Australian Broker Call

Morgan Stanley rates BBN as Overweight (1) -

Toys "R" Us Australia has entered voluntary administration after a sale process failed to find a buyer. Morgan Stanley considers this poses a risk to near-term earnings for Baby Bunting but is a positive in terms of the long-run industry structure.

Toys "R" Us is expected to clear $15-80m in baby-related inventory across the remainder of FY18 and the first quarter of FY19. Morgan Stanley expects Baby Bunting will refrain from price matching and the impact is likely to be felt in sales rather than gross margin.

Overweight retained. Target is $2.10. Industry view: In Line.

Target price is $2.10 Current Price is $1.48 Difference: $0.62
If BBN meets the Morgan Stanley target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $1.59, suggesting upside of 7.3% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Morgans rates CLH as Hold (3) -

The company has entered a transaction with Balbec Capital to assign part of its arrangement book for $19.5m. The company will receive the cash up front and intends to reinvest this in PDLs. Collection House has the option to repurchase the residual rights to collect the remaining arrangements at the end of the five-year agreement.

Morgans considers the deal positive, as the company now has a more flexible balance sheet. Hold rating maintained. Target rises to $1.55 from $1.40.

Target price is $1.55 Current Price is $1.57 Difference: minus $0.02 (current price is over target).
If CLH meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

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

Macquarie rates FBU as Upgrade to Neutral from Underperform (3) -

The company has completed its NZ$750m entitlement offer which Macquarie believes will provide a firm of platform on which to execute its strategic objectives. The broker believes the company's move to consolidate its product and geographic spread will be well received.

More about this strategy will be learned in June. Macquarie upgrades to Neutral from Underperform. Target is raised to NZ$6.54 from NZ$5.30.

Current Price is $5.99. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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: 0.3

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

Ord Minnett rates GOZ as Initiation of coverage with Hold (3) -

Ord Minnett initiates coverage with a Hold rating and $3.20 target. The broker notes, since its inception in 2009, Growthpoint has increased its asset base fivefold and re-weighted its portfolio towards office.

Negative reversion from 10% over-renting in its industrial portfolio, based on the broker's observations, should reduce the growth rate. As a result, earnings and distribution growth of 2% per annum is forecast over 3-5 years.

Target price is $3.20 Current Price is $3.43 Difference: minus $0.23 (current price is over target).
If GOZ meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.15, suggesting downside of -8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.7

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

Citi rates HSO as Neutral (3) -

Healthscope has yet again issued a profit warning, which triggers further lowered estimates, but Citi analysts have also lifted their price target "to reflect corporate action premium". The rating remains Neutral.

Given the highly conditional nature of the two offers that have been made public, Citi analysts side with company management in not allowing for due diligence. They believe higher offers could be forthcoming. New target $2.45 (was $1.80).

Target price is $2.45 Current Price is $2.34 Difference: $0.11
If HSO meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.33, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Credit Suisse rates HSO as Neutral (3) -

Healthscope intends to close Geelong and Cotham private hospitals in Victoria and take an impairment on Frankston Private. The company has also lowered FY18 guidance and signalled 10% growth in hospital operating earnings in FY19.

Healthscope has denied due diligence to BGH and Brookfield based on their current bids.

The company is assessing a sale and lease back opportunity for the property portfolio. While this may free up capital, Credit Suisse suspects the potential value of the portfolio may be significantly reduced. Neutral rating and $2.36 target maintained.

Target price is $2.36 Current Price is $2.34 Difference: $0.02
If HSO meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.33, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Deutsche Bank rates HSO as Hold (3) -

Yet another profit warning triggers yet another "disappointing" response from Deutsche Bank analysts. They retain the Hold rating on ongoing corporate appeal.

Guidance provided for FY19 is also below expectations. The broker notes the company has effectively rejected both offers from current suitors. Target price has lost 5c to $2.

Target price is $2.00 Current Price is $2.34 Difference: minus $0.34 (current price is over target).
If HSO meets the Deutsche Bank target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.33, suggesting downside of -0.2% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

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

Healthscope has rejected requests for due diligence from BGH and Brookfield and intends to re-organise its assets. FY18 operating earnings are revised down around -5%. The company will incur a loss from Geelong, Cotham and Frankston private hospitals.

The near-term fundamentals are likely to take a backseat while the assets are re-organised and Morgan Stanley expects a premium to remain in the shares.

Equal-weight. Target is reduced to $2.23 from $2.36. Industry view is In-Line.

Target price is $2.23 Current Price is $2.34 Difference: minus $0.11 (current price is over target).
If HSO meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.33, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Morgans rates HSO as Hold (3) -

The company has concluded its portfolio review, with the need for rationalisation flagged and underperforming Victorian assets in focus. Both the Geelong Private and the Cotham Private hospitals will close. Healthscope will also take an impairment on Frankston Private.

Asian pathology will probably be divested. FY18 forecasts are downgraded by -4-5%. Morgans suggests there are a lot of moving parts and it is difficult to know if the two would-be suitors will sweeten their current offers.

The broker maintains a Hold rating and reduces the target to $2.30 from $2.42.

Target price is $2.30 Current Price is $2.34 Difference: minus $0.04 (current price is over target).
If HSO 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 $2.33, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Ord Minnett rates HSO as Hold (3) -

The board has decided not to pursue either of the offers for Healthscope. Ord Minnett believes a successful takeover would have been in the best interests of shareholders, particularly in light of the further deterioration in earnings.

Nevertheless, the decision by the board is considered sound, given the conditional nature of the bids and the potential for a bidding war. The broker would be less comfortable with any move by the business to pursue a strategy that would undermine external interest, notably by undertaking the sale and lease back of properties, which is under consideration.

Hold rating maintained. Target rises to $2.50 from $2.36.

Target price is $2.50 Current Price is $2.34 Difference: $0.16
If HSO meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.33, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Citi rates JHX as Buy (1) -

Citi analysts seem pleased with what they believe is a "solid" Q4 performance from the company, accompanied by a strong start into the new financial year. Recently acquired Fermacell added to the positive picture.

The analysts have slightly reduced forecasts, but highlight their expectation remains for double digit earnings growth in the years ahead. The wait continues for a new CEO. Buy recommendation and $27 price target both unchanged.

Target price is $27.00 Current Price is $22.91 Difference: $4.09
If JHX meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 8.2% (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: 0.5

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

Credit Suisse rates JHX as Outperform (1) -

FY18 results were in line with expectations and adjusted net profit up 17.2%. Credit Suisse observes a return to growth in market share in North America is key to the outlook and the company has stuck to prior guidance for 3-5% growth in FY19.

The company has outlined a 10-year vision for the European business, expecting to grow sales to EUR1bn from EUR300m and improve margins to above 20% from 10%.

Still, Credit Suisse notes most of the growth is yet to come from the unknown fibre cement products, and management has stressed the vision is in the embryonic stage. Outperform rating maintained. Target rises to $25.00 from $24.75.

Target price is $25.00 Current Price is $22.91 Difference: $2.09
If JHX meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 8.2% (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: 0.5

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

Deutsche Bank rates JHX as Buy (1) -

Deutsche Bank finds the Q4 performance was better-than-expected, with an equally positive outlook. A stronger US margin plus a tax benefit from restructuring are responsible for the 'beat'.

Pricing and margin outlook remain positive, in the analysts' opinion. Their target has risen to $25.35 from $24.96. Buy rating retained. 

Target price is $25.35 Current Price is $22.91 Difference: $2.44
If JHX meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 8.2% (ex-dividends)

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

Macquarie rates JHX as Outperform (1) -

FY18 numbers were in line with guidance and expectations. The company has highlighted ambitious growth plans for the Fermacell business, expecting EUR1bn in revenue within 10 years.

Macquarie reduces the target to $25.90 from $26.25, largely because of higher FY19 capital expenditure, asbestos liabilities and slightly softer FY19 operating outcomes in the US. Outperform maintained.

Target price is $25.90 Current Price is $22.91 Difference: $2.99
If JHX meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 8.2% (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: 0.5

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

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

Results beat Morgan Stanley's estimates at the headline while volume was a little soft in North America. Management attributed this to softer interior volumes as a result of the removal of some product.

In FY19 the company has guided for primary demand growth of 3-5% in exteriors and 1-3% in interiors. Morgan Stanley suggests the impact from recent capacity constraints appears to have been addressed. A successful roll-out in Europe will be the next potential upside catalyst.

Equal-weight rating. Target is $23.00. Cautious industry view.

Target price is $23.00 Current Price is $22.91 Difference: $0.09
If JHX meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $24.79, suggesting upside of 8.2% (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: 0.5

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

Ord Minnett rates JHX as Lighten (4) -

Net profit in FY18 was slightly ahead of Ord Minnett's estimates. The broker believes the outlook, coupled with a strong operating performance, sets the business up well for FY19.

However, with a PE multiple of 23x on forward EPS the broker believes the share price is factoring in the growth prospects. Lighten rating maintained. Target is reduced to $22.50 from $23.50.

Target price is $22.50 Current Price is $22.91 Difference: minus $0.41 (current price is over target).
If JHX meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.79, suggesting upside of 8.2% (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: 0.5

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

Deutsche Bank rates OFX as Hold (3) -

Deutsche Bank finds management has delivered on its promise/guidance, but tough conditions are here to stay. Hold retaing retained, as well as the $1.40 price target.

The analysts suspect competition remains fierce and the company's loyal corporate customers are keeping margin trend to the downside. There seems to have been a sharp deceleration in new client acquisitions as well.

Target price is $1.40 Current Price is $1.72 Difference: minus $0.32 (current price is over target).
If OFX meets the Deutsche Bank target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Market Sentiment: 0.0

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

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

FY18 net profit was in line with expectations. The company has noted a more competitive operating environment and lower levels of currency volatility.

Macquarie was disappointed with the active client growth in FY18 and believes client acquisition and overall activity levels are necessary to support an improved outlook for profitability and earnings growth.

The broker downgrades to Neutral from Outperform. Target is raised to $1.83 from $1.71.

Target price is $1.83 Current Price is $1.72 Difference: $0.11
If OFX meets the Macquarie 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:

Market Sentiment: 0.0

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

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

Now that Santos has rejected Harbour Energy's higher offer, Citi analysts suggest the company narrative will shift towards growth in the coming months. They also point out, the fact that Harbour Energy said it wasn't impressed from the due diligence "complicates" things just a tad more.

As Citi has reverted back to a Sum-of-the-Parts (SoTP) methodology to value the shares, including long-term oil priced at US$55/bbl, the rating falls to Sell from Neutral. New price target is $5.30.

Target price is $5.30 Current Price is $5.86 Difference: minus $0.56 (current price is over target).
If STO meets the Citi target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.73, suggesting downside of -2.2% (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: 0.0

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

UBS rates STO as Neutral (3) -

Santos has rejected Harbour Energy's final proposal of US$5.21 a share. While Harbour Energy had indicated it would increase the offer to US$5.25 if Santos was willing to extend oil price hedging arrangements it had stated that this proposal was its best and final offer.

UBS notes the share price has traded at a significant discount to the bid price in recent days, attributed to concerns that Santos would reject the bid and/or regulatory approval would not be obtained. Harbour Energy cannot return with another bid for six months. Neutral rating and $6.40 target maintained.

Target price is $6.40 Current Price is $5.86 Difference: $0.54
If STO meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.73, suggesting downside of -2.2% (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: 0.0

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

Morgans rates TNE as Hold (3) -

Timing issues once again framed the company's first half result. Morgans notes operating revenue was up 6% and expenses also up 6%. Net profit was up 1%. Guidance for the full year is in line with expectations.

The broker rates the company as high-quality, given its defensive earnings and long-term track record. Still, Morgans is conscious that the stock is trading at elevated multiples. Hold rating maintained. Target is reduced to $4.82 from $5.10.

Target price is $4.82 Current Price is $4.63 Difference: $0.19
If TNE meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.27, suggesting upside of 13.8% (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

UBS rates TNE as Neutral (3) -

First half results were in line although FY18 guidance is -4-9% below UBS estimates. The company expects 10-15% pre-tax profit growth in FY18. This implies 17-18% growth in the second half and a substantial turnaround in consulting is required, the broker notes.

Cloud momentum remains strong and is a key supporter of earnings in the medium term. The broker requires stabilisation across the consulting and UK businesses before taking a more positive view.

Neutral rating maintained. Target is $5.30.

Target price is $5.30 Current Price is $4.63 Difference: $0.67
If TNE meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.27, suggesting upside of 13.8% (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

Macquarie rates WAF as Outperform (1) -

The company has completed a $35m share placement to accelerate development and exploration at Sanbrado. Primary use of the new funds will be the construction of an underground decline to access the high-grade M1S deposit.

Macquarie adjusts its base case to align with the earlier underground access as well as the overall development timeline. Outperform and 50c target maintained.

Target price is $0.50 Current Price is $0.34 Difference: $0.16
If WAF meets the Macquarie target it will return approximately 47% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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