Australian Broker Call

Ord Minnett rates ALU as Initiation of coverage with Sell (5) -

While management has executed well, Ord Minnett cannot reconcile the current valuation with the level of recurring revenue. The company remains heavily exposed to up-front license sales and recurring revenue is the lowest amongst peers.

While acknowledging recent corporate activity, Ord Minnett considers a potential bid unlikely at current prices. The broker initiates coverage with a Sell rating and $16.54 target.

Target price is $16.54 Current Price is $20.80 Difference: minus $4.26 (current price is over target).
If ALU meets the Ord Minnett target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.89, suggesting downside of -23.6% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

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

Citi rates BAL as Buy (1) -

Bellamy's share price has been weak of late and Citi analysts suggest this might be due to market expectation, too high inventories and increased marketing spending by a2 Milk ((A2M)) may be hurting Bellamy's sales through Chinese channels in the short term.

While acknowledging there is key risk to sales momentum with daigous potentially switching to a2 Milk, the analysts also predict the pressure should abate over H1FY19.

In addition, the analysts try to dismiss any concerns about whether CFDA approval will be received. It's a matter of "when", say the analysts, not if. As there is potential for delay, the analysts have reduced forecasts. Buy rating retained (also because of large discount vis a vis the main competitor). Target $22 (unchanged).

Target price is $22.00 Current Price is $13.18 Difference: $8.82
If BAL meets the Citi target it will return approximately 67% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Macquarie rates BPT as Neutral (3) -

The company is expected to benefit significantly from higher anticipated gas prices on the east coast as uncontracted volumes flow from the Cooper Basin and, longer term, contracts are re-priced from the Lattice transaction.

Macquarie expects Beach Energy to have around 20% of its gas volumes uncontracted by 2020-21, available at a time when southern state prices are expected to increase.

Neutral rating maintained. Target rises to $1.80 from $1.75.

Target price is $1.80 Current Price is $1.92 Difference: minus $0.12 (current price is over target).
If BPT meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.56, suggesting downside of -18.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgans rates CL1 as Add (1) -

The company delivered the weakest growth rate in new customer additions since 2015 in the June quarter, Morgans observes. The broker reduces forecasts to reflect the impact.

Morgans also notes accounting firms are still attempting to cope with the chaos caused by the changes to the superannuation regime last year. Add rating maintained. Target reduced to $2.73 from $2.77.

Target price is $2.73 Current Price is $2.28 Difference: $0.45
If CL1 meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.06, suggesting upside of 34.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Morgans rates ELD as Hold (3) -

The company's trading update has underscored the sensitivity to adverse seasonal conditions and commodity prices. Morgans downgrades operating earnings forecast by -4.5%. As the stock is trading materially above long-term averages a severe reaction in the share price was not unexpected.

With the possible acquisition of PG Wrightson likely to require a significant capital raising, the broker suggests the weakness in the share price may affect the attractiveness of any deal.

Hold rating maintained. Target is reduced to $7.05 from $7.70.

Target price is $7.05 Current Price is $7.23 Difference: minus $0.18 (current price is over target).
If ELD meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates IDX as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley has integrated recent acquisitions into its model which brings a material rise in valuation and the growth outlook. The broker believes the outlook is now more certain and, moreover, FY18 guidance for 20% net profit growth has been reaffirmed.

Rating is upgraded to Equal-weight from Underweight. Target is raised to $3.05 from $2.25. Industry view: In-Line.

Target price is $3.05 Current Price is $3.03 Difference: $0.02
If IDX meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.01, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Ord Minnett rates IGO as Initiation of coverage with Accumulate (2) -

Ord Minnett expects the nickel market to remain in deficit beyond 2018 while higher prices are required to provide the incentive for new supply to keep up with the growth in demand.

The broker considers nickel one of the few commodities that is trading below its long-run real average price. New sources of supply will be higher cost and technically challenging as well.

The broker initiates coverage of Independence Group with an Accumulate rating and $5.40 target.

Target price is $5.40 Current Price is $5.13 Difference: $0.27
If IGO meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting downside of -5.7% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Ord Minnett rates IRE as Resume Coverage with Hold rating (3) -

The company offers a relatively low risk exposure to software but the growth story is complex. Wealth management is growing strongly and starting to accelerate in the UK, and the company has to compensate for a soft outlook in financial markets.

Ord Minnett would like better evidence of organic growth in the UK and, as a result, resumes coverage with a Hold rating and $11.24 target.

Target price is $11.24 Current Price is $11.87 Difference: minus $0.63 (current price is over target).
If IRE meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.98, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates LNK as Overweight (1) -

Morgan Stanley considers the news that AustSafe Super will be merging with SunSuper a negative for Link, in that it is likely SunSuper will end its outsourcing relationship with Link.

The broker incorporates around a -1% impact on FY20 earnings per share which could be neutralised by additional revenues in the European division. Overweight rating and $9.00 target. Industry view is In-Line.

Target price is $9.00 Current Price is $7.42 Difference: $1.58
If LNK meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $8.13, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates NWH as Buy (1) -

Recent contract announcements and feedback from the industry has meant UBS upgrades FY18, FY19 and FY20 mining division revenue by 5%, 17% and 10% respectively.

The broker's confidence in the earnings profile has increased while the valuation is considered undemanding, and there are material catalysts from awards in the iron ore business over FY19. Buy rating and $1.90 target.

Target price is $1.90 Current Price is $1.60 Difference: $0.3
If NWH meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Morgan Stanley rates NXT as Overweight (1) -

The company has announced greater connectivity with Google Cloud. Google is investing to deploy its first domestic public cloud computing power directly in an Australian data centre, rather than just offering an on-ramp to all but enterprise customers.

Morgan Stanley believes this will improve connectivity, bandwidth and latency for the bulk of NextDC customers.

Overweight rating reiterated. In-Line industry view. Target is $9.20.

Target price is $9.20 Current Price is $7.02 Difference: $2.18
If NXT meets the Morgan Stanley target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $7.95, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Credit Suisse rates SBM as Neutral (3) -

The company has produced a record 403,089 gold ounces in FY18 as Gwalia high-grade ore peaked. Simberi was also strong with its fourth consecutive record quarter in June.

FY19 guidance will be released on July 25 with an update on the extension project, although Credit Suisse notes this has been confirmed as on schedule and on budget.

Neutral rating and $3.85 target maintained.

Target price is $3.85 Current Price is $5.23 Difference: minus $1.38 (current price is over target).
If SBM meets the Credit Suisse target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.07, suggesting downside of -22.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Macquarie rates SBM as Neutral (3) -

The company reported another strong production result for the June quarter from its two mines. FY18 full year production is over 400,000 ounces, a record.

Macquarie believes the re-setting of the mining front at Gwalia is clearly paying off as more tonnage can be mined. The broker maintains a Neutral rating and $4.70 target.
 

Target price is $4.70 Current Price is $5.23 Difference: minus $0.53 (current price is over target).
If SBM meets the Macquarie target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.07, suggesting downside of -22.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Macquarie rates STO as Neutral (3) -

Macquarie expects Santos to benefit as higher prices ex Moomba coincide with increased volumes from the Cooper Basin. With the addition of a third drilling rig in the Cooper Basin the broker envisages net gas volumes reaching around 70 PJ per annum.

The broker expects the company will begin offsetting Cooper Basin volumes in the Horizon contract with gas from the eastern Queensland acreage. Neutral rating maintained. Target rises to $5.95 from $5.85.

Target price is $5.95 Current Price is $6.33 Difference: minus $0.38 (current price is over target).
If STO meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.56, suggesting downside of -12.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.1

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

Ord Minnett rates TNE as Initiation of coverage with Buy (1) -

Ord Minnett initiates coverage with a Buy rating and $5.45 target. The stock offers both attractive growth and improving earnings quality and the broker envisages sufficient potential in the company's core Australasian markets.

The broker considers cloud services a relatively low risk way to grow both the addressable market and recurring revenue. Ord Minnett calculates that, based on forecasts that are around -10% below the implied long-term guidance, there is still around 29% upside.

Target price is $5.45 Current Price is $4.25 Difference: $1.2
If TNE meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $4.96, suggesting upside of 16.7% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates WSA as Upgrade to Hold from Sell (3) -

Ord Minnett expects the nickel market to remain in deficit beyond 2018, while higher prices are required to provide the incentive for new supply to keep up with the growth in demand.

The broker considers nickel one of the few commodities that is trading below its long-run real average price. New sources of supply will be higher cost and technically challenging as well.

The broker upgrades to Hold from Sell and raises the target to $3.70 from $2.65.

Target price is $3.70 Current Price is $3.59 Difference: $0.11
If WSA meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.32, suggesting downside of -7.5% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Ord Minnett rates WTC as Initiation of coverage with Hold (3) -

The company offers investors leverage to a global software growth story that is in the early stages. Nevertheless, following a substantial re-rating over recent months, Ord Minnett awaits a more attractive entry point.

Ord Minnett takes up coverage with a Hold rating and $14.96 target.

Target price is $14.96 Current Price is $16.38 Difference: minus $1.42 (current price is over target).
If WTC meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.59, suggesting downside of -23.1% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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