Australian Broker Call
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November 06, 2019
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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).
Last Updated: 05:00 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
CCL - | COCA-COLA AMATIL | Upgrade to Accumulate from Hold | Ord Minnett |
ASG AUTOSPORTS GROUP LIMITED
Automobiles & Components
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Overnight Price: $1.77
Macquarie rates ASG as Outperform (1) -
The company has acquired Trivett Alexandria for $9m, which Macquarie suggests is capitalising on a bottom-of-the-cycle valuation.
The deal comprises six luxury/prestige dealerships in Sydney providing exposure to brands such as Jaguar, Rolls-Royce, Land Rover, McLaren, Bentley and Aston Martin.
Incorporating the acquisition results in 4% earnings accretion in FY20 and 8% in FY21, on Macquarie's calculations.
Coupled with improving industry fundamentals the broker expects this will underpin a positive outlook and maintains an Outperform rating. Target is raised to $1.90 from $1.76.
Target price is $1.90 Current Price is $1.77 Difference: $0.13
If ASG meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 7.80 cents and EPS of 14.20 cents. |
Forecast for FY21:
Macquarie forecasts a full year FY21 dividend of 10.70 cents and EPS of 16.50 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $83.24
Macquarie rates BKL as Underperform (5) -
First half profit is expected to be in line with the second half, with the company noting regulatory changes affecting trade in China have continued to weigh along with gross margin pressures.
An improvement in the second half is expected, supported by full realisation of the price increases in October and cost savings. At the AGM Blackmores also flagged significant management and board level changes.
Macquarie suspects the market is willing to look through the most recent downgrade on the basis that earnings have bottomed. However, current valuation implies a strong recovery and the broker urges caution in this respect.
Underperform rating maintained. Target is reduced to $58 from $60.
Target price is $58.00 Current Price is $83.24 Difference: minus $25.24 (current price is over target).
If BKL meets the Macquarie target it will return approximately minus 30% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $70.67, suggesting downside of -15.1% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 167.70 cents and EPS of 244.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 278.8, implying annual growth of -9.8%. Current consensus DPS estimate is 202.1, implying a prospective dividend yield of 2.4%. Current consensus EPS estimate suggests the PER is 29.9. |
Forecast for FY21:
Macquarie forecasts a full year FY21 dividend of 185.90 cents and EPS of 270.90 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 329.3, implying annual growth of 18.1%. Current consensus DPS estimate is 244.2, implying a prospective dividend yield of 2.9%. Current consensus EPS estimate suggests the PER is 25.3. |
Market Sentiment: -0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
CCL COCA-COLA AMATIL LIMITED
Food, Beverages & Tobacco
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Overnight Price: $10.20
Ord Minnett rates CCL as Upgrade to Accumulate from Hold (2) -
Ord Minnett reviews the stock, noting the Australian beverages division is poised to return to growth because of an increase in volumes and a positive mix on channel and product.
Also, while the Indonesian consumer segment is slowing the beverages industry is still performing well. The broker finds the valuation attractive and upgrades to Accumulate from Hold.
The next catalyst is expected to be the investor briefing on November 15. Target is steady at $11.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $11.00 Current Price is $10.20 Difference: $0.8
If CCL meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).
Current consensus price target is $9.54, suggesting downside of -6.5% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Ord Minnett forecasts a full year FY19 EPS of 51.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 52.3, implying annual growth of 35.8%. Current consensus DPS estimate is 48.7, implying a prospective dividend yield of 4.8%. Current consensus EPS estimate suggests the PER is 19.5. |
Forecast for FY20:
Ord Minnett forecasts a full year FY20 EPS of 55.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 55.3, implying annual growth of 5.7%. Current consensus DPS estimate is 46.4, implying a prospective dividend yield of 4.5%. Current consensus EPS estimate suggests the PER is 18.4. |
Market Sentiment: -0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $11.01
Credit Suisse rates CHC as Reinstate Coverage with Neutral (3) -
Credit Suisse reinstates coverage with a Neutral rating and $10.98 target. As of June 30, 2019 the company managed $30.4bn of real estate on behalf of third-party investors and had a diversified portfolio across industrial, office, retail and social infrastructure segments.
The business is guiding to 18-20% growth in earnings per security in FY20 and a 6% increase in distributions. Credit Suisse expects growth in earnings per security to pull back in FY21 as the $82m in performance fees in FY20 will be tough to replicate.
Target price is $10.98 Current Price is $11.01 Difference: minus $0.03 (current price is over target).
If CHC meets the Credit Suisse target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $12.65, suggesting upside of 14.9% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY20:
Credit Suisse forecasts a full year FY20 dividend of 36.00 cents and EPS of 57.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 58.4, implying annual growth of 15.6%. Current consensus DPS estimate is 37.1, implying a prospective dividend yield of 3.4%. Current consensus EPS estimate suggests the PER is 18.9. |
Forecast for FY21:
Credit Suisse forecasts a full year FY21 dividend of 38.00 cents and EPS of 52.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 54.2, implying annual growth of -7.2%. Current consensus DPS estimate is 39.6, implying a prospective dividend yield of 3.6%. Current consensus EPS estimate suggests the PER is 20.3. |
Market Sentiment: 0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $9.49
UBS rates FMG as Sell (5) -
UBS notes the share price remains at a 12-month high despite a -33% decline in the iron ore price to US$85/dmt from US$126/dmt in early July.
A number of factors are seen contributing to this outperformance including an improving product mix and closing discounts for lower grades.
The broker assesses the market has re-rated Fortescue Metals and is prepared to accept a lower free cash-flow yield to reflect a stronger balance sheet and improved performance.
UBS maintains a Sell rating and $7.50 target, envisaging that a further drop in the iron ore price could mean the multiples and yield are stretched.
Target price is $7.50 Current Price is $9.49 Difference: minus $1.99 (current price is over target).
If FMG meets the UBS target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $8.34, suggesting downside of -12.1% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY20:
UBS forecasts a full year FY20 dividend of 155.54 cents and EPS of 194.06 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 201.0, implying annual growth of N/A. Current consensus DPS estimate is 157.5, implying a prospective dividend yield of 16.6%. Current consensus EPS estimate suggests the PER is 4.7. |
Forecast for FY21:
UBS forecasts a full year FY21 dividend of 68.49 cents and EPS of 105.59 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 104.5, implying annual growth of -48.0%. Current consensus DPS estimate is 59.0, implying a prospective dividend yield of 6.2%. Current consensus EPS estimate suggests the PER is 9.1. |
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
Overnight Price: $8.83
Citi rates ILU as Neutral (3) -
Citi notes Iluka Resources is constructive regarding the mid-term outlook for zircon, expecting a market deficit because of declining supply. The company also expects an upturn in pigment demand for feedstocks by mid 2020.
Citi believes there is an increasing likelihood of a drop in Sierra Rutile production, as it transitions to the operations of one mine before an eventual start up of Sembehun.
The broker amends forecasts for Sierra Rutile production and reduces 2021-23 estimates for earnings by -3-9%. Neutral rating and $9 target maintained.
Target price is $9.00 Current Price is $8.83 Difference: $0.17
If ILU meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).
Current consensus price target is $9.19, suggesting upside of 4.1% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Citi forecasts a full year FY19 dividend of 9.00 cents and EPS of 65.40 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 72.6, implying annual growth of 0.6%. Current consensus DPS estimate is 16.4, implying a prospective dividend yield of 1.9%. Current consensus EPS estimate suggests the PER is 12.2. |
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 23.00 cents and EPS of 90.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 81.3, implying annual growth of 12.0%. Current consensus DPS estimate is 15.8, implying a prospective dividend yield of 1.8%. Current consensus EPS estimate suggests the PER is 10.9. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $18.97
Credit Suisse rates LLC as Outperform (1) -
Credit Suisse expects development earnings will be slightly higher in FY21 and FY22 and upgrades estimates. The broker also revises the risk free rate to 3% from 4% and equity risk premium to 6% from 5% in deriving valuation. The broker finds any upside from the sale of the engineering & services business hard to quantify.
The broker points out Lendlease Group needs to sell 1000-2000 apartments, 3000-4000 residential lots and 2-3 commercial buildings per annum to hit its targeted development return on invested capital of 10-13%. Commercial sales remain the swing factor for the FY20 development division outlook.
Target price rises to $19.85 from $16.83. Outperform rating retained.
Target price is $19.85 Current Price is $18.97 Difference: $0.88
If LLC meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).
Current consensus price target is $19.78, suggesting upside of 4.3% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY20:
Credit Suisse forecasts a full year FY20 dividend of 65.82 cents and EPS of 132.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 135.1, implying annual growth of 63.0%. Current consensus DPS estimate is 66.7, implying a prospective dividend yield of 3.5%. Current consensus EPS estimate suggests the PER is 14.0. |
Forecast for FY21:
Credit Suisse forecasts a full year FY21 dividend of 69.33 cents and EPS of 139.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 137.8, implying annual growth of 2.0%. Current consensus DPS estimate is 70.9, implying a prospective dividend yield of 3.7%. Current consensus EPS estimate suggests the PER is 13.8. |
Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
PDL PENDAL GROUP LIMITED
Wealth Management & Investments
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Overnight Price: $8.22
Morgan Stanley rates PDL as Overweight (1) -
Morgan Stanley updates forecasts ahead of the FY19 result. Given the diversity of growth options - in particular a resolution of Brexit could be a catalyst - the broker envisages compelling value.
Pendal Group has endured the largest obstacles to flows in the EU/UK from Brexit uncertainty. The broker suggests the risk of further Brexit-related outflows are reflected in the price. With a resolution now more likely, the outlook could substantially improve.
Overweight rating. Target is reduced to $8.80 from $9.60. Industry view: In-Line.
Target price is $8.80 Current Price is $8.22 Difference: $0.58
If PDL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).
Current consensus price target is $7.82, suggesting downside of -4.8% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 46.00 cents and EPS of 47.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 50.5, implying annual growth of -26.1%. Current consensus DPS estimate is 44.6, implying a prospective dividend yield of 5.4%. Current consensus EPS estimate suggests the PER is 16.3. |
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 48.00 cents and EPS of 54.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 53.4, implying annual growth of 5.7%. Current consensus DPS estimate is 46.5, implying a prospective dividend yield of 5.7%. Current consensus EPS estimate suggests the PER is 15.4. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $95.12
Macquarie rates RIO as Outperform (1) -
Macquarie adjusts pellet price premium assumptions, which reduces 2019 estimates for earnings per share by -1%. While the company's port facilities in the Pilbara are currently capable of 360mtpa, there are bottlenecks in the logistics chain and the broker remains cautious, maintaining a long-term forecast of 340mtpa.
Steel margins have swung back to positive territory and, with declining port stocks, the near-term outlook for iron ore is becoming more positive, Macquarie suggests. Outperform rating maintained. Target is reduced to $102 from $104.
Target price is $102.00 Current Price is $95.12 Difference: $6.88
If RIO meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).
Current consensus price target is $96.44, suggesting upside of 1.4% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 656.39 cents and EPS of 940.07 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 947.5, implying annual growth of N/A. Current consensus DPS estimate is 673.5, implying a prospective dividend yield of 7.1%. Current consensus EPS estimate suggests the PER is 10.0. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 485.16 cents and EPS of 817.78 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 903.5, implying annual growth of -4.6%. Current consensus DPS estimate is 587.3, implying a prospective dividend yield of 6.2%. Current consensus EPS estimate suggests the PER is 10.5. |
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
Morgan Stanley rates RIO as Equal-weight (3) -
While the free cash flow yield looks attractive, and the company has a balanced and predictable capital allocation strategy, Morgan Stanley believes it is insufficient to warrant an upgrade.
The broker's commodities team forecasts a rapid decline in iron ore prices from the current US$85/t, to US$70/t by the fourth quarter of 2020.
The broker is concerned that the re-rating in Rio Tinto's valuation multiple may not be sufficient to offset the magnitude of the downside to earnings.
Morgan Stanley maintains an Equal-weight rating and lowers the target to GBP45 from GBP46. Industry view is In-Line.
Current Price is $95.12. Target price not assessed.
Current consensus price target is $96.44, suggesting upside of 1.4% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 537.96 cents and EPS of 936.07 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 947.5, implying annual growth of N/A. Current consensus DPS estimate is 673.5, implying a prospective dividend yield of 7.1%. Current consensus EPS estimate suggests the PER is 10.0. |
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 486.59 cents and EPS of 806.22 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 903.5, implying annual growth of -4.6%. Current consensus DPS estimate is 587.3, implying a prospective dividend yield of 6.2%. Current consensus EPS estimate suggests the PER is 10.5. |
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
Overnight Price: $0.67
UBS rates SIG as Sell (5) -
Despite the outcome of the negotiations with Chemist Warehouse being uncertain, UBS notes the share price increased 19% over the last four days.
There is an opportunity in a potential deal to materially lift volumes and better utilise the distribution centre but the broker queries the cost of doing so.
The broker's base case scenario suggests only an 8.7% uplift to earnings would result and a Sell rating is maintained. Target rises to $0.50 from $0.49.
Target price is $0.50 Current Price is $0.67 Difference: minus $0.17 (current price is over target).
If SIG meets the UBS target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $0.50, suggesting downside of -25.0% (ex-dividends)
The company's fiscal year ends in January.
Forecast for FY20:
UBS forecasts a full year FY20 dividend of 2.00 cents and EPS of 2.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 1.8, implying annual growth of -52.6%. Current consensus DPS estimate is 1.6, implying a prospective dividend yield of 2.4%. Current consensus EPS estimate suggests the PER is 37.2. |
Forecast for FY21:
UBS forecasts a full year FY21 dividend of 3.00 cents and EPS of 3.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 2.3, implying annual growth of 27.8%. Current consensus DPS estimate is 2.0, implying a prospective dividend yield of 3.0%. Current consensus EPS estimate suggests the PER is 29.1. |
Market Sentiment: -0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Today's Price Target Changes
Company | Last Price | Broker | New Target | Prev Target | Change | |
ASG | AUTOSPORTS GROUP | $1.77 | Macquarie | 1.90 | 1.15 | 65.22% |
BKL | BLACKMORES | $83.24 | Macquarie | 58.00 | 60.00 | -3.33% |
CHC | CHARTER HALL | $11.01 | Credit Suisse | 10.98 | 4.92 | 123.17% |
LLC | LENDLEASE | $18.97 | Credit Suisse | 19.85 | 16.83 | 17.94% |
NHF | NIB HOLDINGS | $6.83 | Macquarie | 7.15 | 6.95 | 2.88% |
PDL | PENDAL GROUP | $8.22 | Morgan Stanley | 8.80 | 9.60 | -8.33% |
RIO | RIO TINTO | $95.12 | Macquarie | 102.00 | 104.00 | -1.92% |
SIG | SIGMA HEALTHCARE | $0.67 | UBS | 0.50 | 0.49 | 2.04% |
Summaries
ASG | AUTOSPORTS GROUP | Outperform - Macquarie | Overnight Price $1.77 |
BKL | BLACKMORES | Underperform - Macquarie | Overnight Price $83.24 |
CCL | COCA-COLA AMATIL | Upgrade to Accumulate from Hold - Ord Minnett | Overnight Price $10.20 |
CHC | CHARTER HALL | Reinstate Coverage with Neutral - Credit Suisse | Overnight Price $11.01 |
FMG | FORTESCUE | Sell - UBS | Overnight Price $9.49 |
ILU | ILUKA RESOURCES | Neutral - Citi | Overnight Price $8.83 |
LLC | LENDLEASE | Outperform - Credit Suisse | Overnight Price $18.97 |
PDL | PENDAL GROUP | Overweight - Morgan Stanley | Overnight Price $8.22 |
RIO | RIO TINTO | Outperform - Macquarie | Overnight Price $95.12 |
Equal-weight - Morgan Stanley | Overnight Price $95.12 | ||
SIG | SIGMA HEALTHCARE | Sell - UBS | Overnight Price $0.67 |
RATING SUMMARY
Rating | No. Of Recommendations |
1. Buy | 4 |
2. Accumulate | 1 |
3. Hold | 3 |
5. Sell | 3 |
Wednesday 06 November 2019
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