Australian Broker Call

Macquarie rates FPH as Neutral (3) -

Macquarie does not expect another FY upgrade when Fisher & Paykel Healthcare reports first half earnings this week, although another rally would ensue if it does and sales momentum remains positive, the broker notes.

Target rises to NZ$20.79 from NZ$18.38 on a lower risk free rate and cost of capital. Neutral retained as the broker sees significant risks on the horizon.

Current Price is $19.63. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

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: -0.8

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

Macquarie rates KAR as Outperform (1) -

Karoon Energy has completed its acquisition of the Bauna oilfield from Petrobras for US$665m and the capital raising to pay for it, becoming the fourth largest liquids producer on the ASX. Final environmental approval awaits in the March quarter.

Macquarie values the deal at US$970m, or a 50% premium to the price paid, although did not expect quite so large a capital raising. Dilution leads to a target price fall to $2.00 from $3.00, Outperform retained.

Target price is $2.00 Current Price is $1.06 Difference: $0.94
If KAR meets the Macquarie target it will return approximately 89% (excluding dividends, fees and charges).

Current consensus price target is $1.47, suggesting upside of 38.7% (ex-dividends)

The company's fiscal year ends in June.

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

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

Metcash has confirmed the loss of one of its largest customers, 7-Eleven. While the $800m in wholesale sales is much larger than that of the Drakes contract loss, Citi calculates a similar earnings impact.

The broker expects Metcash will retain around 10% of the contract in Western Australia and selected categories.

The broker upgrades to Neutral from Sell and raises the target to $2.80 from $2.60 as earnings downgrades are offset by revised cost assumptions and a re-rating in global comparable multiples.

Target price is $2.80 Current Price is $2.85 Difference: minus $0.05 (current price is over target).
If MTS 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 $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

Credit Suisse rates MTS as Underperform (5) -

Credit Suisse suspects debates regarding the sustainability of the food distribution business at scale will intensify. The company has sustained another contract loss (7-Eleven).

The loss of two contracts, the other being Drakes, appears to be delivering a -$35m impact on earnings (EBIT) over a three-year period, mitigated somewhat by cost reductions.

The broker suggests its the competitive read-through that really matters, being about technology, scale and disintermediation, rather than the direct financial implications of the loss of the contracts.

Underperform rating maintained. Target is reduced to $2.50 from $2.53.

Target price is $2.50 Current Price is $2.85 Difference: minus $0.35 (current price is over target).
If MTS meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

Macquarie rates MTS as Underperform (5) -

It was immediately a risk when 7-Eleven announced it was putting its eastern states supply contract out for tender and sure enough Metcash has lost the $800mpa contract, which is bigger than the Drakes contract lost in SA. However it is mostly low margin tobacco, and Macquarie has cut forecast earnings by -3.5% and -7.7% in FY21-22.

The broker retains Underperform, citing tough industry conditions and required investment, but increases the multiples on its sum of the parts valuation to thus increase its target to $2.70 from $2.41.

Target price is $2.70 Current Price is $2.85 Difference: minus $0.15 (current price is over target).
If MTS meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

Morgan Stanley rates MTS as Overweight (1) -

Metcash has announced that 7-Eleven will not be renewing its current supply agreement beyond August 2020, after failing to agree to terms for supply on the east coast. Metcash remains in discussions with the company regarding the Western Australian supply.

Morgan Stanley estimates an annual earnings (EBIT) impact of -$10-20m and anticipates more detail in the first half result on December 5. Overweight rating. Industry view: Cautious. Price is $3.10.

Target price is $3.10 Current Price is $2.85 Difference: $0.25
If MTS meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

Ord Minnett rates MTS as Hold (3) -

The contract for supply to the east coast 7-Eleven stores will not be renewed in August 2020. Ord Minnett notes the loss of the contract was well flagged although the revenue loss on $700m of the $800m in sales is greater than forecast.

Ord Minnett forecasts an underlying net profit of $95.2m for the first half where the company reports on December 5. Food grocery earnings (EBIT) is expected to decline -8.2%. Hold rating and $3 target maintained.

Target price is $3.00 Current Price is $2.85 Difference: $0.15
If MTS meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

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

Metcash has announced 7-Eleven will not be renewing its east coast supply contract upon expiry in August 2020. UBS notes the profitability of the contract is low but it is the second major loss in two years.

The broker factors in a -$24m earnings (EBIT) impact on the first full year (FY22), to reflect the loss. There is potential for the impact to be less, the broker acknowledges.

Rating is downgraded to Neutral from Buy as, while the stock screens inexpensive, there are few catalysts for outperformance. Target is reduced to $2.80 from $3.10.

Target price is $2.80 Current Price is $2.85 Difference: minus $0.05 (current price is over target).
If MTS meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.82, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in April.

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

Citi rates MYX as Neutral (3) -

Citi lowers FY20 estimates for operating earnings (EBITDA) by -37% and FY21 by -20%. This follows reports that sales for the first four months of the financial year were down -16%.

The outlook remains cautious given the inherent uncertainty in the generics business and the broker suggests consecutive earnings downgrades may cause the market to question whether a change is needed to successfully execute on the company's business plan.

Neutral/High Risk rating and 50c target are maintained.

Target price is $0.50 Current Price is $0.46 Difference: $0.04
If MYX meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 17.9% (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 MYX as Neutral (3) -

Revenue was down -16% in the four months to October 2019, because of continued competition in both generic products and specialty brands. Gross margin also declined to 47% from 59%.

Credit Suisse notes, while the company has a strong pipeline of new products, FY20 earnings will not benefit. The broker forecasts a first half decline in operating earnings (EBITDA) of -54% and a flat second half.

Neutral rating maintained. Target is reduced to $0.56 from $0.65.

Target price is $0.56 Current Price is $0.46 Difference: $0.1
If MYX meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 17.9% (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 MYX as Neutral (3) -

Weak trends for generic drugs are ongoing, Mayne Pharma noted at its AGM, and competition is impacting on growth for specialty brands. The company's trading update for the first four months of FY20 imply numbers below the broker's forecast run-rate.

Macquarie cuts FY20 forecast earnings by -90% but notes medium to longer term opportunities for key pipeline products, although any delay would imply downside risk. Target falls to 57c from 66c, Neutral retained.

Target price is $0.57 Current Price is $0.46 Difference: $0.11
If MYX meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 17.9% (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

UBS rates MYX as Neutral (3) -

The company has indicated that gross revenue for the first four months of FY20 is down -16%. Key products in generics, liothyronine and dofetilide, continue to lose share to competitors. Specialty revenue was broadly flat. Contract services revenue increased 16%.

UBS notes the company is shifting its portfolio to more stable specialty products and away from US retail generics, expecting this to represent more than 60% of sales by FY24. The broker maintains a Neutral rating and reduces the target to $0.54 from $0.60.

Target price is $0.54 Current Price is $0.46 Difference: $0.08
If MYX meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 17.9% (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 NEA as Outperform (1) -

Nearmap has provided FY20 annualised contract guidance in line with the broker's forecast. A second half skew is expected as the company ramps up US investment to monetisation.

Competition concerns will dampen investor sentiment in the short term, Macquarie warns, but market leadership means Nearmap is well placed in the medium to longer term and evidence of execution should drive a re-rating.

Short term volatility is nevertheless to be expected. Outperform and $3.45 target retained.

Target price is $3.45 Current Price is $2.73 Difference: $0.72
If NEA meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $4.08, suggesting upside of 49.5% (ex-dividends)

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 NEW as Equal-weight (3) -

The company has announced a formal sale process for is 49% interest in Boulder and 50% interest in Mount Signal 2. The two equity interests are worth around US$86m within Morgan Stanley's base case valuation.

The prospect of a successful sale is high, in the broker's opinion, based on strong interest in the contracted solar asset class. Proceeds should provide the company with additional flexibility and New Energy Solar has highlighted debt and capital management.

Equal-weight retained. Industry view: Cautious. Target is $1.38.

Target price is $1.38 Current Price is $1.31 Difference: $0.07
If NEW meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Credit Suisse rates WBC as Outperform (1) -

AUSTRAC has commenced civil proceedings against Westpac in relation to alleged contraventions of financing obligations. Credit Suisse increases its potential provisioning to $1bn for notable items including the AUSTRAC matter.

As a result FY20 cash earnings estimates are reduced by -7%. The broker notes the bank has insurance in place to recover a portion of the potential fines.

While acknowledging there are some areas in relation to Westpac's inaction that may render the stock uninvestable to some, the broker asserts the drop in market value since the statement of claim more than encompasses the most pessimistic scenarios in relation to long-term value.

Credit Suisse maintains an Outperform rating and reduces the target to $27.80 from $28.90.

Target price is $27.80 Current Price is $24.39 Difference: $3.41
If WBC meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $26.89, suggesting upside of 10.3% (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 WGN as Hold (3) -

The near-term outlook may be challenging but Morgans notes the focus has shifted to the possible winning of significant major projects. FY20 is expected to be the cyclical low point in earnings.

The broker changes lead analyst and re-bases forecasts for FY20-22. The ability to win major projects in Mozambique LNG, Adani's Carmichael mine and the Cross River Rail in Queensland could increase valuation to $2.45 a share.

Following the share price appreciation, and with a fairly balanced risk/reward profile, the broker maintains a Hold rating. Target is raised to $2.25 from $1.63.

Target price is $2.25 Current Price is $2.07 Difference: $0.18
If WGN meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.82, suggesting downside of -12.2% (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