Australian Broker Call
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June 12, 2018
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)
THIS REPORT WILL BE UPDATED SHORTLY
Last Updated: 12:37 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
Today's Upgrades and Downgrades
| AST - | AUSNET SERVICES | Upgrade to Neutral from Sell | Citi |
AGL AGL ENERGY LIMITED
Infrastructure & Utilities
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Overnight Price: $20.91
Morgan Stanley rates AGL as Equal-weight (3) -
Morgan Stanley observes that pool prices have fallen and retail tariffs will follow. This drives reductions to estimates for earnings per share. Risks around policy add complexity to the outlook.
Nevertheless, the broker believes the headwinds for the energy market are adequately reflected in the share price.
Equal-weight rating. Target is reduced to $22.88 from $24.28. Industry view: Cautious.
Target price is $22.88 Current Price is $20.91 Difference: $1.97
If AGL meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).
Current consensus price target is $23.97, suggesting upside of 14.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Morgan Stanley forecasts a full year FY18 dividend of 114.00 cents and EPS of 152.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 153.4, implying annual growth of 90.6%. Current consensus DPS estimate is 112.1, implying a prospective dividend yield of 5.4%. Current consensus EPS estimate suggests the PER is 13.6. |
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 124.00 cents and EPS of 165.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 165.4, implying annual growth of 7.8%. Current consensus DPS estimate is 123.1, implying a prospective dividend yield of 5.9%. Current consensus EPS estimate suggests the PER is 12.6. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Ord Minnett rates AGL as Accumulate (2) -
The company has announced changes to its residential standing electricity prices for NSW, Queensland and South Australia from July 1. AGL will lower electricity prices slightly in all three states. Unlike Origin Energy ((ORG)), AGL has increased gas prices to both residential and business customers.
Ord Minnett does not believe the market will be surprised by the announcement and expects earnings growth to come from the wholesale business rather than retail. Accumulate rating and $24.50 target maintained.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $24.50 Current Price is $20.91 Difference: $3.59
If AGL meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).
Current consensus price target is $23.97, suggesting upside of 14.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Ord Minnett forecasts a full year FY18 dividend of 113.00 cents and EPS of 173.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 153.4, implying annual growth of 90.6%. Current consensus DPS estimate is 112.1, implying a prospective dividend yield of 5.4%. Current consensus EPS estimate suggests the PER is 13.6. |
Forecast for FY19:
Ord Minnett forecasts a full year FY19 dividend of 128.00 cents and EPS of 171.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 165.4, implying annual growth of 7.8%. Current consensus DPS estimate is 123.1, implying a prospective dividend yield of 5.9%. Current consensus EPS estimate suggests the PER is 12.6. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Morgan Stanley rates AMP as Overweight (1) -
Morgan Stanley believes the company's earnings and franchise resilience will surprise. The broker couples fear with uncertainty and envisages this as an opportunity.
The market fears a once-in-a-generation adviser transition is driving leakage of funds under management, but the broker believes this overlooks the tightening regulatory focus beyond the major players and the potential capital requirements for licensees post the Royal Commission.
Overweight maintained. Target is $4.50. Industry view is In-Line.
Target price is $4.50 Current Price is $3.63 Difference: $0.87
If AMP meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).
Current consensus price target is $4.29, suggesting upside of 18.1% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY18:
Morgan Stanley forecasts a full year FY18 dividend of 29.00 cents and EPS of 30.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 32.2, implying annual growth of 9.9%. Current consensus DPS estimate is 28.1, implying a prospective dividend yield of 7.7%. Current consensus EPS estimate suggests the PER is 11.3. |
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 29.00 cents and EPS of 28.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 33.0, implying annual growth of 2.5%. Current consensus DPS estimate is 28.3, implying a prospective dividend yield of 7.8%. Current consensus EPS estimate suggests the PER is 11.0. |
Market Sentiment: 0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $1.53
Citi rates AST as Upgrade to Neutral from Sell (3) -
Following the recent underperformance of the share price Citi upgrades to Neutral from Sell and considers the stock fairly valued. The broker also updates its model for the FY18 results, which slightly missed expectations.
The broker continues to prefer Spark Infrastructure ((SKI)) in the sector. Target is $1.54.
Target price is $1.54 Current Price is $1.53 Difference: $0.01
If AST meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).
Current consensus price target is $1.76, suggesting upside of 15.0% (ex-dividends)
The company's fiscal year ends in March.
Forecast for FY19:
Citi forecasts a full year FY19 dividend of 9.50 cents and EPS of 6.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 6.7, implying annual growth of -17.1%. Current consensus DPS estimate is 9.5, implying a prospective dividend yield of 6.2%. Current consensus EPS estimate suggests the PER is 22.8. |
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 9.70 cents and EPS of 6.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 6.7, implying annual growth of N/A. Current consensus DPS estimate is 10.0, implying a prospective dividend yield of 6.5%. Current consensus EPS estimate suggests the PER is 22.8. |
Market Sentiment: 0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $0.90
Morgans rates BUB as Hold (3) -
The company has announced a number of new supply agreements with distributors in China's off-line and online sales channels. Morgans upgrades forecasts but, having previously assumed strong revenue growth, maintains a Hold rating.
Recent announcements suggest the company is making progress in building a sustainable business and continued scaling of its distribution highlights the strength of the brand, point of differentiation and value of alliances, in the broker's view. Target is raised to $0.82 from $0.75.
Target price is $0.82 Current Price is $0.90 Difference: minus $0.08 (current price is over target).
If BUB meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 1.10 cents. |
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of 0.20 cents. |
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
CAT CATAPULT GROUP INTERNATIONAL LTD
Medical Equipment & Devices
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Overnight Price: $1.24
Morgans rates CAT as Add (1) -
Catapult has won FIFA approval for its athlete monitoring systems to be worn in-game. Morgans believes this should make it easier for Catapult to initiate sales discussions with clubs and associations.
FIFA approval does not imply endorsement but the certification should be an advantage in signing up new customers. Morgans maintains an Add rating and $1.76 target.
Target price is $1.76 Current Price is $1.24 Difference: $0.52
If CAT meets the Morgans target it will return approximately 42% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 4.10 cents. |
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 5.30 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
PTM PLATINUM ASSET MANAGEMENT LIMITED
Wealth Management & Investments
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Overnight Price: $6.01
Credit Suisse rates PTM as Neutral (3) -
The company reported funds under management of $27.7bn in May, down -0.9% because of negative market movements most of which can be attributed to the underperformance of the international fund. Net flows were positive.
While flows into international equities are cyclically weak at the moment Credit Suisse believes the company continues to attract modest inflows which is countering arguments that it could be negatively affected by PM changes.
While there is downside risk to FY19 forecasts if inflows persist at current levels, the broker is mindful that the company could be on the cusp of large inflows from maturing offshore UCITS products and new US distribution agreements.
Neutral rating and $5.50 target maintained.
Target price is $5.50 Current Price is $6.01 Difference: minus $0.51 (current price is over target).
If PTM meets the Credit Suisse target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $6.31, suggesting upside of 5.0% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Credit Suisse forecasts a full year FY18 dividend of 33.00 cents and EPS of 34.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 33.2, implying annual growth of 4.6%. Current consensus DPS estimate is 32.1, implying a prospective dividend yield of 5.3%. Current consensus EPS estimate suggests the PER is 18.1. |
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 33.00 cents and EPS of 34.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 33.2, implying annual growth of N/A. Current consensus DPS estimate is 31.3, implying a prospective dividend yield of 5.2%. Current consensus EPS estimate suggests the PER is 18.1. |
Market Sentiment: 0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
RHC RAMSAY HEALTH CARE LIMITED
Healthcare services
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Overnight Price: $57.24
Macquarie rates RHC as Outperform (1) -
Macquarie has reviewed the investment case for Ramsay Health Care following recent weakness in the share price. The broker expects the $300m worth of brownfield developments to be opened over 2018 should support growth in FY19/20.
Procurement savings should also support margin expansions. Noting PE/growth relative to domestic healthcare peers Macquarie envisages valuation appeal at current levels and maintains an Outperform rating and $74.50 target.
Target price is $74.50 Current Price is $57.24 Difference: $17.26
If RHC meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).
Current consensus price target is $68.24, suggesting upside of 19.2% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Macquarie forecasts a full year FY18 dividend of 145.50 cents and EPS of 282.90 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 281.8, implying annual growth of 7.8%. Current consensus DPS estimate is 146.0, implying a prospective dividend yield of 2.6%. Current consensus EPS estimate suggests the PER is 20.3. |
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 160.00 cents and EPS of 311.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 308.7, implying annual growth of 9.5%. Current consensus DPS estimate is 161.2, implying a prospective dividend yield of 2.8%. Current consensus EPS estimate suggests the PER is 18.5. |
Market Sentiment: 0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $9.98
Credit Suisse rates SFR as Underperform (5) -
The company has finally achieved in-principle agreement with Talisman ((TLM)) to acquire its 30% interest in the Monty underground copper mine and Springfield exploration JV. The price is $72m cash plus a 1% NSR royalty on future discoveries within the Springfield JV.
Credit Suisse understands the benefit of paying a full price to remove complexity and save management costs in a small deal such as this but hopes that the company does not use the same pricing approach for future transactions, unless the currency used is SFR paper. Rating is Underperform. Target is $6.70.
Target price is $6.70 Current Price is $9.98 Difference: minus $3.28 (current price is over target).
If SFR meets the Credit Suisse target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $7.32, suggesting downside of -26.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Credit Suisse forecasts a full year FY18 dividend of 27.13 cents and EPS of 75.96 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 79.2, implying annual growth of 61.1%. Current consensus DPS estimate is 26.4, implying a prospective dividend yield of 2.6%. Current consensus EPS estimate suggests the PER is 12.6. |
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 29.64 cents and EPS of 84.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 97.6, implying annual growth of 23.2%. Current consensus DPS estimate is 32.8, implying a prospective dividend yield of 3.3%. Current consensus EPS estimate suggests the PER is 10.2. |
Market Sentiment: -0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $4.61
Deutsche Bank rates TAH as Buy (1) -
The strategic review of Sun Bets has concluded and Tabcorp is now in discussions with its partner, News UK, about a proposal to exit its agreement to operate the business.
Deutsche Bank considers an early exit from this agreement as an incremental positive for Tabcorp. The business is loss-making and there appears to be little prospect it will be able to generate revenue in excess of the annual minimum payment obligations.
The broker reduces earnings estimates by -2-3% to reflect the costs of early termination. Buy rating and $5.50 target retained.
Target price is $5.50 Current Price is $4.61 Difference: $0.89
If TAH meets the Deutsche Bank target it will return approximately 19% (excluding dividends, fees and charges).
Current consensus price target is $5.21, suggesting upside of 13.0% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Current consensus EPS estimate is 15.6, implying annual growth of N/A. Current consensus DPS estimate is 20.0, implying a prospective dividend yield of 4.3%. Current consensus EPS estimate suggests the PER is 29.6. |
Forecast for FY19:
Current consensus EPS estimate is 20.7, implying annual growth of 32.7%. Current consensus DPS estimate is 21.7, implying a prospective dividend yield of 4.7%. Current consensus EPS estimate suggests the PER is 22.3. |
Market Sentiment: 0.7
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
WTP WATPAC LIMITED
Industrial Sector Contractors & Engineers
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Overnight Price: $0.76
Morgans rates WTP as Add (1) -
The Besix scheme of arrangement was not carried and its shareholding remains at 28.1%. While there is some overhang associated with the company potentially selling out, Morgans considers there is also upside risk from a full takeover proposal in time.
The broker maintains an Add rating based on the latent underlying asset value and the potential for Watpac to improve delivery. Target is raised to $0.91 from $0.88.
Target price is $0.91 Current Price is $0.76 Difference: $0.15
If WTP meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 1.70 cents. |
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of 7.00 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Summaries
| AGL | AGL ENERGY | Equal-weight - Morgan Stanley | Overnight Price $20.91 |
| Accumulate - Ord Minnett | Overnight Price $20.91 | ||
| AMP | AMP | Overweight - Morgan Stanley | Overnight Price $3.63 |
| AST | AUSNET SERVICES | Upgrade to Neutral from Sell - Citi | Overnight Price $1.53 |
| BUB | BUBS AUSTRALIA | Hold - Morgans | Overnight Price $0.90 |
| CAT | CATAPULT GROUP | Add - Morgans | Overnight Price $1.24 |
| PTM | PLATINUM | Neutral - Credit Suisse | Overnight Price $6.01 |
| RHC | RAMSAY HEALTH CARE | Outperform - Macquarie | Overnight Price $57.24 |
| SFR | SANDFIRE | Underperform - Credit Suisse | Overnight Price $9.98 |
| TAH | TABCORP HOLDINGS | Buy - Deutsche Bank | Overnight Price $4.61 |
| WTP | WATPAC | Add - Morgans | Overnight Price $0.76 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 5 |
| 2. Accumulate | 1 |
| 3. Hold | 4 |
| 5. Sell | 1 |
Tuesday 12 June 2018
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