Australian Broker Call

Citi rates BKW as Neutral (3) -

Citi observes the company's record first half performance was largely driven by significant revaluation profit for property. Building products earnings (EBIT) were down -35% as price increases were unable to offset costs in a softening volume environment.

The recent acquisition of Glen-Gery in the US is progressing to plan. Citi maintains a Neutral rating and raises the target to $18.70 from $17.00.

Target price is $18.70 Current Price is $17.82 Difference: $0.88
If BKW meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $17.77, suggesting downside of -0.3% (ex-dividends)

The company's fiscal year ends in July.

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

Deutsche Bank rates BKW as Downgrade to Hold from Buy (3) -

First half earnings (EBIT) were ahead of Deutsche Bank's expectations, largely from better-than-expected property earnings.

While remaining positive on the medium-term outlook for property development, Deutsche Bank believes there is unlikely to be significant revaluations from FY20 onwards.

Investment in building products in North America is likely to support earnings in the long-term, although the broker also considers significant upside is unlikely in that space in the next three years.

Deutsche Bank downgrades to Hold from Buy. Target is $18.60.

Target price is $18.60 Current Price is $17.82 Difference: $0.78
If BKW meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $17.77, suggesting downside of -0.3% (ex-dividends)

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 BKW as Hold (3) -

First half results were ahead of Morgans. Property stood out, with earnings (EBIT) up 167%. In contrast, building products earnings were down -35%.

Morgans considers the business is well diversified but building activity is weakening and higher energy costs are putting pressure on earnings.

While this may be mitigated by the company's cross-holding in WH Soul Pattinson ((SOL)), as well as property and the US exposure, the broker believes Brickworks is fully valued.

Hold rating maintained. Target rises to $17.44 from $15.96.

Target price is $17.44 Current Price is $17.82 Difference: minus $0.38 (current price is over target).
If BKW meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.77, suggesting downside of -0.3% (ex-dividends)

The company's fiscal year ends in July.

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 ECX as Neutral (3) -

Credit Suisse believes a third consecutive negative trading update raises serious questions about management control and oversight.

While restructuring, cost reductions and the potential disposal of non-core assets offer scope for improved profitability, the broker suggests momentum is very negative and the balance sheet appears stretched.

Potential upside comes from disposing of Right2Drive and/or parts of Grays. The likelihood that the merger with McMillan Shakespeare ((MMS)) does not proceed is considered a negative signal.

However, if the company can prove its fleet and novated businesses are stable, Credit Suisse suggests corporate interest may re-appear. Neutral rating maintained. Target is reduced to $0.88 from $2.55.

Target price is $0.88 Current Price is $0.75 Difference: $0.13
If ECX meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting upside of 41.0% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates ECX as Outperform (1) -

The company's trading update has signalled net profit is down -42.4%, seven weeks following an update which indicated FY19 should be in line with FY18. Weakness is particularly noted in February.

The company has initiated a -10% reduction in operating costs and identified Right2Drive and Grays are non-core. Macquarie points out, until the company can provide more information to the market, including audited accounts, investors will apply a material discount and corporate activity will be on hold.

Should the company be able to stem the impact, corporate interest may return, the broker surmises. Macquarie retains an Outperform rating as the market reaction appears to have presented an opportunity. Target is reduced to $1.06 from $2.48.

Target price is $1.06 Current Price is $0.75 Difference: $0.31
If ECX meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting upside of 41.0% (ex-dividends)

The company's fiscal year ends in September.

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 ECX as Equal-weight (3) -

Morgan Stanley lacks conviction in the outlook and the concerns extend beyond just Grays and Right2Drive. While the broker finds it difficult to ascribe meaningful value to these assets there is merit in a strategic review.

The commercial rationale for acquiring these businesses may have made sense but the broker notes earnings have proven far more volatile and unpredictable.

Morgan Stanley remains on the sideline and retains an Equal-weight rating. Industry view In-Line. Target is reduced to $1.00 from $2.32.

Target price is $1.00 Current Price is $0.75 Difference: $0.25
If ECX meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting upside of 41.0% (ex-dividends)

The company's fiscal year ends in September.

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 EPW as Downgrade to Hold from Add (3) -

Since the company announced its first half result, it has outperformed the broader market index. Morgans believes share price strength has been principally driven by the re-start of the share buyback and increase in the dividend outlook.

The broker downgrades to Hold from Add, as a result of share price strength. The company has reserved $60m for investment in its energy solutions business in addition to the $18m paid for Greensense, Lumaled and Out Performers.

However, while the segment contributes $0.11 to valuation, Morgans points out it is yet to develop a track record of earnings growth.

The company also highlights that the Oakey power station will have increasing value by providing firming capacity to offset the increasing penetration of renewables into the Queensland generation mix. Target is raised to $1.90 from $1.81.

Target price is $1.90 Current Price is $1.94 Difference: minus $0.04 (current price is over target).
If EPW meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.92, suggesting downside of -1.2% (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 HLO as Buy (1) -

Ord Minnett observes the recent decline in the share price is an example of market sentiment where short-term perceptions become reality and any issues become self-perpetuating, at least for a period of time.

The broker believes, over the medium term, the true barometer will be the real loss in earnings, if any, and how accurately the market has capitalised these earnings.

The recent negative press regarding implied political favours has resulted in the market becoming nervous about the potential loss of federal government contracts.

However, Ord Minnett suggests any potential loss is likely to be a relatively small part of earnings. Buy rating and $6.14 target maintained.

Target price is $6.14 Current Price is $4.38 Difference: $1.76
If HLO meets the Ord Minnett target it will return approximately 40% (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

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

Post the release of FY19 financials, Citi has downgraded to Sell/High Risk from Neutral/High Risk. Price target falls to $0.52. The company's guidance towards more capex has led to reduced forecasts.

The analysts see the biggest risk to their Sell rating in the potential of a higher bid to shareholders. Otherwise, execution risks are seen as high, with management aiming to take out $100m in costs out of the business.

The reported financials were labeled as largely in-line. On adjusted basis, the operational performance as actually a smidgen better than expected, admit the analysts. Cash conversion, however, was weak.

Target price is $0.52 Current Price is $0.53 Difference: minus $0.01 (current price is over target).
If SIG 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 $0.48, suggesting downside of -9.0% (ex-dividends)

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 SIG as Underperform (5) -

FY19 results revealed weaker margins and, while earnings overall were slightly ahead of Credit Suisse expectations, the cash performance was notably weak in the second half.

The broker highlights Sigma continues to invest in its new distribution centres and, post the Chemist Warehouse transition, there could be around 50% excess capacity that could limit the amount of operating efficiencies available.

Therefore, Credit Suisse believes there is high risk that Sigma will not reach its $100m in cost savings within 24 months. Underperform maintained. Target rises to $0.50 from $0.48.

Target price is $0.50 Current Price is $0.53 Difference: minus $0.03 (current price is over target).
If SIG 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 $0.48, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in January.

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 SIG as Underweight (5) -

Morgan Stanley observes industry conditions remain challenging, noting the expenditure on distribution centres is continuing through to 2020. Moreover, the lost Chemist Warehouse contract is yet to take effect.

Management has provided additional detail on annual cost savings, expecting to realise $100m over the next 18-24 months. Amid greater clarity on the Project Pivot efficiency profile, Morgan Stanley increases estimates for earnings (EBIT).

Still, the broker maintains a conservative view on the realised benefits. The broker maintains an Underweight rating, In-Line industry view and reduces the target to $0.46 from $0.47.

Target price is $0.46 Current Price is $0.53 Difference: minus $0.07 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.48, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in January.

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 SIG as Downgrade to Sell from Neutral (5) -

Underlying earnings (EBIT) were ahead of guidance in FY19, although UBS notes earnings quality was affected by restructuring costs and weak cash conversion. The company has indicated FY20 underlying operating earnings (EBITDA) will be $55-60m.

UBS makes material upgrades to FY21-22 estimates, reflecting the incorporation of Project Pivot. Project Pivot is the company's $100m cost reduction program, of which around $60m is expected to come from the transition of Chemist Warehouse and the remaining $40m from operating efficiencies.

The company is a quality operator but UBS does not believe the stock warrants a premium to market. Rating is downgraded to Sell from Neutral and the target reduced to $0.45 from $0.58.

Target price is $0.45 Current Price is $0.53 Difference: minus $0.08 (current price is over target).
If SIG meets the UBS target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.48, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in January.

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

Deutsche Bank rates TCL as Buy (1) -

Transurban has received the necessary consents for the CityLink concession amendments as part of the funding for the $5.5bn West Gate Tunnel project.

The amendments provide for an extension of the CityLink concession by 10 years to 2045 and fixed toll escalation of 4.25% per annum from FY20 to FY29.

Deutsche Bank retains a Buy rating and $13.25 target.

Target price is $13.25 Current Price is $12.86 Difference: $0.39
If TCL meets the Deutsche Bank target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $12.31, suggesting downside of -4.3% (ex-dividends)

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

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

The company has advised that the CityLink and West Gate Tunnel project has been confirmed. The legislation enables a 4.25% per annum toll escalation until 2029 and an extension of the CityLink concession to 2045.

Morgan Stanley anticipates the shares will continue to outperform in the near term in view of the company's progress, as well as a neutral traffic outlook and favourable macro valuation environment.

Equal-weight rating and Cautious industry view maintained. Target is $12.38.

Target price is $12.38 Current Price is $12.86 Difference: minus $0.48 (current price is over target).
If TCL 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 $12.31, suggesting downside 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

Citi rates TWE as Sell (5) -

Citi analysts are happy to stick with their Sell rating for Treasury Wines, as forecasts remain below market consensus and the greater risk, in the analysts' opinion, lays with the US wine market facing the prospect of over-supply.

The company is still sizing up acquisition targets Jackson Family Wines and Ste Michelle, report the analysts, but they don't anticipate anything more than a "modest" EPS accretion initially were any of these potential deals be concluded. Target $14.90.

Target price is $14.90 Current Price is $15.44 Difference: minus $0.54 (current price is over target).
If TWE meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.74, suggesting upside of 14.9% (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