Australian Broker Call

Ord Minnett rates FMG as Downgrade to Hold from Buy (3) -

Ord Minnett notes the shares have surged more than 150% in 2019, but as iron ore approaches US$100/t investors may be reluctant to chase the stock, fearing the market will become overheated.

The stock still offers a strong dividend yield but has approached fair value and the broker downgrades to Hold from Buy. Target is raised to $11.00 from $10.50.

Target price is $11.00 Current Price is $10.86 Difference: $0.14
If FMG meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $8.75, suggesting downside of -19.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 IGO as Downgrade to Lighten from Hold (4) -

While the macro outlook remains favourable, Ord Minnett believes several stocks in the base metals sector are overvalued.

The rating on Independence Group is downgraded to Lighten from Hold with the target steady at $5.70.

Target price is $5.70 Current Price is $6.66 Difference: minus $0.96 (current price is over target).
If IGO meets the Ord Minnett target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.86, suggesting downside of -12.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Citi rates LVT as Buy (1) -

Citi expects a step up in growth in the second quarter as the company angles for a partner-based channel strategy. The broker is looking for a record second quarter after a weaker-than-expected first quarter.

Revenue and operating earnings forecasts increase in FY20 as the broker now models non-recurring revenue from Wizdom and CYCL separately.

Buy rating maintained. Target is reduced to $0.63 from $0.75 to reflect slower ARR growth and incremental costs from the acquisition of CYCL.

Target price is $0.63 Current Price is $0.27 Difference: $0.36
If LVT meets the Citi target it will return approximately 133% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

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

Morgans initiates coverage on MoneyMe with an Add rating and $1.79 target. The broker assesses the addressable market is substantial at around $14bn and considers the company's businesses model attractive, driven by strong loan unit economics.

MoneyMe is a consumer credit business that utilises its digital and technology platform to offer loan products. The business generates a 42% net contribution margin per loan and delivered growth of 82% in FY19.

After becoming profitable in FY20, Morgans forecasts profit growth of more than 100% in FY21 and FY22.

Target price is $1.79 Current Price is $1.51 Difference: $0.28
If MME meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgans rates MOZ as Downgrade to Hold from Add (3) -

The company's first half trading update was below expectations, with the Christmas period being affected by the recent bushfires. As a result first half operating earnings (EBITDA) are expected to be $33m.

The impact of the fires has continued into the start of the second half and management will provide an update at the first half result in late February. This could mean the full year outcome is below revised expectations.

The stock remains attractively priced from a valuation perspective but Morgans downgrades to Hold from Add to reflect elevated earnings uncertainty. Target is reduced to $2.40 from $3.46.

Target price is $2.04 Current Price is $1.83 Difference: $0.21
If MOZ meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

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

Credit Suisse upgrades to Neutral from Underperform as the stock reflects better value. The target is raised to $2.64 from $2.39.

Nevertheless, Credit Suisse understands it is challenging to resolve the competitive issues facing the business and there is no easy solution to the heavy risk weighting applied to the company's food division.

The broker floats the idea that, whilst not a perfect solution, the sale of food distribution to retailers could achieve a better alignment of interests and facilitate a high level of investment.

Target price is $2.64 Current Price is $2.58 Difference: $0.06
If MTS meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting upside of 8.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Ord Minnett rates OGC as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades to Buy from Accumulate based on valuation. Target is raised to $4.20 from $4.10.

The broker continues to be attracted to the turnaround potential in the business, expecting the strategies will become clearer in February when guidance is provided.

Target price is $4.20 Current Price is $2.80 Difference: $1.4
If OGC meets the Ord Minnett target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $4.12, suggesting upside of 47.1% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates ORE as Downgrade to Sell from Hold (5) -

Ord Minnett downgrades to Sell from Hold, raising the target to $2.55 from $2.25. The broker expects global GDP growth could rebound by mid year, linked to a fading drag from political conflict.

However, miners largely reflect this improved outlook and inexpensive valuations will be harder to find.

Target price is $2.55 Current Price is $3.58 Difference: minus $1.03 (current price is over target).
If ORE meets the Ord Minnett target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.15, suggesting downside of -12.0% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Citi rates PDL as Neutral (3) -

The first quarter update suggests to Citi a sharp recovery in earnings is unlikely in FY20 amid minimal performance fees and elevated fund outflows. Still, the broker remains constructive on the company's prospects.

A Neutral rating is maintained while the target is raised to $8.20 from $7.90 because of higher market multiples. FY20 and FY21 estimates for earnings per share are reduced by -6% and -3% respectively.

Target price is $8.20 Current Price is $8.40 Difference: minus $0.2 (current price is over target).
If PDL meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.51, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Credit Suisse rates PDL as Underperform (5) -

Funds under management and flows in the first quarter were below Credit Suisse estimates. JO Hambro reported its ninth consecutive quarter of outflows.

The broker expects performance fees will stay subdued and FY20 will be a challenging year. Underperform rating and $8.15 target maintained.

Target price is $8.15 Current Price is $8.40 Difference: minus $0.25 (current price is over target).
If PDL meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.51, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Morgans rates PDL as Downgrade to Hold from Add (3) -

First quarter funds under management of $101.4bn were up 1% on the prior quarter. Further net outflows were experienced at JO Hambro. Morgans observes the stock has rallied from a previously undemanding valuation because of improved sentiment in UK markets.

As the stock is now trading in line with valuation the rating is reduced to Hold from Add. Some risk of sustained outflows, amid a preference for the growth path being less reliant on market direction, prevents the broker from taking a more positive view. Target is reduced to $8.83 from $8.85.

Target price is $8.83 Current Price is $8.40 Difference: $0.43
If PDL meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.51, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Ord Minnett rates PDL as Accumulate (2) -

After the company reported first-quarter funds under management, Ord Minnett suggests the flow outlook is relatively benign. The broker considers the current share price presents an attractive risk/reward balance relative to other ASX-listed asset managers.

Historically, JO Hambro has been the driver of flows for the group but has experienced outflows from UK-based business over the past 8 quarters because of macro economic factors and a weakening underlying performance.

Ord Minnett maintains an Accumulate rating and raises the target to $9.40 from $9.30.

Target price is $9.40 Current Price is $8.40 Difference: $1
If PDL meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.51, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

UBS rates PDL as Sell (5) -

Net fund flows were a key area of disappointment for UBS in the first quarter update, with -$1.3bn in net outflows spread across both PDL Australia and its higher margin JO Hambro business.

The broker believes headwinds to revenue are likely to persist and lowers FY20 estimates for earnings per share by -1.9%. UBS retains a Sell rating and $7.75 target. UBS continues to envisage limited scope for JO Hambro performance fees in 2020 and 2021.

Target price is $7.75 Current Price is $8.40 Difference: minus $0.65 (current price is over target).
If PDL 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 $8.51, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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

Macquarie rates RDY as Outperform (1) -

The company has won a $7m contract with an initial five-year software subscription period. Implementation revenue will commence being recognised in the fourth quarter of FY20.

The contract is with Bendigo Kangan TAFE and will use ReadyTech's cloud-based student management system and JR Plus.

Macquarie observes the stock is trading at more than -50% discount to ASX peers and ongoing execution should drive a re-rating of multiples. Outperform maintained. Target is raised 4% to $2.50.

Target price is $2.50 Current Price is $1.99 Difference: $0.51
If RDY meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates RSG as Outperform (1) -

The company's 2020 production guidance of 500,000 ounces is in line with Macquarie's expectations while guidance for AISC of US$980/oz is -19% below forecasts.

Macquarie expects production will peak in 2020 and lifts long-term cost assumptions. If operating stability is achieved, the broker believes de-leveraging will be a key positive catalyst for the stock in 2020.

Outperform rating maintained. Target is reduced by -19% to $1.30.

Target price is $1.30 Current Price is $1.18 Difference: $0.12
If RSG meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 SBM as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades to Buy from Accumulate based on valuation and raises the target to $3.40 from $3.10.

The broker continues to be attracted to the deeper value and turnaround potential, expecting more clarity in February when the company provides guidance and plans for key projects.

Target price is $3.40 Current Price is $2.92 Difference: $0.48
If SBM meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Morgan Stanley rates TYR as Initiation of coverage with Overweight (1) -

Tyro Payments is an Australian merchant acquirer business competing against the major banks. Morgan Stanley believes this presents a rare opportunity to gain exposure to the payments system.

Card payments in Australia are worth around $650m in total transaction value per annum and are a structural growth story, increasing 7% per annum.

The broker does not expect Tyro to be profitable in FY20-21 as it requires further scale. Morgan Stanley initiates coverage with an Overweight rating and $4.15 target. Industry view is Attractive.

Target price is $4.15 Current Price is $3.50 Difference: $0.65
If TYR meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates TYR as Initiation of coverage with Accumulate (2) -

Tyro Payments is a pure domestic payments company and has achieved 10% market share in its vertical businesses. Ord Minnett believes it is primed to accelerate growth through market share, new verticals and cross-selling opportunities.

The broker initiates coverage with an Accumulate rating and $3.75 target. The gains in market share have come at a cost to major competitors such as the big four banks.

As these competitors work to overhaul their offerings on payments, Ord Minnett believes this is an opportune time for a fast tech-enabled disruptor to move on market share aggressively.

Target price is $3.75 Current Price is $3.50 Difference: $0.25
If TYR meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgans rates WBC as Add (1) -

In the absence of an AUSTRAC-related civil penalty, and assuming no further customer remediation charges, Morgans expects Westpac to have around $4.5bn of surplus CET1 capital at the end of FY20.

The broker believes damage to the share price is excessive and Westpac remains its preferred major bank.

Cash earnings forecasts are reduced by -3.8% and -2.4% for FY20 and FY21 respectively because of the share purchase plan, which raised more than expected, and a reduction in first half non-interest income forecasts because of an expected rise in general insurance claims stemming from the bushfires.

Add maintained. Target is reduced to $30.00 from $30.50.

Target price is $30.00 Current Price is $24.67 Difference: $5.33
If WBC meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $26.44, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates WPL as Outperform (1) -

The main milestones in 2020 include a Scarborough toll deal, a Browse toll/FEED and the interconnector deal with North West Shelf.

Other factors Credit Suisse believes will affect the company during the year are the low spot LNG prices, the price premium for Greater Enfield, the outcome of arbitration on Sangomer and possible trading losses from the US.

The broker maintains an Outperform rating on the back of de-risking Sangomer, with upside risk from the Greater Enfield ramp up and premium pricing. This is offset by the downside risk of US LNG trading losses and lower LNG spot prices.

Credit Suisse increases the target to $37.10 from $36.00, envisaging upside risk from Scarborough and Interconnector growth prospects.

Target price is $37.10 Current Price is $35.82 Difference: $1.28
If WPL meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $36.52, suggesting upside of 2.0% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates Z1P as Accumulate (2) -

The company has signalled a strong finish to 2019 with positive surprises from higher transaction value and receivables.

Ord Minnett increases revenue and operating earnings forecasts going forward, given the first quarter contribution from Spotcap, which was acquired in September.

Whilst the TTV run rate is impressive, the broker still believes the FY20 target of 2.5m active customers is a stretch. Accumulate rating and $3.95 target maintained.

Target price is $3.95 Current Price is $3.57 Difference: $0.38
If Z1P meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.16, suggesting upside of 16.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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