Australian Broker Call

Macquarie rates AGI as Neutral (3) -

Ainsworth has downgraded FY18 profit guidance on weak new game performance, highlighting to the broker the volatility and low visibility within this product segment. New guidance assumes the 600 unit sale to Churchill Downs is completed in the period.

The broker assumes it will be, although the sale remains subject top regulatory approval. Ainsworth expects a better FY19 but new games will have to lift their performance. The broker acknowledges corporate appeal given Novamatic holds 52% of the stock.

Target drops to $1.05 from $2.28. Neutral retained.

Target price is $1.05 Current Price is $1.21 Difference: minus $0.16 (current price is over target).
If AGI meets the Macquarie target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

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

UBS rates AGI as Sell (5) -

The company has announced a significant downgrade to trading expectations, forecasting second half pre-tax profit of around $20m versus previous expectations for it to be ahead of $42m.

Delays to key releases are considered part of the reason behind the decline, although UBS believes the majority is via lower demand and lower ship share.

The broker suggests the underlying trend could be worse and re-bases earnings for future years. Estimates for earnings per share in FY18 are downgraded by -38% and by -41% for FY19. Sell rating maintained. Target is reduced to $1.09 from $1.75.

Target price is $1.09 Current Price is $1.21 Difference: minus $0.12 (current price is over target).
If AGI meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

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

Citi rates AMP as Neutral (3) -

Citi suggests, at face value, the company's submission to the Royal Commission has the right tone but is unlikely to repair the damage to its brand. The broker acknowledges difficulty in determining whether the current share price offers good value or otherwise.

Although the cost of remediation, so far, is relatively small, Citi believes there are significant risks to future profitability from brand damage which remain unquantifiable.

Neutral/High Risk rating. Target is $4.15.

Target price is $4.15 Current Price is $4.14 Difference: $0.01
If AMP meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.87, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates AMP as Accumulate (2) -

AMP has released an additional submission to the Royal Commission, disputing some of the assertions and findings. Ord Minnett believes the report might go some way to give investors more clarity on the downside scenarios and risks.

Over time, the broker suggests investor and customer concerns should dissipate and the risks from the immediate scrapping of the vertical integration model may not eventuate.

Accumulate retained. Target is $5.90.

Target price is $5.90 Current Price is $4.14 Difference: $1.76
If AMP meets the Ord Minnett target it will return approximately 43% (excluding dividends, fees and charges).

Current consensus price target is $4.87, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

UBS rates AMP as Downgrade to Sell from Neutral (5) -

UBS believes there are numerous risks and operating challenges that cannot be readily quantified and the business faces a 2-3-year rebuild before management, structure, governance and operating stability return. Moreover, turnarounds in insurance always take longer.

Accordingly, the broker is unable to recommend the shares on a 12-month view and downgrades to Sell from Neutral. Target is reduced to $3.80 from $5.40.

Target price is $3.80 Current Price is $4.14 Difference: minus $0.34 (current price is over target).
If AMP meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.87, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Citi rates AX1 as Buy (1) -

Accent Group remains Citi's favourite small cap retail stock and the analysts have once again increased estimates, suggesting investors are too worried about the wrong things (like the risk from Skechers' weak international sales).

This has a direct impact on the valuation and price target, which jump by 22% to $1.40. Buy (of course).

Target price is $1.40 Current Price is $1.22 Difference: $0.18
If AX1 meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Market Sentiment: 0.5

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

Citi rates BXB as Neutral (3) -

CHEP Americas earnings have been affected by negative operating leverage, as costs rise faster than revenue. Citi expects the pressure will remain and that earnings margins will contract a further -300 basis points in the second half.

The broker expects the CHEP EMEA business will be the main driver of the Brambles share price moving forward and, over time, investor attention will shift to this market.

Neutral rating and $10.10 target maintained.

Target price is $10.10 Current Price is $9.80 Difference: $0.3
If BXB meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $10.37, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates COH as Underperform (5) -

The broker came out of Cochlear's investor day noting the market opportunity for the company is substantial, but it will require ongoing investment in order to increase utilisation. The product offering is attractive but the market is factoring in market share and industry growth rates well ahead of the broker's base case.

With a forward PE of 40x and a forecast total shareholder return of -14% based on discounted cash flow valuation the broker retains Underperform. Target rises to $166 from $160.

Target price is $166.00 Current Price is $195.60 Difference: minus $29.6 (current price is over target).
If COH meets the Macquarie target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $162.37, suggesting downside of -17.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.4

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

Ord Minnett rates COH as Lighten (4) -

Ord Minnett envisages limited potential upside to guidance for FY18 and expects earnings to grow in line with sales, in the low double digits. The company provided no financial update at its investor briefing with a focus, similar to the prior year, on improving customer awareness and engagement.

Management reiterated a commitment to R&D spending. The company re-stated the challenge it faces regarding the poor understanding of cochlear implant indications by referrers, such as GPs and audiologists.

Lighten rating. Target is $158.

Target price is $158.00 Current Price is $195.60 Difference: minus $37.6 (current price is over target).
If COH meets the Ord Minnett target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $162.37, suggesting downside of -17.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.4

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

Citi rates CSL as Buy (1) -

Andexxa, a competitor to CSL's  Kcentra, has been approved. Citi envisages limited short-medium term impact as Kcentra has been growing very rapidly and CSL remains a preferred name.

Kcentra is used off label in NOAC-related bleeding where there was no antidote up until now. The broker suggests the forecast decline of Warfarin share, to around 10% in 10 years, should mean NOACs are the beneficiary.

Buy rating maintained. Target is $175.

Target price is $175.00 Current Price is $170.21 Difference: $4.79
If CSL meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $168.25, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.6

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

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

While it is early in the new season, Morgans believes it prudent to revise FY19 forecasts given the poor start to cropping conditions on the east coast.

Over February to April rainfall across most cropping regions, particularly in NSW and Victoria, was very much below average. These regions also experienced some of the warmest temperatures on record.

The broker downgrades to Hold from Add. Target is reduced to $8.00 from $8.47.

Target price is $8.00 Current Price is $8.24 Difference: minus $0.24 (current price is over target).
If GNC meets the Morgans target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.66, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Citi rates GUD as Buy (1) -

Citi analysts reiterate their Buy rating for GUD Holdings. The core Automotive division is expected to deliver, with acceleration in growth stemming from new products and further bolt-on acquisitions.

Management has used the Investor Day to reiterate the company remains on track to deliver 8-10% growth in revenues (as targeted) in both FY18 and FY19. Target is $13.90.

Target price is $13.90 Current Price is $12.71 Difference: $1.19
If GUD meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $12.80, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Morgan Stanley rates IEL as Overweight (1) -

Direct competition is limited and highly fragmented so Morgan Stanley believes the company can attain global leadership.

The broker transfers coverage to a new analyst with this report, and expects aggressive reinvestment to drive higher sales growth via digital and geographic expansion.

Target is raised to $9.65 from $7.00. Overweight rating. Industry view is In-Line.

Target price is $9.65 Current Price is $8.05 Difference: $1.6
If IEL meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $7.26, suggesting downside of -9.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

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

The business has not yet appeared in front of the Royal Commission and, therefore, UBS observes, sidestepped the direct fall-out affecting other vertically integrated operators.

Still, as an almost pure play in the sector, the broker believes cost and flow implications are more pronounced. The business would be most impacted under a scenario where advice and platforms are structurally separated, and UBS ascribes a notional 20% probability to this.

The broker downgrades to Neutral from Buy, given the value constraints until the risk dissipates. Target is reduced to $10.00 from $11.50.

Target price is $10.00 Current Price is $9.54 Difference: $0.46
If IFL meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.62, suggesting upside of 21.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

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

Morgan Stanley envisages more upside than downside risk in FY19 and this should continue to support the share price, although a PE of around 14x at this point in the cycle keeps the rating at Equal-weight.

Growth in net profit contribution from the operating businesses has tracked at around 6% per annum over the past three years although management has not provided guidance for FY19.

Morgan Stanley forecasts an improvement in the contribution from capital markets but a modest decline in annuity style earnings for the first time since the financial crisis.

In-Line industry view retained. Target is $100.

Target price is $100.00 Current Price is $108.01 Difference: minus $8.01 (current price is over target).
If MQG 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 $104.54, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in March.

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 MQG as Add (1) -

FY18 results highlight the strength of the diversified business model, although Morgans notes other income and charges remain a significant driver of current performance.

The highlight, in the broker's opinion, was a lift in performance of the capital markets-facing businesses in the fourth quarter.

Morgans lowers FY19 and FY20 estimates for earnings per share by -1-3%. Target is lifted to $115.80 from $109.60. Add rating maintained.

Target price is $115.80 Current Price is $108.01 Difference: $7.79
If MQG meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $104.54, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in March.

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 MQG as Hold (3) -

FY18 net profit was up 15.2% and ahead of Ord Minnett's forecasts. While there can be some debate about the quality of the earnings, the broker considers the group is performing very well.

Despite the improving trends in some of the recurring revenue drivers, the stock appears fair value to the broker. Hold rating maintained. Target is raised to $110 from $100.

Target price is $110.00 Current Price is $108.01 Difference: $1.99
If MQG meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $104.54, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in March.

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 MQG as Buy (1) -

FY18 results benefited from very strong performance fees. Although performance fees are expected during FY19, UBS suggests they are likely to be sharply lower versus FY18 levels. From FY20 onwards performance fees are likely to bounce back as many of the un-listed funds reach maturity.

With a dearth of investment opportunities across Australian financials UBS expects the market to continue to support Macquarie Group despite its price performance. Buy rating maintained. Target is raised to $117 from $110.

Target price is $117.00 Current Price is $108.01 Difference: $8.99
If MQG meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $104.54, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in March.

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 NAB as Add (1) -

First half earnings missed Morgans' forecasts largely because of softer loan growth. The bank has reiterated guidance for expenses to grow 5-8% in FY18 and then remain broadly flat over FY19-20.

The bank continues to target cost savings of over $1bn by the end of FY20. Morgans is less confident about the magnitude of cost savings above around $500m but takes comfort from the fact the bank is not relying on super-normal expenses growth.

The bank is closing the technology gap with its peers, which Morgans believes was quite urgent. Add rating retained. Target is reduced to $33.00 from $33.50.

Target price is $33.00 Current Price is $29.10 Difference: $3.9
If NAB meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $30.98, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

UBS rates NWL as Sell (5) -

As a leading specialty platform provider the business stands to be a beneficiary of any fall-out affecting larger, vertically-integrated operators in a scenario where structural separation is recommended.

While this may appear to offer further upside, UBS believes it is limited, given the likely technology and pricing responses from major wealth managers. Sell rating retained. Target rises to $6.85 from $5.60.

Target price is $6.85 Current Price is $7.70 Difference: minus $0.85 (current price is over target).
If NWL meets the UBS target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.58, suggesting downside of -14.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates QBE as Overweight (1) -

Morgan Stanley believes it is time to buy QBE as the outlook is for a cleaner portfolio, with greater underwriting discipline, supported by improving fundamentals.

Positive first steps are the exit of North American personal lines, a Hong Kong workers compensation reinsurance deal and the Latin American sale.

Target is $11.90. Overweight retained. Industry view is In-Line.

Target price is $11.90 Current Price is $10.24 Difference: $1.66
If QBE meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $11.00, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates STO as Neutral (3) -

Santos has sold its Asian Business Unit as expected but at a lower price than the broker assumed, due to exploration commitments. The sale, and stronger oil prices, should help speed up debt reduction and the timing of dividend reinstatement.

The broker does not see a reinstatement in 2018 due to capex required on new projects, but does note the oil price has risen 7% since Harbour made its takeover offer, suggesting a higher price may be sought. The broker assigns an 80% chance of the takeover proceeding. Neutral and $6.30 target retained.

Target price is $6.30 Current Price is $6.20 Difference: $0.1
If STO meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.86, suggesting downside of -5.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.2

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

Citi rates WTC as Upgrade to Buy from Neutral (1) -

Following the company's inaugural investor briefing Citi upgrades to Buy from Neutral and increases revenue forecasts for FY19-20 by 3-10%.

The target jumps to $14.12 from $9.51 because of the expansion in FY19 peer multiples and an increase to the stock's premium, reflecting greater confidence in the company's organic growth trajectory.

Growth is expected to be led by new product developments and the ability to integrate acquisitions over the medium term.

Target price is $14.12 Current Price is $12.28 Difference: $1.84
If WTC meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $11.90, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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