Australian Broker Call

Ord Minnett rates APT as Buy (1) -

In the wake of the first half result, Ord Minnett highlights that marketing expenditure may have increased materially but this is overwhelmingly driven by the US and UK and the expenditure in Australasia is rather small by comparison.

The broker also points out the seasonal nature of the average merchant fees should not be forgotten, with the second half generally benefiting. Meanwhile gross bad debts continue to trend down.

Hence, the strength of traction in the US and UK has caused the broker to upgrade revenue forecasts by 1-10% over the forecast period. Ord Minnett retains a Buy rating and raises the target to $37.40 from $36.50.

Target price is $37.40 Current Price is $34.14 Difference: $3.26
If APT meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $37.70, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Macquarie rates BHP as Outperform (1) -

Scarborough is progressing through to a final investment decision at the end of the year. A tolling fee has been agreed and interests in the fields are now aligned. Macquarie includes Scarborough in forecasts, with a base case return of 10%.

Meanwhile, buoyant iron ore prices are driving earnings upgrade momentum further for BHP Group.

The broker retains an Outperform rating and reduces the target to $42 from $43 amid increased near-term expenditure from Scarborough and a lower near-term earnings profile. Outperform maintained.

Target price is $42.00 Current Price is $33.27 Difference: $8.73
If BHP meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $39.60, suggesting upside of 19.0% (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: 0.2

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

UBS rates BRG as Upgrade to Buy from Neutral (1) -

UBS upgrades to Buy from Neutral, given strong top-line growth. The broker believes a premium multiple is justified because of the growth profile and business quality.

Direct entry to a new region could add up to $5 per share to the valuation, the broker calculates. The main risk is potential supply chain disruption from coronavirus although the company has not been materially affected to date.

Europe is now the second largest market for Breville and the broker forecasts more than $300m in sales by FY23. Target is raised to $22.70 from $17.85.

Target price is $22.70 Current Price is $19.09 Difference: $3.61
If BRG meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $23.63, suggesting upside of 23.8% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates BXB as Buy (1) -

Citi updates its US cost monitor, noting lumber prices are recovering. Softwood lumber inflation was 5.6% in January which comes as prices start to cycle the strong decline experienced in the prior corresponding half.

Meanwhile, transport inflation is receding. The broker expects CHEP Americas underlying earnings (EBIT) margins will increase by 90 basis points in the second half supported by lower inflation and automation benefits. Buy rating and $14.90 target unchanged.

Also, Citi suggests Brambles could turn out a beneficiary from an increase in inhome dining or stockpiling behaviours as consumers adjust consumption behaviours.

Target price is $14.90 Current Price is $11.99 Difference: $2.91
If BXB meets the Citi target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $12.89, suggesting upside of 7.5% (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: 0.0

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

UBS rates COH as Sell (5) -

UBS believes, excluding the Advanced Bionics recall and coronavirus, FY20 guidance for net profit of $290-300m is optimistic.

While the recall office market share opportunities, the broker suspects this will be limited as Advanced Bionics has a replacement device and a relatively small starting position. Any benefit will likely be more than offset by the deferral of surgeries because of coronavirus.

The broker also suggests the market is pricing in 75% penetration of processor upgrades over the traditional five-year cycle which, based on the current trend, does not appear achievable. Sell rating and $195 target maintained.

Target price is $195.00 Current Price is $208.14 Difference: minus $13.14 (current price is over target).
If COH meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $217.20, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in June.

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 COL as Upgrade to Accumulate from Lighten (2) -

Ord Minnett has become more confident in the supermarket industry as food inflation is now likely to persist. Moreover, the broker likes the Coles strategy based on cost savings and tailoring of range and formats.

Value now exists and the gap to Woolworths ((WOW)) is expected to continue narrowing. Rating is upgraded to Accumulate from Lighten and the target lifted to $16.75 from $15.00.

Target price is $16.75 Current Price is $15.76 Difference: $0.99
If COL meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $16.10, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in June.

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 CZI as Initiation of coverage with Buy (1) -

Ord Minnett initiates coverage on Cassini Resources with a Speculative Buy and $0.30 target.

The broker takes a closer look at the feasibility study for the West Musgrave nickel/copper project, in which the company owns a minority 30% stake and is in joint venture with OZ Minerals ((OZL)).

Ord Minnett conservatively values Cassini Resources at $137m, which is seen offering a compelling risk/reward versus the $34m enterprise value.

Target price is $0.30 Current Price is $0.09 Difference: $0.21
If CZI meets the Ord Minnett target it will return approximately 233% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

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

NSW Treasury has pulled -$1.6bn from its Australian mandate with Dexus which means, on a pro forma basis, the company's assets under management have fallen to $15.4bn.

While this is not good news, Morgan Stanley points out funds management only contributes around 8% of group earnings. One Treasury asset will now remain with Dexus management, the 50% stake in Westfield Knox.

The cessation of the Treasury mandate will occur from July 1, 2020, so there is no impact on growth guidance for FY20. Dexus has also indicated it is progressing a number of new funds that may fill the earnings hole.

Equal-weight rating maintained. In-Line sector view. Price target is $12.45.

Target price is $12.45 Current Price is $12.61 Difference: minus $0.16 (current price is over target).
If DXS meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.58, suggesting upside of 7.7% (ex-dividends)

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 HPI as Hold (3) -

The company has acquired two freehold hotel assets of $60m located in Brisbane and Sydney. The acquisition will be partially funded via the underwritten $30m placement as well as debt.

Following the acquisitions, the portfolio is valued at around $775m across 45 properties with a weighted average capital return of 6.1% and a weighted average lease expiry of 11.8 years.

Morgans retains a Hold rating and reduces the target to $3.36 from $3.44.

Target price is $3.36 Current Price is $3.27 Difference: $0.09
If HPI meets the Morgans target it will return approximately 3% (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

Macquarie rates IAG as Neutral (3) -

After recent peril events, Macquarie is becoming more positive on the outlook for the premium rate cycle, particularly for property risks.

Volume challenges continue but the broker envisages a flight to quality which should benefit Insurance Australia Group.

However, investment income is a challenge and the broker now incorporates recent changes to the Australian cash rate in forecasts. Neutral rating. Target is $6.70.

Target price is $6.70 Current Price is $6.80 Difference: minus $0.1 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.24, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in June.

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 MYR as Sell (5) -

Citi's initial response to today's H1 report release is that Myer's performance proved broadly in-line with market expectations, though Citi's own forecast sat 3.8% above reported net profit. Myer cleared 18 months of inventory in eight weeks, point out the analysts.

FY20 capex guidance came out higher than expected, while gross margins remain under pressure and like-for-like sales for the bricks and mortar operations declined by -5.3%, note the analysts. Cost reductions and ongoing space reduction are cited as positives.

Post today's release, Citi anticipates downgrades to market consensus forecasts, also noting Myer provided no guidance. Citi's forecast for FY20 sits -10% below consensus, but the analysts also believe this has already been priced in.

Target price is $0.57 Current Price is $0.33 Difference: $0.24
If MYR meets the Citi target it will return approximately 73% (excluding dividends, fees and charges).

Current consensus price target is $0.66, suggesting upside of 99.4% (ex-dividends)

The company's fiscal year ends in July.

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 NXT as Buy (1) -

Citi analysts have reiterated their Buy rating for NextDC following the announcement the cloud centres operator has landed a 6MW hyper scale contract for Melbourne-based M2. This contract win increases earnings visibility for the company, argues Citi.

The analysts explain Melbourne has been lagging Sydney in this type of contracts and while forecasts are for robust growth in Sydney, current forecasts for Melbourne are rather conservative, implying upside risk if this contract is to be followed up by more of the same.

Price target jumps 5% to $9.55. As hyperscale customers typically ramp-up power utilisation, which translates into higher costs for NextDC, Citi's estimates have remained largely unchanged.

Target price is $9.55 Current Price is $8.60 Difference: $0.95
If NXT meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.91, suggesting upside of 3.5% (ex-dividends)

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

Morgan Stanley rates NXT as Overweight (1) -

The company has announced a new hyper-scale contract for the M2 facility at 6MW with expansion options for an additional 7MW.

Morgan Stanley suggests the news will be positively received as the market had become concerned about the potential for signing hyper-scale deals in Melbourne.

As a result, the company increases FY20 capital expenditure estimates to $320-340m in order to accelerate the fit-out of M2.

Revenue will not be realised until later periods and Morgan Stanley notes, as a reference, when S2 signed a 5MW hyper-scale deal in the first half of FY19 the full revenue run rate was slated for FY21, two years later.

Overweight maintained. In-Line industry view. Target is $9.00.

Target price is $9.00 Current Price is $8.60 Difference: $0.4
If NXT meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.91, suggesting upside of 3.5% (ex-dividends)

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 NXT as Hold (3) -

The company has contracted 6MW of additional commitments in Victoria and will commence building its second structure in Melbourne, M2, for 12MW of additional capacity.

Ord Minnett is encouraged that the company is finally experiencing hyper-scale demand in Melbourne, although was surprised that none of the 8MW or more of latent capacity currently available at M2 will be used.

While the announcement provides additional revenue it also pulls forward capital expenditure and lowers the estimated internal rate of return by around -70 basis points.

Ord Minnett would like a stronger near-term demand signal before meaningfully reducing the estimated timeframe to fill M2. Hold maintained. Target rises to $8.25 from $8.20.

Target price is $8.25 Current Price is $8.60 Difference: minus $0.35 (current price is over target).
If NXT 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 $8.91, suggesting upside of 3.5% (ex-dividends)

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

UBS rates NXT as Buy (1) -

Contracted commitments at the Victorian data centres have increased to 21MW. There is another potential 7MW.

This is a big positive, UBS suggests, given investor concerns around the lack of hyper-scale activity in Melbourne and whether the location of M2 is suitable.

Others are likely to follow suit now the leading contracts have been committed, UBS suspects.

If both major markets in Australia are heating up, the broker envisages scope for accelerated earnings growth over the medium term. Buy maintained. Target is $9.10.

Target price is $9.10 Current Price is $8.60 Difference: $0.5
If NXT meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.91, suggesting upside of 3.5% (ex-dividends)

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

Macquarie rates OZL as Outperform (1) -

The ramp up at Carrapateena is in line with expectations and the process plant has hit target rates. This project is only expected to contribute moderate production in the first half of 2020, while achieving targeted throughput rates remains a key catalyst for the end of the year, in the analysts' view.

Macquarie makes modest adjustments to long-term production forecasts, leaving earnings forecasts largely unchanged. Target is reduced to $10.80 from $11.30. Outperform maintained.

Target price is $10.80 Current Price is $9.13 Difference: $1.67
If OZL meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $10.58, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates OZL as Accumulate (2) -

Ord Minnett is surprised by the significant de-risking at West Musgrave and improvement in project economics. Hence, the broker is more confident that the project will be the next development.

Copper continues to look weak for the near term but Ord Minnett suspects it will be one of the first items to benefit from stimulus in China. Accumulate rating and $11.30 target maintained.

Target price is $11.30 Current Price is $9.13 Difference: $2.17
If OZL meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $10.58, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates SDG as Hold (3) -

The first half result was mixed, Morgans observes, and overshadowed by the announcement of a proposed $60m off-market buyback. No FY20 guidance was provided but the broker expects a second half earnings skew, given the timing of settlements.

Development margins overall were 40%, boosted by the Ingleside land sale. No interim dividend was announced, given the buyback proposal.

The company believes a buyback is the appropriate way to achieve a balance between managing surplus funds and delivering sustainable returns.

Hold rating maintained. Target is raised to $1.75 from $1.62.

Target price is $1.75 Current Price is $1.69 Difference: $0.06
If SDG meets the Morgans target it will return approximately 4% (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

Macquarie rates SUN as Underperform (5) -

After recent peril events, Macquarie is becoming more positive on the outlook for the premium rate cycle, particularly for property risks.

Volume challenges continue but the broker envisages a flight to quality which should benefit Suncorp Group.

However, investment income is a challenge and the broker now incorporates recent changes to the Australian cash rate in forecasts.

Target is reduced to $11.20 from $11.45. Underperform retained.

Target price is $11.20 Current Price is $11.45 Difference: minus $0.25 (current price is over target).
If SUN meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.54, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates URW as Hold (3) -

Ord Minnett incorporates the 2019 result into its financial modelling. The broker continues to expect balance-sheet values to reduce. A small development pipeline is also anticipated.

Meanwhile, rental growth estimates continue to reflect a significant slowdown over the next five years. Ord Minnett maintains a Hold rating and the target is reduced to $11.00 from $11.80.

Target price is $11.00 Current Price is $8.95 Difference: $2.05
If URW meets the Ord Minnett target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $10.42, suggesting upside of 16.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

This company reports in EUR. 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

Macquarie rates WGX as Outperform (1) -

The company has undertaken the first mass firing to re-establish the Big Bell cave. This is an important step in Macquarie's view, as the ramp up of the mine over 2020 is a key component in the simplification of the production base.

Moderating the extraction rate assumptions at Big Bell means the broker's FY20 and FY21 estimates for earnings per share are reduced by -6% and -4% respectively. Target is reduced to $3.30 from $3.40. Outperform maintained.

Target price is $3.30 Current Price is $1.97 Difference: $1.33
If WGX meets the Macquarie target it will return approximately 68% (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 WPL as Upgrade to Outperform from Neutral (1) -

Scarborough is progressing and set for a final investment decision in 2020. A tolling fee has been agreed and interest in the fields are now aligned for both Woodside Petroleum and BHP Group ((BHP)).

Gas will be processed through the Pluto train 1 and the train 2 expansion.

Woodside's ability to manage capital investment over returns to shareholders will be a key driver of the share price in the medium term, Macquarie suggests.

The broker upgrades to Outperform from Neutral, noting the payment of the dividend is now critical to a positive view. A 73% pay-out ratio is assumed for 2020. Target is reduced to $33 from $35.

Target price is $33.00 Current Price is $27.32 Difference: $5.68
If WPL meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $35.64, suggesting upside of 30.4% (ex-dividends)

The company's fiscal year ends in December.

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: 0.5

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