Australian Broker Call

UBS rates AD8 as Initiation of coverage with Buy (1) -

UBS increases tech sector coverage by initiating on Audinate with a Buy rating and $9.45 target. The company is the dominant provider of professional digital audio networking technologies globally.

Audinate is building a marketplace which the broker believes will provide a platform for future opportunities in complementary audio software.

The broker assesses the opportunity in digital audio networking is growing and forecasts FY19 revenue of $28m, versus a potential opportunity of $411m. If the company's Dante product becomes a default standard, there is strong upside risk.

Target price is $9.45 Current Price is $7.66 Difference: $1.79
If AD8 meets the UBS target it will return approximately 23% (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

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

The company has updated on prospectus forecasts and now expects FY19 revenue to be over $50m. Pro forma operating earnings (EBITDA) of $1.4m are expected. Morgans assesses the business is gaining traction on new products, particularly as it expands into more consumer oriented business.

The broker downgrades to Hold from Add, following strong share price appreciation. Given the scalable manufacturing operation, the broker points out that additional partnerships can move the dial in terms of revenue/earnings uplift. Target is raised to $1.42 from $0.90.

Target price is $1.42 Current Price is $1.30 Difference: $0.12
If AMS meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

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 BKL as Upgrade to Equal-weight from Underweight (3) -

Reports suggest Australia's flu season is extensive and well ahead of any of the previous five years at this early stage. Morgan Stanley believes this will translate into strong support for sales in the fourth quarter of FY19 and first quarter of FY20.

There is also greater confidence in the cost reduction program, which should support near-term earnings growth. Morgan Stanley upgrades to Equal-weight from Underweight and raises the target to $84 from $75. Industry view is: Cautious.

Target price is $84.00 Current Price is $98.65 Difference: minus $14.65 (current price is over target).
If BKL meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $86.04, suggesting downside of -12.8% (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

Deutsche Bank rates BLD as Buy (1) -

Deutsche Bank reduces FY19 assumptions ahead of the investor briefing because of weaker-than-expected demand in Australia and concerns over the weather in the US. The broker now expects flat earnings for Boral in Australia.

Nevertheless, long-term value is envisaged for the stock and a Buy rating is maintained. Target is $6.70.

Target price is $6.70 Current Price is $5.20 Difference: $1.5
If BLD meets the Deutsche Bank target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $5.83, suggesting upside of 12.1% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

Credit Suisse rates BSL as Outperform (1) -

As iron ore prices soar and steel spreads collapse, BlueScope Steel has cut its FY20 earnings guidance to $930m from a prior $1038m. Falling spreads puts the focus on the company's pending decision on Northern Star expansion, the broker notes.

BlueScope Steel had indicated it would distribute at least 50% of free cash flow to shareholders, but this may now be undermined by spending on Northern Star, were the decision to be to proceed with expansion.The broker cuts its target to $15.90 from $16.50 while retaining Outperform.

Target price is $15.90 Current Price is $10.50 Difference: $5.4
If BSL meets the Credit Suisse target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $14.31, suggesting upside of 36.3% (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 CLW as Initiation of coverage with Buy (1) -

Citi initiated coverage with a Buy rating and $5.29 target. The broker likes the relatively low-risk income stream secured by long leased duration.

The business has been accelerating acquisition activity, with $300m in acquisitions in the year to date. Against a backdrop of long-term bond yields trading at historical lows and further cuts to the cash rate expected, Citi suggests yield exposure is back in focus.

Target price is $5.29 Current Price is $4.90 Difference: $0.39
If CLW meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.66, suggesting downside of -4.8% (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

Macquarie rates DOW as Outperform (1) -

Wind farm partner at Murra Warra, Senvion, has filed for self-administration. This has raised concerns about the project proceeding. Any liability on the project contract is shared jointly although Downer holds a substantial bank guarantee from Senvion.

Macquarie assesses a "worst" impact to Downer of -$57-92m after tax but stresses this is a worst-case scenario not a base case. The broker remains comfortable with the broader business and maintains an Outperform rating and $8.53 target.

Target price is $8.53 Current Price is $7.15 Difference: $1.38
If DOW meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $7.83, suggesting upside of 9.5% (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

UBS rates DOW as Buy (1) -

The company's partner on the Murra Warra wind farm, Senvion, has filed self-administration proceedings in Germany. While the scope of work is split, the two share any project liabilities. UBS notes this creates additional concerns for Downer in the event that Senvion cannot satisfy its obligations under the contract.

The broker estimates a net potential additional obligation for Downer of -$75m after application of the bank guarantee and understands investors need to know how exposed the company is to the risks. The broker maintains a Buy rating and $8.22 target.

Target price is $8.22 Current Price is $7.15 Difference: $1.07
If DOW meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $7.83, suggesting upside of 9.5% (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

Macquarie rates FLT as Neutral (3) -

Macquarie has surveyed 40 travel agents, airlines and hotel operators to gauge recent travel trends. The consensus view is that conditions are subdued for both domestic and international travel. Global political uncertainty and corporates mandating travel freezes of varying degrees are having an impact.

Price deflation amongst hotel operators and airlines globally has persisted, dampening any rebound in volume. Macquarie believes, despite valuation support, structural and cyclical issues continue to weigh on Flight Centre and expectations of a recovery in FY20 are optimistic.

Neutral maintained. Target rises to $43.70 from $37.60 as the model is rolled forward.

Target price is $43.70 Current Price is $43.47 Difference: $0.23
If FLT meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $45.31, suggesting upside of 4.2% (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 GNX as Upgrade to Speculative Buy from Hold (1) -

Morgans is confident the K2-H project will go ahead although warns investors they need to be aware that, as the bulk of the stock's value comes from this project, this increases the risk.

Management has targeted June 2019 for financial close on both this project and Jemalong. The broker also updates assumptions for the K2-Solar and K3-Wind projects.

Morgans upgrades to Speculative Buy from Hold and raises the target to $0.29 from $0.25.

Target price is $0.29 Current Price is $0.25 Difference: $0.04
If GNX meets the Morgans 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

Credit Suisse rates GUD as Downgrade to Neutral from Outperform (3) -

Channel checks of the auto market conducted by Credit Suisse suggest after-market growth is trending lower and competition is increasing among part suppliers. The broker notes that while GUD has an excellent track record of navigating through increased competition in the past, its relative reliance on auto is now greater than it ever has been.

Credit Suisse has not changed forecasts but sees sufficient downside risk emerging to warrant a pullback to Neutral from Outperform. Target falls to $12.00 from $13.35.

Target price is $12.00 Current Price is $10.54 Difference: $1.46
If GUD meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $13.28, suggesting upside of 26.0% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates KPG as Hold (3) -

FY19 guidance has been updated, with the company now expecting revenue of $39.6-41.5m and net profit of $3.0-3.5m. A final dividend of 1.1c will be paid in July taking the full year dividend to 4.4c.

Morgans notes a rebound in the second half but believes the company will need to deliver on growth expectations into FY20 to restore investor confidence. Hold rating maintained. Target is reduced to $0.85 from $1.08.

Target price is $0.85 Current Price is $0.72 Difference: $0.13
If KPG meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

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

Citi rates MGR as Neutral (3) -

The company has announced a $750m placement at $2.97 a share. The precise use of proceeds has not been specified but management has highlighted developments and potential acquisitions.

Citi reduces estimates for FY20 earnings per share because of the dilution. The broker views the raising of capital as somewhat opportunistic ahead of any new acquisitions/developments but prudent at this point in the cycle. Neutral rating and $2.82 target maintained.

Target price is $2.82 Current Price is $3.02 Difference: minus $0.2 (current price is over target).
If MGR meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -9.0% (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

Credit Suisse rates MGR as Neutral (3) -

Mirvac will raise $750m via an institutional placement and SPP at around a -4% discount. The placement will be used to reduce debt, replenish funding for existing developments and provide funds for new opportunities. Mirvac also offered maiden FY20 guidance.

Adjusting for capital raising dilution, the broker calculates a 2% earnings upgrade implicit in guidance. The broker rolls forward its valuation model to FY20, which leads to a target price increase to $2.85 from $2.56. Neutral retained.

Target price is $2.85 Current Price is $3.02 Difference: minus $0.17 (current price is over target).
If MGR meets the Credit Suisse target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -9.0% (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

Deutsche Bank rates MGR as Hold (3) -

The company has announced a $750m institutional placement to fund growth opportunities. This is envisaged to include over $4bn in development and over $2bn in acquisition opportunities.

Funds raised will initially be used to repay debt bringing pro forma gearing down to 19%. While Deutsche Bank believes the equity raising makes sense, given the recent rally in the share price, it also suggests the company could be positioning for a turn in the property cycle.

Hold rating maintained. Target is $2.78.

Target price is $2.78 Current Price is $3.02 Difference: minus $0.24 (current price is over target).
If MGR meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -9.0% (ex-dividends)

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

Macquarie rates MGR as No Rating (-1) -

Mirvac has announced a $750m equity raising to fund future developments. Macquarie notes it will be initially dilutive because of a longer-dated deployment period. The company has provided FY20 distribution guidance of more than 5% growth. The implied pay-out ratio is 70%.

Gearing is expected to decline to 19% after the equity raising. Macquarie is currently on research restrictions and cannot provide a rating or target.

Current Price is $3.02. Target price not assessed.

Current consensus price target is $2.75, suggesting downside of -9.0% (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

UBS rates MGR as Sell (5) -

The company will make a $750m placement to fund future developments and acquisitions. UBS assesses this puts the balance sheet in a prudent position. Distribution growth is expected to remain solid, supported by the existing office development pipeline.

The company has confirmed it is on track to hit the top end of guidance for 5% growth in distributions. The broker considers the current price of the stock is full and retains a Sell rating. Target is raised to $2.64 from $2.60.

Target price is $2.64 Current Price is $3.02 Difference: minus $0.38 (current price is over target).
If MGR meets the UBS target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -9.0% (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

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

Demand in the company's core markets continues to improve and Citi envisages upside risk to forecasts from further contract gains and better-than-expected margins. However, the broker considers the stock fairly valued and downgrades to Neutral from Buy.

A key concern is the credit risk associated with the $55m per annum Dalgaranga project. The company provided a $12m working capital facility in December 2018 and also had to support a capital raising by the project owner. Target is raised to $3.01 from $2.52.

Target price is $3.01 Current Price is $2.77 Difference: $0.24
If NWH meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting upside of 1.3% (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

Credit Suisse rates OML as Outperform (1) -

oOh!media did not downgrade its guidance at its AGM as was feared. Increased demand for domestic cyclicals has led to a re-rating that is long overdue, the broker suggests. But with a PE still under 9x, in an election year, the broker believes the market is still ignoring improving industry fundamentals.

Outperform retained. Target rises to $4.80 from $4.75.

Target price is $4.80 Current Price is $4.27 Difference: $0.53
If OML meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.69, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in December.

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 SBM as Neutral (3) -

Citi alerts investors to the community opposition to Atlantic Gold's Moose River mine in Nova Scotia, Canada. While community concerns will not break the acquisition deal, the broker suggests mining permits and operating licences are a different story and can never be considered guaranteed until actually issued.

A stalling of Moose River mine at its current level of production reduces the broker's unrisked valuation by -32%. This is similar to the risk weighting already applied to the project in terms of St Barbara's valuation so no changes are made. Neutral rating and $3.49 target.

Target price is $3.49 Current Price is $2.72 Difference: $0.77
If SBM meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.26, suggesting upside of 19.9% (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

Citi rates SIG as Upgrade to Neutral from Sell (3) -

Since its FY19 result, Sigma has entered into a new community service obligation deed with the Commonwealth government which has provided some certainty around payments until at least June 2020.

Also, the company has provided more clarity around the cost reductions in relation to the loss of a major contract. Finally, with the re-election of the Coalition this suggests the government will be more supportive of existing regulations around the pharmacy distribution industry.

Citi now upgrades to Neutral/High Risk from Sell/High Risk while the target is steady at $0.52.

Target price is $0.52 Current Price is $0.53 Difference: minus $0.01 (current price is over target).
If SIG meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.48, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in January.

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

Credit Suisse rates TLS as Neutral (3) -

Telstra has increased FY19 restructure cost guidance to -$800m from a prior -$600m, and guided to -$350m beyond FY19 when the broker previously had set a -$100m forecast. While higher, guidance does provide more certainty on the cost of the restructure required to achieve the company's $2.5bn cost-out goal.

Telstra has also written down the value of its legacy IT assets by -$500m, which will result in a reduction in D&A expense in latter years. Lower earnings due to increased restructure costs do not impact the broker's valuation as they are one-off in nature. Target rises to $3.25 from $3.15, Neutral retained.

Target price is $3.25 Current Price is $3.63 Difference: minus $0.38 (current price is over target).
If TLS meets the Credit Suisse target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.27, suggesting downside of -10.1% (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

Deutsche Bank rates TLS as Buy (1) -

Deutsche Bank is positive about the acceleration of the company's T22 restructuring charges and the -$500m non-cash impairment of legacy IT assets. Additionally, Telstra has reiterated FY19 guidance. The broker maintains a Buy rating and increases the target by 3% to $3.80.

Target price is $3.80 Current Price is $3.63 Difference: $0.17
If TLS meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.27, suggesting downside of -10.1% (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

Ord Minnett rates TLS as Downgrade to Hold from Accumulate (3) -

Telstra has updated guidance around restructuring costs and asset impairment. Management now expects -$800m of restructuring costs to be incurred in FY19 and has also guided to a further -$350m post FY19.

The company also plans to write down the carrying value of its legacy IT systems by -$500m. Ord Minnett downgrades to Hold from Accumulate based on valuation. Target is unchanged at $3.55. FY19 and FY20 earnings estimates are unchanged.

Target price is $3.55 Current Price is $3.63 Difference: minus $0.08 (current price is over target).
If TLS 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 $3.27, suggesting downside of -10.1% (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

UBS rates TLS as Buy (1) -

Telstra is now on track to deliver $1.1-1.2bn in productivity enhancements, largely in terms of -6000 job reductions. This suggests to UBS that FY20 cost reduction targets may be conservative.

The main negative the broker deduced from the briefing was that operating expenditure is now likely to be higher in FY19 because of hardware costs, which will have a revenue offset. FY19 earnings guidance was retained. UBS maintains a Buy rating and $3.60 target.

Target price is $3.60 Current Price is $3.63 Difference: minus $0.03 (current price is over target).
If TLS meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.27, suggesting downside of -10.1% (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