Australian Broker Call

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

Citi notes the balance sheet is ungeared post the sale of the sexual wellness business and now explicitly forecasts acquisitions. Management has noted numerous acquisition opportunities and believes it has the capacity to make a transaction worth US$1-1.4bn.

The broker estimates an acquisition worth US$600m would be accretive to earnings by around 24% in FY21. The broker continues to forecast a progressive US$600m buyback over FY19-22. Rating is upgraded to Buy from Neutral. Target is raised to $28.50 from $25.50.

Target price is $28.50 Current Price is $25.35 Difference: $3.15
If ANN meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $26.46, suggesting upside of 4.4% (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: 0.1

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

Credit Suisse rates BHP as Neutral (3) -

Credit Suisse believes the company's diverse asset portfolio provides a key advantage over its peers because of an extensive suite of high-returning internal growth options.

The market does not yet possess sufficient detail to properly model some of these options and the broker expects that, as further disclosure is forthcoming, assessment of the earnings profile will grow incrementally. Neutral rating maintained. Target rises to $35 from $31.

Target price is $35.00 Current Price is $31.04 Difference: $3.96
If BHP meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $36.04, suggesting upside of 16.1% (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

Morgan Stanley rates DMP as Overweight (1) -

The Australian Fair Work Ombudsman has concluded the investigation of potential wage underpayment by Domino's Pizza. The investigation found very little underpayment across the network - around $2000 - and Morgan Stanley believes the findings lift a significant overhang from the stock.

The broker suggests this should incrementally drive a stronger Australian performance as the focus shifts to operations and the negative media commentary slows down.

Overweight rating retained. Cautious industry view. Target is $65.

Target price is $65.00 Current Price is $53.36 Difference: $11.64
If DMP meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $48.74, suggesting downside of -8.7% (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

Citi rates FPH as Sell (5) -

Citi believes FX should be a tailwind in FY19, although higher-than-anticipated litigation expenses following new court actions by ResMed ((RMD)) have pushed the company to lower its FY19 net profit guidance to around NZ$205-210m.

Citi believes the business is solid but the stock is trading well above long-term averages. A Sell rating is maintained on valuation grounds. Target is raised to NZ$13.00 from NZ$12.50.

Current Price is $13.63. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

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: -0.8

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 signalled that its explosive business in North America and Australia will be in line with first half guidance while fertilisers will experience lower distribution margins and volumes because of drought conditions.

Nevertheless, fertiliser pricing is firming and the company has confirmed a commitment to the business, while recognising current domestic ammonium nitrate markets are oversupplied.

Citi maintains a Neutral rating and raises the target to $4.10 from $3.90 following upgrades to FY19-20 forecasts.

Target price is $4.10 Current Price is $3.80 Difference: $0.3
If IPL meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Credit Suisse rates IPL as Upgrade to Neutral from Underperform (3) -

Credit Suisse observes that surplus cash is being used to reduce debt over the near term, creating options for larger scale reinvestment beyond FY19. The broker suggests the focus on downstream expansion in explosives appears relatively low in capital requirements and low risk.

Meanwhile, divesting the fertiliser business in Australia appears to be off the table, which the broker considers is a missed opportunity. Credit Suisse upgrades to Neutral from Underperform. Target is raised to $4.02 from $3.37.

The broker suggests earnings will be swept higher because of a tightening in fertiliser prices over the medium term and a gradual tightening in the explosives market.

Target price is $4.02 Current Price is $3.80 Difference: $0.22
If IPL meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Deutsche Bank rates IPL as Buy (1) -

The company is more confident in its outlook for fertiliser prices and will retain this business to optimise the performance and address uncertainty at Gibson Island. Quarry & construction demand remains strong, Moranbah is sustaining at record production and the Louisiana plant will run at 105% nameplate.

The company will complete the $300m buyback by the end of the year and then look to reduce debt and source growth opportunities. Deutsche Bank maintains a Buy rating and $4.55 target.

Target price is $4.55 Current Price is $3.80 Difference: $0.75
If IPL meets the Deutsche Bank target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates IPL as Outperform (1) -

The investor briefing was consistent with Macquarie's preview. A combination of better FY19 production, ongoing growth in US explosives and firm global fertiliser prices should mean stronger earnings in FY19.

The broker notes a growth agenda with an explosives bias. The company envisages an opportunity to continue investing in electronic explosives/emulsion and also to better market its capabilities. There is potential for Moranbah to expand in 2021. Macquarie maintains an Outperform rating and $4.16 target.

Target price is $4.16 Current Price is $3.80 Difference: $0.36
If IPL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

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

The company has outlined a strategy for growth in both the explosives and fertiliser businesses. Morgan Stanley believes the explosives business has the first call on capital to expand into end market and/or adjacent geographies.

However, the company has also outlined opportunities to improve its position in the fertiliser value chain. The broker notes debt reduction appears to be a priority and this is an appropriate approach, given the cyclical nature of the business.

Equal-weight rating, Cautious industry view and target raised to $3.90 from $3.80.

Target price is $3.90 Current Price is $3.80 Difference: $0.1
If IPL meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Ord Minnett rates IPL as Buy (1) -

Management discussed plant reliability and enhanced fertiliser profitability at its latest investor briefing. Earnings from the Waggaman ammonia plant and improved demand for explosives are expected to drive growth going forward.

Ord Minnett revises estimates for capital allocated to sustaining expenditure to $210m and minor growth capital expenditure to $65m, as guided. Accumulate rating maintained. Target rises to $4.10 from $3.90.

Target price is $4.10 Current Price is $3.80 Difference: $0.3
If IPL meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Credit Suisse rates JHG as Underperform (5) -

The stock is considered relatively inexpensive but Credit Suisse cannot envisage a positive catalyst on the horizon to underpin a re-rating of the price/earnings ratio. Net flows remain negative and are unlikely to return to positive territory because of pockets of weaker fund performance and management disruption.

The buyback is now in place but it is relatively small and there is only limited capacity for an increase. In the medium term the broker envisages room for a less bearish view but maintains an Underperform rating and $39 target.

Target price is $39.00 Current Price is $38.82 Difference: $0.18
If JHG meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $46.65, suggesting upside of 20.2% (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: 0.4

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

Ord Minnett rates JHX as Upgrade to Accumulate from Hold (2) -

Jack Truong will formally become CEO of James Hardie from next year. Ord Minnett believes the management team is strong and well prepared to drive the business going forward.

The share price has de-rated in recent months and is now trading at a rare discount to the S&PASX 200 industrials, the broker observes.

Ord Minnett takes the opportunity to upgrade to Accumulate from Hold. Target is $23.

Target price is $23.00 Current Price is $21.50 Difference: $1.5
If JHX meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $24.46, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in March.

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

UBS rates JHX as Buy (1) -

The company has appointed Jack Truong as its new CEO and he will formally take up the position in early 2019. UBS suspects investor caution prevailed ahead of this announcement because any change of CEO create some hesitation over the stock.

The broker considers Mr Truong the right person for the job as he has led the smooth acquisition and integration of Fermacell. Buy rating and $26.20 target maintained.

Target price is $26.20 Current Price is $21.50 Difference: $4.7
If JHX meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $24.46, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in March.

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

Macquarie rates NST as Upgrade to Outperform from Neutral (1) -

Macquarie resumes coverage and upgrades to Outperform from Neutral after a $175m placement. Target increases by 27% to $9.50. The placement is part of the funds for the acquisition of the Pogo mine in Alaska.

Incorporating Pogo delivers a material uplift to the broker's earnings forecasts, with earnings per share raised by 11% for FY19 and by 22% and 32% for FY20 and FY21 respectively.

Macquarie expects near-term reserve growth as the company's substantial resources are drilled out. The broker expects similar productivity gains and production increases at Pogo as have occurred at both Kalgoorlie and Jundee.

Target price is $9.50 Current Price is $8.27 Difference: $1.23
If NST meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $7.20, suggesting downside of -12.9% (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 PRY as Upgrade to Buy from Sell (1) -

Citi observes the capital raising has led to a re-basing of the business that it did not envisage. The broker increases forecasts for the medical centres business as a result of the $140m capital injection in that division.

The broker upgrades to Buy from Sell because the share price has de-rated so materially and the valuation now looks attractive. Target is raised to $3.20 from $2.85.

Target price is $3.20 Current Price is $2.92 Difference: $0.28
If PRY meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 5.8% (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

Credit Suisse rates SGM as Neutral (3) -

Credit Suisse is urging caution regarding month-by-month analysis of export volumes as these can be wildly distorted by the timing of the departure of a single ship. US port tonnage for export was flat for three months to July and remains down -23% on the very strong April tonnage.

The main issue is whether an expected softening in Turkish domestic steel demand can be offset by an increase in Turkish steel exports. The export price from Turkey has been extremely volatile, the broker points out, slumping to US$297/t mid August from US$327.50/t.

Credit Suisse maintains a Neutral rating and $14.80 target.

Target price is $14.80 Current Price is $12.90 Difference: $1.9
If SGM meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $15.01, suggesting upside of 16.3% (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 SIG as Underweight (5) -

Morgan Stanley observes industry conditions are challenging. The stock re-rated in 2016 after the business delivered on its growth strategy and secured contract terms with Chemist Warehouse.

Yet Morgan Stanley lacks confidence, given that this customer's impending exit makes it hard to predict earnings outcomes despite a positive track record. The broker envisages material risk until the Chemist Warehouse agreement expires and a firm earnings base is revealed.

Underweight retained. Industry view: In-Line. Target is reduced to $0.41 from $0.43.

Target price is $0.41 Current Price is $0.57 Difference: minus $0.16 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 28% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.47, suggesting downside of -17.5% (ex-dividends)

The company's fiscal year ends in January.

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