Australian Broker Call

Citi rates ABC as Upgrade to Neutral from Sell (3) -

Citi observes the shares have fallen -38% from highs in early July. The housing cycle may have peaked but the broker believes the company's exposure to infrastructure and non-residential markets will provide a meaningful offset.

While the company has downgraded net profit guidance by -6%, the broker believes the factors are temporary. The broker cannot rule out speculation regarding the logic of a merger between Adelaide Brighton and privately-owned Barro, which is owned by the company's largest shareholder, the Barro family.

Citi upgrades to Neutral from Sell, believing the stock has retreated to fair value. Target is reduced to $4.70 from $5.50.

Target price is $4.70 Current Price is $4.57 Difference: $0.13
If ABC meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.89, suggesting upside of 7.1% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates AMC as Accumulate (2) -

Ord Minnett observes North American beverage volumes are a key focal point for the business. Beverage data by Nielsen points to continued volume weakness over the four weeks to December 1.

Notably, Kraft Heinz, the largest customer of Bemis, accounting for 10% of sales, has experienced an improvement in recent months.

North American beverages represent around 17% of Amcor's group revenue. Ord Minnett expects volumes to increase by 2% in FY19 before settling at growth of 1%.

Accumulate rating and $15.50 target maintained.

Target price is $15.50 Current Price is $13.24 Difference: $2.26
If AMC meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $15.23, suggesting upside of 15.0% (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: 0.8

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

Morgans rates AVG as Initiation of coverage with Add (1) -

Australian Vintage is one of Australia's largest vertically-integrated wine companies and Morgans initiates coverage with an Add rating and $0.64 target.

The company operates two wineries, in Sunraysia and the Hunter Valley and owns six vineyards, while leasing an additional four.

The business has strong positions with a number of retailers and wholesalers throughout Australia and the UK and is intent on growing sales in Europe, North America and Asia.

The broker forecasts an increase in net profit in FY19 of 15.3%.

Target price is $0.64 Current Price is $0.50 Difference: $0.14
If AVG meets the Morgans target it will return approximately 28% (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

Citi rates BPT as Upgrade to Neutral from Sell (3) -

Citi downgrades oil price forecasts and now expects Brent oil at U $60/bbl for 2018 and US$55/bbl for 2019. The broker maintains a neutral view on the sector but concedes there may be deep value emerging in some names.

Following the recent decline in the share price the broker now considers Beach Energy fair value and upgrades to Neutral from Sell. Target is reduced to $1.62 from $1.70.

Target price is $1.62 Current Price is $1.51 Difference: $0.11
If BPT meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.87, suggesting upside of 23.7% (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 CIP as Hold (3) -

The company has acquired two industrial assets in Queensland and Western Australia for $54.4m, to be partly funded by a non-renounceable rights issue and debt.

Morgans notes the portfolio is now valued at $1.1bn, with occupancy around 94.6% and a weighted average lease expiry of around 4.7 years.

The broker retains a Hold rating and raises the target to $2.72 from $2.71.

Target price is $2.72 Current Price is $2.83 Difference: minus $0.11 (current price is over target).
If CIP meets the Morgans target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Credit Suisse rates EVN as Downgrade to Underperform from Neutral (5) -

Credit Suisse believes, while Evolution Mining is a high-quality gold producer with a diverse portfolio, the stock is expensive.

A strong operating performance has meant acquisitions have been rapidly paid for, which has positioned the business to prosper under a range of gold price scenarios.

Still, on the basis of valuation, the broker downgrades to Underperform from Neutral. Target is reduced to $2.55 from $2.65.

Target price is $2.55 Current Price is $3.29 Difference: minus $0.74 (current price is over target).
If EVN meets the Credit Suisse target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.04, suggesting downside of -7.8% (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

Citi rates HUB as Initiation of coverage with Neutral (3) -

Citi expects a structural shift to specialist platform providers will accelerate and the company will more than double its market share over the next five years.

The broker initiates coverage with a Neutral rating, because upside in market share is envisaged but also downside to margins. The target is $14.25.

The broker envisages upside to market share forecasts if vertically-integrated operators are restricted by regulation and aligned advisers depart at a faster rate.

Target price is $14.25 Current Price is $13.20 Difference: $1.05
If HUB meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $13.84, suggesting upside of 4.9% (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 KLL as Outperform (1) -

Macquarie observes Beyondie continues to advance rapidly. Early works and FEED are progressing and the company will install camp facilities early in 2019. Financing discussions are continuing.

An offtake agreement with a German fertiliser producer is nearing finalisation, with due diligence and review of the bankable feasibility study being completed. Macquarie also believes further optimisation from FEED activity and recovery enhancements are likely.

The broker maintains an Outperform rating and $0.75 target.

Target price is $0.75 Current Price is $0.35 Difference: $0.4
If KLL meets the Macquarie target it will return approximately 114% (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

Credit Suisse rates NCM as Neutral (3) -

Newcrest and partner Harmony have signed an MOU with the PNG government that affirms the intention to proceed with Wafi Golpu. The MOU allows the planned work for 2019 to proceed.

Credit Suisse notes prior guidance had indicated the company's share of expenditure for the year would be US$40-45m and this remains likely to be the case.

Newcrest currently has a 50% equity share, which could be diluted to 35% if the PNG government takes up its right to 30%.

Credit Suisse maintains a Neutral rating and $20.30 target.

Target price is $20.30 Current Price is $20.63 Difference: minus $0.33 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.31, suggesting upside of 3.3% (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: 0.2

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

Citi rates NWL as Initiation of coverage with Neutral (3) -

Citi expects a structural shift to specialist platform providers will accelerate and the company will more than double its market share over the next five years.

The broker initiates coverage with a Neutral rating, because upside in market share is envisaged but also downside to margins. The target is $8.10.

The broker envisages upside to market share forecasts if vertically-integrated operators are restricted by regulation and aligned advisers depart at a faster rate.

Target price is $8.10 Current Price is $8.00 Difference: $0.1
If NWL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.90, suggesting downside of -1.3% (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 PAN as Initiation of coverage with Add (1) -

The company's Savannah project in Western Australia is being re-started. The mine infrastructure has been kept in good standing and Morgans notes the company's long-established knowledge of operations.

The broker initiates coverage with an Add rating and $0.70 target, believing the stock offers modest upside leverage versus other base metal developers, with correspondingly lower risk given the mine's proven operations, de-risked geology and funding certainty.

Target price is $0.70 Current Price is $0.38 Difference: $0.32
If PAN meets the Morgans target it will return approximately 84% (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

Deutsche Bank rates QBE as Hold (3) -

QBE has announced a new reinsurance program for 2019. Exposure is reduced to large single events but increased to medium-sized events.

Deutsche Bank observes the change will result in a $100m improvement in the regulatory capital position. However, the lower level of horizontal cover increases the P&L volatility.

Hold rating and $11 target are maintained.

Target price is $11.00 Current Price is $10.18 Difference: $0.82
If QBE meets the Deutsche Bank target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $12.15, suggesting upside of 19.4% (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: 0.8

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

UBS rates QUB as Neutral (3) -

UBS estimates $600m will be spent at Moorebank in the next three years and the company has sufficient balance sheet capacity, supported by a more positive outlook for Patrick.

The broker observes delays to Moorebank and pressure on stevedore profitability have been offset by a solid performance in the operating division and the potential for a special dividend.

Additionally, NSW Ports investment in rail, and increased infrastructure levies by DP World, are likely to improve investor sentiment.

The broker makes minor downgrades to estimates for earnings per share, given the stock has outperformed the market since beginning of November.

The broker continues to believe FY18 will be the cyclical low point and the shares are fairly valued at current levels. Neutral maintained. Target is reduced to $2.75 from $2.80.

Target price is $2.75 Current Price is $2.58 Difference: $0.17
If QUB meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting upside of 5.3% (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

Credit Suisse rates SBM as Downgrade to Underperform from Neutral (5) -

Credit Suisse believes the business is performing extremely well, with a record performance across both assets. The challenges lie with identifying another acquisition target that would be a good fit for the portfolio.

As a result of its corporate strategy, St Barbara has built various equity positions in Australian-listed gold companies, but the broker observes these are at the early stage and reliant on significant exploration success to define a development.

Rating is downgraded to Underperform from Neutral as the stock is considered fully priced. Target is raised to $3.90 from $3.85

Target price is $3.90 Current Price is $4.24 Difference: minus $0.34 (current price is over target).
If SBM 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 $4.28, suggesting upside of 0.9% (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 SHL as Upgrade to Buy from Neutral (1) -

The company will acquire US-based Aurora Diagnostics, funded by a $600m placement, up to $100m in a share purchase plan and debt. The transaction appears a good strategic fit, Citi suggests, and could be transformational for the US business over time.

Still, the broker questions whether raising equity at the current point in time is appropriate, given the company has the balance sheet capacity to fully fund the deal with debt. There is also limited visibility on the business, as it was acquired for private equity.

Citi upgrades to Buy from Neutral on valuation. Target is reduced to $25.25 from $26.25.

Target price is $25.25 Current Price is $21.76 Difference: $3.49
If SHL meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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

Credit Suisse rates SHL as Neutral (3) -

Sonic Healthcare will acquire Aurora Diagnostics for US$540m. Credit Suisse notes the US anatomical pathology market is highly fragmented and growth is being driven by the increasing prevalence of chronic diseases, an ageing population and increased healthcare expenditure.

The broker envisages potential for revenue synergies, with the company leveraging its new scale across the US hospital market. The broker maintains a Neutral rating and raises the target to $24.70 from $23.00.

Target price is $24.70 Current Price is $21.76 Difference: $2.94
If SHL meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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

Deutsche Bank rates SHL as Buy (1) -

Deutsche Bank believes the acquisition of  Aurora Diagnostics makes sense but is wary of challenging US market conditions and the sustainability of Aurora's margin.

The transaction is expected to expand the US business and increase exposure to the fragmented anatomical pathology market.

Buy rating maintained. Target is $29.56.

Target price is $29.56 Current Price is $21.76 Difference: $7.8
If SHL meets the Deutsche Bank target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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

Macquarie rates SHL as Neutral (3) -

The company will acquire Aurora Diagnostics, a US-based anatomical pathology service provider. Macquarie believes this is a strategically sound acquisition that will provide near-term accretion and the potential for growth over the longer term.

The broker's investment view balances reimbursement pressure in both the US and Germany, with potential for acquisitions and lower Australian collection centre rent costs.

Neutral rating maintained. Target is raised to $25.20 from $24.30.

Target price is $25.20 Current Price is $21.76 Difference: $3.44
If SHL meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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

Morgan Stanley rates SHL as Overweight (1) -

The company has acquired Aurora Diagnostics, a US-based pathology business with pro forma revenue of US$310m and EBITDA of US$59m.

Morgan Stanley notes, as anatomical pathology is not subject to funding cuts, the deal dilutes some of the top-line risk in the US and increases the company's US business representation to 28%.

The purchase price is US$540m, to be funded by a placement and bridging facility. Expected synergies are derived from cross selling opportunities between clinical and anatomical pathology.

Overweight. Target is $27.70. Industry view is In-Line.

Target price is $27.70 Current Price is $21.76 Difference: $5.94
If SHL meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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 SHL as Add (1) -

The company has increased its US footprint, purchasing Aurora Diagnostics for US$540m. Morgans believes the multiple paid is at the high end, although synergies include revenue expansion opportunities and the company is adding significant scale in a fragmented market.

The broker increases US sales projections and operating margins, leading to increases in earnings per share of up to 3.1%. Add rating maintained. Target is reduced to $27.95 from $28.70.

Target price is $27.95 Current Price is $21.76 Difference: $6.19
If SHL meets the Morgans target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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

UBS rates SHL as Neutral (3) -

Sonic Healthcare has announced the acquisition of Aurora Diagnostics for US$540m to be funded by a fully underwritten institutional placement, a separate share purchase plan and cash/debt facilities.

The acquisition significantly the increases the company's scale in anatomical pathology services and expands the US footprint into five new states.

UBS incorporates the pro forma earnings into its model, which drives a 7.3% increase to FY19 revenue and 11.4% to net profit. Earnings per share estimates lift 2-3% across the forecast period.

UBS maintains a Neutral rating and reduces the target to $23.20 from $23.50.

Target price is $23.20 Current Price is $21.76 Difference: $1.44
If SHL meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $26.02, suggesting upside of 19.6% (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