Australian Broker Call

Morgans rates BUB as Hold (3) -

Morgans was disappointed with the FY18 loss although revenue was better than expected. Consequently, the broker downgrades forecasts significantly. There was a material write-down to the goodwill of the recently acquired NuLac Foods.

The broker finds forecasting the future financial performance difficult as the company is in a development phase. However, some progress has been made toward strategic initiatives, the highlight being the new Chinese distribution agreements.

Morgans maintains a Hold rating and reduces the target to $0.60 from $0.82.

Target price is $0.60 Current Price is $0.67 Difference: minus $0.07 (current price is over target).
If BUB meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Macquarie rates COE as Initiation of coverage with Outperform (1) -

Cooper Energy is set to leverage tightness in the east coast gas market and Macquarie envisages upside through divestment of core assets. The broker expects a sell-down of Sole will support funding for Manta through a cash or carry.

Macquarie initiates coverage with an Outperform rating and $0.55 target. A number of key catalysts are envisaged in the next 12-18 months that could de-risk Manta and the Otway exploration assets and offer upside to valuation. Cooper Energy could be supplying more than 10% of Australia's east coast domestic gas demand.

Target price is $0.55 Current Price is $0.44 Difference: $0.11
If COE meets the Macquarie target it will return approximately 25% (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

UBS rates CSL as Neutral (3) -

Based on competitor results in the June quarter, UBS estimates that CSL's Idelvion captured 25% of the recombinant FIX market. Afstyla is at around 2% of the FVIII market.

UBS revises up revenue forecasts for both Idelvion and Afstyla, based on an assumed increase in market share through FY19. With an estimated margin of 35%, the broker forecasts FY19 operating earnings from these two products of US$200m, up 22%.

UBS maintains a Neutral rating and raises the target to $230 from $220.

Target price is $230.00 Current Price is $229.43 Difference: $0.57
If CSL meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $214.89, suggesting downside of -6.3% (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: 0.3

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

Citi rates FPH as Sell (5) -

Major competitor (foe?) ResMed ((RMD)) has declared it filed new patent infringement court actions against the company relating to OSA masks and management has responded by downgrading guidance for FY19 due to additional litigation costs.

Citi analysts see yet more evidence in support of their Sell rating. Estimates have been lowered. The analysts highlight such legal disputes are complicated, expensive and their outcomes remain difficult to predict.

Current Price is $14.53. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

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: -0.8

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

Macquarie rates IPL as Outperform (1) -

Macquarie believes a combination of firm global fertiliser pricing and a weaker Australian dollar is skewing earnings risk to the upside and this should support the share price. The company will brief investors on September 7 and the broker expects a trading update as well as a strategic overview.

Macquarie lifts FY19 estimates for earnings per share by 8.6% because of higher diammonium phosphate and ammonia prices. Outperform rating maintained. Target is raised to $4.16 from $3.95.

Target price is $4.16 Current Price is $3.96 Difference: $0.2
If IPL meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.88, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Credit Suisse rates KMD as Neutral (3) -

The company has indicated it should deliver FY18 operating earnings of NZ$72-77m which, taking the mid point, implies growth of around 31%. Credit Suisse suggests this reflects action taken by management to improve inventory control, product offerings and in-store experience.

Entering FY19, key input costs indicate a more challenging environment, notably an increase in merino wool, up 40% in the last season.

Despite management's efforts and the recent improvement in margins Credit Suisse struggles to envisage valuation upside to support a more positive view. Neutral rating maintained. Target rises to NZ$3.10 from NZ$2.35.

Current Price is $3.00. Target price not assessed.

Current consensus price target is $2.92, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

Ord Minnett rates MGR as Accumulate (2) -

Ord Minnett updates its model to include the sale of 50% of the Calibre development for $125m at a capitalisation rate of 5.14%. The broker estimates this will generate around $30m of development profit in the first half, significantly better than anticipated.

FY19 earnings forecasts are raised by 2%. Accumulate maintained. Target is $2.60.

Target price is $2.60 Current Price is $2.45 Difference: $0.15
If MGR meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.45, suggesting upside of 0.2% (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

Macquarie rates MPL as Neutral (3) -

Macquarie believes the potential for a limit on health insurance pricing creates significant margin risks for the industry.

The broker does not believe this feature is completely priced into estimates and, while current valuations remain supportive, the broker maintains a neutral stance on the sector.

FY19 earnings estimates are upgraded by 0.2% and FY20 downgraded by -0.3%. Target is raised to $3.15 from $2.95.

Target price is $3.15 Current Price is $3.02 Difference: $0.13
If MPL meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.96, suggesting downside of -2.1% (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

Deutsche Bank rates NST as Sell (5) -

The company has purchased the Pogo mine in Alaska for $347m from Sumitomo. The current reserve could support an operation for three years so conversion of resources to reserves is critical, Deutsche Bank asserts.

The broker considers this an accretive acquisition. Target rises to $6.40 from $5.90. Sell rating maintained.

Target price is $6.40 Current Price is $8.12 Difference: minus $1.72 (current price is over target).
If NST 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 $6.91, suggesting downside of -14.8% (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

Ord Minnett rates PAC as Buy (1) -

FY18 results were in line with Ord Minnett estimates. The focus now turns to the redeployment of proceeds from the Aperio transaction. Aperio has been sold for US$73m with proceeds expected before the end of October.

 After factoring in the sale and adjusting for other boutique growth, Ord Minnett reduces the target to $8.29 from $9.00. The broker considers the stock cheap and retains a Buy rating.

Target price is $8.29 Current Price is $6.89 Difference: $1.4
If PAC meets the Ord Minnett target it will return approximately 20% (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 RAP as Add (1) -

FY18 results were slightly better than Morgans expected, although the focus is on the outcome of the US paediatric trial. Headline results are expected over the coming month.

Morgans makes no changes to forecasts but removes the discount to valuation. Add rating maintained. Target is raised to $0.35 from $0.28.

Target price is $0.35 Current Price is $0.23 Difference: $0.12
If RAP meets the Morgans target it will return approximately 52% (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 REA as Add (1) -

The company's US affiliate, Move, controlled by News Corp ((NWS)), will acquire Opcity, a sales lead qualification company servicing real estate agents and brokers across the US.

Morgans makes small changes to REA's forecasts and believes there is upside to current valuation should the US strategy prove successful. Add rating maintained. Target is reduced $95.21 from $95.41.

Target price is $95.21 Current Price is $91.60 Difference: $3.61
If REA meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $87.90, suggesting downside of -4.0% (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 REH as Buy (1) -

For Citi's initial assessment, see Broker Call Report on 31 August. The analysts found the FY18 performance in line, although with the observation that strong growth was accompanied by weak margins.

Given the domestic operations still represent 71% of FY19 group EBITDA, Citi analysts highlight there is risk from the slowing housing cycle and lack of organic growth opportunities in Australia.

The integration of Morsco in the US has become the key focal point for the company. Positive currency impact from anticipated weakening AUD delivers an upgrade to the tune of 6-7% for earnings forecasts. Target lifts by 10% to $14.28. Buy.

Target price is $14.28 Current Price is $12.70 Difference: $1.58
If REH meets the Citi target it will return approximately 12% (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

UBS rates SGM as Neutral (3) -

Going forward, China is expected to ban all scrap imports by December 2020. In response, Sims is considering upgrading some of its scrap to a semi-refined product to partly mitigate the impact.

UBS notes volumes to Turkey are expected to take a hit in the current quarter but this should recover as Turkish steel mills redirect volumes from the domestic market to the export market.

There is no guidance for the company's volumes in FY19 and the broker models 5% growth. UBS believes the outlook for volumes and margins carries risk to the downside and maintains a Neutral rating. Target is $13.85.

Target price is $13.85 Current Price is $12.33 Difference: $1.52
If SGM meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $15.01, suggesting upside of 21.7% (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 SGR as Outperform (1) -

Macquarie reviews The Star Sydney domestic gaming tax rate, given exclusivity expires in November 2019. This could trigger a renegotiation of tax with the NSW government.

Macquarie estimates that each one percentage point reduction in The Star Sydney's domestic gaming tax rate adds $10.5m or 1.5% to operating earnings in FY20. The broker finds the valuation attractive and maintains an Outperform rating and $6.15 target.

Target price is $6.15 Current Price is $5.47 Difference: $0.68
If SGR meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.12, suggesting upside of 11.9% (ex-dividends)

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

UBS rates SGR as Buy (1) -

The share price has outperformed since the FY18 result, UBS observes. Investor sentiment is mixed and the negatives still outweigh the positives, the broker suggests.

While continuing to monitor the issues, UBS believes a case for upside has emerged and there may be some positive announcements before the next result in February. Issues that could push the shares higher in the next six months include continued improvement at the Sovereign Room and the purchase of shares on market by the JV partners.

Moreover, the risk of a blow-out in capital expenditure in Brisbane has been reduced. UBS maintains a Buy rating and $6.20 target.

Target price is $6.20 Current Price is $5.47 Difference: $0.73
If SGR meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $6.12, suggesting upside of 11.9% (ex-dividends)

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

Ord Minnett rates SSM as Buy (1) -

Ord Minnett takes the opportunity to review FY20/21 forecasts in the wake of the release of the NBN strategic plan, particularly network construction, believing estimates are too conservative.

The broker suggests, as the construction tasks move to more ad hoc projects rather than large-scale, this will favour a more nimble partner such as Service Stream. FY19 forecasts are unchanged but the broker increases the outer years by 11-20%.

Ord Minnett maintains a Buy rating and raises the target to $2.00 from $1.90.

Target price is $2.00 Current Price is $1.76 Difference: $0.24
If SSM meets the Ord Minnett target it will return approximately 14% (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

Ord Minnett rates STO as Hold (3) -

Ord Minnett lowers earnings estimates to incorporate the purchase price allocation from the Quadrant transaction, which will likely result in additional depreciation and interest expense.

The broker expects a modest uplift in earnings with value accretion coming from extensions to reserve life. Hold rating maintained. Target rises to $6.85 from $6.80.

Target price is $6.85 Current Price is $6.81 Difference: $0.04
If STO meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting downside of -7.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Credit Suisse rates TCL as Neutral (3) -

Transurban has acquired a 25.5% stake in the WestConnex asset for $4.1bn, implying an enterprise value of $25.2bn. Credit Suisse suggests it may take 10 years to be certain this was a good deal. The company is raising $4.2bn to fund the acquisition and an additional $600m for general corporate purposes.

The broker estimates distributions may not be fully covered by cash flow over the next three years but still expects 5% growth in distributions each year. The broker maintains a Neutral rating and reduces the target to $11.60 from $12.30.

Target price is $11.60 Current Price is $12.06 Difference: minus $0.46 (current price is over target).
If TCL meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.50, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Ord Minnett rates TCL as Buy (1) -

Transurban's Sydney Transport Partners has been selected to acquire a 51% equity stake in WestConnex. Ord Minnett suggests investors will have to have confidence in the company's ability to accurately forecast long-term traffic volumes and deliver shareholder value because the price paid appears generous. Nevertheless, historically, confidence in Transurban's management has been well placed.

Ord Minnett maintains a Buy rating and reduces the target to $13.25 from $14.00.

Target price is $13.25 Current Price is $12.06 Difference: $1.19
If TCL meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $12.50, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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