid 2018 result. UBS does not consider the stock expensive by long-dated standards but it is fully valued.

Rating is downgraded to Neutral from Buy and the target raised to $94 from $88. The main risk to the broker's call is the iron ore market and further disruptions in Brazil as a result of the Vale tailings dam failure in January.

Target price is $94.00 Current Price is $96.76 Difference: minus $2.76 (current price is over target).
If RIO meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $92.17, suggesting downside of -4.7% (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: 0.3

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

UBS rates RMD as Neutral (3) -

UBS delves into the financial implications of the company's recent software-as-a-service/connected care acquisitions and joint ventures.

While the broker believes there is opportunity for robust growth in revenue, the path to profitability and improved returns is more difficult to ascertain.

This is primarily because of limited company disclosure and publicly available information regarding the revenue models of the connected care businesses, and the extent of operating costs or investment that are still required to achieve scale.

Still, the broker considers diversification into new revenue streams holds strategic merit. Neutral rating maintained. Target is reduced to US$109 from US$115.

Current Price is $14.48. Target price not assessed.

Current consensus price target is $15.08, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates SGR as Buy (1) -

Deutsche Bank considers the Queensland government's call for registrations of interest to develop a global tourism hub on the Gold Coast a minor negative for Star Entertainment.

Such a hub would incorporate a second casino licence and the government appears further ahead in finding a suitable site and additional slot licenses than the broker first appreciated.

Deutsche Bank believes the market is saturated from a gaming capacity perspective, especially once the Queen's Wharf project is completed.

The broker also suspects the government may use the process to extract additional concessions from Star. Buy rating maintained. Target is $5.60.

Target price is $5.60 Current Price is $4.47 Difference: $1.13
If SGR meets the Deutsche Bank target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $5.50, suggesting upside of 23.1% (ex-dividends)

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

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

There were grim faces at Smiles Inclusive after a disappointing first half result. Integration issues, practice underperformance and a lack of management oversight have brought loan covenants into question, Morgans notes. The bank is now working with the company.

With the CFO departing and CEO stepping down its an unsettling time for investors and while the broker has taken on board lowered FY guidance, previously assumed further acquisitions have been removed from valuation modelling until the broker is confident the business is back on track.

Target fall to 14c from $1.01. Downgrade to Hold from Add.

Target price is $0.14 Current Price is $0.14 Difference: $0
If SIL meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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 VCX as Accumulate (2) -

Ord Minnett believes the separation of assets, via an in specie distribution, warrants serious consideration, as the gradual sell-down of the tail could drag on for a number of years.

The broker believes $2.2bn in assets could be separated into a new higher yielding and lower-growth A-REIT. This would remove the issue of potential asset sales as well as the timing and pricing.

It will also remove the ongoing drag to earnings, and increase the weighting to high quality assets. The broker maintains an accumulate rating and $2.80 target.

Target price is $2.80 Current Price is $2.53 Difference: $0.27
If VCX meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting upside of 8.6% (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 VHT as Add (1) -

A major trial involving over 40,000 women in The Netherlands is showing the benefits of density-based screening, the broker reports, which has major positive implications for a number of publicly based screening programs. Morgans expects positive commentary and new contract wins to be announced at Volpara's next quarterly update in late April.

Volpara remains a key pick for the broker in the health space. Add and $1.55 target retained.

Target price is $1.55 Current Price is $1.21 Difference: $0.34
If VHT meets the Morgans target it will return approximately 28% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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 VRL as Upgrade to Outperform from Neutral (1) -

Macquarie finds positive momentum as the company turns around its business and executes on key initiatives. In theme parks, price increases and channel management drove a 34%-plus increase in ticket yield, offsetting declines in attendance.

Stronger second half earnings are also expected in cinema. The broker assesses the stock is "under-owned" at an institutional level because of historical governance concerns.

Hence, there is an opportunity for incremental buying over time, supported by restoration of the balance sheet. Macquarie upgrades to Outperform from Neutral and raises the target to $3.80 from $2.00.

Target price is $3.80 Current Price is $3.38 Difference: $0.42
If VRL meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting downside of -4.4% (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