Australian Broker Call

Macquarie rates CTX as Neutral (3) -

Macquarie suggests new initiatives could be required to offset headwinds in the business. The March quarter profit update pleased the broker, given the strength in supply & marketing.

The larger drivers of the share price are considered to be execution on convenience stores and the outcome of the asset review. Macquarie maintains a Neutral rating and increases the target to $36.60 from $36.20.

Target price is $36.60 Current Price is $30.49 Difference: $6.11
If CTX meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $36.22, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates CTX as Underweight (5) -

Morgan Stanley observes, on the back of the March quarter trading update, the marketing result appears to be good. However, there was no detail on this, the primary driver of value, the broker contends.

In other news, the broker notes speculation that Puma Energy is looking to buy 230 Woolworths ((WOW)) petrol stations. Morgan Stanley considers it unlikely that Puma's owner, Trafigura, would be interested in Caltex supplying the petrol stations.

This suggests to the broker why Caltex should trade on a lower multiple, as risks are growing it will not get to keep part, or all, of this contract.

Underweight rating. In-Line industry view. Target is $26.

Target price is $26.00 Current Price is $30.49 Difference: minus $4.49 (current price is over target).
If CTX meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.22, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates CTX as Hold (3) -

The company has reported a first quarter net profit of $155m. The main driver was growth in supply & marketing which offset weakness in refining, Ord Minnett notes.

Supply & marketing earnings were not disclosed because of the planned change in the division structure. Hold rating and $34 target maintained.

Target price is $34.00 Current Price is $30.49 Difference: $3.51
If CTX meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $36.22, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CTX as Buy (1) -

March quarter net profit was flat but ahead of UBS estimates. This stems primarily from Lytton, which generated first quarter operating earnings of $47m.

Despite the stronger first quarter result the broker's FY18 estimates for earnings per share have fallen -2% to reflect lower refiner margin. UBS's suspects the stock has been oversold and retains a Buy rating. Target is reduced to $38.70 from $38.90.

Target price is $38.70 Current Price is $30.49 Difference: $8.21
If CTX meets the UBS target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $36.22, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in December.

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 GNC as Upgrade to Outperform from Neutral (1) -

Graincorp's share price had been weak of late, Credit Suisse notes, due to a poor harvest. At the same time, the company has signalled several initiatives that are likely to deliver better profit and capital utilisation over the medium term.

A significantly more diversified grain marketing business, asset sale opportunities, improving earnings in refined oils and opportunities in craft malt whisky support valuation, the broker suggests, in the face of short-term weather impacts. To that end Credit Suisse upgrades to Outperform from Neutral while trimming its target to $8.80 from $9.06.

Target price is $8.80 Current Price is $7.83 Difference: $0.97
If GNC meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.64, suggesting upside of 10.3% (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 GNC as Neutral (3) -

Macquarie observes the first half result was mixed and the seasons are not in the company's favour. The company continues to push ahead with its efficiencies and efforts to diversify both upstream and downstream.

While sustaining capital expenditure is reduced, Macquarie notes progress on the company's efforts is only likely to become evident in FY19. Neutral rating and $8.29 target are maintained.

Target price is $8.29 Current Price is $7.83 Difference: $0.46
If GNC meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.64, suggesting upside of 10.3% (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

Morgans rates GNC as Hold (3) -

First half results were weak because of a below-average crop on the east coast. Underlying EBITDA was down -49.5% and net profit down -64%.

Given the challenging start to the winter season and the potential for another below-average year, Morgans remains cautious on the stock in the near term. Realising value from infrastructure assets poses potential upside risk. Hold rating and $8 target maintained.

Target price is $8.00 Current Price is $7.83 Difference: $0.17
If GNC meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.64, suggesting upside of 10.3% (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

UBS rates GNC as Neutral (3) -

The first half result was relatively weak but well flagged, given the poor cropping season. The broker observes the company's rail take-or-pay contracts continue to hurt in small crop volume years, although these are currently being re-negotiated for FY20 onwards.

The broker notes the oil division suffered severe operating issues and competitive pressures, and an improvement in this division as well as increased malt sales are required for the company to deliver FY18 guidance.

Neutral rating maintained. Target rises to $8.30 from $8.15.

Target price is $8.30 Current Price is $7.83 Difference: $0.47
If GNC meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.64, suggesting upside of 10.3% (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 LNK as Hold (3) -

The recent federal budget indicates the Australian government wants to consolidate inactive small accounts with the Australian Taxation Office acting as administrator.

There are 26.5m super accounts in Australia and Link is the largest funds administration business, with 9.3m customer accounts. Of this, Deutsche Bank calculates, there are 2.6m inactive customer accounts.

At this stage, the broker is uncertain just how many customers may transfer to the ATO and, hence, retains a Hold rating. Target is $7.70.

Target price is $7.70 Current Price is $6.89 Difference: $0.81
If LNK meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.46, suggesting upside of 22.7% (ex-dividends)

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

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

In Citi's analysis, Lovisa is in the early stages of its international expansion and there is material upside for earnings over the medium term. The stock is also trading at a -41% discount to its Australian retail peers.

Citi calculates, should the company successfully roll out 418 stores across the three pilot markets, it could be worth $16.12 a share. Over the medium term the broker envisages potential for Lovisa to enter new markets such as China, Mexico or Canada.

The broker initiates coverage with a Buy rating and $12.30 target.

Target price is $12.30 Current Price is $11.08 Difference: $1.22
If LOV meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.57, suggesting downside of -22.7% (ex-dividends)

The company's fiscal year ends in July.

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

Citi rates NWS as Neutral (3) -

March quarter results beat estimates, assisted by several one-off factors, Citi observes. The step up in Foxtel investment is to come and the broker suggests the underlying earnings trend is not as strong.

Still, the broker expects a fourth quarter acceleration in earnings from REA Group ((REA)) will offset the decline in the company's other divisions. Neutral rating maintained. Target rises to $23.00 from $21.85.

Target price is $23.00 Current Price is $20.52 Difference: $2.48
If NWS meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $22.17, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Credit Suisse rates NWS as Neutral (3) -

News Corp's March Q was impacted by higher costs in Cable Programming and News & Info, the broker notes, with digital real estate once again providing the offset. Move posted a strong result but its contribution is minimal compared to the REA Group ((REA)) stake.

The broker has increased its FY18 earnings forecast to reflect the consolidation of Foxtel and Fox Sports in the Dec Q, net of the cost of the new cricket rights deal. Target rises to $22 from $20 largely due to the lower A$. Neutral retained.

Target price is $22.00 Current Price is $20.52 Difference: $1.48
If NWS meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $22.17, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Deutsche Bank rates NWS as Buy (1) -

March quarter results were largely in line with estimates. Revenue performance was better than expected but offset by higher costs, particularly at news & information services.

Deutsche Bank makes limited changes to estimates and increases the target to $24.80 from $24.00. Buy rating maintained.

Target price is $24.80 Current Price is $20.52 Difference: $4.28
If NWS meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $22.17, suggesting upside of 8.1% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Credit Suisse rates ORA as Neutral (3) -

Orora's investor session produced nothing to move the broker into reassessing forecasts. Noting that the company is unlikely to win on price, management noted it continues to pursue a strategy of differentiation.

Investment is required in equipment to produce premium, innovative features in box-making. The broker retains Neutral and a $3.45 target, noting Orora's multiple is approaching that of Amcor ((AMC)) when that company's global diversity should suggest a higher multiple.

Target price is $3.45 Current Price is $3.39 Difference: $0.06
If ORA meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.48, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates ORA as Outperform (1) -

The company has reiterated FY18 expectations, noting Botany is on track to produce at nameplate in FY18 and a renewables deal has been signed with the new Victorian wind farm, effective May 1, 2018.

Macquarie suggests the stock is a solid defensive growth story and organic initiatives should provide positive earnings growth while acquisition potential remains. Outperform rating and $3.54 target maintained.

Target price is $3.54 Current Price is $3.39 Difference: $0.15
If ORA meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.48, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates PDL as Add (1) -

First half net profit was well above forecasts. The highlights for Morgans include 18% growth in base management fees and underlying operating margin expansion.

In the short term, the broker acknowledges the prospect of Westpac ((WBC)) selling its remaining 10% stake and also the likelihood that market volatility will weigh on the share price. Morgans maintains an Add rating and raises the target to $11.60 from $11.45.

Target price is $11.60 Current Price is $10.36 Difference: $1.24
If PDL meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $10.93, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates REA as Neutral (3) -

REA beat expectations with 19% revenue growth in the March Q, despite the drag of the timing of Easter. Earnings also grew 19% but were dragged down by the cost of marketing for the mortgage product, which the company had flagged.

The broker believes HomeTrack is a natural extension and a sensible way to expand REA's product offering. Target rises to $85 from $75. At a 33x FY19 PE, the stock is well priced, the broker suggests. Neutral retained.

Target price is $85.00 Current Price is $89.43 Difference: minus $4.43 (current price is over target).
If REA meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $81.96, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Deutsche Bank rates REA as Hold (3) -

March quarter results were well ahead of Deutsche Bank's estimates. The strong performance was driven by higher-than-expected revenue and lower-than-expected costs.

The broker upgrades estimates in line with the implied upgrade to full year guidance. Hold rating maintained. Target increases to $76.00 from $67.30.

Target price is $76.00 Current Price is $89.43 Difference: minus $13.43 (current price is over target).
If REA meets the Deutsche Bank target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $81.96, suggesting downside of -8.4% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Morgan Stanley rates REA as Overweight (1) -

Morgan Stanley notes, at first glance, the March quarter result suggests the business is on track to meet full year expectations.

The pace of growth is only slightly below the first half and the company has flagged a negative timing impact from public holidays.

Overweight rating, Attractive industry view and $85 target maintained.

Target price is $85.00 Current Price is $89.43 Difference: minus $4.43 (current price is over target).
If REA 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 $81.96, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

UBS rates REA as Sell (5) -

The company delivered a stronger-than-expected March quarter revenue and earnings outcome. UBS flags the launch of new agent branding products, which could add new revenue once fully penetrated and the Hometrack accretion, likely to be minimal because of the additional D&A.

The broker maintains a Sell rating and considers the stock expensive. Target is raised to $80 from $68.

Target price is $80.00 Current Price is $89.43 Difference: minus $9.43 (current price is over target).
If REA meets the UBS target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $81.96, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Credit Suisse rates SGP as Outperform (1) -

Stockland's investor day outlined a priority of shifting out of Retail Town Centres via asset sales and further investing in Logistics & Business Parks. Residential Communities remains robust, the broker notes, with price growth exceeding management's expectations and prompting a margin guidance upgrade.

The broker retains Outperform and a $4.71 target, noting that while Retail remains a concern in the current environment, other parts of the business offer upside.

Target price is $4.71 Current Price is $4.25 Difference: $0.46
If SGP meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.50, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates SGP as Accumulate (2) -

Stockland plans to increase its exposure to the industrial segment, to 20% from 14% currently, driven primarily by development. The company intends to maintain a tactical exposure to the office segment and would also like to execute further retail divestments.

Ord Minnett believes the retail portfolio could be better placed if it offloaded seven assets that are valued at about $820m or 11% of the portfolio. Accumulate maintained. Target is $4.70.

Target price is $4.70 Current Price is $4.25 Difference: $0.45
If SGP meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.50, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates STO as Neutral (3) -

Citi expects Harbour Energy will need to sweeten its bid to compensate shareholders for the recent increase in the oil price. The broker increases the target to $7.00 from $6.50 in anticipation.

This is based on calculations of how much the market's intrinsic value may have increased on a higher oil price assumption since the bid was first lodged.

Citi suggests Harbour Energy could appease FIRB concerns with domestic supply guarantees or committed capital. The broker retains a Neutral rating.

Target price is $7.00 Current Price is $6.27 Difference: $0.73
If STO meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.95, suggesting downside of -5.2% (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: 0.2

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

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

Xero's FY18 performance may have met market consensus, but Citi analysts had been a little more ambitious, and thus the company slightly "missed". But only on operational costs affecting EBITDA; other numbers were either better or in-line.

Estimates have been slightly reduced to incorporate lower margin assumptions. Valuation increases to $40.60 from $39.09, but that's not enough to keep the Buy rating in place given the strong rally in the share price, hence the downgrade to Neutral.

Target price is $40.60 Current Price is $40.07 Difference: $0.53
If XRO meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $38.15, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in March.

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 XRO as Underperform (5) -

Xero's maiden profit represents a break-out year for the company, the broker suggests. Cash is now close to troughing although another net outflow is expected in FY19.

Net additions were solid in Australia in the half and momentum improved in the UK, although growth in North America remains slow. The company reports progress in US partnerships.

The broker remains impressed by Xero's strategy and execution but a share price materially above valuation means Underperform retained. Target rises to $32.50 from $27.62.

Target price is $32.50 Current Price is $40.07 Difference: minus $7.57 (current price is over target).
If XRO meets the Credit Suisse target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $38.15, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in March.

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