Australian Broker Call

Citi rates A2M as Sell (5) -

Citi envisages downside to a2 Milk's consensus margins over the medium term because of the increased focus on top-line growth vs short-term profitability, also because of the investment required to capitalise on the opportunities in the US and China and the increased competition in China.

Chinese infant formula operator Junlebao has launched an A2 protein formula under its Zhizhen series. This marks the first entry into the A2 category by a major domestic operator along with another registered A2 formula.

Sell rating and $12.20 target maintained.

Target price is $12.20 Current Price is $11.82 Difference: $0.38
If A2M meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $13.59, suggesting upside of 15.0% (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

Morgan Stanley rates AD8 as Overweight (1) -

Surveys from the audiovisual industry add to Morgan Stanley's conviction of the readiness for networked video and the advantages of the company's Dante AV. The broker considers the opportunity and timing of sales revenue has not changed and first revenue is likely in FY20 via product development kits, with recurring chip sales from FY21 onwards.

Dante AV is already well regarded by the industry. Video will add software development and monetisation, providing a greater reliance on software tools. Morgan Stanley envisages the additional functionality could be packaged as an 'app' and monetised as such.

Overweight rating reiterated. Target is $10.30. Industry view is In-Line.

Target price is $10.30 Current Price is $7.97 Difference: $2.33
If AD8 meets the Morgan Stanley target it will return approximately 29% (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

UBS rates ASG as Buy (1) -

The company has acquired six dealerships, generating around $200m in revenue. This expands the brand portfolio and increases market share in prestige and luxury cars on the east coast.

While new car conditions are challenging, UBS expects luxury/prestige car sales will return to growth in the December quarter. Buy rating maintained. Target is raised to $2.00 from $1.75.

Target price is $2.00 Current Price is $1.78 Difference: $0.22
If ASG meets the UBS target it will return approximately 12% (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 AZJ as Underperform (5) -

The company has proposed lowering the coal volume target in FY20 to 240mt from the original 248mt. The lower volume translates to around -$27.7m in reduced revenue.

Macquarie notes such a variance appears negative but the relationship between the miners and Aurizon has improved and an agreed outcome is now negotiated to the benefit of both parties.

The broker maintains an Underperform rating and $5.33 target.

Target price is $5.33 Current Price is $5.82 Difference: minus $0.49 (current price is over target).
If AZJ meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -2.3% (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

Credit Suisse rates BAP as Outperform (1) -

The company has signalled it is on target to achieve at least mid single-digit net profit growth. Credit Suisse observes volume growth appears to have returned to historical levels, partially offset by pockets of discounting/customer acquisition costs.

Hence, core assumptions are unchanged. The broker believes the stock offers relatively reliable organic growth in a mixed environment and maintains an Outperform rating.

Bapcor is also well-placed to fund a mix of internal and external opportunities. Target is raised to $7.80 from $7.25.

Target price is $7.80 Current Price is $7.35 Difference: $0.45
If BAP meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $7.54, suggesting upside of 2.6% (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

Morgans rates CCP as Hold (3) -

Credit Corp has started FY20 with a bang, with purchased debt ledger cash collections up 17% and consumer lending volumes up 14%. Guidance has been maintained, and looks conservative compared to the broker's forecast.

Morgans assumes the company is in the running to acquire PNC's assets, and if successful, the broker sees the purchase as highly accretive. The broker is confident of further earnings upside, but retains Hold on valuation. Target rises to $34.00 from $28.80.

Target price is $34.00 Current Price is $31.52 Difference: $2.48
If CCP meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

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 CLW as Buy (1) -

The company has acquired interests in three properties with a gross value of $331.5m. Citi envisages scope for small upgrades to expectations amid an increase in guidance.

Charter Hall Long WALE is now in a position to acquire higher-quality assets and management appears to be taking the opportunity to improve the portfolio. Citi reiterates a Buy rating and $6.52 target.

Target price is $6.52 Current Price is $5.69 Difference: $0.83
If CLW meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.44, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates CLW as Underperform (5) -

The company has acquired three assets for $270.6m. Macquarie estimates the transaction is largely neutral to earnings in FY20 and, whilst a marginal positive, is insufficient to change its view on the stock.

The benefit will be in FY21 and the broker estimates the transaction is around 150 basis points accretive to earnings per share. Underperform retained. Target rises to $4.49 from $4.36.

Target price is $4.49 Current Price is $5.69 Difference: minus $1.2 (current price is over target).
If CLW meets the Macquarie target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.44, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates CSL as Outperform (1) -

Credit Suisse believes CSL is the best positioned in a tight market for immunoglobulin. CSL recorded 16% comparable immunoglobulin sales growth in FY19.

The broker forecasts 15% sales growth in FY20, as the company benefits from a strong market position, amid greater ability to collect sufficient plasma to meet demand.

Credit Suisse maintains an Outperform rating and $249 target.

Target price is $249.00 Current Price is $261.46 Difference: minus $12.46 (current price is over target).
If CSL meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $249.70, suggesting downside of -4.5% (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: 0.5

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

UBS rates CSL as Neutral (3) -

The US monthly data for plasma/recombinant volumes shows the amount of immunoglobulin distributed in July at a record high.

UBS considers this a good start for CSL's FY20 outlook and forecasts 15% revenue growth in immunoglobulin for the company, with more modest growth in the haemophilia portfolio. Neutral rating maintained. Target rises to $265 from $263.

Target price is $265.00 Current Price is $261.46 Difference: $3.54
If CSL meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $249.70, suggesting downside of -4.5% (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: 0.5

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

Morgan Stanley rates CSR as Underweight (5) -

Morgan Stanley notes a press article that suggests the company could be a takeover target. While unable to rule this out, the broker notes the asbestos liability, albeit stable, could be a meaningful deterrent.

Also, the minority stake in the Tomago aluminium smelter is unlikely to be of interest to buyers of the building products business.

While understanding the attraction of buying at cyclical lows, Morgan Stanley believes the risk lies to the downside for consensus estimates in FY20-21.

Underweight rating maintained. Target is $3.25. Industry view is Cautious.

Target price is $3.25 Current Price is $4.64 Difference: minus $1.39 (current price is over target).
If CSR meets the Morgan Stanley target it will return approximately minus 30% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.78, suggesting downside of -18.6% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates GNX as Add (1) -

The offtake agreement for Genex Power's pumped hydro project is being renegotiated and won't be signed this year, the broker reports. Debt and equity agreements will also need to be renegotiated.

It is not clear how the agreement with Energy Australia will be reshaped or whether there are alternative offtake partners, but the broker does know the market is keen on storage and pumped hydro. An investment decision on the Jemalong solar project is still likely this year.  The broker retains Speculative Buy, target falls to 25c from 30c.

Target price is $0.25 Current Price is $0.19 Difference: $0.06
If GNX meets the Morgans target it will return approximately 32% (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

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

The company has made an all-scrip offer for Panoramic Resources ((PAN)). This would provide Independence Group with a third mine. An all-scrip offer, despite the strong cash position, makes sense in the broker's view, given the recent support from the gold price.

In full production the Savannah project would add 22% to Independence Group production. The asset is also within the company's current tenements in the Kimberley.

Equal-weight. Industry view is Attractive. Target is $6.10.

Target price is $6.10 Current Price is $6.40 Difference: minus $0.3 (current price is over target).
If IGO meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.05, suggesting downside of -5.5% (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

Ord Minnett rates IGO as Hold (3) -

Independence Group has made an off-market bid for Panoramic Resources ((PAN)). The company had tried to engage the Panoramic Resources board but was unsuccessful. Ord Minnett notes the largest shareholder is Zeta Resources, which owns around 34%.

The key asset is the Savannah nickel mine in Western Australia. Independence Group has signalled its intention is project optimisation and exploration. Hold rating and $5.70 target maintained.

Target price is $5.70 Current Price is $6.40 Difference: minus $0.7 (current price is over target).
If IGO meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.05, suggesting downside of -5.5% (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

Macquarie rates ILU as Downgrade to Neutral from Outperform (3) -

Macquarie observes the near-term outlook for zircon is subdued and achieving the forecast step up in sales in the December quarter without further impacting on realised prices appears unlikely.

Moreover, a more conservative staged development at Sierra Rutile is likely to limit output to 175,000tpa. The main positive is the potential de-merger of the Mining Area C royalty but this is outweighed by the near-term softness in demand, in the broker's view.

Rating is downgraded to Neutral from Outperform and the target is reduced to $9.30 from $10.00.

Target price is $9.30 Current Price is $8.82 Difference: $0.48
If ILU meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $9.19, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates OEL as Add (1) -

Morgans had assumed Otto Energy would secure debt financing to support development of its commercial discoveries, but confirmation that it has provides the broker with greater confidence in a number of its assumptions.

The broker sees it as a material catalyst and retains an Add rating and 15.5c target.

Target price is $0.16 Current Price is $0.05 Difference: $0.105
If OEL meets the Morgans target it will return approximately 210% (excluding dividends, fees and charges).

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: 1.0

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

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

After reviewing Origin Energy's Sep Q report, Morgans has pulled its rating back to Hold from Add. APLNG production was solid, aided by better prices, but Energy Markets was less impressive with electricity volumes down -8% and gas down -7%.

The broker has reduced its forecast for the division to the bottom end of the guidance range.

Meanwhile, Beetaloo drilling results look positive, but the complexity of commercialisation will limit any near term market reaction, the broker suspects. Target falls to $8.19 from $8.24.

Target price is $8.19 Current Price is $8.07 Difference: $0.12
If ORG meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $8.46, suggesting upside of 4.9% (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 PAN as Outperform (1) -

Independence Group ((IGO)) has launched a hostile scrip takeover offer for Panoramic Resources. Conditions include securing a 50.1% interest and no further reductions to FY20 guidance.

The offer includes one Independence Group share for every 13 Panoramic Resources shares and values the stock at 47.6c per share. Macquarie suggests Panoramic Resources' largest shareholder, Zeta Resources, could present a major hurdle to completing the transaction.

Outperform rating maintained. Target rises 11% to $0.50.

Target price is $0.50 Current Price is $0.43 Difference: $0.07
If PAN meets the Macquarie target it will return approximately 16% (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

Credit Suisse rates PGH as Outperform (1) -

The company has significantly improved its operations, Credit Suisse observes. Since FY19, Pact Group has replaced local supply of resin with imports and initiated an overhaul of its plastic packaging infrastructure in Australia.

Credit Suisse suspects the minimum volume requirements demanded by its Australian resin supplier in the past may have caused inefficiencies. The broker suggests the company is in the midst of a turnaround and maintains an Outperform rating and $3.60 target.

Target price is $3.60 Current Price is $2.47 Difference: $1.13
If PGH meets the Credit Suisse target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $2.77, suggesting upside of 12.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates S32 as Underperform (5) -

Macquarie suggests downgrade momentum is intensifying, with recent declines in key commodity prices. Cash flow generation is likely to be suppressed as a result.

Material declines in spot prices for manganese and premium hard coking coal have been witnessed recently and Macquarie maintains an Underperform rating and $2.40 target.

Target price is $2.40 Current Price is $2.58 Difference: minus $0.18 (current price is over target).
If S32 meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.02, suggesting upside of 17.1% (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: 0.4

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

Credit Suisse rates WBC as Outperform (1) -

Cash earnings were ahead of estimates in FY19. Credit Suisse observes the bank faces a number of headwinds in FY20, which are not limited to the impact of lower interest rates. Overall, earnings forecasts are reduced by -8%.

The broker takes the view that a buy thesis for Westpac is based on a PE re-rating on the back of reduced uncertainty and there is relative upside, given the capital and dividend issues have been dealt with.

Outperform rating maintained. Target is reduced to $28.90 from $30.55.

Target price is $28.90 Current Price is $27.21 Difference: $1.69
If WBC meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

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) -

FY19 results were broadly in line with subdued expectations, although Macquarie notes underlying trends are weak. Earnings are expected to continue to decline in FY20 and FY21.

The broker believes the bank's discounted valuation was partially reflecting capital concerns, which have now been addressed, and there is scope for the relative discount to unwind.

However, with limited balance sheet growth and margin pressures, the outlook for interest income appears challenging. Neutral rating maintained. Target is reduced to $26.50 from $28.50.

Target price is $26.50 Current Price is $27.21 Difference: minus $0.71 (current price is over target).
If WBC 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 $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

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 Equal-weight (3) -

The second half cash profit was below Morgan Stanley's forecasts. Management has flagged weaker volume growth, lower wealth income and modestly higher costs in FY20.

Westpac has reduced its H2 dividend by -15% and announced a $2.5bn capital raising, including a fully underwritten $2bn share placement at a fixed price of $25.32. Morgan Stanley lowers cash earnings forecasts by -10%.

The broker suggests rate reductions and the flat yield curve are weighing on profitability without driving a meaningful pick up in loan growth. Equal-weight rating maintained. Target is reduced to $25.50 from $27.30. Industry view: In Line.

Target price is $25.50 Current Price is $27.21 Difference: minus $1.71 (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 $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Morgans rates WBC as Add (1) -

Westpac's earnings result fell short of Morgan's forecast, although adjusting for "transient items" produces a better underlying result. The dividend of 80c, down from a 94c interim, is -4c lower than the broker forecast.

Asset quality is stable and the net interest margin in line with expectation. The broker is puzzled by the extent of the capital raising, which would take CET1 capital to 11.25%.

After taking into account new APRA requirements, Westpac looks over-capitalised to the broker. Earnings forecasts have been lowered and target falls to $31.50 from $33.00. Add retained, with Westpac remaining the broker's preferred bank.

Target price is $31.50 Current Price is $27.21 Difference: $4.29
If WBC meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

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) -

FY19 cash net profit in the second half was below Ord Minnett's forecasts. Lower revenue and higher costs were only partially offset by lower bad debts.

The main surprise for the broker was the extent of the margin impact from lower cash rates.

Ord Minnett notes solid dividend yield support but a difficult banking backdrop and maintains a Hold rating, trimming the target to $26.70 from $28.30. Cash net profit forecasts are reduced by around -8% for FY20 and FY21.

Target price is $26.70 Current Price is $27.21 Difference: minus $0.51 (current price is over target).
If WBC 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 $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

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) -

UBS observes revenue pressure is intensifying and FY19 results were below expectations. The capital raising is likely to provide a buffer for the expected regulatory changes as well as potential litigation, the broker notes.

The broker downgrades estimates for earnings per share by -5% and expects flat dividends, at $0.80 per half year, although notes the forecast pay-out ratio rises back to the mid 80% level in the outer years.

The broker maintains a Sell rating and $24.50 target.

Target price is $24.50 Current Price is $27.21 Difference: minus $2.71 (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 $27.84, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Morgans rates Z1P as Add (1) -

Zip Co's growth trends remained strong in the Sep Q, but significant near term investment required to drive this growth meant margins were impacted, the broker notes. Profit forecasts trimmed.

Zip Co is executing well in the broker's opinion, but having rallied 200% this year, signs of offshore growth gaining traction are required. Hold retained, target rises to $3.56 from $3.55.

Target price is $3.56 Current Price is $3.67 Difference: minus $0.11 (current price is over target).
If Z1P 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 $4.10, suggesting upside of 11.8% (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