Australian Broker Call

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

The company will sell its Australian consumer tissue business for $180m. As this business is losing money Citi believes this is a good decision for shareholders. The broker lifts estimates for earnings per share by 35% in FY19 and 23% in FY20.

Debt will be paid down with the proceeds and the broker forecasts a dividend of 2.5c in FY19. The residual business is largely B2B sales in tissue plus feminine hygiene and incontinence products. These businesses have higher market share, strong brands and a better return on capital, Citi notes.

The broker upgrades to Buy from Neutral and raises the target to $1.05 from $0.80.

Target price is $1.05 Current Price is $0.95 Difference: $0.1
If AHY meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $0.92, suggesting downside of -3.7% (ex-dividends)

The company's fiscal year ends in December.

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 AHY as No Rating (-1) -

The company has disposed of its loss-making consumer tissue business in Australia. The business has been sold to Solaris Paper for $180m. The sale is expected to be accretive.

Operating earnings (EBITDA) of $65-70m is expected in FY19 from continuing business. The Australasian personal care business unit, NZ & Pacific Islands CT and professional hygiene Australasian business will be retained.

Macquarie is restricted on rating and target at present.

Current Price is $0.95. Target price not assessed.

Current consensus price target is $0.92, suggesting downside of -3.7% (ex-dividends)

The company's fiscal year ends in December.

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 AZJ as Sell (5) -

The Queensland Competition Authority has handed down its final UT5 decision. The regulated rate of return has been lifted to 5.7% but this is well below the company's proposal of 7.03%. At the earliest, Citi expects the decision to be implemented from March.

The decision is marginally better than the broker expected but further information is required about the potential impact on the company. Moreover, a lack of opportunity to reduce operating costs in the above-rail business means earnings headwinds will be difficult to offset.

Sell maintained. Target price is $3.80.

Target price is $3.80 Current Price is $4.42 Difference: minus $0.62 (current price is over target).
If AZJ meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.30, suggesting downside of -2.7% (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

Credit Suisse rates AZJ as Outperform (1) -

The final regulatory decision for UT5 of 5.7% is above the draft WACC and at the upper end of the market's expectations but below Aurizon's request. Credit Suisse suspects the company may seek a judicial review of the decision.

The broker raises FY20 estimates for operating earnings (EBIT) by 9% because of the higher revenue allowed in this decision. Target is raised to $4.70 from $4.50. Outperform maintained.

Target price is $4.70 Current Price is $4.42 Difference: $0.28
If AZJ meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.30, suggesting downside of -2.7% (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

Deutsche Bank rates AZJ as Hold (3) -

The handing down of the final UT5 decision by the Queensland Competition Authority has led to Deutsche Bank analysts lifting the price target for Aurizon Holdings by 30c to $4.40. Hold rating retained.

Target price is $4.40 Current Price is $4.42 Difference: minus $0.02 (current price is over target).
If AZJ meets the Deutsche Bank target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.30, suggesting downside of -2.7% (ex-dividends)

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

Macquarie rates AZJ as Outperform (1) -

The final decision on UT5 from the Queensland Competition Authority has been released, and it was better than Macquarie expected with revenue of $4.12bn allowed. Clarity is a positive, although the broker notes Aurizon has lost the battle in this instance.

The company is expected to consider an appeal although Macquarie doubts the grounds for such have improved.

The focus now shifts towards UT6 where the broker observes an opportunity exists to develop a broader risk-sharing approach with miners around performance. Outperform rating and $4.66 target maintained.

Target price is $4.66 Current Price is $4.42 Difference: $0.24
If AZJ meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.30, suggesting downside of -2.7% (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

UBS rates AZJ as Neutral (3) -

The Queensland Competition Authority's final UT5 decision implies revenue of $4.12bn over the four years to 2021, which UBS calculates is 6% better than the draft decision.

Certain elements remain well below the company's claim, especially maintenance costs. Therefore, UBS expects Aurizon will formally appeal the decision but will find the case difficult to prove as it needs to be on grounds of process rather than merit.

The broker maintains a Neutral rating and $4.60 target.

Target price is $4.60 Current Price is $4.42 Difference: $0.18
If AZJ meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.30, suggesting downside of -2.7% (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

UBS rates FSF as Neutral (3) -

Fonterra reported a trading loss in the first quarter because of lower sales volumes and ongoing margin pressure in food service. Ingredients sales fell -2% because of a slow start, although UBS notes this is picking up in line with milk production.

Australian ingredients were under pressure with low milk production and higher milk prices. FY19 underlying guidance is maintained, supported by a lower NZ farm gate milk price.

UBS retains a Neutral rating and NZ$5.05 target until there is greater confidence in the turnaround.

Current Price is $4.42. Target price not assessed.

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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

Macquarie rates GOR as Outperform (1) -

The company has updated the mine plan for Gruyere and the production profile has increased, driven by larger mill capacity and reserves from Golden Highway. The mine remains on track for first gold in the second quarter of 2019.

Macquarie observes the benefits from increases in production are offset by increasing costs. Outperform rating and 80c target.

Target price is $0.80 Current Price is $0.62 Difference: $0.18
If GOR meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 HT1 as Downgrade to Underweight from Overweight (5) -

Morgan Stanley believes a positive investment thesis has largely played out and downgrades to Underweight from Overweight. The target is reduced to $1.60 from $2.75 following the sale of Adshel and the announcement of a capital return and share buyback.

The broker decreases estimates for the new smaller business by -7-29% from 2018-20. Attractive industry view maintained.

Target price is $1.60 Current Price is $1.73 Difference: minus $0.13 (current price is over target).
If HT1 meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.31, suggesting upside of 33.7% (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

UBS rates LYC as Buy (1) -

UBS finds some good news hidden in the initial announcement by the Malaysian government, in that the company has to export waste. This means the LAMP plant can continue to operate. On the broker's analysis, the cost of exporting the waste, while costly, is not terminal.

The export waste solution cuts valuation by around -5-8% and operating earnings (EBITDA) by around -5%. The broker believes the slump in the share price on the ruling by the government appears excessive.

The main risk is gaining the necessary approvals by September 2019 to enable the trade to occur. The broker notes there are also various other options available to management including moving the front end of the plant to Australia.

Buy rating maintained. Target is reduced to $2.90 from $3.10.

Target price is $2.90 Current Price is $1.69 Difference: $1.21
If LYC meets the UBS target it will return approximately 72% (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

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

Morgan Stanley upgrades to Overweight from Equal-weight, lifting the target to $2.20 from $2.00. The broker consolidates the Fairfax acquisition and estimates for earnings per share move lower to reflect the dilution and factoring in a lower overall TV advertising market.

Revenue share of 38% is assumed. While the broker has a cautious view on traditional media stocks there are a number of company-specific opportunities that it believes should help the shares outperform on a 12-18 month view. Industry view: Attractive.

Target price is $2.20 Current Price is $1.67 Difference: $0.53
If NEC meets the Morgan Stanley target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 28.0% (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

Citi rates NUF as Buy (1) -

The company's comments from the AGM are consistent with guidance provided at the September results. Overall, the company maintains a target for a flat outcome in the first half and $500-530m in operating earnings (EBITDA) in FY19.

Citi believes the market will be relieved and expects a neutral impact on the stock. In Australia, a partial recovery in earnings is assumed but the winter crop production is expected to be -23% lower.

Dry conditions continue in Europe, while Latin America is tracking ahead of the prior year and there is strong momentum in North America. Buy rating and $7.87 target maintained.

Target price is $7.87 Current Price is $6.00 Difference: $1.87
If NUF meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $7.86, suggesting upside of 31.1% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Credit Suisse rates NUF as Outperform (1) -

There were no surprises for Credit Suisse in the AGM update. Seasonal impacts in Australia and Europe are no worse but guidance is dependent on the second half.

The main risk, in the broker's view, is the assumption of normal demand for the 2019 Australian winter crop.

Credit Suisse maintains an Outperform rating and $10.16 target.

Target price is $10.16 Current Price is $6.00 Difference: $4.16
If NUF meets the Credit Suisse target it will return approximately 69% (excluding dividends, fees and charges).

Current consensus price target is $7.86, suggesting upside of 31.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Morgan Stanley rates NUF as Overweight (1) -

The company has reiterated guidance for FY19 operating earnings (EBITDA) of $500-530m. Morgan Stanley observes conditions in the Americas appear favourable while Australia and Europe are challenged by the seasons.

Overweight rating. Price target is $8.70. Industry view: Cautious.

Target price is $8.70 Current Price is $6.00 Difference: $2.7
If NUF meets the Morgan Stanley target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $7.86, suggesting upside of 31.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Ord Minnett rates NUF as Buy (1) -

The company reiterated operating earnings guidance of $500-530m at its AGM. Ord Minnett reduces first half estimates as dry conditions continue in Australia and Europe.

The broker maintains a Buy rating and $7.50 target.

Target price is $7.50 Current Price is $6.00 Difference: $1.5
If NUF meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $7.86, suggesting upside of 31.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

UBS rates NVT as Neutral (3) -

UBS notes enrolments have stabilised but remain mixed. Canada is the main driver of North American growth but universities are close to full capacity. EU growth is underpinned by the favourable immigration environment.

Longer term uncertainty persists around US policy while growth is slowing in Australia. UBS believes the risks centre around the target of growing enrolments by over 5%.

Neutral rating maintained. Target rises to $5.50 from $4.35.

Target price is $5.50 Current Price is $5.27 Difference: $0.23
If NVT meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.26, suggesting downside of -0.1% (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

Morgan Stanley rates NWS as Underweight (5) -

Morgan Stanley tweaks estimates down slightly to reflect the marking to market of the 61% stake in REA Group ((REA)). The broker envisages no catalyst to close the gap between the current share price and intrinsic value.

Underweight rating. Target is reduced to US$12.00 from US$12.50. Industry view is Attractive.

Current Price is $17.88. Target price not assessed.

Current consensus price target is $22.68, suggesting upside of 26.8% (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: 0.2

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

Morgan Stanley rates SEK as Overweight (1) -

Morgan Stanley increases revenue forecasts by 10-17% over FY19-21 to reflect the strong volume and yield growth across Australasia, Asia and China.

However, earnings forecasts are decreased by -2-4% to factor in higher operating expenditure as the company invests more aggressively in new products and services.

Overweight retained. Industry view: Attractive. Price target is reduced to $21 from $23.

Target price is $21.00 Current Price is $17.10 Difference: $3.9
If SEK meets the Morgan Stanley target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $20.17, suggesting upside of 17.9% (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

Morgan Stanley rates TME as Overweight (1) -

Morgan Stanley incorporates higher expenditure on real estate premium advertising, noting the company is also subject to two private equity proposals which are at a higher price than its target. The prospect of a takeover is included in the bull case scenario.

Overweight rating. Industry view is Attractive. Price target is raised to NZ$5.60 from NZ$5.40.

Current Price is $5.87. Target price not assessed.

Current consensus price target is $5.20, suggesting downside of -11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

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

Market Sentiment: 0.2

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

Morgan Stanley rates WTC as Overweight (1) -

Morgan Stanley lifts revenue estimates by 10-17% but earnings per share decline -4-10% for FY19-21 as recent acquisitions are incorporated. Some of the acquisitions will weigh on the margin in the near term.

The broker raises the target to $20 from $17 and maintains an Overweight rating. Industry view is Attractive.

Target price is $20.00 Current Price is $18.23 Difference: $1.77
If WTC meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $16.98, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

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