Australian Broker Call

Macquarie rates ARF as Outperform (1) -

Macquarie suggests there is increased takeover risk at Arena REIT and unlisted capital is likely to pay the highest price. There are early indications of stronger demand from the changing regulatory funding environment.

The broker estimates a private equity bid could result in additional leverage and a takeover price of $2.48 a share. Outperform rating maintained. Target is raised to $2.55 from $2.44.

Target price is $2.55 Current Price is $2.19 Difference: $0.36
If ARF meets the Macquarie target it will return approximately 16% (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

UBS rates GXL as Neutral (3) -

The company's board has endorsed a $5.55 takeover from TPG Capital Funds via a scheme of arrangement. UBS notes this is well below the $6.75 per share indicative offer received in 2016.

Since then, the competitive landscape has become more difficult and the company's vet performance has deteriorated. The balance sheet is also more stretched.

The broker expects the company will need to continue reinvesting in lower retail pricing as online competition increases. A Neutral rating is maintained. Target is raised to $5.55 from $4.40.

Target price is $5.55 Current Price is $5.41 Difference: $0.14
If GXL meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting downside of -8.3% (ex-dividends)

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 IPL as Outperform (1) -

Global peers, Mosaic and Nutrient, have both upgraded earnings expectations. Macquarie believes this supports a favourable outlook for fertiliser prices, noting Incitec Pivot's significant operating leverage at its WALA and SCF plants.

The company reports its FY18 result on November 12. Macquarie maintains an Outperform rating and $4.16 target.

Target price is $4.16 Current Price is $4.21 Difference: minus $0.05 (current price is over target).
If IPL meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.18, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Credit Suisse rates LNK as Neutral (3) -

The company will increase its stake in PEXA to 27-44%, depending on the level of shareholder acceptance, from 20%. The additional investment, $100-400m, will be funded from existing cash and debt.

Adding in earnings from the existing 20% stake and the potential increase takes total benefits from PEXA ?to 6-10% by FY22, on Credit Suisse's calculations.

Neutral rating maintained. Target is reduced to $8.30 from $8.40.

Target price is $8.30 Current Price is $7.58 Difference: $0.72
If LNK meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $8.59, suggesting upside of 13.3% (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 LNK as Hold (3) -

Link is part of a consortium that will acquire PEXA for an enterprise value of $1.6bn. Link already owns 19.8% and is expected to increase its stake to 27-44%.

Still, Deutsche Bank points out Link will remain a minority owner. No equity will be raised as part of the transaction. Hold rating and $8.00 target maintained.

Target price is $8.00 Current Price is $7.58 Difference: $0.42
If LNK meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.59, suggesting upside of 13.3% (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

UBS rates LNK as Buy (1) -

Link Group is leading a consortium to acquire a controlling stake in PEXA, Australia's online property exchange. Depending on the final level of acceptances, the company's current holding will increase to 27-44%.

UBS considers the deal strategically sensible but believes it is too early to be precise regarding the financial implications. Still, the revaluation gain on the existing 19.8% stake, by itself, equates to $0.35 per share of upside in the broker's $8.90 target. Buy rating maintained.

Target price is $8.90 Current Price is $7.58 Difference: $1.32
If LNK meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $8.59, suggesting upside of 13.3% (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

Citi rates RMD as Neutral (3) -

ResMed has announced the acquisition of MatrixCare for US$750m and Citi analysts estimate the deal to be 2% EPS accretive in FY19. The transaction will be primarily funded from existing credit facility while also leading to the share buyback being suspended.

Citi analysts have incorporated this latest deal into the modeling, but left the $15.20 price target unchanged, as well as the Neutral rating.

The analysts make the observation this deal marks ResMed's third acquisition into "connected care", after Brightree in 2016 and Healthcarefirst in May this year.

Target price is $15.20 Current Price is $14.45 Difference: $0.75
If RMD meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

Credit Suisse rates RMD as Outperform (1) -

ResMed has acquired US software company, MatrixCare, for US$750m. The acquisition is separate from the company's respiratory and sleep business but, Credit Suisse assesses, adds to the cloud-based connected care offering.

The broker believes the purchase price is high as no financial history has been provided. At completion of the deal the company's share buyback will be suspended.

Credit Suisse maintains an Outperform rating and $15.10 target.

Target price is $15.10 Current Price is $14.45 Difference: $0.65
If RMD meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

Deutsche Bank rates RMD as Buy (1) -

The acquisition of MatrixCare for US$750m increases the company's exposure to the US out-of-hospital software market. However, Deutsche Bank expects minimal synergies from the transaction.

While lukewarm about the merits of the transaction, the broker continues to like the outlook for the rest of the operations. Buy rating and US$127.70 target maintained.

Current Price is $14.45. Target price not assessed.

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

Morgan Stanley rates RMD as Overweight (1) -

ResMed will acquire MatrixCare, which provides out-of-hospital software to a range of facilities, home health and hospice providers. The cost of the acquisition is US$750m.

Morgan Stanley estimates the deal to be 0.8% accretive to FY19 and around 1.4% accretive to FY20 diluted earnings per share.

Overweight and US$119 target retained. Industry view: In line.

Current Price is $14.45. Target price not assessed.

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

Morgans rates RMD as Add (1) -

ResMed has acquired MatrixCare, a US provider of out-of-hospital software, for US$750m. Morgans believes the acquisition will establish ResMed as a leading provider of solutions across a broad spectrum.

The broker increases FY19-21 underlying earnings estimates by up to 4%. This is the largest push by ResMed to gain scale and efficiencies in health information software since the acquisition of Brightree.

Morgans maintains an Add rating and raises the target to $16.73 from $16.40.

Target price is $16.73 Current Price is $14.45 Difference: $2.28
If RMD meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

Ord Minnett rates RMD as Hold (3) -

ResMed will acquire MatrixCare to build a position in the US out-of-hospital market. MatrixCare serves more than 15,000 providers across home care, senior living, assisted senior living and skilled nursing.

Ord Minnett believes ResMed has paid a high price, at US $750m, although the prior success with Brightree provides confidence in the company's software-as-a-service strategy.

Hold rating maintained. Target rises to $15.30 from $15.20.

Target price is $15.30 Current Price is $14.45 Difference: $0.85
If RMD meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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

UBS rates RMD as Neutral (3) -

ResMed will acquire MatrixCare, a US provider of long-term software servicing senior living, home care and skilled nursing. UBS incorporates the acquisition into forecasts and believes this will be complementary to current offerings via Brightree and HEALTHCAREfirst.

UBS assumes that, under a well resourced owner, investment in growth can be supported and translate to robust revenue and earnings. Neutral rating maintained. Target is raised to US$107 from US$106.

Current Price is $14.45. Target price not assessed.

Current consensus price target is $15.17, suggesting upside of 5.0% (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: 0.4

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 believes the most recent share price weakness can be explained by new reports regarding a formal process for a second casino licence on the Gold Coast.

The broker remains of the view that the hurdles relating to a second casino licence on the Gold Coast are significant, including lack of an appropriate site as well as the the inability to provide slot machines, along with social and environmental concerns.

Therefore, the broker believes the probability of a second integrated resort proceeding is extremely low. Buy rating maintained. Target is $6.20.

Target price is $6.20 Current Price is $4.59 Difference: $1.61
If SGR meets the Deutsche Bank target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $5.94, suggesting upside of 29.5% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates URW as Neutral (3) -

Note Citi covers this company from Europe. The analysts have observed the company has maintained its EPS guidance, while asset disposals are running ahead of schedule.

The conglomerate is battling retail market weakness, but Citi analysts find the operational performance remains "sound". Neutral rating retained. Target price Eur204 (unchanged).

Current Price is $12.51. Target price not assessed.

Current consensus price target is $17.65, suggesting upside of 41.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in EUR. 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

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

Note Morgan Stanley covers this stock from Europe. Morgan Stanley remains concerned bond yields may make a sharper move than currently being anticipated by investors; this is seen as the key risk for investors holding shares in the company.

Another worry is that the group's portfolio might be set to experience a negative structural repricing owing to future rental growth likely being below past levels. This, the analysts argue, has been priced in, which explains the underperformance over the past 18 months.

Morgan Stanley continues to see risk as potentially to the downside, and thus cannot get excited about jumping on board. Equal-Weight rating. Industry view In-Line. Price target drops to EUR165 from EUR190.

Current Price is $12.51. Target price not assessed.

Current consensus price target is $17.65, suggesting upside of 41.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in EUR. 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

Macquarie rates WAF as Outperform (1) -

The company is starting to accelerate the development of Sanbrado, awarding an EPCM contractor. Project funding is still expected to be wrapped up by the second quarter of FY19.

Macquarie pushes back expectations for the first gold by six months to the first quarter of FY21, in line with the development plan. FY20 estimates for earnings per share, therefore, swing to negative.

Outperform rating and $0.50 target maintained.

Target price is $0.50 Current Price is $0.28 Difference: $0.22
If WAF meets the Macquarie target it will return approximately 79% (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

Deutsche Bank rates WBC as Buy (1) -

Slightly weaker revenue growth was the main miss to Deutsche Bank's forecasts in the second half. While the retail banking space is tough the broker envisages valuation support for Westpac and maintains a Buy rating. Target is $30.

Target price is $30.00 Current Price is $27.18 Difference: $2.82
If WBC meets the Deutsche Bank target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $29.86, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates WBC as Sell (5) -

FY18 results were no surprise to UBS, with remediation charges having been well flagged. A sharp fall in net interest margin was predominantly driven by funding costs, remediation rebates and housing competition.

Pressure on mortgage margins and remediation costs is likely to continue and the broker believes it will be challenging for banks to undertake further back-book re-pricing, especially ahead of the federal election in 2019.

Sell rating maintained. Target is reduced to $24.50 from $25.00.

Target price is $24.50 Current Price is $27.18 Difference: minus $2.68 (current price is over target).
If WBC meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.86, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in September.

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

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

Morgan Stanley suspects the forecast contribution of the Destinations of the World acquisition is conservative. Webjet expects 20% accretion post synergies.

The broker finds it unusual to guide for organic growth below consensus estimates while attempting to raise $153m for a $283m transaction, suggesting the price is be "very full".

Morgan Stanley expects DOTW contribute $17-18m or more in FY19 if synergies are delivered. The cost of the deal and a single-digit forecast return on invested capital keeps the broker on the sidelines.

Equal-weight. Target is reduced to $14.20 from $16.60. Industry View is In-Line.

Target price is $14.20 Current Price is $11.93 Difference: $2.27
If WEB meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $16.29, suggesting upside of 36.5% (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 WEB as Hold (3) -

Webjet will acquire Destinations of the World (DOTW), a B2B accommodation platform headquartered in Dubai. The price is $240m plus an earn-out. The acquisition increases the scale of the company's WebBeds business.

This is in line with the strategy of achieving global scale in the B2B market, but Morgans is conscious that the acquisition of JacTravel has only been completed within the last 12 months and there is yet to be a full earnings benefit from that business.

Therefore the acquisition of DOTW is highly dependent on a high proportion of synergy benefits. Without synergies the broker struggles to work out how the acquisition is accretive.

Hold rating maintained. Target is reduced to $14.60 from $17.15.

Target price is $14.60 Current Price is $11.93 Difference: $2.67
If WEB meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $16.29, suggesting upside of 36.5% (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