Australian Broker Call

Morgans rates ADH as Add (1) -

The company will acquire Mocka, a vertical online retailer of affordable homewares and furniture. While the multiple is not cheap, Morgans notes it is rare to acquire an online business that is profitable and light on capital expenditure.

The broker assumes accretion of 9% in FY20 and 15% in FY21.Morgans believes earnings upside and a PE expansion are likely over time and the stock can outperform. Add rating maintained. Target rises to $2.42 from $1.93.

Target price is $2.42 Current Price is $2.28 Difference: $0.14
If ADH meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

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

UBS rates ADH as Buy (1) -

Adairs has acquired online A&NZ home/living retailer Mocka, which the broker estimates will be 10% earnings accretive. Mocka is cash generative, capital-light and profitable.

The broker sees the deal as sound. Buy retained, target rises to $2.60 from $2.25.

Target price is $2.60 Current Price is $2.28 Difference: $0.32
If ADH meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

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

UBS rates AMA as Buy (1) -

Having had time to run the numbers, the broker now believes AMA Group's acquisition of Capital SMART is far more important than the broker's initial synergy estimations implied. It is a major de-risking event, given Capital SMART was the last major player a competitor could acquire to enter the market with some scale.

Moreover, first right of call for Suncorp ((SUN)) repair volumes suggests upside to the broker's current volume assumptions and could provide for further acquisitions. Buy retained, target rises to $1.60 from $1.50.

Target price is $1.60 Current Price is $1.14 Difference: $0.46
If AMA meets the UBS target it will return approximately 40% (excluding dividends, fees and charges).

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

UBS rates APT as Sell (5) -

Afterpay Touch has been described, among other things, as a "lifestyle partner for millennials". All well and good, but UBS perceives BNPL as implying "very high credit risk".

The company's impairment charge to average gross loans, or buy now can't pay, is 14.8% and not highlighted in company financials. This is a much higher level than peers.

Rapid loan growth can mask credit issues, the broker warns, but as the company matures and growth slows, credit risk soon becomes evident. Plus, Afterpay is expanding into lower socio-economic demographics and geographies.

Sell and $17.60 target retained.

Target price is $17.60 Current Price is $29.66 Difference: minus $12.06 (current price is over target).
If APT meets the UBS target it will return approximately minus 41% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.00, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgan Stanley rates BBN as Overweight (1) -

A baby products retailer, Baby and Toddler Town, based in southern New South Wales has gone into administration just eight months after Baby Bunting opened its Shellharbour store 12km away.

While not attributing the closure to the competition, Morgan Stanley believes this is a further data point underscoring Baby Bunting's scale, range and digital & data advantages in a very fragmented industry.

This reinforces the view that expenditure will gravitate to scale players and Baby Bunting is the category leader.

Overweight maintained. Target is $3.50. Industry view is In-line.

Target price is $3.50 Current Price is $3.41 Difference: $0.09
If BBN meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.79, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in July.

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 BHP as Equal-weight (3) -

BHP Group's earnings diversification is attractive, Morgan Stanley believes, although iron ore prices are likely to come under pressure in the second half of 2020 and have an impact.

The balance sheet is also providing further protection and upside potential to the dividend yield. The near-term catalysts are scarce. The broker notes that Jansen, the company's most sizeable growth project, is expected for early FY21 and its project economics are predicated on improving prices.

Equal-weight maintained. Industry view: Attractive. Target is $39.40.

Target price is $39.40 Current Price is $37.41 Difference: $1.99
If BHP meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $38.03, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Morgan Stanley rates BXB as Equal-weight (3) -

Morgan Stanley believes operating leverage will be the focus at the first half result in February. The broker assumes no margin improvement and envisages downside risk ahead of the result as expectations are revised.

Most recently, FY19 earnings (EBIT) margins declined -250 basis points in the first half and -201 basis points in the second half.

Equal-weight. Target is $11.80. Industry view is Cautious.

Target price is $11.80 Current Price is $12.29 Difference: minus $0.49 (current price is over target).
If BXB meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.92, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Citi rates CSL as Neutral (3) -

CSL continues to expect expenditure of 10-11% of revenue on R&D annually. The main message Citi took from the investor briefing is that there is a constant balancing of risk and reward in the pipeline.

The broker remains of the view that CSL is an excellent custodian of shareholder funds when incurring expenditure on R&D.

Neutral rating and $282.60 target maintained.

Target price is $282.60 Current Price is $276.95 Difference: $5.65
If CSL meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $274.84, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

Credit Suisse rates CSL as Outperform (1) -

The HAE phase II double-blind trial for Garadacimab has been completed and CSL is likely to present the data in early 2020.

Credit Suisse believes the market needs to witness evidence of efficacy and understand the potential role of this drug in an already competitive prophylactic HAE market.

Meanwhile, the US FDA has granted Hizentra orphan drug designation for use in CIDP in the US. This provides seven years of marketing exclusivity.

Credit Suisse retains an Outperform rating and $305 target.

Target price is $305.00 Current Price is $276.95 Difference: $28.05
If CSL meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $274.84, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

Macquarie rates CSL as Outperform (1) -

Macquarie notes the outlook for immunoglobulin is robust, supported by strong demand. The company has a number of candidates in late-stage development which have the potential to support medium-longer term growth.

Privigen and Hizentra have market-leading share and Hizentra recently received US FDA orphan drug designation for CIDP. This provides a seven-new marketing exclusivity. Outperform rating and $300 target maintained.

Target price is $300.00 Current Price is $276.95 Difference: $23.05
If CSL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $274.84, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

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

Management has highlighted the breadth of projects and included an upbeat assessment of key markets at its R&D briefing. Ord Minnett raises FY20 forecasts to 3% ahead of guidance, reflecting strong demand and rising prices.

The target is raised to $270 from $260. Rating is downgraded to Hold from Accumulate, considering the lack of potential upside to the revised target.

Opportunities are large but are some years away from commercialisation and face uncertain trials, the broker assesses.

Target price is $270.00 Current Price is $276.95 Difference: minus $6.95 (current price is over target).
If CSL meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $274.84, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

UBS rates CSL as Buy (1) -

CSL's R&D day highlighted an ongoing strategy to invest 10-11% of revenues towards existing product life cycle management, market development of new geographies and indications and new product development. New products in the pipeline include [insert extensive list of medical gobbledygook].

Many of these are still years away form commercialisation, UBS notes, but nearer term the stock will be supported by core plasma products and the ongoing rollout of more recently launched products. Buy and $295 target retained.

Target price is $295.00 Current Price is $276.95 Difference: $18.05
If CSL meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $274.84, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.6

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

Macquarie rates CVN as Outperform (1) -

Macquarie believes there is a high likelihood that Dorado will be developed and expects FEED in the second quarter of 2020 and a final investment decision later in the year.

The broker expects Carnarvon Petroleum to be well funded through these processes.

Following the release of the development concept, the broker lifts forecasts for production and expenditure. Target is raised to $0.60 from $0.50 and an Outperform rating is maintained.

Target price is $0.60 Current Price is $0.33 Difference: $0.27
If CVN meets the Macquarie target it will return approximately 82% (excluding dividends, fees and charges).

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

Credit Suisse rates DXS as Upgrade to Outperform from Neutral (1) -

Credit Suisse upgrades to Outperform from Neutral following recent price movements and suggests investor concerns about the exposure to the Sydney CBD office market are overdone.

The broker points out it takes 4-5 years for changes in market rents to cycle through a portfolio and remains comfortable that Dexus Property will generate distribution growth.

A strong balance sheet also provides flexibility. The "threat" of a buyback could provide support for the stock, although this is not reflected in the broker's estimates. Target is steady at $12.32.

Target price is $12.32 Current Price is $12.11 Difference: $0.21
If DXS meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $12.98, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in June.

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 IAP as Initiation of coverage with Hold (3) -

Ord Minnett initiates coverage with a Hold rating and $1.50 target. Investec Australia Property Fund owns a $1.2bn portfolio comprising 13 office and 18 industrial assets across Australasia.

The broker believes the fund's value-add strategy is differentiating it from other Australian real estate investment trusts and the asset mix should position it well to benefit from compression of capitalisation rates over the next 12 months.

Target price is $1.50 Current Price is $1.48 Difference: $0.02
If IAP meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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

Ord Minnett rates MOE as Buy (1) -

Ord Minnett revisits the investment case after a period of heightened activity across both the corporate advisory and asset management divisions.

While the company's advisory business leads the market in productivity and expertise, asset management has scaled up quickly and now contributes more than 80% of operating earnings (EBITDA).

Earnings are also now increasingly supported by fee-based income. Ord Minnett reiterates a Buy rating and raises the target to $5.83 from $5.58.

Target price is $5.83 Current Price is $4.88 Difference: $0.95
If MOE meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 OML as Outperform (1) -

Credit Suisse believes a more aggressive sales strategy in the fourth quarter has paid dividends for the company with an earnings upgrade bolstering confidence in its ability to deliver.

Pressure around the balance sheet has subsided, although the broker points out it has not disappeared.

Credit Suisse upgrades estimates for earnings per share by 10-15% and believes a re-rating is still warranted. Target rises to $4.50 from $3.70. Outperform maintained.

Target price is $4.50 Current Price is $3.85 Difference: $0.65
If OML meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.24, suggesting upside of 10.1% (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

Morgan Stanley rates RIO as Equal-weight (3) -

Rio Tinto has approved the extension of its Kennecott copper mine until 2032. This would add 1mt of refined copper between 2026 and 2032. Total capital expenditure is -US$1.5bn over the next six years.

Morgan Stanley envisages minimal changes to estimates as a result of the announcement. The company has also curtailed operations at Richard Bay in South Africa, citing escalation of criminal activity.

As a result the smelter is running at lower capacity. Rio Tinto now expects 2019 production of titanium dioxide to hit the lower end of guidance. No timeline or production impact was provided for 2020.

Equal-weight rating. Industry view is In-Line. Target is $95.

Target price is $95.00 Current Price is $95.80 Difference: minus $0.8 (current price is over target).
If RIO meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $96.66, suggesting upside of 0.9% (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

Ord Minnett rates RIO as Buy (1) -

Ord Minnett assesses the 2020 outlook for iron ore prices remains solid and continues to be attracted to iron ore stocks from an investment standpoint, despite strong performances.

The broker retains a relative preference for Rio Tinto over BHP Group ((BHP)), although believes there is little to separate the investment theses.

Rio Tinto has announced the curtailment of mining at the Richards Bay operation in South Africa because of civil unrest. Richards Bay has nameplate zircon production of 250-300,000t which, even with a reduced operating rate, represents around 16% of the global supply.

An extended outage could result in a material impact on prices. The company has not indicated how long the outage will last and Ord Minnett believes the recent difficulties could eventually put the asset in the non-core category.

Titanium dioxide guidance is now at the lower end of the company's 1.2-1.4mt range. While disappointing, Ord Minnett notes the business is only a small portion of net profit and not material to forecasts.

Buy rating maintained. Target rises to $102 from $99.

Target price is $102.00 Current Price is $95.80 Difference: $6.2
If RIO meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $96.66, suggesting upside of 0.9% (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

Macquarie rates STO as Outperform (1) -

Santos has updated 2019 guidance, narrowing the ranges on production, sales, unit costs and capital expenditure.

For 2020 production of 79-87mmboe is expected, amid total capital expenditure of -US$1.45bn that includes -US$500m in expenditure on Barossa, Dorado and PNG LNG.

Macquarie found the upgrade to production targets of 120mmboe by 2025 a positive, but notes this will be contingent on conversion of the opportunities and the strong volume growth from Dorado and the Cooper Basin.

Outperform rating maintained. Target rises to $9.00 from $8.70.

Target price is $9.00 Current Price is $8.14 Difference: $0.86
If STO meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.58, suggesting upside of 5.4% (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: 0.5

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

Citi rates SYD as Sell (5) -

Citi believes activities outside of aeronautics could attract most of the focus at the upcoming investor briefing. The upcoming Qantas ((QAN)) jet base lease expiry and northern lands could present a 50 ha logistics opportunity, in the broker's view.

A project of this size, on Citi's estimates, could take more than five years to be fully developed and the advantages of partnering with an industry expert outnumber the disadvantages.

Citi retains a Sell rating on Sydney Airport, believing there are more attractive options across the real assets universe. Target is $7.06.

Target price is $7.06 Current Price is $9.08 Difference: minus $2.02 (current price is over target).
If SYD meets the Citi target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.23, suggesting downside of -9.4% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates TLS as Upgrade to Buy from Neutral (1) -

UBS has reviewed its Telstra thesis in the wake of a positively received investor day and concluded mobile earnings will likely remain weak in the first half FY20, but average revenue per user should stabilise in FY21 ahead of a return to significant growth in FY22.

From FY23, mobile growth should offset NBN headwinds. The dividend should thus be safe at 16c. Upgrade to Buy from Neutral, target unchanged at $4.00.

Target price is $4.00 Current Price is $3.69 Difference: $0.31
If TLS meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.97, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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