Australian Broker Call

Deutsche Bank rates AMC as Buy (1) -

Deutsche Bank considers the Brazilian regulator's approval of the merger with Bemis a minor positive. No remedial action ended up being required.

The transaction remains subject to regulatory approval in the US. Amcor remains of the view that, collectively, potential remedies will be immaterial and not impact on synergy targets.

Deutsche Bank retains a Buy rating and $16.15 target.

Target price is $16.15 Current Price is $15.67 Difference: $0.48
If AMC meets the Deutsche Bank target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $15.59, suggesting downside of -0.5% (ex-dividends)

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: 0.6

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

Macquarie rates AZJ as Neutral (3) -

Ahead of Aurizon's quarterly haulage report next week, the broker notes coal volumes at ports have rebounded from a weather-impacted February. The company had also indicated a change to maintenance practices, and lost slots continue to improve against the prior period.

That aside, the broker notes the stock has enjoyed a rally recently as bond prices have fallen. A reset to a long term bond rate assumption of 3.2% sees the broker lift its target to $4.49 from $4.35. Neutral retained.

Target price is $4.49 Current Price is $4.63 Difference: minus $0.14 (current price is over target).
If AZJ meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.47, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

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

The share price has appreciated 41% year-to-date, believe it or not, and Citi analysts counter it is time for a pause, hence why the downgrade to Neutral from Buy. The broker remains a supporter of the company and the chosen strategy.

Irrespective, Citi analysts acknowledge concerns around potential further delays in Bellamy’s SAMR registration remain (or are resurfacing, depending on one's view) while the new product formula essentially still needs to prove itself.

Target price increases 8% to $10.50 as Citi has now incorporated the new formula in its model. The analysts speculate China might be favouring local products, which increases the odds Bellamy's SAMR licensing is facing further delays.

Target price is $10.50 Current Price is $9.85 Difference: $0.65
If BAL meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $9.78, suggesting downside of -0.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Citi rates BOQ as Neutral (3) -

Yesterday, Broker Call reported Citi's initial assessment. On second analysis, Citi analysts suggest the interim performance was (sort of) in-line with the bank's earlier profit warning, but with the added comment there was still plenty of room for disappointment.

Despite the negatives, Citi analysts continue to hold the view that, in the absence of a deteriorating credit cycle, a strong CET 1 position and dividend will provide valuation support. They also add it's unclear what the regional lender's strategy is.

Target price sinks to $9.50 from $9.90 as EPS forecasts have been reduced by a further -4%. Updated forecasts suggest 68c in dividends per annum is what loyal shareholders should expect from here onwards.

Target price is $9.50 Current Price is $8.77 Difference: $0.73
If BOQ meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Credit Suisse rates BOQ as Neutral (3) -

Following the first half result Credit Suisse downgrades earnings by -3-8%, envisaging the bank will struggle to offset increased costs. The broker's dividend profile is also lower, reflecting a more sustainable pay-out ratio.

Credit Suisse does not believe the bank has the scale for the required investment in technology or to cope with increasing regulatory requirements. Credit Suisse retains a Neutral rating and reduces the target to $9.25 from $9.69.

Target price is $9.25 Current Price is $8.77 Difference: $0.48
If BOQ meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Macquarie rates BOQ as Underperform (5) -

Bank of Queensland's result indicates ongoing revenue pressures from slowing volume growth, market share loss and margin pressure. The broker expects pressure to continue and forecasts a -10% reduction in earnings over the next three years.

On a comparative basis the stock remains expensive on a 12% PE premium to the majors and despite having already cut the dividend once, the broker suggests another cut will be needed. Despite recent share price weakness the broker retains Underperform. Target falls to $8.50 from $9.00.

Target price is $8.50 Current Price is $8.77 Difference: minus $0.27 (current price is over target).
If BOQ meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Morgan Stanley rates BOQ as Underweight (5) -

Morgan Stanley observes the bank is investing for the longer-term, while dealing with regulatory costs and a challenging operating environment. Mortgages were flat in the first half and the bank does not expect to return to system growth for at least 12 months.

The first half dividend implies an 85% pay-out in FY19, and almost 90% in FY20 on the broker's forecasts. Hence, Morgan Stanley believes the ratio still looks too high and could mean the bank is vulnerable to another cut to the dividend if earnings deteriorate further.

Underweight rating retained. Industry view is In-Line. Price target is reduced to $8.10 from $8.50.

Target price is $8.10 Current Price is $8.77 Difference: minus $0.67 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Morgans rates BOQ as Hold (3) -

First half cash earnings were in the middle of the guidance range of $165-170m. Morgans had suspected that a reduction to the dividend was nigh and this turned out to be the case.

The broker believes negative earnings momentum is intensifying. There was no growth in the home loan book between August 2018 and February 2019. The broker continues to expect the bank will struggle to grow the home loan book without compromising on margins.

Morgans maintains a Hold rating and reduces the target to $8.00 from $8.50.

Target price is $8.00 Current Price is $8.77 Difference: minus $0.77 (current price is over target).
If BOQ 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 $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Ord Minnett rates BOQ as Downgrade to Lighten from Hold (4) -

A difficult first half has led Bank of Queensland to reduce its interim dividend to $0.34 per share, representing a pay-out ratio of 82%. Ord Minnett envisages scope for the dividend to be cut again as, without this, the pay-out ratio would climb into the high 80% range, which appears unsustainable.

The broker still believes the stock is expensive versus peers, despite the decline in the share price. Target is lowered to $8.50 from $9.45 and the rating is downgraded to Lighten from Hold. While the major banks are not immune to revenue headwinds, greater diversification suggests they are better able to absorb the regulatory costs.

Target price is $8.50 Current Price is $8.77 Difference: minus $0.27 (current price is over target).
If BOQ meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

UBS rates BOQ as Sell (5) -

UBS found few positive signs in the first half result. Management guidance also suggests the performance will not turnaround any time soon. The broker believes the reduction in dividends is prudent, given the outlook.

The broker maintains a Sell rating and $9 target.

Target price is $9.00 Current Price is $8.77 Difference: $0.23
If BOQ meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $8.79, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

Macquarie rates CIA as Initiation of coverage with Outperform (1) -

Champion Iron is a dual-listed pure-play on exposure to high grade, high quality iron ore in Canada. The company's Bloom Lake mine produces 66% grade iron, which attracts a premium over benchmark 62% fines, and offers a 20-year mine life.

While current focus is on Bloom Lake, the miner has other nearby projects that could expand production and extend mine life. The broker initiates coverage with an Outperform rating and $3.00 target.

Target price is $3.00 Current Price is $2.41 Difference: $0.59
If CIA meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Citi rates COL as Buy (1) -

Updating on the sector, Citi analysts note supermarket capital intensity is rising in Australia after several years of underinvestment from both dominant retailers. On the analysts' assessment, Woolworths is two years ahead of Coles in the capex cycle.

As competition remains rational among the grocers, and dynamics are seen improving profitability overall, Citi analysts believe higher capex is but a minor headwind for the industry. Equally important, Citi believes the dividends are sustainable.

Buy rating retained for Coles, which is the relative favourite on a cheaper valuation and catch up potential, with an unchanged $13.40 price target.

Target price is $13.40 Current Price is $12.25 Difference: $1.15
If COL meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting downside of -2.6% (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 IAG as Neutral (3) -

The strength of the company's balance sheet and improved ability to fund capital returns may be positive but UBS does not believe this is a large enough driver of value to change the investment case.

With evidence of a hardening of rates across commercial lines and supportive conditions in personal lines the broker is positive on the sector but prefers exposure through Suncorp ((SUN)) and QBE Insurance ((QBE)).

Neutral rating maintained. Target is raised to $7.70 from $7.40.

Target price is $7.70 Current Price is $7.66 Difference: $0.04
If IAG meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.76, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates MHJ as Neutral (3) -

Post the March quarter performance update, Citi analysts are willing to accept that green shoots are emerging, but they also prefer to remain cautious. The analysts would like to see some signs of consistent growth before recommending the stock to their clientele.

In addition, they also note the jewellery mid-market remains competitive and, post the exit from Emma and Roe and the USA, Citi analysts question what can possibly be the longer-term growth driver for this company?

Neutral rating retained, while the price target lost -1c to 63c.

Target price is $0.63 Current Price is $0.61 Difference: $0.02
If MHJ meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $0.75, suggesting upside of 23.5% (ex-dividends)

The company's fiscal year ends in March.

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

Credit Suisse rates NWL as Neutral (3) -

The company reported funds under administration of $21.1bn in the March quarter, up 11% and driven by market movements and net inflows.

Growth in net flows has slowed, Credit Suisse observes, but this is expected to accelerate over the next year amid strong gains in new accounts.  Neutral rating. Target is $8.65.

Target price is $8.65 Current Price is $8.65 Difference: $0
If NWL meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $8.06, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Macquarie rates NWL as Neutral (3) -

Netwealth enjoyed a 31.5% increase in funds under administration in the March quarter, reflecting a balance of inflows and market appreciation. While the broker sits atop peers in terms of forecast inflows, it diverges with consensus in expecting greater fee margin compression and higher reinvestment into the cost base to support market opportunity.

To that end the broker's earnings forecasts are some -11% below the market, and the broker also warns regulatory scrutiny of platforms is likely to increase. Neutral retained, target rises to $7.83 from $7.51.

Target price is $7.83 Current Price is $8.65 Difference: minus $0.82 (current price is over target).
If NWL meets the Macquarie target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.06, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

UBS rates NWL as Sell (5) -

Net flows were softer than UBS expected for the second consecutive quarter. However, the acquisition of ANZ Private on the platform is expected to provide a significant boost to funds under administration in FY20.

UBS suspects revenue benefits will be more moderate, given significantly lower margins. Sell rating maintained. Target is raised to $7.65 from $7.45.

Target price is $7.65 Current Price is $8.65 Difference: minus $1 (current price is over target).
If NWL meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.06, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Macquarie rates TCL as Neutral (3) -

Now that the government has been returned in NSW, various transport infrastructure projects will accelerate, the broker notes. There is a major opportunity for Transurban to extend the structure of West Harbour Tunnel, Northern Beaches Link and F6 extension to hook up with the company's existing Eastern Distributor and Cross-City Tunnel.

The stock price has rallied recently on falling bond yields, but as that momentum fades, the broker expects the market to focus on West Connex traffic and the potential to acquire the West Harbour Tunnel. In the meantime, a reset of the broker's long term band rate assumption to 3.2% lifts its target to $13.27 from $11.93.

Neutral retained.

Target price is $13.27 Current Price is $13.43 Difference: minus $0.16 (current price is over target).
If TCL 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 $12.48, suggesting downside of -7.1% (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 WHC as Buy (1) -

It appears March quarter production volumes disappointed and management had to guide for lower production for the full financial year due to temporary interruption at Maules Creek.

Citi analysts don't seem worried. They have reduced forecasts by some -4%.

Rolling forward their modeling has lowered the price target to $4.85 from $5.10. Buy rating retained.

Target price is $4.85 Current Price is $4.04 Difference: $0.81
If WHC meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (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

Credit Suisse rates WHC as Outperform (1) -

Credit Suisse is unconcerned about the headline downgrade at Maules Creek, believing it to be a short-term issue. The broker believes the investment case is on track and the key concerns leading into the March quarter did not materialise.

Unit cost guidance was maintained and Narrabri was stronger than expected. Thermal prices have softened but the broker considers the margins remain healthy.

Credit Suisse believes the stock screens cheap, noting the under-leveraged balance sheet. Outperform rating and $5.10 target maintained.

Target price is $5.10 Current Price is $4.04 Difference: $1.06
If WHC meets the Credit Suisse target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (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

Deutsche Bank rates WHC as Buy (1) -

The company has trimmed FY19 guidance but Deutsche Bank notes the share price has held up, reflecting low expectations and representing an attractive opportunity for those focused on value and yield.

The broker maintains a Buy rating with a $5.10 target.

Target price is $5.10 Current Price is $4.04 Difference: $1.06
If WHC meets the Deutsche Bank target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (ex-dividends)

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

Morgan Stanley rates WHC as Overweight (1) -

A weak production report for the March quarter was driven by Maules Creek, while Narrabri appears to have stabilised. Morgan Stanley's estimates are already below the low end of the company's updated guidance and the stock is considered cheap.

Saleable coal production guidance has been lowered to 21.5-22.5mt. Overweight rating maintained. Target is $5.55. Industry view: In-Line.

Target price is $5.55 Current Price is $4.04 Difference: $1.51
If WHC meets the Morgan Stanley target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (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 WHC as Add (1) -

The company has downgraded production guidance, which has disappointed Morgans. Nevertheless, despite concerns about Narrabri's complex issues, the broker is comfortable that these appear to be in hand.

A weaker coal price remains the headwind, but the broker suggests momentum buyers will readily return as Chinese buying behaviour eventually normalises.

The broker also believes market interest in the capital management upside will gather strength into the second half. Add rating maintained. Target is reduced to $5.15 from $5.40.

Target price is $5.15 Current Price is $4.04 Difference: $1.11
If WHC meets the Morgans target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (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

UBS rates WHC as Buy (1) -

Maules Creek disappointed in the March quarter, with production -30-40% below UBS's expectations. A bigger issue is the coal market, in the broker's view.

The thermal coal price, at US$85/t, is below UBS' estimates, as lower priced alternative energy sources and Chinese import restrictions conspire against it.

While considering the situation unsustainable, UBS suspects the headwinds are likely to remain for a few more months. The broker maintains a Buy rating and reduces the target to $5.75 from $5.90.

Target price is $5.75 Current Price is $4.04 Difference: $1.71
If WHC meets the UBS target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 25.9% (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

Citi rates WOW as Neutral (3) -

Updating on the sector, Citi analysts note supermarket capital intensity is rising in Australia after several years of underinvestment from both dominant retailers. On the analysts' assessment, Woolworths is two years ahead of Coles in the capex cycle.

As competition remains rational among the grocers, and dynamics are seen improving profitability overall, Citi analysts believe higher capex is but a minor headwind for the industry. Equally important, Citi believes the dividends are sustainable.

Neutral rating and $29 price target retained for Woolworths, with Citi preferring Coles on relative valuation and upside potential to consensus forecasts.

Target price is $29.00 Current Price is $30.93 Difference: minus $1.93 (current price is over target).
If WOW meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.75, suggesting downside of -7.1% (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