Australian Broker Call

Credit Suisse rates ABP as Outperform (1) -

Abacus Property and Charter Hall ((CHC)) have acquired a 19.9% strategic interest in Australian Unity Office Fund ((AOF)) for $95.6m, equivalent to $2.95 per unit. Australian Unity Office has since released a notice to ASX stating it has received an unsolicited takeover proposal.

Credit Suisse calculates the offer would represent a 6.1% premium to the last closing price. The broker estimates the deal would be around 8.5% accretive in FY20 under a formal takeover scenario. Outperform rating and $4 target maintained.

Target price is $4.00 Current Price is $3.99 Difference: $0.01
If ABP meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.76, suggesting downside of -5.8% (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

Ord Minnett rates BPT as Buy (1) -

Ord Minnett notes media suggestions that ExxonMobil could be about to sell its Victorian oil & gas assets within the Gippsland Basin JV. Ord Minnett suggests Beach Energy could be a likely bidder.

The broker believes the assets would be appealing to the company, given the strategic importance of the onshore Longford gas plant to Victoria and NSW gas supply. Buy rating retained. Target is $2.40.

Target price is $2.40 Current Price is $1.82 Difference: $0.58
If BPT meets the Ord Minnett target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $2.08, suggesting upside of 14.5% (ex-dividends)

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

Deutsche Bank rates CCL as Hold (3) -

The company has completed the sale of its fruit and vegetable processing business, SPC. Profit on the sale of the asset is expected to be around $10-15m.

Given the company effectively wrote the value down to zero this is better than Deutsche Bank expected.

Hold rating and $8 target maintained.

Target price is $8.00 Current Price is $9.58 Difference: minus $1.58 (current price is over target).
If CCL meets the Deutsche Bank target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.36, suggesting downside of -12.8% (ex-dividends)

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

Macquarie rates CHC as Outperform (1) -

Along with Abacus Property the company has acquired a 19.9% stake in Australian Unity Office Fund ((AOF)), representing a 6% premium to the last close. The consortium will initiate discussions regarding a potential transaction, although this is yet to be confirmed, Macquarie points out.

If assumptions eventuate, the broker estimates the transaction would be around 1% accretive to Charter Hall's earnings on an annualised basis. Macquarie maintains an Outperform rating and $10.53 target.

Target price is $10.53 Current Price is $10.43 Difference: $0.1
If CHC meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $10.56, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

UBS rates CSL as Buy (1) -

The latest monthly data in the US show IG growth remains robust at 8.8% while haemophilia softness has broadened. The results are in line with the broker's CSL forecasts and there is no change to the Buy rating and $223 target.

Key catalysts ahead include CSL's result in August, resolution of albumin licencing issues in China and the next round of data.

Target price is $223.00 Current Price is $201.24 Difference: $21.76
If CSL meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $207.96, 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: 0.4

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

Credit Suisse rates FBU as Neutral (3) -

The company has completed the sale of Formica and, after the sale of Roof Tile Group earlier in 2019, Credit Suisse notes this now completes the divestments of international assets.

Earnings (EBIT) guidance reduces to NZ$620-650m, versus NZ$650-700m at the half-year result, reflecting one less month of Formica trading and softness in recent Formica earnings.

The broker notes the company will end FY19 with a strong balance sheet and, while this provides some options with respect to capital management, the broker expects a conservative approach is likely.

Target is raised to NZ$5.43 from NZ$5.28. Neutral maintained.

Current Price is $4.91. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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

Macquarie rates FBU as No Rating (-1) -

Fletcher Building has completed the sale of Formica and disclosed the contribution to FY19 guidance, updating for timing and variations. New guidance range is NZ$620-650m, with a -1.6% downgrade at the mid point from prior guidance.

Macquarie remains restricted on rating and target at present.

Current Price is $4.91. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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

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

The company has revised guidance for group earnings (EBIT) in FY19 to NZ$620-650m, which represents a -NZ$30m reduction to prior guidance because of the earlier completion of the Formica sale and softer trading in that business.

Morgan Stanley was not surprised by the reduction but believes the completion of the sale will return the balance sheet to a healthier, albeit under-leveraged, position.

The company will hold an investor briefing on June 26 when capital management could be announced. The broker suspects this is likely to be a buyback.

Equal-weight rating maintained. Target is NZ$5.00. Cautious industry view.

Current Price is $4.91. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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 FBU as Neutral (3) -

Fletcher Building has completed the sale of its formica business, which represented around one quarter of market cap, the broker notes. The question now is as to whether the company can add value with the proceeds or whether a historically low multiple is justified.

Guidance has been downgraded by -2%, which the broker suspects reflects margin pressure in steel. Neutral and NZ$5.15 target retained.

Current Price is $4.91. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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 GBT as Neutral (3) -

GBST has upgraded FY19 earnings guidance to be in line with FY18 after three years of declines. The upgrade reflects a 10-year contract signed with Canada Life UK for the use of the company's Composer software. It's the first major announcement in two years and is a major endorsement of GBST's recovery plan, the broker suggests.

The broker had set its target at the $2.50 takeover offer from Bravura Solutions ((BVS)) but increases to $2.70 post contract win and a stronger earnings outlook, noting Bravura's offer may be rejected. Neutral retained.

Target price is $2.70 Current Price is $2.55 Difference: $0.15
If GBT meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting upside of 6.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Citi rates IPL as Neutral (3) -

The company has secured economic gas that will mean its Gibson Island plant continues to operate until 2022. Citi expects the company will record a strong earnings rebound in FY20. Nevertheless, fertiliser markets remain depressed and this puts some downside risk on FY19.

Incitec Pivot has secured gas supply from APLNG which will meet its needs and, in a separate announcement, a three-year extension has been announced to the gas transportation agreement by APA Group ((APA)).

While the new price was not disclosed, Citi calculates it will be lower than the current interim contract price of $9/GJ, enabling an improvement to earnings of $5m in FY20. Neutral rating maintained. Target is raised to $3.45 from $3.40.

Target price is $3.45 Current Price is $3.40 Difference: $0.05
If IPL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 7.5% (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

Deutsche Bank rates IPL as Buy (1) -

Deutsche Bank considers the three-year Gibson Island gas agreement a minor positive as it removes the last remaining uncertainty for the company and provides some options while obviating the need to shut the plant and avoid stranded costs.

Following a troubled first half, the broker suggests positives are emerging as all plants are operating at, or above, nameplate and the urea price is rising. Buy rating and $4.10 target maintained.

Target price is $4.10 Current Price is $3.40 Difference: $0.7
If IPL meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 7.5% (ex-dividends)

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 NWH as Sell (5) -

FY19 operating earnings (EBITDA) guidance is slightly softer than Deutsche Bank assessed, at $140-145m. Guidance implies a sequential margin decline of around -385 basis points to around 10.5%.

The broker notes no information was provided about why the second half is likely to be so much weaker, instead the company provided FY20 revenue guidance well above forecasts. Sell rating and $2.32 target.

Target price is $2.32 Current Price is $2.44 Difference: minus $0.12 (current price is over target).
If NWH meets the Deutsche Bank target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.79, suggesting upside of 14.5% (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

UBS rates NWH as Upgrade to Buy from Neutral (1) -

NRW client Gascoyne Resources has gone into administration. Work will continue and NRW will continue to be paid while the administrator explores all options, but UBS suspects NRW will write off the $35m at risk despite this being the worst case scenario.

The broker cuts FY19 forecast earnings but leaves FY20-21 largely unchanged, noting a forecast win-rate for new iron ore contracts offers material upside. UBS believes selling has been overdone and upgrades to Buy. Target falls to $3.05 from $3.10.

Target price is $3.05 Current Price is $2.44 Difference: $0.61
If NWH meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $2.79, suggesting upside of 14.5% (ex-dividends)

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

UBS rates NWS as Buy (1) -

REA Group ((REA)) is the broker's preferred online classifieds stock. It also accounts for 67-75% of major shareholder News Corp's valuation, the broker suggests. News Corp's "stub" of mostly traditional media assets is, the broker believes, weill undervalued by the market while still generating some 70% of earnings.

News is thus a cheaper way to play REA, although such a strategy is not without risk, the broker concedes, given the structural decline in traditional media. Buy retained, target rises to $21.25 from $20.75.

Target price is $21.25 Current Price is $17.01 Difference: $4.24
If NWS meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $21.24, suggesting upside of 24.8% (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: 0.4

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

Deutsche Bank rates QAN as Buy (1) -

The US government has tentatively approved Qantas' proposed expanded alliance and revenue pooling agreement with American Airlines. The arrangement will mean the two carriers co-ordinate flight schedules, pricing and capacity and share revenue on international routes between the US, Australia and New Zealand.

This is expected to underpin stronger returns on the Qantas trans Pacific operations. Deutsche Bank maintains a Buy rating and $6.40 target.

Target price is $6.40 Current Price is $5.42 Difference: $0.98
If QAN meets the Deutsche Bank target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $5.91, suggesting upside of 9.0% (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

Credit Suisse rates SGR as Outperform (1) -

As the Queensland government has initiated a formal procurement process for a global tourism hub on the Gold Coast, that could take until late 2020 for a proposal, this will remain an overhang on the company's share price, Credit Suisse believes.

A new casino resort may not be economically viable because of the small domestic market and Credit Suisse calculates such an investment may need to be near $1.5bn.

If such a casino is eventually built, the broker suggests Star Entertainment could lose -$20m in operating earnings (EBITDA) relative to forecasts worth $0.30 a share to the competition.

Notwithstanding this, Credit Suisse believes the stock is undervalued and retains an Outperform rating. Target is $5.50. Crown Resorts ((CWN)) in Sydney is assumed to be less of a competitive threat than is factored into the share price.

Target price is $5.50 Current Price is $4.45 Difference: $1.05
If SGR meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $5.55, suggesting upside of 24.8% (ex-dividends)

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

Ord Minnett rates SGR as Buy (1) -

Ord Minnett has reviewed the Sydney and Queensland markets and concludes there is more than $43m per annum in earnings growth from the additional hotel capacity at Queen's Wharf in Brisbane, of which Star Entertainment owns a 50% equity share.

This is expected to open in 2022. The broker increases earnings estimates by 7.5% for FY24 and 7.7% for FY25. Buy rating maintained. Target is raised to $5.70 from $5.50.

Queen's Wharf remains the key long-term driver, although increased capital expenditure, regulations and softness in Asian tourist numbers remain risks.

Target price is $5.70 Current Price is $4.45 Difference: $1.25
If SGR meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $5.55, suggesting upside of 24.8% (ex-dividends)

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

UBS rates SHV as Neutral (3) -

Select Harvests has posted an "exceptionally strong" crop performance, the broker suggests, 11% above previously upgraded guidance, thanks to ideal conditions, new technology and risk mitigation investment in, for example, frost fans.

The company does face higher costs for leasing and water, but this can be offset by strong performance and lower processing costs.

US-China trade relations offer volatility in almond pricing but the broker makes no changes to price forecasts. Neutral retained, target rises to $7.25 from $6.65.

Target price is $7.25 Current Price is $6.97 Difference: $0.28
If SHV meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

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

Deutsche Bank rates VOC as Hold (3) -

EQT has decided not to proceed with the indicative proposal to acquire Vocus for $5.25 a share. Deutsche Bank is not entirely surprised but considers this an incremental negative for Vocus as it has now received four unsuccessful bids in the last two years.

Despite the withdrawal, Deutsche Bank believes takeover interest continues and now incorporates a 15% takeover premium into the valuation. Target is reduced to $3.90 from $4.70. Hold maintained.

Target price is $3.90 Current Price is $3.76 Difference: $0.14
If VOC meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.13, suggesting upside of 10.0% (ex-dividends)

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 VRL as Buy (1) -

Citi believes the company's plan to invest $50m over the next 18 months to develop three new attractions at Sea World and improve customer experience at its theme parks could result in market share gains.

The stock is the broker's top pick in the small cap leisure sector. Buy rating maintained. Target rises to $3.90 from $3.75.

Target price is $3.90 Current Price is $3.34 Difference: $0.56
If VRL meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.61, suggesting upside of 7.9% (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