Australian Broker Call

Citi rates A2M as Sell (5) -

Mead Johnson is launching an A2-protein formula and Citi considers this entry by a major competitor as another challenge that a2 Milk must overcome.

Increased competition in the category will make a2 Milk increasingly reliant on its brand to drive growth, as opposed to the science.

The broker envisages downside to consensus margin expectations over the medium term and maintains a Sell rating. Target is $12.20.

Target price is $12.20 Current Price is $12.07 Difference: $0.13
If A2M meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $13.59, suggesting upside of 12.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Morgans rates ACF as Add (1) -

The company will acquire Uni-span for $21.25m. Morgans estimates FY21 accretion of 29%. There is further upside likely if management can generate revenue synergies and/or exceed cost synergy expectations.

Uni-span is a Queensland-based provider of engineered formwork systems and scaffold hire. It also provides new equipment sales and industrial labour to complement its hire services to the energy, mining and industrial sectors.

Morgans maintains an Add rating and raises the target to $0.40 from $0.34. The company will fund the deal through expanded debt facilities.

Target price is $0.40 Current Price is $0.34 Difference: $0.06
If ACF meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates AJM as Underperform (5) -

The company will raise $21.5m to fund the ramp up of Pilgangoora. September quarter production was solid, in Macquarie's view. Cash cost guidance was reiterated.

The dilution from the equity top-up as well as additional short-term debt reduces the target to 4c from 5c. Underperform maintained.

Target price is $0.04 Current Price is $0.06 Difference: minus $0.02 (current price is over target).
If AJM meets the Macquarie target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -1.0

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

Credit Suisse rates ARB as Neutral (3) -

A combination of falling car sales in the company's categories and an appreciating Thai baht has meant ARB Corp now expects net profit to be weaker than the prior first half.

Despite a three-year period of negative revisions to earnings, albeit modest, Credit Suisse does not believe this is evidence of anything more structural. A meaningful turnaround in relevant vehicle sales and a step change in the outlook for offshore business is required nonetheless for any outperformance going forward.

The broker reduces estimates for earnings per share by -3-5% over FY20-22. Target is reduced to $16.80 from $17.40 and Neutral rating retained.

Target price is $16.80 Current Price is $17.38 Difference: minus $0.58 (current price is over target).
If ARB 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 $17.43, suggesting upside of 0.3% (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

Macquarie rates AVN as Outperform (1) -

Macquarie observes operating conditions are solid despite soft residential markets. Development returns are also attractive with over 10% yield on cost. Opportunities exist at both Cranbourne and Peninsula.

The broker notes a relatively full balance sheet will limit the consolidation strategy but this is offset by a tenant base that has an improving sales outlook. Outperform maintained. Target price rises 9.5% to $3.12.

Target price is $3.12 Current Price is $2.80 Difference: $0.32
If AVN meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Citi rates DMP as Neutral (3) -

Domino's Pizza Enterprises has indicated any acquisitions would be preferred in markets where pizza consumption is high, further accompanied by a stable political climate and a strong currency.

Citi notes most of the international markets Domino's Pizza UK is departing fit the criteria, namely Iceland, Norway, Sweden and Switzerland. The broker's main concern is distraction, as Domino's Pizza needs to focus on building scale in France and Germany, its core European markets.

Hence, Citi does not envisage much scope for earnings upside. Neutral rating and $46.40 target maintained.

Target price is $46.40 Current Price is $49.82 Difference: minus $3.42 (current price is over target).
If DMP 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 $43.28, suggesting downside of -13.1% (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

Citi rates EVT as Buy (1) -

Citi has lifted forecasts on better momentum in the movie theatre business while it remains a firm believer in the long term optionality surrounding the company's property development pipeline.

While earnings increases are small, the price target jumps by 17% to $15.05, including the analysts ascribing a higher valuation for the hotel operations. Buy.

Target price is $15.05 Current Price is $13.58 Difference: $1.47
If EVT meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Macquarie rates FMG as Outperform (1) -

The company will construct a 60MW solar power generation facility at the Chichester Hub that will materially reduce carbon emissions for the project. The facility will be connected to Alinta Energy's Newman gas-fired plant and 35MW battery. Fortescue Metals will invest US$250m to integrate its power network.

Macquarie notes spot iron ore prices and narrow discounts for lower-grade products continue to drive strong upgrade momentum. The broker maintains an Outperform rating and $10.10 target.

Target price is $10.10 Current Price is $8.32 Difference: $1.78
If FMG meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $8.10, suggesting downside of -2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

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

Citi upgrades to Buy from Neutral on the view that Inghams share price has now fallen too far post the release of a disappointing financial performance report in August. Target price remains unchanged at $3.40.

The analysts also believe the implied yield looks rather attractive in the current low yield environment. On top of all that, the analysts seem confident that management will be able to steer this ship around successfully.

The company is organising a Strategy Day on 22 October 2019.

Target price is $3.40 Current Price is $3.03 Difference: $0.37
If ING meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.32, suggesting upside of 9.5% (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

Citi rates MGX as Neutral (3) -

September quarter sales of iron ore were in line with expectations and shipments from Koolan Island continue to ramp up. Citi marginally adjusts iron ore price estimates for FY20, resulting in a -6% downgrade to net profit estimates.

Neutral/High Risk rating maintained. Target is $0.85.

Target price is $0.85 Current Price is $0.74 Difference: $0.11
If MGX meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Macquarie rates MGX as Outperform (1) -

Ramp up at Koolan Island continues and sales doubled in the September quarter. Realised pricing was affected by a provisional adjustment but Macquarie notes free cash flow remains healthy.

The broker also notes significant upside potential at spot prices and increases FY20 and FY21 estimates for earnings per share by 20% and 70% respectively. Target is unchanged at $1 and an Outperform rating is retained.

Target price is $1.00 Current Price is $0.74 Difference: $0.26
If MGX meets the Macquarie target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Credit Suisse rates QAN as Downgrade to Neutral from Outperform (3) -

Qantas will provide a first quarter trading update on October 24. Credit Suisse estimates capacity in the domestic airline market was up 0.4%. Forward schedules indicate flat market capacity in the second quarter.

Credit Suisse suspects the market is expecting large capacity cuts from Virgin Australia ((VHA)) which will be of significant benefit to Qantas.

While the broker acknowledges this is possible, there is limited evidence this is occurring and cuts may be smaller and take longer to materialise. Rating is downgraded to Neutral from Outperform. Target is steady at $6.40.

Target price is $6.40 Current Price is $6.53 Difference: minus $0.13 (current price is over target).
If QAN meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.57, suggesting upside of 0.6% (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

Credit Suisse rates SBM as Outperform (1) -

The company has downgraded production guidance for Gwalia in FY20 to 175-190,000 ounces from 200-210,000 ounces. Cost estimates are increased to $1309-1450/oz.

It appears to Credit Suisse on first glance that the Gwalia production downgrade may reflect overly ambitious forecasting of the company's ability to obtain a balance between the haulage capacity required to deliver the ventilation upgrade and the mining and ore haulage activities.

Meanwhile, Atlantic Gold's guidance is in line with expectations. Outperform rating and $3.50 target maintained.

Target price is $3.50 Current Price is $2.53 Difference: $0.97
If SBM meets the Credit Suisse target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 27.5% (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

Macquarie rates SBM as Outperform (1) -

FY20 guidance reveals a downgrade to production forecasts for Gwalia. This is driven by a revision of near-term expectations as mining and extension activities compete for limited ventilation.

First guidance from Moose River is in line with expectations. Macquarie expects more detail on the ultimate production potential at Gwalia once the mine stabilises in the third quarter of FY20.

Outperform rating maintained. Target is reduced to $3.30 from $3.50.

Target price is $3.30 Current Price is $2.53 Difference: $0.77
If SBM meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 27.5% (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

Ord Minnett rates SBM as Accumulate (2) -

St Barbara has reduced FY20 production guidance for the Gwalia operation by -11%, to 175-190,000 ounces. This comes with slightly higher capital expenditure and costs.

Ord Minnett does not believe this is a great start to FY20, reducing estimates by -15%. The main issue is constrained ventilation related to the Gwalia extension, but once completed in the March quarter it will set the mine up for a 2031 mine life.

Accumulate rating maintained. Target is lowered to $3.20 from $3.50.

Target price is $3.20 Current Price is $2.53 Difference: $0.67
If SBM meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.23, suggesting upside of 27.5% (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

Ord Minnett rates SDF as Accumulate (2) -

At the AGM management has signalled the business is performing strongly, leading to a narrowing of FY20 guidance to the top end of the $215-$225m range.

Ord Minnett increases estimates slightly but suspects, given the considerable scope for acquisitions, there is further upside likely. Accumulate rating maintained. Target rises to $3.95 from $3.90.

Target price is $3.95 Current Price is $3.64 Difference: $0.31
If SDF meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.05, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Macquarie rates STO as Outperform (1) -

Production volume growth remains positive, in Macquarie's view, and while the miss in September quarter revenue disappointed it was still higher.

Positive catalysts include Dorado flow testing and the acquisition of the ConocoPhillips NT interest. Macquarie expects organic growth as well as M&A should allow Santos to reach its 100mmboe production goal well ahead of the 2025 target.

Outperform rating maintained. Target reduced to $8.70 from $8.80.

Target price is $8.70 Current Price is $7.76 Difference: $0.94
If STO meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.25, suggesting upside of 6.3% (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

Morgans rates STO as Add (1) -

Third quarter production was mixed, Morgans observes. An aggressive cost cutting program, transformative acquisitions and a recovery in the oil price have helped the company to be a "formidable" competitor, the broker notes.

However, GLNG disappointed because of a statutory one-month shutdown of train 1, amid ongoing concern about the sustained performance upstream. Morgans envisages increased risk around the long-term cost structure at GLNG, where significant appraisal of the coals is still required outside of the current development.

Meanwhile, the company performed solidly in the Cooper Basin and Western Australia. Add rating maintained. Target is raised to $8.67 from $8.60.

Target price is $8.67 Current Price is $7.76 Difference: $0.91
If STO meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.25, suggesting upside of 6.3% (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

Credit Suisse rates SWM as Neutral (3) -

The company has announced a merger proposal with Prime Media ((PRT)), an all scrip offer of 0.4582 shares for each Prime Media share. This was announced in conjunction with the sale of Redwave Media, the WA radio assets, to Southern Cross Media ((SXL)).

The sale proceeds of $28m for the latter are a good price, in Credit Suisse's view, given recent weakness in the radio market. The transactions are estimated to be accretive to earnings per share by 5% on a pro forma basis and will reduce net debt.

Nevertheless, Seven West needs to convince major shareholders that this is a compelling transaction. Neutral rating and $0.43 target maintained.

Target price is $0.43 Current Price is $0.43 Difference: $0
If SWM meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.46, suggesting upside of 7.9% (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

Ord Minnett rates SWM as Buy (1) -

The company has announced a merger proposition with Prime Media, expected to be immediately accretive. Ord Minnett estimates 13% earnings accretion in FY20.

As part of the transaction, the Redwave business in Western Australia will be divested to Southern Cross Media ((SXL)) for $28m.

Ord Minnett considers the transaction positive, as this will expand audience to 90% of Australians and leverage the core TV content assets. Buy rating and $0.65 target maintained.

Target price is $0.65 Current Price is $0.43 Difference: $0.22
If SWM meets the Ord Minnett target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $0.46, suggesting upside of 7.9% (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

UBS rates SWM as Buy (1) -

The company is proposing a merger with Prime Media ((PRT)) through a scrip-based arrangement. Each Prime Media shareholder will receive 0.4582 in Seven West shares.

While UBS is yet to factor in the announcement, given the outstanding approvals that are required, the combined impact of the merger and the divestments of Redwave Media is assessed to have only a negligible impact on short-term earnings.

Once the full amount of cost synergies is factored in, UBS calculates pro forma accretion of 6%.

The company has also confirmed there is no change to existing guidance for TV advertising markets, expecting a low single-digit decline in FY20. Buy rating and $0.50 target maintained.

Target price is $0.50 Current Price is $0.43 Difference: $0.07
If SWM meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $0.46, suggesting upside of 7.9% (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

Ord Minnett rates SYD as Hold (3) -

Passenger numbers rose 1.4% in September, with both domestic and international recording growth. Despite the recovery, year to date numbers are flat and passenger growth has slowed meaningfully, Ord Minnett observes.

The broker assesses Sydney Airport is trading at elevated multiples and maintains a Hold rating and $7.80 target.

Target price is $7.80 Current Price is $8.45 Difference: minus $0.65 (current price is over target).
If SYD meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.22, suggesting downside of -2.7% (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

Credit Suisse rates SYR as Outperform (1) -

Price realisation in the September quarter was materially below Credit Suisse estimates at US$391/t. Redundancies/restructuring have been forced on the company at both Balama and at the corporate level by the price collapse.

2020 production is to be managed to the market. Credit Suisse awaits the update from management and retains an Outperform rating. Target is reduced to $1.30 from $2.30.

Target price is $1.30 Current Price is $0.38 Difference: $0.92
If SYR meets the Credit Suisse target it will return approximately 242% (excluding dividends, fees and charges).

Current consensus price target is $0.74, suggesting upside of 93.4% (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: 0.0

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

Ord Minnett rates WEB as Buy (1) -

Ord Minnett has been disappointed with the underperforming share price since upgrading to Buy on October 17. Because of the significant changes taking place, the broker suggests the current weakness is likely to be noise.

Ord Minnett reiterates the view that the stock is a serious buying opportunity, forecasting operating earnings (EBITDA) to grow at a compound 13.7% per annum over the next decade. Target is raised to $20.20 from $16.77 and a "Strong Buy" rating is reiterated.

Target price is $20.20 Current Price is $10.69 Difference: $9.51
If WEB meets the Ord Minnett target it will return approximately 89% (excluding dividends, fees and charges).

Current consensus price target is $14.89, suggesting upside of 39.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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