Australian Broker Call

Ord Minnett rates ABC as Downgrade to Lighten from Hold (4) -

Given continued weakness in residential approvals data in April and May, Ord Minnett believes the second half result will underperform estimates. Net profit in 2019 is now expected to fall -17%.

Trading multiples remain elevated and the broker downgrades to Lighten from Hold. The target is lowered to $3.90 from $4.00.

Target price is $3.90 Current Price is $4.16 Difference: minus $0.26 (current price is over target).
If ABC meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.84, suggesting downside of -7.6% (ex-dividends)

The company's fiscal year ends in December.

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 ALX as Outperform (1) -

Macquarie revises discount rates to 2% for the US, from 3.4%, and 0.6% for France, from 1.6%. The broker considers the time is ideal for the company to consider a capital raising.

Atlas Arteria currently has EUR350m of holding company debt which, if removed, would provide the flexibility to acquire a larger stake in MEIF2.

Macquarie likes the quality of the dividend and the organic growth and maintains an Outperform rating. Target is raised to $8.45 from $7.31.

Target price is $8.45 Current Price is $7.84 Difference: $0.61
If ALX meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $7.30, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in December.

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 BKL as Neutral (3) -

Pharmacy scan data show the vitamin category has been weakening in the June quarter. May category sales in the Australian pharmacy channel were down -10%.

Moreover, channel checks suggest the 6/18 retail event in China was very competitive in the health segment and Australian daigou volumes may have been affected.

Blackmores has less dependence on daigou sales versus its competitors and the broker suspects it will have performed better. Neutral rating and $85 target maintained.

Target price is $85.00 Current Price is $90.49 Difference: minus $5.49 (current price is over target).
If BKL 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 $86.04, suggesting downside of -4.9% (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

Citi rates CBA as Downgrade to Sell from Neutral (5) -

Commonwealth Bank is challenged, Citi believes, as it offsets the headwinds from lower portfolio returns. Its leading market position in mortgages and deposits, however, provides a platform for actively re-pricing.

As the leader in retail banking, Commonwealth Bank is well-placed to reap the benefits from the easing of front book competition, in the broker's view.

Nevertheless, the stock has run hard and is fully priced. Rating is downgraded to Sell from Neutral. Target is raised to $73.25 from $70.50.

Target price is $73.25 Current Price is $80.78 Difference: minus $7.53 (current price is over target).
If CBA meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $71.59, suggesting downside of -11.4% (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

Credit Suisse rates CCL as Underperform (5) -

Credit Suisse observes Australian beverage volumes are subdued and pricing remains competitive. Data from retail scan sales in May suggest pricing is unlikely to be a source of profit growth for the company.

The company has guided that 2019 will be a transition year and the broker continues to model a -2.5% erosion in earnings per share. Underperform rating and $8.90 target maintained.

Target price is $8.90 Current Price is $10.39 Difference: minus $1.49 (current price is over target).
If CCL meets the Credit Suisse target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.36, suggesting downside of -19.6% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates CPU as Underweight (5) -

The stock is down -20% from its peak and trading at a discount to the ASX 200 for the first time since 2016, Morgan Stanley notes. The broker is convinced earnings risks are building after a recent trip to the UK. The broker disagrees that the stock has been oversold.

FY20 outlook commentary is expected to be the main driver of the stock at the results in August 14. Morgan Stanley considers the yield trade is over, as futures markets are pricing in rate cuts and US banks have already begun lowering rates paid on all term deposits.

The broker also envisages structural risks to the carry trade from US shareholder attrition, escheatment of abandoned property and faster payments. Morgan Stanley retains an Underweight rating, In-Line industry view and reduces the target to $13.50 from $14.50.

Target price is $13.50 Current Price is $16.43 Difference: minus $2.93 (current price is over target).
If CPU meets the Morgan Stanley target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.97, suggesting upside of 3.3% (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: -0.1

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

Credit Suisse rates ECX as Outperform (1) -

The company has sold Grays Online and Are You Selling for $60m. Proceeds will be applied to reducing corporate debt and lenders have agreed to remove the non-cash loss (-$100m) from covenant testing.

Credit Suisse believes the sale is positive to the extent that it has quickly followed the divestment plan disclosed at the first half result.

Given flat earnings in the core fleet and novated business and potential corporate appeal, the broker believes the upside outweighs the downside at the current valuation. Outperform maintained. Target is raised to $1.75 from $1.40.

Target price is $1.75 Current Price is $1.54 Difference: $0.21
If ECX meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.57, suggesting upside of 1.9% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates ECX as Buy (1) -

The sale of GraysOnline and AreYouSelling for $60m was ahead of expectation and is the first of multiple near term catalysts for EclipX Group, the broker suggests, including refinancing debt facilities, further non-core asset sales and further clarity on core business cost-outs and strategy.

The broker believes the stock to be attractively valued and the focus is on synergies available from further industry consolidation. Buy retained, target rises to $1.80 from $1.50.

Target price is $1.80 Current Price is $1.54 Difference: $0.26
If ECX meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.57, suggesting upside of 1.9% (ex-dividends)

The company's fiscal year ends in September.

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 JHG as Neutral (3) -

Citi reduces 2019 estimates for earnings per share by -1.3% and 2020 by -2%. The latest industry data suggest fund outflows have eased for the company but remain at elevated levels.

The broker considers the investment performance is improving but it remains too early to be certain of the extent. Australian-based ownership continues to decline and there is some risk the trend could continue, thereby placing further near-term pressure on the stock.

However, the company has been recently added to the Russell 1000 index and this, as well as the US$200m share buyback program, could provide modest support. Citi maintains a Neutral rating and reduces the target to $33.65 from $36.30.

Target price is $33.65 Current Price is $31.32 Difference: $2.33
If JHG meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $34.16, suggesting upside of 9.1% (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: 0.0

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

Morgans rates MFG as Hold (3) -

The company ended June with $86.7bn in funds under management, up 24.7% over the financial year. Morgans expects an update on new products at the August results, such as the US sustainable and retirement income product, which are medium to longer term growth options.

Given the strong run in the share price, the broker suggests the stock is susceptible to any meaningful market pull-back. A Hold rating is maintained, given the quality of earnings and growth options as well as a strong balance sheet. Target is raised to $49.22 from $37.65.

Target price is $49.22 Current Price is $54.42 Difference: minus $5.2 (current price is over target).
If MFG meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.58, suggesting downside of -21.8% (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

UBS rates NWH as Buy (1) -

Following a fatal accident at Golding's Baralaba North coal mine, operations have been halted pending investigation. NRW Holdings' Baralaba contract represents some 20% of FY19 mining division earnings and extends to 2021.

The broker awaits further developments before changing its forecasts but notes contract disruption and possible legal ramifications are potential scenarios. Buy and $3.05 target retained for now.

Target price is $3.05 Current Price is $2.36 Difference: $0.69
If NWH meets the UBS target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting upside of 18.9% (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

Ord Minnett rates PPH as Lighten (4) -

Front book delivery is increasingly important for the company at present, Ord Minnett asserts, as it drives a majority of incremental growth in the next year.

Another co-founder has sold down stock in the last week and the broker is mindful of the lessons from prior founder sell-downs. Moreover, industry feedback signals the market for online faith giving is becoming increasingly competitive.

Lighten rating maintained. Target is reduced to $2.92 from $3.30.

Target price is $2.92 Current Price is $3.26 Difference: minus $0.34 (current price is over target).
If PPH meets the Ord Minnett 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 March.

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: 0.3

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

Citi rates QBE as Buy (1) -

Citi recalibrates forecasts to reflect the fall in bond yields and strong equity markets at the end of the first half as well as a probable weaker crop in FY19.

The broker suggests investment income is likely to fall in future years as a result of the fall in bond yields across the globe, but particularly in Australia and Europe.

Nevertheless, the broker considers the underlying story is on track and maintains a Buy rating and $13.30 target.

Target price is $13.30 Current Price is $11.90 Difference: $1.4
If QBE meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $12.90, suggesting upside of 8.4% (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: 0.4

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

Credit Suisse rates SFR as Upgrade to Neutral from Underperform (3) -

Credit Suisse concludes the acquisition of MOD Resources ((MOD)) is accretive and raises the target to $6.75 from $6.40. Sandfire Resources has agreed to a 45% premium, in cash and scrip for the company, which owns the undeveloped T3 copper project in Botswana.

The broker expects the company to deliver at the top end of production guidance in the June quarter. Rating is upgraded to Neutral from Underperform.

Target price is $6.75 Current Price is $6.65 Difference: $0.1
If SFR meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.58, suggesting upside of 13.9% (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

Ord Minnett rates STO as Buy (1) -

The Roc South-1 well, jointly owned with Carnarvon Petroleum ((CVN)) has failed to intersect productive hydrocarbons at the Caley and Baxter intervals, where earlier drilling at Dorado had encountered significant quantities of oil and condensate-rich gas.

While disappointing, Ord Minnett assesses the possibility of connection to the Dorado reservoir likely represented upside rather than a base case. Therefore, no implications are considered likely for the development at Dorado. Buy rating and $7.50 target maintained.

Target price is $7.50 Current Price is $6.84 Difference: $0.66
If STO meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.04, suggesting upside of 2.9% (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: 0.4

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

Macquarie rates SUN as Underperform (5) -

Macquarie continues to envisage earnings headwinds for Suncorp and a risk to consensus estimates. The broker believes the company's cash return targets are becoming increasingly unachievable. Some change to FY20 guidance is expected at the August result.

The broker believes it will to be difficult for the stock to outperform until the downgrade cycle stops. Underperform rating maintained. Target is $12.80.

Target price is $12.80 Current Price is $13.41 Difference: minus $0.61 (current price is over target).
If SUN 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 $13.85, suggesting upside of 3.3% (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

Macquarie rates TAH as Outperform (1) -

The company has underperformed its ASX peers, Macquarie observes. Wagering has challenges, admittedly, but the broker considers this is still undervalued.

Macquarie envisages a re-rating opportunity should earnings for wagering & media stabilise in FY20. Outperform maintained. Target is raised to $5.40 from $5.15.

Target price is $5.40 Current Price is $4.67 Difference: $0.73
If TAH meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.08, suggesting upside of 8.7% (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

Ord Minnett rates VHT as Hold (3) -

The company will distribute Transpara, a computer aided detection product developed by ScreenPoint Medical. The latter is about to be awarded FDA clearance for the sale of its 3D product in the US and Volpara Health is hopeful of the launch later this year.

Ord Minnett expects a gradual increase in average revenue per unit over coming years for the company, and the agreement is considered an opportunity to accelerates that growth.

However, the broker is keen on finding evidence of sales traction before becoming more positive and maintains a Hold rating. Target is raised to $1.71 from $1.65.

Target price is $1.71 Current Price is $1.62 Difference: $0.09
If VHT meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

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: 0.5

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

Ord Minnett rates VVA as Initiation of coverage with Buy (1) -

Viva Leisure is a health club operator in Australia, intending to build on its ACT footprint to expand where it can secure attractive rents and strong site economics. Ord Minnett notes the business is running ahead of prospectus expectations for member numbers and club openings, which bodes well for FY20.

The fitness market remains highly fragmented, which provides significant scope for consolidation, the broker assesses. Ord Minnett initiates with a Buy rating and target of $1.50.

Target price is $1.50 Current Price is $0.95 Difference: $0.55
If VVA meets the Ord Minnett target it will return approximately 58% (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 WPL as Outperform (1) -

Credit Suisse understands that the regulator, NOPTA, has indicated the Scarborough and Browse developments may be economic and retention leases may not be renewed for a further five years upon expiry next year.

As joint venture alignment, rather than economics, is the key hurdle to both developments, the broker believes. Government pressure may be needed and be brought to bear to push both developments towards the finishing line.

The broker considers Woodside Petroleum a quality base business, underpinned by growth upside at Scarborough and a life extension on the North West Shelf. Credit Suisse maintains an Outperform rating and raises the target to $38.02 from $37.55.

Target price is $38.02 Current Price is $36.15 Difference: $1.87
If WPL meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $36.00, suggesting downside of -0.4% (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: 0.3

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