Australian Broker Call

Morgan Stanley rates BLD as Overweight (1) -

A tour of the US business provides confidence that increased fly ash volumes can be generated while maintaining attractive margins. Morgan Stanley envisages improved conditions for the remainder of the US business and, coupled with synergies, this should deliver strong growth.

The Australian business is also poised to benefit from strong construction markets. Overweight rating reiterated. Target is $8.00 and Industry view is Cautious.

Target price is $8.00 Current Price is $6.90 Difference: $1.1
If BLD meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $7.55, suggesting upside of 9.4% (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 BLD as Neutral (3) -

UBS observes, post the acquisition of Headwaters 15 months ago, there has never been this level of consolidation in the US fly ash industry and this is one of the arguments why storage & distribution is now a worthwhile investment.

This should provide consistency of supply and lead to better penetration rates. After a US site tour, the broker notes Boral's pitch centres on offering a full suite of services backed by technology and marketing that is unrivalled by peers. UBS maintains a Neutral rating and $7 target.

Target price is $7.00 Current Price is $6.90 Difference: $0.1
If BLD meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.55, suggesting upside of 9.4% (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 CCL as Neutral (3) -

While the company's main growth driver is Indonesia, volumes have been weak and there are a cyclical and structural challenges.

Citi expects, therefore, the share price to be range bound until there is consistent revenue growth in Australia and a rebound in Indonesian volumes.

Neutral rating and $9.50 target maintained.

Target price is $9.50 Current Price is $9.64 Difference: minus $0.14 (current price is over target).
If CCL 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 $9.05, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

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

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

Morgan Stanley believes the royal commission into the aged care sector clouds the investment debate. The outlook is unclear as there is little detail on the main questions that will be posed.

Potential points for examination include over-estimating patient acuity to obtain higher aged care funding, appropriate registered nurse ratios and appropriate hours of care per day.

The broker suspects Estia Health may gravitate towards a new bear case scenario and, at a minimum, a rise in compliance costs can be expected. Target is reduced to $2.63 from $3.45. Equal-weight retained. In-Line industry view.

Target price is $2.63 Current Price is $2.38 Difference: $0.25
If EHE meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.08, suggesting upside of 29.5% (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 GMG as Buy (1) -

Citi believes the outlook for the logistics sector is bright and driven by structural factors such as demand from e-commerce, the evolution of the supply chain and automation.

With little evidence of oversupply in key urban markets globally and shrinking infill markets because of higher value land-use, the broker questions whether the company can benefit by retaining more earnings for acquisitions and/or expanding the development pipeline.

The broker suggests that lowering the pay-out ratio now could provide an additional lever for the business. The stock remains Citi's top pick in Australian property and infrastructure with a Buy rating and $11.90 target.

Target price is $11.90 Current Price is $10.55 Difference: $1.35
If GMG meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $9.89, suggesting downside of -6.2% (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 HSO as Neutral (3) -

The company is pursuing a sale and lease-back of its property assets to an unlisted property trust, of which it will own 51%. Despite the company maintaining a majority ownership through the trust, Credit Suisse incorporates in its view the possibility that a change in beneficial owner may trigger capital gains tax.

The broker believes the transaction provides an opportunity for the co-investor to include significant rent increases in the agreement. Upside is considered muted by potential capital gains and stamp duty and Credit Suisse suggests a share buyback with the proceeds would be more accretive than repaying debt.

Neutral rating maintained. Target is reduced to $2.08 from $2.15.

Target price is $2.08 Current Price is $2.06 Difference: $0.02
If HSO meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.21, suggesting upside of 7.3% (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 IPL as Neutral (3) -

Credit Suisse notes press speculation regarding private equity expressing an interest in the company's fertiliser assets. The broker is in a quandary because of the mention of valuations of $1bn, given it has a valuation of $2bn for the Australian fertiliser business. Why would Incitec Pivot sell a dollar for $0.50?

The broker's divestment thesis hinges on the fact that fertiliser assets would likely be of more value to a global fertiliser manufacturing business that could maximise supply channels. Neutral rating and $4.02 target.

Target price is $4.02 Current Price is $3.95 Difference: $0.07
If IPL meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.10, suggesting upside of 3.9% (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 KLL as Outperform (1) -

The company's bankable feasibility study for Beyondie has revealed a 9% increase in average production and -7% lower cash costs over the life of the mine compared to the pre-feasibility estimates.

Macquarie considers the increase in scale a positive development, albeit partially offset by the rise in capital costs. Funding and offtake agreements are likely to be forthcoming and these are considered to be the near-term catalysts for the stock.

Outperform rating. Target is raised to $0.70 from $0.65.

Target price is $0.70 Current Price is $0.46 Difference: $0.24
If KLL meets the Macquarie target it will return approximately 52% (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 KMD as Buy (1) -

Deutsche Bank saw a strong result, in line with expectations and in the middle of the company's guidance range. There was no trading update or outlook guidance, but the analysts are not worried. Cost control is very much a factor also. Estimates have increased.

Buy rating retained, while the price target lifts to NZ$3.45 from NZ$3.20. The AUD-equivalent valuation of $3.17 is based on an AUD/NZD of 1.09, the analysts explain.

Current Price is $2.89. Target price not assessed.

Current consensus price target is $3.07, suggesting upside of 6.1% (ex-dividends)

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: 0.5

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

Morgan Stanley rates NAB as Underweight (5) -

The bank has announced a new and simplified remuneration framework for senior executives, designed to "incentivise performance in a way which represents the interests of all NAB stakeholders".

The framework is consistent with Morgan Stanley's view that Australian banks will need to focus more closely on culture and conduct. The broker believes a reduction in profitability may be required over the next few years to win back support and enhance long-term sustainability.

Underweight weighting retained. Industry view: In-line. Price target is $26.40.

Target price is $26.40 Current Price is $27.82 Difference: minus $1.42 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.19, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates SM1 as Underperform (5) -

Profit stood out in FY18, up 89%. Credit Suisse believes the company has made a clear statement on growth ambitions as it seeks to diversify from a single site and market. The broker finds there is a lot to like, as the company moves away from toll manufacturing and pursues the domestic everyday dairy market.

However, momentum is now expected to slow and the main issue for the broker going forward is the timing in which to price upside. A large valuation gap dominates the Credit Suisse view, given the uncertainty regarding the appropriate long-term return on capital.

Underperform maintained. Target is raised to NZ$7.65 from NZ$7.34.

Current Price is $10.92. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

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: -1.0

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

Deutsche Bank rates SM1 as Sell (5) -

Growth in FY18 was primarily from a further step change in finished infant formula, Deutsche Bank observes, and the outlook is supported by volume forecasts for a2 Milk ((A2M)).

Management is balancing the capture of continued growth from a2 Milk while diversifying its risk, to which end the broker notes the conditional acquisition of a specialty cheese manufacturer. Sell rating.

Current Price is $10.92. Target price not assessed.

Current consensus price target is N/A

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: -1.0

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

Macquarie rates SM1 as Underperform (5) -

FY18 results were in line with Macquarie's estimates. Profit growth is expected in FY19, albeit at a slower pace than the 89% increase witnessed in FY18.

The outlook for canned infant formula sales is conservative and probably based on uncertainty regarding the timing of approvals for Akara and Pure Canterbury, in the broker's view.

Macquarie maintains an Underperform rating on valuation. Target is raised to NZ$8.40 from NZ$7.00.

Current Price is $10.92. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

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: -1.0

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

UBS rates SVW as Buy (1) -

The company has showcased the new WesTrac Casula facility and the Coates Hire operation. UBS believes the $10m investment in technology and efficiency is enabling better fleet utilisation and asset maintenance/servicing.

There is also greater control of revenue management. Ongoing growth in infrastructure related activity in Sydney and opportunities such as the Western Sydney airport provide for growth. UBS reiterates a Buy rating. Target is $25.

Target price is $25.00 Current Price is $21.22 Difference: $3.78
If SVW meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $23.67, suggesting upside of 11.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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