Australian Broker Call

Citi rates ABP as Upgrade to Buy from Neutral (1) -

Citi believes the stock has sold off on concerns relating to the delays in realising the residential project in NSW, while a slowing residential market is weighing on earnings.

The broker suspects the new strategy of moving towards a higher recurring base simplifies the business and could lead to a multiple re-rating.

The broker does not believe much has been priced in for the land bank and upgrades to Buy from Neutral. Target is raised to $3.91 from $3.80.

Target price is $3.91 Current Price is $3.38 Difference: $0.53
If ABP meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

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

Ord Minnett rates AMC as Accumulate (2) -

Ord Minnett factors in the proposed acquisition of Bemis, believing the deal should improve the company's sales mix, with flexibles increasing substantially and diluting the less-attractive tobacco and carbonated soft drinks segments.

Growth is expected to pick up because of normalising input costs, restructuring benefits and acquisition synergies. Accumulate rating and $15.50 target maintained.

Target price is $15.50 Current Price is $13.52 Difference: $1.98
If AMC meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $15.22, suggesting upside of 12.6% (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

Credit Suisse rates AZJ as Outperform (1) -

Credit Suisse adjusts FY19 estimates in line with the UT5 final decision. The company has until February 4 to respond to the Queensland Competition Authority with an amended undertaking, a week ahead of its first half results.

The broker expects the company to accept the final decision. FY19 operating earnings (EBIT) estimates are reduced by -4.6% and FY20-21 raised by 4%.

Credit Suisse maintains an Outperform rating and raises the target to $4.75 from $4.70.

Target price is $4.75 Current Price is $4.38 Difference: $0.37
If AZJ meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.31, suggesting downside of -1.6% (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

Ord Minnett rates BPT as Buy (1) -

Beach Energy is a beneficiary of higher domestic gas prices and Ord Minnett adjusts its Cooper Basin production assumptions. Domestic gas realised price forecasts are also raised to $9/GJ by 2024 and $10.50/GJ by 2025.

The broker maintains a Buy rating and raises the target to $2.15 from $2.00.

Target price is $2.15 Current Price is $1.70 Difference: $0.45
If BPT meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $1.89, suggesting upside of 11.2% (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

Citi rates BXB as Upgrade to Buy from Neutral (1) -

Citi observes the share price has been pressured in recent years by the decline in earnings for the CHEP Americas business. These headwinds are expected to fade in the second half and lead to double-digit earnings growth from FY20.

The broker upgrades to Buy from Neutral and lifts the target to $12.10 from $11.00. Citi now forecasts underlying margins to decline by -190 basis points for the CHEP Americas division in the first half, affected by cost inflation and the timing of costs recovery strategies.

Target price is $12.10 Current Price is $10.73 Difference: $1.37
If BXB meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $11.16, suggesting upside of 4.0% (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: 0.5

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

Macquarie rates CVN as Outperform (1) -

December quarter results were largely in line with Macquarie's forecasts. Farm-out discussions have commenced at Buffalo, which the broker suspects could substantially reduce the equity requirements.

The company remains committed to drilling Dorado-2 and Dorado-3 in April. Macquarie maintains an Outperform rating and $0.40 target.

Target price is $0.40 Current Price is $0.37 Difference: $0.03
If CVN meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Citi rates DXS as Downgrade to Neutral from Buy (3) -

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

Citi trims office exposure and reduces the Dexus rating to Neutral from Buy. Target is raised to $11.05 from $10.83.

Target price is $11.05 Current Price is $11.20 Difference: minus $0.15 (current price is over target).
If DXS meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.56, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.2

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

Citi rates LLC as Upgrade to Buy from Neutral (1) -

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

Citi upgrades LendLease to Buy/High Risk from Neutral. Target is steady at $15.06.

Target price is $15.06 Current Price is $12.11 Difference: $2.95
If LLC meets the Citi target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $15.36, suggesting upside of 26.8% (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 MIN as No Rating (-1) -

Macquarie incorporates the sale of 50% of Wodgina for the first time as well as the purchase of Mount Marion. Shipment forecasts for Iron Valley and Koolyanobbing are also adjusted to reflect the latest port data.

Macquarie is currently on research restrictions and cannot advise a rating or target.

Current Price is $15.98. Target price not assessed.

Current consensus price target is $20.07, suggesting upside of 25.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Morgan Stanley rates MPL as Underweight (5) -

Morgan Stanley suspects a 2% cap on premium increases in 2020 and 2021 is a most likely outcome for private health insurers. Private health has emerged as a key policy debate in the upcoming federal election.

The broker suspects the industry will underperform again in 2019, despite multiples de-rating to substantially below historical averages.

Regulated profit pools make up around 90% of Medibank Private's earnings and, the broker notes, the ADF contract loss is a major blow to the company's ambitions to double non-insurance earnings.

Target is reduced to $2.15 from $2.30. Underweight rating maintained.  Industry view: In-Line.

Target price is $2.15 Current Price is $2.62 Difference: minus $0.47 (current price is over target).
If MPL meets the Morgan Stanley target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.55, suggesting downside of -2.8% (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

Citi rates MYX as Initiation of coverage with Buy (1) -

Making accurate forecasts about the complex US generics market is an Herculean task, so much analysts at Citi are prepared to acknowledge. But then this market has grown by 4% CAGR over the past decade.

Citi's positive view is based upon Mayne Pharma, supported by an expanded sales force, will increase its market share. Plus the company is expected to play an active role in consolidating smaller players.

Citi initiates coverage with Buy rating and 95c price target.

Target price is $0.95 Current Price is $0.85 Difference: $0.1
If MYX meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $1.00, suggesting upside of 17.9% (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

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

Morgan Stanley suspects a 2% cap on premium increases in 2020 and 2021 is a most likely outcome for private health insurers. Private health has emerged as a key policy debate in the upcoming federal election.

The broker suspects the industry will underperform again in 2019, despite multiples de-rating to substantially below historical averages. The broker believes nib, with 40% of earnings in unregulated businesses, is better placed to manage this scenario.

Equal-weight rating maintained. Target is reduced to $5.15 from $6.00. Industry view: In-line.

Target price is $5.15 Current Price is $5.35 Difference: minus $0.2 (current price is over target).
If NHF meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.83, suggesting upside of 8.9% (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

Credit Suisse rates PGH as Downgrade to Neutral from Outperform (3) -

Credit Suisse observes the share price has rallied ahead of the result, due on February 20. As a result, the broker downgrades to Neutral from Outperform. Target is steady at $3.85.

Guidance signals FY19 operating earnings (EBITDA) of around $245m in earnings will be weighted towards the second half, with the full year inclusion of the TIC acquisition. Guidance assumes no changes to resin prices.

Target price is $3.85 Current Price is $3.71 Difference: $0.14
If PGH meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.02, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.2

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

Credit Suisse rates QUB as Underperform (5) -

Credit Suisse rolls forward valuation and raises the target to $2.50 from $2.40. Underperform rating maintained. The broker expects first half net profit of $64m, up 4% because of modest growth in ports & bulk, infrastructure & property and Patrick.

The broker expects an update from management on timing and demand for Moorebank, due to open in the second half of 2019.

Target price is $2.50 Current Price is $2.69 Difference: minus $0.19 (current price is over target).
If QUB meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.73, suggesting upside of 1.5% (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

Morgan Stanley rates RMD as Overweight (1) -

Morgan Stanley expects double-digit top-line growth and ongoing operating leverage will be evident in the first half report. However, a definite trajectory is required towards double-digit EPS growth, otherwise the broker envisages a risk to the Overweight rating.

Morgan Stanley envisages less pressure on the gross margin, versus the previous five years, because of a softer US competitive bidding stance. Better growth in consumables should also help sustain gross margins.

Target is raised to $17.90 from $17.70. Industry view: In-Line.

Target price is $17.90 Current Price is $16.35 Difference: $1.55
If RMD meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $15.79, suggesting downside of -3.4% (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

Citi rates SAR as Sell (5) -

Guidance has been upgraded for FY19 after a record December quarter for gold production. Citi also adjusts its gold price outlook higher.

The broker maintains a Sell rating on valuation, raising the target to $2.10 from $1.95 because of the stronger production and lift in the gold price forecast.

Target price is $2.10 Current Price is $2.88 Difference: minus $0.78 (current price is over target).
If SAR meets the Citi target it will return approximately minus 27% (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

Macquarie rates SAR as Outperform (1) -

The company produced 88,800 ounces of gold in the December quarter, beating Macquarie's estimates by 5%. Grades at Carosue Dam were a highlight.

The strong outcome has prompted the company to lift production guidance to 345-365,000 ounces, while exploration results to date have led to accelerated expenditure over the remainder of FY19.

Macquarie maintains an Outperform rating and raises the target to $3.30 from $3.20.

Target price is $3.30 Current Price is $2.88 Difference: $0.42
If SAR meets the Macquarie target it will return approximately 15% (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

Citi rates SFR as Neutral (3) -

The company has confirmed media reports of a potential takeover offer for greenfields copper developer, MOD Resources ((MOD)).

Citi wants more detail in order to assess whether this is the right business for the company to acquire, although acknowledges Sandfire must act to bolster copper production as reserves at DeGrussa dwindle.

MOD Resources holds a portfolio of licences in Botswana's prospective Kalahari copper belt.

Citi maintains a Neutral/High Risk rating and $7.45 target.

Target price is $7.45 Current Price is $6.85 Difference: $0.6
If SFR meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $7.15, suggesting upside of 4.4% (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

Credit Suisse rates SGM as Outperform (1) -

The company has downgraded first half operating earnings (EBIT) guidance to around $110m. Credit Suisse notes continuing challenges from municipal waste recycling, where contract changes are required to restore margins, as well as weak e-recycling.

The broker was disappointed with the update as it comes despite global shredder capacity reductions and costly capital upgrades to technology.

Credit Suisse maintains an Outperform rating and reduces the target to $12.90 from $14.45.

Target price is $12.90 Current Price is $9.20 Difference: $3.7
If SGM meets the Credit Suisse target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $12.15, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in June.

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 SGM as Outperform (1) -

The company has guided to lower underlying operating earnings (EBIT) in the first half, at around $109.8m versus Macquarie's estimates of $129.3m.

Generally, margins were under pressure across operations and the broker believes a complex market environment affects the visibility. Valuation compensates, Macquarie assesses, being at a -40% or more discount to the market.

The broker believes the investment in lifting scrap quality should stand the business in good stead. Outperform maintained. Target is reduced to $14.65 from $16.60.

Target price is $14.65 Current Price is $9.20 Difference: $5.45
If SGM meets the Macquarie target it will return approximately 59% (excluding dividends, fees and charges).

Current consensus price target is $12.15, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates SGM as Overweight (1) -

The company has downgraded first half earnings estimates, highlighting a difficult market. While the longer-term outlook appears fine, Morgan Stanley suggests the recent track record of downgrades mean any opportunities may take time to play out.

The revised guidance is for group operating earnings (EBIT) of $110m, down -12% on the prior corresponding half. The broker adjusts forecasts to account for the revised guidance with the net result being a downgrade of -22.0% to FY19 and -13.6% to FY20 estimates.

Morgan Stanley maintains an Overweight rating and reduces the target to $12 from $15. Industry view is Cautious.

Target price is $12.00 Current Price is $9.20 Difference: $2.8
If SGM meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $12.15, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates SGM as Buy (1) -

The company has revealed that the second quarter of FY19 deteriorated significantly, downgrading first half operating earnings estimates. Ord Minnett reduces forecasts for FY19 by -27% in FY20 by -25%. The performance was weak across all businesses in the first half.

The broker acknowledges that, following two downgrades to guidance for the first half, it may require some significantly positive catalysts before the stock reflects its fundamental valuation.

Still a Buy rating is maintained on valuation, while the target is lowered to $11.50 from $15.40.

Target price is $11.50 Current Price is $9.20 Difference: $2.3
If SGM meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $12.15, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SGM as Downgrade to Sell from Neutral (5) -

The company has guided to a downgrade to December half operating earnings (EBIT), to around $110m. UBS observes most of the weakness during the period has reflected for margins in Europe, which in turn reflects underinvestment and increased competition.

Municipal recycling was also weak. The broker remains cautious on the outlook, as global scrap markets face increasing disruption.

UBS acknowledges forecasting the company's earnings trajectory has not become easier. Forecasts are reduced by around -15-20% and downside risk is still envisaged.

The broker downgrades to Sell from Neutral and reduces the target to $8.50 from $12.50.

Target price is $8.50 Current Price is $9.20 Difference: minus $0.7 (current price is over target).
If SGM meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.15, suggesting upside of 32.1% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates SGP as Upgrade to Buy from Neutral (1) -

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

The broker prefers fund managers and residential A-REITs in the sub-sector. Citi upgrades Stockland to Buy from Neutral and raises the target to $4.00 from $3.98.

Target price is $4.00 Current Price is $3.73 Difference: $0.27
If SGP meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.02, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates STO as Buy (1) -

Santos is a beneficiary of higher domestic gas prices and Ord Minnett adjusts its Cooper Basin production assumptions. Domestic gas realised price forecasts are also raised to $9/GJ by 2024 and $10.50/GJ by 2025.

As a result the broker raises the target to $7.20 from $7.10. Buy rating maintained.

Target price is $7.20 Current Price is $6.06 Difference: $1.14
If STO meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $7.03, suggesting upside of 16.0% (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: 0.5

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

Citi rates WOW as Downgrade to Neutral from Buy (3) -

Citi suspects the first half reporting season will be defined by retail trading through the Christmas period. Grocery remains the broker's preferred exposure, with favourable conditions continuing.

Citi downgrades Woolworths to Neutral from Buy as the valuation factors in upside from capital returns and margin expansion. Target is reduced to $31.30 from $33.00.

Target price is $31.30 Current Price is $29.89 Difference: $1.41
If WOW meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $29.09, suggesting downside of -2.7% (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