Australian Broker Call

Ord Minnett rates ABP as Hold (3) -

Ord Minnett updates its model to allow for the acquisition of the K1 building in King Street, Fortitude Valley, Queensland. The asset was acquired in partnership with global real estate management firm Heitman for around $170m.

Ord Minnett slightly lifts forecasts for FY19 and FY20 earnings but lowers the target to $3.30 from $3.40. Hold rating maintained.

Target price is $3.30 Current Price is $3.40 Difference: minus $0.1 (current price is over target).
If ABP meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Macquarie rates ALL as Outperform (1) -

Macquarie observes the business has underperformed the ASX100 by -9% since the end of July despite no changes to the growth opportunities and addressable markets. Hence, the broker suggests the PE de-rating provides an entry point to the stock. A review of the outlook suggests a 24% three-year compound growth rate in earnings.

The company is also a beneficiary of US tax reform and more than 70% of earnings are generated in this region. Outperform rating and $34 target maintained.

Target price is $34.00 Current Price is $28.28 Difference: $5.72
If ALL meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $34.65, suggesting upside of 22.5% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates BKW as Neutral (3) -

Citi was impressed with the FY18 results but notes a credit squeeze has started to slow sales as the housing market comes off the boil. The broker expects the diversified portfolio to mitigate the impact of a lower contribution from building materials.

A solid start for the property segment has been noted for FY19 and the broker increases estimates for earnings by 7% and 3% for FY19 and FY20, respectively. Neutral rating and $16.20 target maintained.

Target price is $16.20 Current Price is $16.18 Difference: $0.02
If BKW meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $15.95, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates BKW as Neutral (3) -

FY18 results were ahead of Macquarie's expectations. The broker observes headwinds to growth are mounting as energy costs are taking the lustre of building products and property profits are also expected to decline.

While the housing market remains a challenge, management has pointed to strong order books and supportive macro conditions in the east coast markets. The broker maintains a Neutral rating and increases the target to $15.65 from $15.60.

Target price is $15.65 Current Price is $16.18 Difference: minus $0.53 (current price is over target).
If BKW meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.95, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates BKW as Hold (3) -

FY18 results were ahead of expectations and Morgans increases FY19 operating earnings estimates by 12%. With building activity slowing and higher energy costs creating a headwind for building products, the broker believes earnings growth over the next few years will be challenging.

This will be mitigated by the cross holding in WH Soul Pattinson ((SOL)) but the broker believes the stock is fully valued. Hold rating maintained. Target is raised to $16.00 from $15.61.

Target price is $16.00 Current Price is $16.18 Difference: minus $0.18 (current price is over target).
If BKW 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 $15.95, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in July.

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

Morgan Stanley rates BOQ as Underweight (5) -

Morgan Stanley trims second half margin forecasts, believing the bank has not re-priced enough to stem funding pressures and stabilise margins.

The broker expects a $30m restructuring charge to be announced at the results on October 4, while capital initiatives are contingent on the sale of St Andrews to Freedom Insurance. Regulatory and compliance spending continues to increase as well.

Underweight maintained. Target is reduced to $9.30 from $9.50. In-Line industry view retained.

Target price is $9.30 Current Price is $11.07 Difference: minus $1.77 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.65, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Ord Minnett rates CSL as Hold (3) -

Ord Minnett believes CSL is well-positioned for another year of earnings growth in the high teens, supported by the therapies Idelvion, Haegarda and Hizentra.

Still, news that a second competitor plans to initiate a phase II trial of its neonatal FC receptor therapy is a reminder, the broker suggests, that the elevated valuation makes little allowance for potential disruption to immunoglobulin sales in the medium term. Ord Minnett maintains a Hold rating with a $202 target.

Target price is $202.00 Current Price is $207.12 Difference: minus $5.12 (current price is over target).
If CSL meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $216.70, suggesting upside of 4.6% (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: 0.3

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

Morgan Stanley rates ILU as Overweight (1) -

Morgan Stanley observes the Chinese market for zircon remains tight and domestic prices have run ahead of the company's flagged price of US$1580/t. Recent consolidation in the ceramics industry is leading to a drawdown of inventory and this, coupled with a seasonally weak fourth quarter, should lead to the zircon prices correcting lower.

Meanwhile, the market for rutile remains tight as well and prices are expected to increase. The broker maintains an Overweight rating and In-Line sector view. Target is $12.10.

Target price is $12.10 Current Price is $10.00 Difference: $2.1
If ILU meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $11.04, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in December.

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 PDL as Neutral (3) -

JO Hambro has been the main growth engine since its acquisition in 2011, with UBS noting it is driven 98% of the company's 25% profit growth over the past five years. However the outlook appears more challenging as an increasingly mixed investment performance weighs on the business.

UBS estimates negligible performance fee accrual from JO Hambro over 2018. Although the valuation is now more palatable the broker envisages little scope for near-term outperformance and maintains a Neutral rating. Target is reduced to $9.80 from $10.50.

Target price is $9.80 Current Price is $8.69 Difference: $1.11
If PDL meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $10.76, suggesting upside of 23.8% (ex-dividends)

The company's fiscal year ends in September.

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 PMV as Downgrade to Sell from Neutral (5) -

Citi observes Smiggle is shifting to a less capital intensive model including concessions, wholesale agreements and third-party online partners. Nevertheless, the broker remains cautious and suspects rising labour costs and digital investment will carry over into FY19.

The broker downgrades the stock to Sell from Neutral on valuation grounds. Target is reduced to $17.00 from $18.20. While earnings growth remains strong, the broker reduces retail operating earnings forecast by -9% in FY19 and -7% in FY20 because of elevated growth in operating costs.

Target price is $17.00 Current Price is $18.20 Difference: minus $1.2 (current price is over target).
If PMV 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 $17.26, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in July.

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 PMV as Neutral (3) -

Credit Suisse believes the FY18 results were overshadowed by the developments in the Smiggle strategy as growth objectives were accelerated and the business focus moved more towards online, concession and wholesale.

The Smiggle expansion is likely to continue dominating the outlook while apparel retail treads water. Credit Suisse makes -1% downgrades to FY19 and FY20 estimates and suspects the market may be missing the impact of increasing wage pressures in Australia and the set up costs in Europe.

Neutral rating maintained. Target rises to $17.74 from $16.41.

Target price is $17.74 Current Price is $18.20 Difference: minus $0.46 (current price is over target).
If PMV meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.26, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in July.

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

Deutsche Bank rates PMV as Downgrade to Hold from Buy (3) -

FY18 results highlight the growing contribution of Smiggle as well as good cost control, and Deutsche Bank is encouraged by the sales trend in the apparel brands. Smiggle and Peter Alexander, the highest margin and highest growth brands, now account for 43% of retail sales.

The broker believes management has done a good job of steadying the core brands and executing on its growth strategy, however, the stock is nearing the revised valuation and the rating is downgraded to Hold from Buy. Target is raised to $18.50 from $16.70.

Target price is $18.50 Current Price is $18.20 Difference: $0.3
If PMV meets the Deutsche Bank target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $17.26, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in July.

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 PMV as Neutral (3) -

UBS found the FY18 results solid. Cash flow was the highlight and margins continue to improve. Women's apparel brands generated positive sales growth in the second half, offsetting what appeared to be a slower performance in Peter Alexander and Smiggle.

UBS notes Smiggle's UK online performance has been very strong and sales in the UK/Ireland are up 29% in the first five weeks of FY19. Neutral rating maintained. Target is reduced to $20.20 from $20.30.

Target price is $20.20 Current Price is $18.20 Difference: $2
If PMV meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $17.26, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in July.

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 RIO as Buy (1) -

The company will distribute the US$3.2bn net proceeds from the sale of coal assets through additional capital management, comprising a $2.7bn off-market buyback of ASX stock and US$1.3bn on-market buyback of LSE stock.

Further potential returns to shareholders are expected in respect of the US$500m Dunkerque smelter sale. Citi maintains a Buy rating and $87 target.

Target price is $87.00 Current Price is $79.49 Difference: $7.51
If RIO meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $86.60, suggesting upside of 8.9% (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: 0.8

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

Macquarie rates RIO as Outperform (1) -

The company has announced a new US$3.2bn share buyback, equivalent to the proceeds from the recent coal divestments. Macquarie notes the higher skew towards buying back ASX stock reflects a re-weighting of recent buybacks to be broadly in line with the company's 75:25 LSE:ASX structure.

The broker envisages further capital management potential should the US$3.5m Grasberg divestment be completed. Macquarie maintains an Outperform rating and $91 target.

Target price is $91.00 Current Price is $79.49 Difference: $11.51
If RIO meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $86.60, suggesting upside of 8.9% (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: 0.8

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

Morgans rates RIO as Upgrade to Add from Hold (1) -

Rio Tinto plans to return the $3.2bn in net proceeds from the sale of its remaining coal assets through a new off-market share buyback which will be carried out over the remainder of 2018. While the buyback is a positive, Morgans struggles with the move to divest coal, as it has further concentrated the business.

The broker considers the recent weakness in the share price has uncovered attractive value, and healthy metal prices could mean additional capital management and growth is added. Morgans upgrades to Add from Hold. Target is raised to $81.32 from $80.67.

Target price is $81.32 Current Price is $79.49 Difference: $1.83
If RIO meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $86.60, suggesting upside of 8.9% (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: 0.8

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

Deutsche Bank rates RWC as Upgrade to Hold from Sell (3) -

The company has hosted an investor briefing. Deutsche Bank is pleased that John Guest is on track as it is the near-term catalyst for the business. The broker remains concerned that adequate US sales margin growth can be achieved, nonetheless, as the opportunities are largely in lower margin segments.

While forecasts remain unchanged, given the recent underperformance in the share price, the broker upgrades to Hold from Sell. Target is $4.80.

Target price is $4.80 Current Price is $5.30 Difference: minus $0.5 (current price is over target).
If RWC meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.89, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Deutsche Bank rates SUN as Hold (3) -

No surprises were expected from the FY18 AGM and there was no formal trading update, given it was relatively soon after the results.

SunCorp has reiterated targets for FY19 and expects a significant uplift in shareholder returns. Deutsche Bank retains a Hold rating on valuation. Target is $15.10.

Target price is $15.10 Current Price is $14.48 Difference: $0.62
If SUN meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $15.33, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates VEA as Initiation of coverage with Buy (1) -

First half results were mixed as cash flow in refining missed estimates, while retail outperformed stronger volumes and cost control. UBS believes the market is not pricing in the upside from the retail and commercial divisions.

The broker initiates coverage with a Buy rating and $2.85 target. UBS forecasts 5% three-year growth in earnings per share.

Target price is $2.85 Current Price is $2.36 Difference: $0.49
If VEA meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

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

Credit Suisse upgrades to Outperform from Underperform and believes Scarborough's time has come. The broker, with a new analyst assuming coverage, considers Scarborough makes up for the aspects of the business it does not like, presenting a more de-risked project than is widely credited.

The broker considers Woodside's unique industry position and appetite for greater LNG market exposure is the differentiator. Positive announcements regarding Browse are also expected and major downside risks, aside from the oil price, are believed unlikely to materialise in the near term. The broker raises the target to $40.50 from $27.20.

Target price is $40.50 Current Price is $36.95 Difference: $3.55
If WPL meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $36.61, suggesting downside of -0.9% (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: 0.4

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