Australian Broker Call

Macquarie rates AFG as Downgrade to Neutral from Outperform (3) -

Macquarie has downgraded Australian Finance Group to Neutral from Outperform in the wake of the Hayne report, which recommends banning trailing commissions and switching to a borrower pays model for mortgage brokers.

The downgrade reflects caution ahead of more clarity on regulation along with the weakening housing market. The broker has applied a -40% risk discount to valuation given uncertainty. Target falls to $1.17 from $1.95.

Target price is $1.17 Current Price is $0.90 Difference: $0.27
If AFG meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

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

Morgans rates APA as Hold (3) -

The share price continues to be strong, even after the federal government blocked the CKI takeover bid.

Morgans suspects the shares are still factoring in takeover potential yet is not convinced an offer is imminent.

The company will report its first half result on February 20. Hold rating maintained. Target is reduced to $8.40 from $8.65.

Target price is $8.40 Current Price is $9.52 Difference: minus $1.12 (current price is over target).
If APA meets the Morgans target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.47, suggesting downside of -0.5% (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

Ord Minnett rates ASB as Accumulate (2) -

The company has upgraded FY19 revenue guidance by 36-46% because of significant contract gains. First half operating earnings (EBIT) guidance of $39-41m is 12% ahead of Ord Minnett's forecasts.

Most of the uplift is driven by the US ship-building operations, as the company won contracts to construct four littoral combat ships and two expeditionary fast vessels in the past four months.

Ord Minnett maintains an Accumulate rating and raises the target to $2.40 from $2.30.

Target price is $2.40 Current Price is $2.15 Difference: $0.25
If ASB meets the Ord Minnett 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: 0.8

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

Citi rates BLD as Buy (1) -

Heavy rains and delays to major projects have driven a downgrade to Boral's FY19 guidance. As the shares have fallen around -44% over the past year, Citi believes much of this is now priced in.

The company still expects overall earnings to be higher year-on-year. As the company is guiding for first half net profit of $200m a strong second half skew is implied.

Citi maintains a Buy rating and reduces the target to $6 from $7.

Target price is $6.00 Current Price is $4.65 Difference: $1.35
If BLD meets the Citi target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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 BLD as Neutral (3) -

Credit Suisse notes earlier guidance was contingent on a turnaround in the second half following a weak first quarter.

The broker suggests the company is now capitulating, after weather-related delays in the US and a slower recovery in Australia following wet weather in the first quarter.

From the company's update, Credit Suisse calculates group operating earnings (EBITDA) have been downgraded by around -6%.

Credit Suisse maintains a Neutral rating and reduces the target to $4.80 from $5.30.

Target price is $4.80 Current Price is $4.65 Difference: $0.15
If BLD meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates BLD as Buy (1) -

The company downgraded guidance for FY19 and now expects Boral Australia operating earnings, ex property, to be similar to FY18.

While Deutsche Bank is concerned about the delays in major projects they are still likely to progress in full. The broker maintains a Buy rating and $7.30 target.

Target price is $7.30 Current Price is $4.65 Difference: $2.65
If BLD meets the Deutsche Bank target it will return approximately 57% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (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

Macquarie rates BLD as Outperform (1) -

Boral has downgraded its guidance for FY19, while noting an earnings skew to the second half. The broker sticks with Outperform.

A number of Australian infrastructure projects have been slow to start, the broker notes, but infrastructure continues to remain supportive. US operations have been impacted by wet weather, particularly in Texas. Discussions with regard the USG JV are ongoing, and remain a key catalyst, the broker believes. Valuation stands out both historically and relative to peers.

Target falls to $6.20 from $6.60.

Target price is $6.20 Current Price is $4.65 Difference: $1.55
If BLD meets the Macquarie target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates BLD as Overweight (1) -

The company has revised guidance for FY19, resulting in a -7% downgrade to Morgan Stanley's forecasts.

The broker believes this will set a more realistic base for earnings and should allow investors to focus on an attractive value proposition.

The broker likes the company's Australian infrastructure exposure and envisages upside from the US.

Overweight rating reiterated. Target is reduced to $6.50 from $7.00. Industry view is Cautious.

Target price is $6.50 Current Price is $4.65 Difference: $1.85
If BLD meets the Morgan Stanley target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates BLD as Accumulate (2) -

Ord Minnett attributes the downgrade to the company's earnings expectations for the first half to overly optimistic forecasts to begin with, as well as unfavourable external factors that have caused major project delays.

The broker believes Boral is in a strong negotiating position with respect to increased exposure to plasterboard assets in the Asia-Pacific and Middle East regions.

Regardless of the downgrade, Ord Minnett continues to envisage valuation support and maintains an Accumulate rating. Target is lowered to $6.20 from $6.90.

Target price is $6.20 Current Price is $4.65 Difference: $1.55
If BLD meets the Ord Minnett target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates BLD as Neutral (3) -

Boral has updated ahead of its half year result on February 25. The company is now guiding to strong underlying demand in Australia and modest demand in the US.

Boral expects operating earnings (EBITDA), excluding property, to be similar to the prior year. UBS estimates FY19 earnings will be flat, despite the company's comments for it to be "higher".

Neutral rating maintained. Target is $6.94. North America is guiding to 15% growth from existing operations, versus prior guidance of 20%, with the company citing weakness from the weather, albeit making no comment on fly ash.

Target price is $6.94 Current Price is $4.65 Difference: $2.29
If BLD meets the UBS target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $6.28, suggesting upside of 35.0% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates CSL as Accumulate (2) -

Despite difficult comparables, Ord Minnett is confident CSL will report solid growth at its first half result on February 14.

This reflects buoyant immunoglobulin demand, a modest lift in prices and strong growth in high-value specialty therapy sales.

The broker maintains an Accumulate rating and raises the target to $219 from $215.

Target price is $219.00 Current Price is $192.59 Difference: $26.41
If CSL meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $213.95, suggesting upside of 11.1% (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: 0.6

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

UBS rates CSL as Buy (1) -

UBS updates modelling assumptions and forecasts net profit of US$1163m when the company reports its first half result on February 13, which implies a first half earnings skew of around 60%.

The broker points out forecasting the phasing of CSL Behring revenues and operating costs is becoming increasingly difficult.

Buy rating and $216 target maintained.

Target price is $216.00 Current Price is $192.59 Difference: $23.41
If CSL meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $213.95, suggesting upside of 11.1% (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: 0.6

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

Macquarie rates CVW as Downgrade to Neutral from Outperform (3) -

Macquarie has downgraded Clearview to Neutral from Outperform in the wake of the Hayne report, the recommendations of which may add to the operational cost of the Life/Wealth Management/Advice model. Life remuneration faces more years of uncertainty, the broker suggests, while Wealth and Advice may be impacted by annual fee arrangement renewals.

The broker has applied a -20% risk discount to valuation given uncertainty. Target falls to 91c from $1.14.

Target price is $0.91 Current Price is $0.89 Difference: $0.02
If CVW meets the Macquarie target it will return approximately 2% (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

Morgans rates CWY as Add (1) -

Morgans expects the company to deliver 8% growth in revenue and 15% growth in operating earnings (EBITDA) when the first half result is reported on February 14.

Adding in the Toxfree acquisition lifts revenue growth forecasts to 42% and operating earnings to 44%. Cash conversion is normally strong.

The recent retreat in the share price gives the broker cause to retain an Add rating. Target is raised to $1.94 from $1.89.

Target price is $1.94 Current Price is $1.78 Difference: $0.16
If CWY meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.02, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates GEM as Buy (1) -

Ord Minnett suggests a strong finish to 2018, noting occupancy in 2019 has started stronger. Supply continues to be a headwind but as development funding continues to get harder to obtain this should inevitably slow growth in new licensed places.

The broker suspects the industry has moved through the low point and positive growth should now occur. Buy rating maintained. Target is raised to $3.60 from $2.85.

Target price is $3.60 Current Price is $3.38 Difference: $0.22
If GEM meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $3.30, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Macquarie rates IAG as Underperform (5) -

Macquarie suggests Insurance Australia Group could be facing a -12% downgrade to consensus earnings owing to the storm in Victoria and the Queensland floods.

Macquarie suspects the company will downgrade reported margin guidance at the first half result on February 6. The broker maintains an Underperform rating and $6.85 target.

Target price is $6.85 Current Price is $7.28 Difference: minus $0.43 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting upside of 4.3% (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 JHX as Outperform (1) -

The company's December quarter results were marginally below Macquarie's expectations. James Hardie has tightened guidance, lifting the mid point to US$295-315m.

James Hardie has also announced a three-year US$100m cost reduction target for North America.

While the contribution from Fermacell was slightly below Macquarie's expectations, integration continues apace. Outperform rating and $23.40 target maintained.

Target price is $23.40 Current Price is $15.92 Difference: $7.48
If JHX meets the Macquarie target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $21.03, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Morgans rates NVX as Upgrade to Add from Hold (1) -

The company has exercised its option to increase its stake in PUREgraphite JV. Novonix now hold 75% of the joint venture and has rights to 100% of synthetic graphite above 1000tpa.

Morgans considers this a positive step for the company to maximise super potential value of its synthetic graphite intellectual property.

The broker reduces its risk factor on the JV in line with the milestones identified and upgrades to Add from Hold. Target is raised to $0.54 from $0.40.

While more positive on the stock than previously, the broker cautions investors that the company still has a long way to go to build a profitable battery anode business at scale.

Target price is $0.54 Current Price is $0.49 Difference: $0.05
If NVX meets the Morgans target it will return approximately 10% (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

Macquarie rates ORE as Neutral (3) -

Phase 1 of Orocobre's lithium project appears to be nearing completion but the start of phase 2 continues to be pushed back, the broker notes. China has reduced EV subsidies and five new producers hit the market in 2018, pressuring lithium prices.

Orocobre has not yet contracted 2019 sales and capex will rise with phase 2 construction. The recent equity injection means cash flow should not be an issue but the broker cuts earnings forecasts and its target to $3.40 from $4.60, Neutral retained.

Target price is $3.40 Current Price is $3.28 Difference: $0.12
If ORE meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.15, suggesting upside of 57.0% (ex-dividends)

The company's fiscal year ends in June.

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 PPT as Sell (5) -

The company is due to report its first half result on February 21. UBS will be looking for potential strategic responses to weak operating trends.

The broker maintains a Sell rating and $32.85 target.

Target price is $32.85 Current Price is $34.29 Difference: minus $1.44 (current price is over target).
If PPT meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.22, suggesting upside of 2.7% (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

Ord Minnett rates QUB as Buy (1) -

Patrick has notified terminal users that it will raise infrastructure surcharges. Ord Minnett believes investors should be pleased with this announcement as it demonstrates the stevedoring industry is becoming more focused on improving financial returns.

The broker maintains a Buy rating and raises the target to $3.20 from $3.10. From March 4 Patrick will increase infrastructure surcharges by 74-89% at Sydney, Melbourne and Brisbane. This represents the third such increase in just over 18 months.

Target price is $3.20 Current Price is $2.74 Difference: $0.46
If QUB meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.75, 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

Ord Minnett rates RWC as Accumulate (2) -

Management has reaffirmed FY19 operating earnings guidance (EBITDA) of $280-290m. However, if no freeze event occurs in the US southern regions during February or March there could be -1.5-3.0% downside, Ord Minnett suggests.

The broker excludes this benefit from estimates, nevertheless. Estimates for earnings per share are reduced by an average of -2.7% over FY19-21.

The broker maintains an Accumulate rating and reduces the target to $5.70 from $5.90.

Target price is $5.70 Current Price is $4.72 Difference: $0.98
If RWC meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $5.57, suggesting upside of 18.1% (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

Credit Suisse rates SCP as Underperform (5) -

Although Credit Suisse supports the company strategy and backs management to deliver on guidance when results are reported on February 5, pressure on retail valuations cannot be ignored.

The broker expects the result to focus on the re-positioning of the portfolio of assets acquired from Vicinity Centres ((VCX)). Underperform rating and $2.25 target maintained.

Target price is $2.25 Current Price is $2.50 Difference: minus $0.25 (current price is over target).
If SCP 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 $2.39, suggesting downside of -4.4% (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

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

Morgans expects the first half earnings growth will be principally driven by acquisitions. The broker expects around 13% growth in operating earnings (EBITDA) with a relatively flat margin.

No change is expected to FY19 distribution guidance of $0.59 per security. The company will report its first half result on February 12.

Morgans downgrades to Hold from Add, given recent strength in the share price. Target is raised to $12.29 from $12.03.

Target price is $12.29 Current Price is $12.05 Difference: $0.24
If TCL meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $12.31, suggesting upside of 2.1% (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