Australian Broker Call

Citi rates A2M as Neutral (3) -

Citi analysts attended a2 Milk's Shanghai Investor Day with the take-away message that growth potential remains significant, but from here onwards the company will have to spend more to achieve it.

Citi analysts surmise events such as the Investor Day might lift investor confidence in management's ability to execute on its plans. The analysts also conclude as management's focus is more on improving sales rather than profitability, consensus forecasts are likely to prove optimistic.

Citi's forecasts incorporate margin pressure, but the analysts maintain risks remain to the downside. Elsewhere, the analysts' confidence in US expansion has increased. Neutral. Target price $15.15.

Target price is $15.15 Current Price is $12.63 Difference: $2.52
If A2M meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $14.18, suggesting upside of 12.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Ord Minnett rates A2M as Lighten (4) -

The company's strategy presentation, as part of the investor briefing in China, reveals four criteria outlined by management. These include brand awareness, share of category consumption, absolute revenue growth and healthy gross margins by product category.

Ord Minnett concludes a2 Milk has a deep understanding of the Chinese consumer and its investment strategy is sound, although this could weigh on operating earnings (EBITDA) margins as a longer-term approach is taken. Lighten rating and $12.92 target maintained.

Target price is $12.92 Current Price is $12.63 Difference: $0.29
If A2M meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $14.18, suggesting upside of 12.3% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

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

Aurizon has initiated court proceedings to preserve pre-emptive rights over the Genesee & Wyoming Australian interests.

Morgan Stanley envisages little downside for Aurizon and a wide range of potential positive outcomes, such as compensation to allow the Genesee & Wyoming takeover transaction to proceed or acquisition of the Australian interests.

Target is $5.88. Equal-weight rating. Industry view: Cautious.

Target price is $5.88 Current Price is $6.00 Difference: minus $0.12 (current price is over target).
If AZJ meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.69, suggesting downside of -5.2% (ex-dividends)

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

UBS rates CRN as Buy (1) -

The company hosted a visit to the Curragh coal mine and UBS notes the revised mine plan is for saleable coal output to be lifted to 15mtpa from 12mtpa with capital expenditure of US$200m.

Operating expenditure drops -10% as a result of the expansion. While the company has focused on the expansion opportunity at Curragh, UBS notes there are other opportunities in the US which are not in the valuation.

Buy rating maintained. Target is $3.80.

Target price is $3.80 Current Price is $2.50 Difference: $1.3
If CRN meets the UBS target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $4.11, suggesting upside of 64.5% (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: 1.0

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

UBS rates ING as Sell (5) -

UBS continues to envisage downside risk to near-term earnings. The company faces a feed cost of around -$48m in FY20 and, while assuming an 80% pass-through, UBS suspects this could be optimistic.

On a 2-3-year view there is opportunity to move margins closer to best practice, but this may require more expenditure. The broker also envisages risk that contract renewals could be less favourable. Sell rating and $3.10 target maintained.

Target price is $3.10 Current Price is $3.13 Difference: minus $0.03 (current price is over target).
If ING 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 $3.38, suggesting upside of 7.8% (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 NHC as Neutral (3) -

The FY19 performance missed both Citi's and consensus' expectations. The analysts blame lower than forecast price realisation. Estimates have been reduced on lower forecasts for sales and price.

Citi's sum-of-the-parts valuation, mixed in with some DCF calculations, falls by -3% to $2.24 but the price target remains intact at $2.55. Neutral rating retained.

Target price is $2.55 Current Price is $2.52 Difference: $0.03
If NHC meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates NHC as Outperform (1) -

The FY19 result revealed materially softer coal prices in the second half. Delays at Acland continue. The project still requires the mining and water licence to proceed and no further insight was provided.

Thermal prices appear to have found a floor, although Credit Suisse notes the company echoed Whitehaven Coal's ((WHC)) commentary about the growing threat of seaborne supply from Russia.

Unless the price environment improves and/or there is progress on Acland, there is no catalyst in view, the broker asserts. Outperform rating and $3 target maintained.

Target price is $3.00 Current Price is $2.52 Difference: $0.48
If NHC meets the Credit Suisse target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates NHC as Neutral (3) -

FY19 results were below Macquarie's forecasts because of lower-than-expected revenue at Bengalla. While approval and legal headwinds persist, the broker considers the company's interest in Bengalla (80%) is a long-term positive.

Meanwhile, New Hope was unable to secure the required approvals for Acland stage 3 and will subsequently ramp down operations over the next 18 months. The company remains committed to getting the required approvals.

Macquarie maintains a Neutral rating and reduces the target to $2.20 from $2.30.

Target price is $2.20 Current Price is $2.52 Difference: minus $0.32 (current price is over target).
If NHC meets the Macquarie target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.74, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates NHC as Add (1) -

While a record, FY19 results were below expectations, which Morgans attributes to the implications of the deeper-than-expected correction in second half coal prices. Net debt is higher than expected but appears manageable.

The market appears to ascribe no value to the non-operating assets, notably Acland 3, which the broker considers excessively bearish. Morgans considers the time is right for accumulating the stock and retains an Add rating. Target is reduced to $3.20 from $3.37.

Target price is $3.20 Current Price is $2.52 Difference: $0.68
If NHC meets the Morgans target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $2.74, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates OPC as Initiation of coverage with Hold (3) -

Morgans envisages a long growth path for the company. Long-term recurring earnings are growing and the business is defensive. The one negative, in the broker's opinion, is the stock has rallied 63% from its IPO price and the valuation looks fair based on FY20 forecasts.

Morgans initiates coverage with a Hold rating and $3.45 target. The broker finds it rare that a business gets paid to build, own and operate an asset but this is the case with OptiComm.

As a wholesale access provider, the company's networks are used by retail service providers such as iiNet ((TPM)), Exetel, and iPrimus ((VOC)).

Target price is $3.45 Current Price is $3.30 Difference: $0.15
If OPC meets the Morgans target it will return approximately 5% (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

Morgan Stanley rates QAN as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley assesses, while some early demand indicators for FY20 are subdued, there is more confidence the downside risks are captured and there is limited near-term impact from volatility in the oil price.

While oil is a risk, the company is fully hedged for FY20. Qantas has guided to a worst-case fuel bill of -$4.1bn.

Loyalty growth, meanwhile, has accelerated and this has become increasingly separate from the vagaries of the airline industry.

Morgan Stanley now explicitly accounts for loyalty in its valuation and upgrades to Overweight from Equal-weight. Target is raised to $7.00 from $5.90.

Target price is $7.00 Current Price is $6.26 Difference: $0.74
If QAN meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.29, suggesting upside of 0.5% (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

Ord Minnett rates SBM as Accumulate (2) -

Ord Minnett remains attracted to the prospect for exploration at the Moose River open pit gold operation in Nova Scotia. However, the 2019 technical report appears to indicate the former owner squeezed the resource inventory hard and left little but execution risk for St Barbara.

For now, the broker lowers the target to $3.50 from $4.40. In the longer term there is value if the Moose River project delivers, and an Accumulate rating is retained.

Target price is $3.50 Current Price is $3.03 Difference: $0.47
If SBM meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.19, suggesting upside of 5.3% (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