Australian Broker Call

Deutsche Bank rates ALL as Buy (1) -

Despite recent earnings downgrades, Deutsche Bank believes the company provides above-market rates of growth and increasing cash flow as well as exposure to the higher-growth digital segment.

The broker forecasts recurring revenue streams will generate 72% of group earnings that should ultimately result in a multiple re-rating. Buy rating maintained. Target is reduced to $37.75 from $39.75.

Target price is $37.75 Current Price is $24.69 Difference: $13.06
If ALL meets the Deutsche Bank target it will return approximately 53% (excluding dividends, fees and charges).

Current consensus price target is $31.39, suggesting upside of 27.1% (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 CKF as Upgrade to Add from Hold (1) -

The KFC brand continues to perform well domestically, which implies a better performance from the company's Australian operations, Morgans suggests. Yum! Brands and Restaurant Brands have recently reported positive quarterly sales for their KFC operations.

The broker expects Europe will remain challenging for the company in the short term but a return to sustainable positive same-store sales growth could provide the medium-term catalyst for a more aggressive roll out.

The broker upgrades estimates for earnings per share by 0.5-2% for FY19-21, primarily reflecting higher KFC Australia assumptions. The broker believes there is meaningful value to be realised in Collins Foods and upgrades to Add from Hold. Target is raised to $7.78 from $6.90.

Target price is $7.78 Current Price is $7.11 Difference: $0.67
If CKF meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $7.69, suggesting upside of 8.2% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

UBS rates CPU as Neutral (3) -

UBS assesses the company's interest-rate leverage appears to have run its course. Earnings growth is now increasingly dependent on cost reductions and growth in mortgage services.

While the broker expects mortgage services to rebound strongly in 2019, the growth could be short lived. Allowing for this, and lower yields, UBS lowers FY21 estimates for earnings per share by -6%.

The broker considers the slippage in US revenue and earnings a temporary setback, although expects the UK will face a step down from FY21. Neutral rating maintained. Target is reduced to $18.15 from $18.80.

Target price is $18.15 Current Price is $16.63 Difference: $1.52
If CPU meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $18.23, suggesting upside of 9.6% (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

Macquarie rates DCN as Outperform (1) -

The company has updated the outlook for the second half. The limited availability of equipment has meant reduced FY19 guidance, at 150-160,000 ounces versus 180-210,000 ounces.

Macquarie lowers its production estimates but retains a positive longer-term view. The company notes mine-to-mill reconciliation has been strong and mining dilution from both underground and open pit remains better than the estimates from the feasibility study.

Outperform rating maintained. Target is reduced to $3.00 from $3.10.

Target price is $3.00 Current Price is $2.28 Difference: $0.72
If DCN meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Citi rates HUB as Neutral (3) -

Previewing the upcoming Q3 trading update, Citi analysts are anticipating ongoing strong net funds inflows. If Citi's forecast is correct, the company should report $760m in net flows, which would be up 28% yoy.

Earnings estimates have been lifted by 1%, which pushes up the price target to $13.60 from $13.40. Neutral rating retained.

Target price is $13.60 Current Price is $13.27 Difference: $0.33
If HUB meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $12.63, suggesting downside of -4.8% (ex-dividends)

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 HVN as Buy (1) -

The company's offshore businesses have strong potential and this implies Australia is very cheap, in Deutsche Bank's view. Offshore currently accounts for less than 30% of earnings (EBIT), ex property, but the broker expects this will exceed 40% within five years.

Australia, meanwhile, is likely to be tougher for the short to medium term but remains a good business, and the broker believes the 10x ungeared price/earnings ratio more than compensates for cyclical weakness. Buy rating and $4.70 target.

Target price is $4.70 Current Price is $3.80 Difference: $0.9
If HVN meets the Deutsche Bank target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $3.75, suggesting downside of -1.3% (ex-dividends)

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 KMD as Neutral (3) -

At first glance, it appears the financial performance has slightly beaten Macquarie's estimates. The analysts observe it was towards the upper end of management's guidance.

Given the uncertain environment for retailers such as Kathmandu, Neutral rating retained. Price target $2.28.

Target price is $2.28 Current Price is $2.12 Difference: $0.16
If KMD meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting upside of 24.5% (ex-dividends)

The company's fiscal year ends in July.

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: 0.5

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

Deutsche Bank rates PMV as Hold (3) -

Deutsche Bank found the first half results in apparel brands exceptional, defying a general market trend. Growth for Smiggle slowed sharply, affected by the UK which accounts for over 40% of sales.

Hence, the broker considers the decision to slow the rolling out of stores and focus online and on wholesale is appropriate. Hold rating maintained. Target is reduced to $16.90 from $18.50.

Target price is $16.90 Current Price is $15.95 Difference: $0.95
If PMV meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $18.03, suggesting upside of 13.1% (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

UBS rates PMV as Buy (1) -

The company provided a strong first half result, with the performance of apparel brands surprising to the upside. UBS notes online business was again a highlight. Smiggle was subdued.

The company has indicated it will expand the wholesale business for Smiggle, with over 100 stores opening from July. The European launch will begin with an online-only Amazon wholesale launch.

UBS still expects Smiggle to launch European concession stores and enter the US in the future. Buy rating and $19.80 target maintained.

Target price is $19.80 Current Price is $15.95 Difference: $3.85
If PMV meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $18.03, suggesting upside of 13.1% (ex-dividends)

The company's fiscal year ends in July.

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 REG as Buy (1) -

Regis Healthcare has confirmed it will receive the full additional government funding and reaffirmed FY19 guidance. Residential care operators will receive a one-off subsidy equal to 9.5% of the aged care funding instrument over March 20 to June 30.

UBS calculates this represents an increase of around $18 per occupied bed bay, or $10.4m in additional revenue for FY19.

UBS upgrades estimates for earnings per share by 4% for FY19 and downgrades by -4% for FY20. The broker maintains a Buy rating and $3.80 target.

Target price is $3.80 Current Price is $3.23 Difference: $0.57
If REG meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.41, suggesting upside of 5.4% (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

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

The feasibility study for the Gwalia mass extraction project has assessed the viability of pumping as technically feasible but, with a doubling of the original cost assumptions amid more difficult geometry in the orebody, this has now been abandoned in favour of trucking.

Ord Minnett considers the recent sell-off a buying opportunity, believing the company is in solid shape. Rating is upgraded to Accumulate from Hold. Target is reduced to $3.80 from $4.60.

Target price is $3.80 Current Price is $3.52 Difference: $0.28
If SBM meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 5.7% (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

Citi rates WBC as Buy (1) -

Additional remediation attributable to salaried financial planners and banking product refunds have triggered yet another -$260m dent to earnings for Westpac. The analysts have reduced forecasts.

Citi analysts point out, on an underlying basis Westpac is expected to continue to deliver core revenue growth of circa 2%. Operational costs should remain contained. On this basis, the broker retains its Buy rating, with a $30 price target.

Noteworthy: on Citi's forecasts, Westpac shareholders can expect 188c in annual dividends for a long time into the future, as has been the case in recent years.

Target price is $30.00 Current Price is $25.96 Difference: $4.04
If WBC meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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 WBC as Neutral (3) -

The bank has announced that first half cash earnings will be reduced by around -$260m amid further customer remediation. This remediation does not include aligned dealer group fee-for-no-service, which is still to come.

Credit Suisse is disappointed, having expected Westpac had moved through the majority of banking-related remediation while the aligned dealer group remediation appears larger than first thought.

The broker maintains a Neutral rating and $28 target.

Target price is $28.00 Current Price is $25.96 Difference: $2.04
If WBC meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates WBC as Sell (5) -

Westpac has disclosed salaried adviser remediation of -$260m, largely already captured in Deutsche Bank's numbers.

The broker books an extra contingency for bad conduct in FY20 estimates and believe this is prudent, given the current regulatory environment.

Deutsche Bank maintains a Sell rating and $22 target.

Target price is $22.00 Current Price is $25.96 Difference: minus $3.96 (current price is over target).
If WBC meets the Deutsche Bank target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

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

Macquarie rates WBC as Neutral (3) -

Westpac has announced additional provisions for salaried adviser remediation. Macquarie increases its remediation forecasts for the major banks for the next four years, resulting in downgrades to estimates of -3-5% for FY19.

The broker considers the bank's pay-out ratio is elevated and suspects an ongoing need for dilutive dividend reinvestment plans, or a cut to the dividend.

Macquarie calculates Westpac's remediation update implies around $600-700,000 per adviser before costs. The broker's analysis indicates a great divide between the amounts estimated and provided for by Westpac and wealth managers AMP ((AMP)) and IOOF ((IFL)).

The broker suspects there may be an element of conservatism from Westpac, or a higher proportion of inappropriate advice remediation. Neutral rating and $27 target.

Target price is $27.00 Current Price is $25.96 Difference: $1.04
If WBC meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates WBC as Underweight (5) -

Westpac has announced further customer remediation provisions that will reduce first half cash earnings by -$260m. This is more than Morgan Stanley expected.

The bank is not yet able to finalise a reliable estimate of potential refunds for customers of aligned advisers. The broker envisages risks that remediation could be higher and drag on for longer than expected.

The broker maintains an Underweight rating and $24.30 target. Industry view: In Line.

Target price is $24.30 Current Price is $25.96 Difference: minus $1.66 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates WBC as Hold (3) -

Westpac expects to set aside a provision equivalent to -$260m, related to financial advice service fees from its wealth management operations and the incorrect classification of loans for some borrowers.

Ord Minnett also expects the bank's peers will face these issues. The broker maintains a Hold rating and lowers the target to $27.90 from $28.00.

Target price is $27.90 Current Price is $25.96 Difference: $1.94
If WBC meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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 WBC as Sell (5) -

Westpac will take additional provisions with its first half results for customer remediation. Total provisions for customer remediation since FY17 amount to around -$1.4bn, UBS calculates.

UBS observes that a large proportion of rebates are for customers with interest only loans where the bank failed to switch back to principal and interest at the end of the term. UBS is alarmed by this, as interest only loans peaked at 50% of the mortgage book in FY17.

Earnings estimates are downgraded by -7% for FY19. Sell rating and $24.50 target maintained.

Target price is $24.50 Current Price is $25.96 Difference: minus $1.46 (current price is over target).
If WBC meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.09, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in September.

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