Australian Broker Call

Macquarie rates AZJ as Outperform (1) -

Aurizon reported soft coal chain volumes for the Sep Q, down -3-4%. But the numbers were overridden by the announced sale of the company's Queensland intermodal business to Linfox. The sale will be subject to the lifting of a federal injunction, the broker notes, but the ACCC will not oppose.

The sale will trigger write downs, but the broker sees it as step one in stemming the company's losses. Steps two and three will be the sale of Acacia Ridge and resolving UT5. On a calculated internal rate of return of 11.7%, the broker retains Outperform and a $4.66 target.

Target price is $4.66 Current Price is $4.01 Difference: $0.65
If AZJ meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting upside of 7.0% (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 AZJ as Sell (5) -

Ord Minnett was surprised by the ACCC approval of the sale of the Queensland Intermodal business. Still, the bigger issue is the outcome of the court proceedings which commence on November 19.

The ACCC has approved a restructured transaction that will allow Linfox to acquire the Intermodal business for $7.3m while Aurizon agrees to provide the rail line-haulage service under a 10-year take-or-pay contract.

Meanwhile, the company and Pacific National will continue to seek clearance for the proposed sale of Acacia Ridge, which Ord Minnett suspects is unlikely, given raised barriers to entry for rail companies if Pacific National controls the terminal. Sell rating and $3.85 target maintained.

Target price is $3.85 Current Price is $4.01 Difference: minus $0.16 (current price is over target).
If AZJ meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.25, suggesting upside of 7.0% (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

UBS rates CMA as Buy (1) -

UBS incorporates the acquisition of four office assets in Brisbane, Sydney and Melbourne for $501m into its numbers. The price target is reduced to $2.58 from $2.60 to reflect dilution to financial metrics balanced against the benefits of the transaction.

The broker continues to have a preference for suburban office A-REITs in the small cap segment. Buy rating maintained.

Target price is $2.58 Current Price is $2.43 Difference: $0.15
If CMA meets the UBS target it will return approximately 6% (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

Ord Minnett rates CWY as Hold (3) -

The company has been awarded the waste services contract for the City of Sydney for seven years from July 1, 2019. Interestingly, Ord Minnett notes the contract also includes a requirement to provide sustainability training for the City of Sydney aiming to reduce waste and improve recycling rates.

While the annual revenue is relatively small in the context of Cleanaway's overall business, this is a highly visible contract, Ord Minnett observes, and follows much larger successes over the last year.

Hold rating and $1.85 target maintained.

Target price is $1.85 Current Price is $1.75 Difference: $0.1
If CWY meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 14.9% (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

Morgans rates CYB as Add (1) -

The bank has received IRB accreditation for its mortgage and SME/corporate portfolios. This has no impact on underlying forecasts, although Morgans increases forecasts for earnings per share by 10%, allowing for an earlier contribution from Virgin Money.

Add rating and $6.25 target maintained.

Target price is $6.25 Current Price is $5.46 Difference: $0.79
If CYB meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $6.55, suggesting upside of 24.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

This company reports in GBP. 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 DHG as Sell (5) -

Citi now forecasts flat revenue in the first half and growth in operating expenditure of 5%. Lower property listings in Sydney, structural changes in media display and rapid print declines have contributed to reduced revenue estimates.

While there should be modest improvements in revenue in the second half the broker suspects it will be insufficient to offset costs growth. Sell rating maintained. Target is reduced to $2.50 from $2.70. Citi asserts that most of the revenue decline should be temporary, with improved volume after the federal election, although margins could remain subdued for some time.

Target price is $2.50 Current Price is $2.77 Difference: minus $0.27 (current price is over target).
If DHG meets the Citi target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.06, suggesting upside of 16.0% (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

Credit Suisse rates DHG as Neutral (3) -

The company's trading update has pointed to weak volumes, with revenue down -1% for the first 15 weeks of FY19. Credit Suisse calculates, with digital revenue up 6%, this implies print revenue is down more than -20%.

The broker observes the commentary is consistent with recent data on new listings in the Sydney and Melbourne markets, although the extent of the impact has surprised to the downside.

Credit Suisse makes earnings changes which reflect an improvement in the second half and assumes some of the costs growth will be shifted to FY20. Neutral rating maintained. Target is reduced to $3.10 from $3.50.

Target price is $3.10 Current Price is $2.77 Difference: $0.33
If DHG meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.06, suggesting upside of 16.0% (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

Macquarie rates DHG as No Rating (-1) -

An update from Domian ahead of the Fairfax ((FXJ))-Nine ((NEC)) merger scheme booklet being released suggests the company is feeling the housing crunch, the broker notes. Earnings forecasts cut by -13% in FY19 and -10% in FY20.

Macquarie is on research restrictions and cannot provide a rating or target at this stage.

Current Price is $2.77. Target price not assessed.

Current consensus price target is $3.06, suggesting upside of 16.0% (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

Morgans rates DHG as Reduce (5) -

A downturn in residential advertising in NSW and Victoria has meant a downgrade to the company's expectations for FY19. Morgans observes first quarter revenue growth is less than half previous forecasts. Digital revenues grew to 6% in the first 15 weeks of FY19 versus 19.9% growth in FY18.

The broker believes Domain is paying a price for over exposure to NSW, where the drop off in advertising has been more severe than in other states. While there is likely to be several years of growth ahead for the business the broker believes the stock is overpriced and maintains a Reduce rating. Target is lowered to $2.52 from $2.81.

Target price is $2.52 Current Price is $2.77 Difference: minus $0.25 (current price is over target).
If DHG meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.06, suggesting upside of 16.0% (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 DHG as Accumulate (2) -

Listing declines in Sydney and Melbourne in the first quarter at Domain were in line with Ord Minnett's expectations, although digital revenue growth was much weaker than forecast.

Regardless, the broker's investment thesis is intact as depth penetration continues to grow in every state. Ord Minnett remains a buyer of the stock at current levels, ahead of the proposed merger between Nine Entertainment ((NEC)) and Fairfax ((FXJ)).

Accumulate rating maintained. Target is reduced to $3.50 from $3.80.

Target price is $3.50 Current Price is $2.77 Difference: $0.73
If DHG meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.06, suggesting upside of 16.0% (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

UBS rates DHG as Neutral (3) -

UBS suggests the market was aware of the potential for a softer trading update because of weak listing volumes and a lack of guidance at the FY18 result. Still, the extent of the downgrade to expectations has caught the broker by surprise, as the extent to which a soft housing environment amplifies print bundling/revenue has been underestimated.

Additionally, media, developer and commercial revenue growth probably turned negative in the first 15 weeks of FY19. UBS maintains a Neutral rating and reduces the target to $2.75 from $3.35.

Target price is $2.75 Current Price is $2.77 Difference: minus $0.02 (current price is over target).
If DHG meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.06, suggesting upside of 16.0% (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 FXJ as Neutral (3) -

Citi notes the fall in the Nine Entertainment ((NEC)) share price has now eliminated the premium from the merger bid for Fairfax shareholders. At this stage, the benefit to Fairfax shareholders from the merger is less obvious and the broker is no longer confident it will proceed under current terms.

Citi now reverts to valuing Fairfax on a fundamental basis rather than with an implied takeover price. Target is reduced to $0.72 from $0.90. Earnings forecasts are reduced by -4-8% across FY19-20 to account for the latest trading update. Neutral rating maintained.

Target price is $0.72 Current Price is $0.67 Difference: $0.05
If FXJ meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $0.84, suggesting upside of 26.0% (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

Macquarie rates FXJ as No Rating (-1) -

An update from Fairfax ahead of the merger scheme booklet being released suggests the company is feeling the housing crunch, the broker notes. Earnings forecasts cut by around -7% in FY19-21.

The broker is on research restrictions and cannot provide a target or rating at this stage.

Current Price is $0.67. Target price not assessed.

Current consensus price target is $0.84, suggesting upside of 26.0% (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 FXJ as Upgrade to Buy from Neutral (1) -

Fairfax has provided a trading update which was largely in line with UBS estimates. Revenue is tracking around -5% lower year-on-year.

Meanwhile, a softer trading update from Domain ((DHG)) and a downgrade to guidance caught the broker by surprise. This resulted in a substantial drop in the Fairfax share price. UBS upgrades to Buy from Neutral. Target is reduced to $0.80 from $0.85.

Target price is $0.80 Current Price is $0.67 Difference: $0.13
If FXJ meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $0.84, suggesting upside of 26.0% (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

Morgans rates JHC as Hold (3) -

The government has released the terms of reference for the Royal Commission into the aged care sector. Morgans expects higher wage, audit and compliance costs are likely across the sector.

The main downside risk, in the broker's view, from the RC is likely to be changes to the structure of the industry. Hold rating maintained. Target is reduced to $1.35 from $1.84.

Target price is $1.35 Current Price is $1.24 Difference: $0.11
If JHC meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.43, suggesting upside of 15.5% (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 JHG as Neutral (3) -

Citi marks to market for the September quarter, making some allowance for the drop in equity markets since September 30. The latest industry data suggests net fund outflows have continued at similar levels and performance fees are expected to be seasonally weaker.

Beyond FY18 the broker trims estimates for flows in performance fees but incorporates a further modest share buyback. Neutral rating maintained. Target is reduced to $36.35 from $43.60.

Target price is $36.35 Current Price is $33.99 Difference: $2.36
If JHG meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $43.34, suggesting upside of 30.3% (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

Morgans rates MHJ as Downgrade to Reduce from Hold (5) -

The company's trading update has revealed a very weak first quarter and Morgans makes meaningful downgrades to sales and earnings forecasts. All regions experienced heavy same-store sales declines with Australia down -12.8%, New Zealand -7.6% and Canada -11%.

While the share price is likely to fall materially on the back of the update Morgans is conscious of not becoming too negative at what could be a low point.

Nevertheless, the fact all territories are so weak simultaneously remains of concern. Hence, the broker downgrades to Reduce from Hold. Target is lowered to $0.70 from $1.01.

Target price is $0.70 Current Price is $0.91 Difference: minus $0.21 (current price is over target).
If MHJ meets the Morgans target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.95, suggesting upside of 35.7% (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

Macquarie rates MLX as Outperform (1) -

Metals X posted a soft Sep Q report, with production at both Nifty and Renison missing expectation. The broker has subsequently lowered its ramp-up timing forecast for Nifty in FY19 but maintains it run-rate forecast for FY20 and beyond.

Exploration results at both mines were positive but will have limited impact until the Nifty production rate improves, the broker suggests. Target falls to 80c from 85c, Outperform retained.

Target price is $0.80 Current Price is $0.51 Difference: $0.29
If MLX meets the Macquarie target it will return approximately 57% (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

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

Morgan Stanley notes documentation regarding the proposed takeover of Fairfax ((FXJ)) suggests the TV ad market has softened, as has Nine Entertainment's growth.

TV advertising revenues were broadly flat in the first quarter. The company still expects full year FY19 operating earnings of $280-300m.

Target is $2.00. Equal-weight retained. Industry view: Attractive.

Target price is $2.00 Current Price is $1.84 Difference: $0.16
If NEC meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.13, suggesting upside of 17.0% (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 NEC as Buy (1) -

Nine Entertainment has confirmed existing earnings guidance of $280-300m. Digital Avenue grew by over 10% in the September quarter.

The broker believes the reaction in the share price to the downgrade to forecasts by Domain ((DHG)) is excessive. Nine Entertainment would need to downgrade FY19 net profit by around -18% to justify the share price reaction.

UBS maintains a Buy rating and reduces the target to $2.15 from $2.60.

Target price is $2.15 Current Price is $1.84 Difference: $0.31
If NEC meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.13, suggesting upside of 17.0% (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 NSR as Upgrade to Accumulate from Lighten (2) -

Ord Minnett better understands how self storage is valued, where the transactions occur and the return on capital, after discussions with key stakeholders in the industry in Australia.

The broker reviews the company's financials and lifts free cash flow forecasts materially. Accordingly, the rating is upgraded to Accumulate from Lighten and the target raised to $1.85 from $1.55. Ord Minnett forecasts compound annual growth in earnings per share for the next three years of 5-6%.

Target price is $1.85 Current Price is $1.63 Difference: $0.22
If NSR meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $1.64, suggesting upside of 0.9% (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

Credit Suisse rates PLS as Outperform (1) -

The company's first concentrate shipped in October exceeded benchmarks. Credit Suisse considers achieving saleable grade specifications a significant positive and a de-risking event.

The stock remains the broker's top pick for asset quality, growth, strategic partnering and attractive valuation. Outperform and $1.15 target retained.

Target price is $1.15 Current Price is $0.79 Difference: $0.36
If PLS meets the Credit Suisse target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $1.10, suggesting upside of 37.5% (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

Morgans rates REA as Add (1) -

Morgans takes a more cautious view and lowers forecasts, given the downgrade by Domain ((DHG)). The broker acknowledges that REA Group's business is more geographically diversified but believes it is not resistant to the drop in top-end residential listings in Sydney and Melbourne, which affected Domain.

Morgans believes current 'for sale' listing volumes are unsustainably low but a return to normal is difficult to pin down. REA is expected to deliver several more years of double-digit earnings growth. Add rating maintained. Target is reduced to $92.02 from $95.21.

Target price is $92.02 Current Price is $75.50 Difference: $16.52
If REA meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $87.82, suggesting upside of 18.7% (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

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

Morgan Stanley observes the sell-off in luxury wines plus a slowdown in China has hurt the company recently. On the broker's estimates, Treasury Wine generates 34% of FY19 operating earnings from China and this has been the largest driver of the share price. The broker trims  FY19-21 estimates to reflect the trends.

As concerns around the Chinese macro economic environment linger and the shift away from growth stocks continues, the broker does not envisage valuation support at current levels. Equal-weight rating and $20 target retained. Industry view: Cautious.

Target price is $20.00 Current Price is $16.39 Difference: $3.61
If TWE meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $18.32, suggesting upside of 10.8% (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