Australian Broker Call

Credit Suisse rates AGL as Underperform (5) -

Credit Suisse expects a -25% fall in Newcastle coal prices to be sustained. In terms of electricity, the broker believes interventionist federal policy will mean a return to oversupply beyond 2022 and, thus, a return to coal cost as the price setter.

The broker believes the stock's value is exposed to lower coal prices, estimating the value sensitivity to a US$10/t change in the export coal price is 8.5%. The broker maintains an Underperform rating and reduces the target to $18.10 from $18.30.

Target price is $18.10 Current Price is $22.28 Difference: minus $4.18 (current price is over target).
If AGL meets the Credit Suisse target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.70, suggesting downside of -7.1% (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

Morgan Stanley rates ANZ as Underweight (5) -

The RBNZ has revoked ANZ bank's accreditation to model its own operating risk capital requirement because of a persistent failure in its controls and attestation process. This will increase the bank's minimal capital requirement by NZ$277m and reduce its CET1 ratio in New Zealand by -0.4%.

Morgan Stanley observes this capital increase for operating risk is small, relative to the potential increase from the review of the capital framework. However, the broker believes this highlights the RBNZ's determination to tighten requirements.

Underweight. Target is raised to $25 90 from $25.30. Industry view: In-Line.

Target price is $25.90 Current Price is $27.75 Difference: minus $1.85 (current price is over target).
If ANZ meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.83, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in September.

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 ANZ as Hold (3) -

The RBNZ has revoked ANZ Bank's accreditation to model its own NZ operating risk requirements because of persistent failures in its controls and attestation process. In Ord Minnett's view, this will not have a material impact on the group.

The broker was surprised ANZ did not undertake a more thorough review following the penalties imposed by the RBNZ on Westpac Banking Corp ((WBC)) for a slightly different breach in November 2017.

The broker suggests the fall in the ANZ share price following the announcement likely reflects a belief that the penalty signals the RBNZ will take a hard-line approach in its capital review. Hold rating and $28.70 target maintained.

Target price is $28.70 Current Price is $27.75 Difference: $0.95
If ANZ meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.83, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates EPW as Add (1) -

Morgans observes the investor briefing did not provide any updates on the FY19 outlook, although management is confident the energy solutions business will deliver growth.

The company is largely unaffected by the proposed electricity market reforms, as it does not have a large generation fleet and does not retail to households.

The company is hoping to be a one-stop shop, offering a wide array of solutions, backed by wholesale market expertise. Morgans maintains an Add rating and $1.86 target.

Target price is $1.86 Current Price is $1.83 Difference: $0.03
If EPW meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.90, suggesting upside of 4.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

UBS rates JHX as Downgrade to Neutral from Buy (3) -

UBS believes the risk/return is now more balanced and downgrades to Neutral from Buy. US housing starts have commenced 2019 on a weaker footing while Australian detached housing approvals are falling.

The broker suspects restoring above-market growth could take longer than previously expected, while the company has toned down its targets for FY20. Target is reduced to $19.60 from $20.20.

Target price is $19.60 Current Price is $17.80 Difference: $1.8
If JHX meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $20.94, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in March.

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: 0.8

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

Morgan Stanley rates MPL as Underweight (5) -

Morgan Stanley believes the fundamentals are unchanged, despite the surprise Coalition win at the federal election.

Given structural and cyclical headwinds, margin benefits need to be reinvested to counter participation trends and enhance the value proposition, in the broker's view.

The broker maintains an Underweight rating and $2.40 target. Industry view: In-Line.

Target price is $2.40 Current Price is $3.21 Difference: minus $0.81 (current price is over target).
If MPL meets the Morgan Stanley target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.73, suggesting downside of -15.0% (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 MPL as Upgrade to Hold from Lighten (3) -

Ord Minnett observes the Coalition win in the 2019 federal election removes the downside risk from Labor's proposed 2% cap on premium rates. The broker still believes margins will fall but now at a slower rate.

The broker upgrades to Hold from Lighten and raises the target to $3.05 from $2.30. The broker expects the incoming government will allow premium rate increases that are only modestly behind claims inflation, even with increasing efforts by health insurers to offset those costs.

Target price is $3.05 Current Price is $3.21 Difference: minus $0.16 (current price is over target).
If MPL 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 $2.73, suggesting downside of -15.0% (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

Morgan Stanley rates NAB as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley believes National Australia Bank offers a sound retail and business bank performance and better capital generation, as well as more flexibility following the decision to cut the dividend and partially underwrite the reinvestment plan.

The result of the federal election now lowers the tail risks in relation to credit quality, the mortgage market and regulatory environment and the broker upgrades to Overweight from Equal-weight. Target is raised to $25.70 from $25.10. Industry view: In-line.

Target price is $25.70 Current Price is $25.78 Difference: minus $0.08 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.60, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates NWH as Downgrade to Sell from Hold (5) -

The company has won the contract for Koodaideri. Deutsche Bank believes the win was already factored in and, although the contract size is close to forecasts, at $150m over 80 weeks it is likely to be a disappointment to consensus expectations.

The broker marginally reduces revenue forecast for FY20 because of the current outlook and the expectation the company will face capacity constraints. Rating is downgraded to Sell from Hold and the target is steady at $2.31.

Target price is $2.31 Current Price is $2.91 Difference: minus $0.6 (current price is over target).
If NWH meets the Deutsche Bank target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.64, suggesting downside of -9.2% (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

UBS rates NWH as Downgrade to Neutral from Buy (3) -

The company has been awarded the Koodaideri earthworks contract, to be delivered primarily in FY20. UBS upgrades FY20 revenue estimates by 5%.

The broker expects a further $200m in contracts will be won and delivered over the year. The 80% gain in the share price in the year to date means UBS downgrades to Neutral from Buy. Target is raised to $3.10 from $2.55.

Target price is $3.10 Current Price is $2.91 Difference: $0.19
If NWH meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting downside of -9.2% (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

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

Ord Minnett's main concern was a challenge to industry profitability posed by plans by the Labor Party for caps of 2% for two years to premiums. The broker is now confident the pricing environment will be more benign and raises domestic margin forecasts.

As there are fewer challenges in Australian business and improved tariffs in the UK and France, the broker considers the outlook has improved. Rating is upgraded to Accumulate from Hold and the target raised to $75 from $60.

Target price is $75.00 Current Price is $69.52 Difference: $5.48
If RHC meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $64.40, suggesting downside of -7.4% (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 RIO as Buy (1) -

Citi wonders whether it is time to re-think value over volume. China's steel production continues to expand, which indicates the iron ore market deficit could be deeper than expected.

Given Rio Tinto can add material tonnage at a much lower capital cost versus its peers, and at a high internal rate of return, the broker suggests the company has an opportunity to grab an enlarged share of the iron ore market should Vale's production be permanently impaired.

The main risk is if Vale proceeds with a large-scale expansion of S11D. Buy rating and $104 target maintained.

Target price is $104.00 Current Price is $102.50 Difference: $1.5
If RIO meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $97.49, suggesting downside of -4.9% (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

UBS rates VAH as Sell (5) -

The company has guided to an FY19 underlying pre-tax loss of around -$35m. This follows a record profit in the first half and highlights the sharp decline in revenue in the domestic market.

While part of this was driven by the federal election, the company also highlighted lower levels of consumer and business confidence.

The broker continues to envisage a weakening demand outlook and maintains a Sell rating. Target is reduced to $0.17 from $0.18.

Target price is $0.17 Current Price is $0.18 Difference: minus $0.01 (current price is over target).
If VAH 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 $0.18, suggesting upside of 1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.8

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