Australian Broker Call

UBS rates A2M as Buy (1) -

A2 Milk is being corporatised, UBS observes. Investment is accelerating to expand market share and create a more profitable and larger business for the long term.

The focus is on strong revenue growth with margins a clear second. UBS suspects operating earnings (EBITDA) margins beyond FY20 may fall and incorporates declines into estimates.

Infant formula margin should recover in FY23 as investment reduces and US losses ease. Buy rating maintained. Target reduced to NZ$16.20 from NZ$17.10.

Current Price is $12.18. Target price not assessed.

Current consensus price target is $13.59, suggesting upside of 11.6% (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: -0.1

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

Credit Suisse rates AMP as Outperform (1) -

AMP has announced a transformation strategy to shape the earnings profile over the next few years. Growth is expected to come from AMP Capital and AMP Bank with wealth management decreasing its contribution.

However, Credit Suisse points out absolute earnings levels are unclear. The main focus for investors continues to be the downside risk in wealth management earnings.

Credit Suisse suggests there is near-term earnings risk around the decline in assets under management and pressure on revenue margins and, while this is not a logical stock on which to be positive, it is trading at a -40% PE discount to the market and investors appear to be allowing for this risk.

Outperform. Target is $2.

Target price is $2.00 Current Price is $1.73 Difference: $0.27
If AMP meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $1.79, suggesting upside of 3.7% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates ANZ as Upgrade to Equal-weight from Underweight (3) -

ANZ Bank has underperformed other major banks over the past six months and Morgan Stanley observes investor expectations are low while key challenges are understood. The broker raises the stock to number two in order of preference and upgrades to Equal-weight from Underweight.

The broker still envisages revenue and earnings risk amid execution challenges following three years of cost cutting. Target is raised to $26.00 from $25.80. Industry view: In-Line.

Target price is $26.00 Current Price is $27.30 Difference: minus $1.3 (current price is over target).
If ANZ 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 $27.71, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in September.

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 DCN as Neutral (3) -

Analysts at Citi have taken their time to update thoughts and forecasts for Dacian Gold. The Neutral/High Risk rating remains in place, as does the $1.40 price target. The financial numbers as released in August didn't quite meet expectations.

Citi's update highlights how, with 78% of ounces projected for FY20 hedged (read: sold in advance at a fixed price), any exposure to a strengthening AUD gold price remains limited.

Target price is $1.40 Current Price is $1.48 Difference: minus $0.08 (current price is over target).
If DCN meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Credit Suisse rates MYX as Neutral (3) -

The company has signed an exclusive licence and supply agreement to commercialise a combined oral contraceptive in the US for total consideration of US$295m. The product is to be launched in the second half of FY21, subject to FDA approval.

Credit Suisse assesses, not only does the agreement provide a platform for Mayne Pharma to generate synergies and improve earnings potential in its generic women's health portfolio, it also provides an opportunity to expand specialty brands.

Credit Suisse values the deal at $0.30 a share and increases the target to $0.73 from $0.60. Neutral maintained.

Target price is $0.73 Current Price is $0.60 Difference: $0.13
If MYX meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $0.64, suggesting upside of 6.3% (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

Macquarie rates MYX as Upgrade to Neutral from Underperform (3) -

The company has announced a supply and license agreement with Mithra for the commercialisation of a combined oral contraceptive. Macquarie assesses the agreement provides an opportunity for both growth and diversification of earnings over the medium to longer term.

Management estimates potential peak sales of the contraceptive of US$200m and the expected launch is in the first half of 2021, subject to US FDA approval.

With an implied shareholder return of 5% based on a revised target price, the broker upgrades to Neutral from Underperform. Target is raised to $0.66 from $0.51.

Target price is $0.66 Current Price is $0.60 Difference: $0.06
If MYX meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $0.64, suggesting upside of 6.3% (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 MYX as Neutral (3) -

The company has signed a 20-year exclusive licensing deal with Mithra Pharmaceuticals to commercialise a novel oral contraceptive in the US. Mithra plans to file with the US FDA in late 2019.

Mayne Pharma will pay up to US$295m along with contingent cash payments based on sales targets. UBS believes the licensing deal makes strategic sense, given this is a branded product which will not face generic competition before the end of 2029.

UBS maintains a Neutral rating and raises the target to $0.66 from $0.56.

Target price is $0.66 Current Price is $0.60 Difference: $0.06
If MYX meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $0.64, suggesting upside of 6.3% (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

Citi rates NAB as Buy (1) -

The bank announced a -$1.2bn top up of reserves to remediate customers in addition to a -$494m pre-tax write-down of capitalised software and both numbers were considerably higher than what analysts at Citi thought feasible.

The analysts see the software write-down as preparation for the arrival of the new CEO. Ross McEwan is due to start at NAB in December. Estimates have been reduced. 

But lower software amortisation expense going forward sees Citi's forecast FY20/21 EPS ~1% higher. The analysts argue none of these matters impact on the core banking operations (suggesting it is but noise for longer term, fundamentally oriented investors).

Target price is $29.50 Current Price is $28.07 Difference: $1.43
If NAB meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

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 NAB as Neutral (3) -

National Australia Bank has announced additional charges to be taken in the second half of -$1.19bn relating to increased provisions for customer-related remediation plus changes to the application of software capitalisation.

The top-up of previous provisions and the consumer credit insurance provisions have surprised Credit Suisse. That said, once the shock of the announcement passes, the market is expected to incorporate a more normalised earnings trajectory in FY20 and beyond.

The broker retains a Neutral rating and $27.90 target.

Target price is $27.90 Current Price is $28.07 Difference: minus $0.17 (current price is over target).
If NAB meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Neutral (3) -

Macquarie downgrades earnings estimates by -12% in FY19 as a result of additional remediation charges. While the broker considers these charges "low quality" items and does not incorporate them into valuation, prior estimates have proven to be consistently low and, hence, highlights a risk for more to come beyond FY19.

The broker increasingly envisages a need for National Australia Bank to raise its CET1 ratio, which would result in further dilution. Macquarie maintains a Neutral rating and reduces the target to $29 from $30.

Target price is $29.00 Current Price is $28.07 Difference: $0.93
If NAB meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Downgrade to Underweight from Equal-weight (5) -

Additional remediation announced by National Australia Bank, all else being equal, will reduce Morgan Stanley's cash profit forecasts by -24% for the second half of FY19 and by -12% for FY19 overall.

Morgan Stanley moves National Australia Bank to number four in its major bank order of preference, believing the outlook for revenue is deteriorating. Rating is downgraded to Underweight from Equal-weight.

The stock has outperformed other major banks by an average of 5-10% over the past six months and is now trading at a premium to both ANZ Bank ((ANZ)) and Westpac Bank ((WBC)). Target is reduced to $25.60 from $26.00. Industry view: In-line.

Target price is $25.60 Current Price is $28.07 Difference: minus $2.47 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Hold (3) -

Morgans reduces the FY19 cash earnings forecast by -17.6% as a result of the additional charges announced for the second half. The bank will include charges of -$1.19bn relating to customer remediation and a change to the application of its software capitalisation policy.

Morgans believes National Australia Bank has been lagging other major banks when it comes to raising these provisions and suggests the strong rally in the share price since the reduction in the dividend in May was unjustified, with these announcements now supporting its view.

Hold rating and $24.50 target retained.

Target price is $24.50 Current Price is $28.07 Difference: minus $3.57 (current price is over target).
If NAB meets the Morgans target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Accumulate (2) -

National Australia Bank will recognise a further -$1.19bn in charges in the second half of FY19 comprising new customer-related remediation and changes to the software capitalisation policy.

This is well above Ord Minnett's estimates and appears to put National Australia Bank towards the upper end of its peer range for provisions in relation to fee-for-no-service and inappropriate advice.

However, following the recent cut to the dividend and capital raising through the partially underwritten dividend reinvestment plan, the broker envisages the bank is in a relatively sound position.

National Australia Bank remains the broker's preferred exposure among the major banks, although there is less potential upside to the new target of $29.50, reduced from $29.60, and an Accumulate rating is maintained.

Target price is $29.50 Current Price is $28.07 Difference: $1.43
If NAB meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Sell (5) -

The bank will take -$1.19bn in additional remediation charges in the second half in its results. This top up is driven by the inclusion of provisions for customer refunds for self-employed advisers.

National Australia Bank has now assumed a refund rate of 36% of all advice fees received from 2009-2018. Further charges are also being taken for consumer credit insurance, non-compliant advice and higher provisions for salaried advisers to 28% of total advice fees received.

UBS asserts the announcement continues the bank's track record of large "one-off", "specified" and "below-the-line" items. The broker is disappointed, calculating that these large one-off items have accelerated to an average of 24% of cash profit since the global financial crisis.

The broker retains a Sell rating and $23 target.

Target price is $23.00 Current Price is $28.07 Difference: minus $5.07 (current price is over target).
If NAB meets the UBS target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.00, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in September.

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 ORG as Outperform (1) -

Credit Suisse increases forecasts for energy market earnings, offset by marking to market Brent oil prices in FY20. Origin Energy's net profit estimates are reduced by -1.5% in FY20 and increased by 7.0% in FY21.

The broker maintains an Outperform rating, believing Origin Energy is subject to less downside risk to wholesale margins than its competitor AGL Energy ((AGL)) and has more chance of growth investment through its E&P portfolio. Target is raised to $8.50 from $8.00.

Target price is $8.50 Current Price is $7.69 Difference: $0.81
If ORG meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.44, suggesting upside of 9.8% (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

Morgans rates RAP as Add (1) -

The company has received Therapeutic Goods Administration approval for its paediatric cough diagnostic. This follows CE Mark approval for both children and adults which allows the company to market the device across Europe.

The bigger prize, achieving US FDA approval, is expected late in 2019 or early 2020. Morgans continues to fully risk commercial outcomes until there is insight into initial reception across Europe and Australia.

There have also been positive results in the company's sleep apnoea study, showing high rates of accuracy when compared with at-home comprehensive sleep studies.

Speculative Buy (Add) maintained. Target is raised to $0.32 from $0.28.

Target price is $0.32 Current Price is $0.28 Difference: $0.04
If RAP meets the Morgans target it will return approximately 14% (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

Credit Suisse rates STO as Neutral (3) -

Credit Suisse assesses the stock is up 16% versus its peers over 2019 because of declining costs and increasing production onshore as well as synergies from Quadrant and de-risking of Dorado.

The increasingly diversified portfolio/market exposure is likely to weigh in the company's favour, the broker adds. On a 12-month horizon Credit Suisse envisages positive catalysts should outweigh any negatives.

Neutral rating maintained. Target is raised to $7.24 from $6.72.

Target price is $7.24 Current Price is $7.30 Difference: minus $0.06 (current price is over target).
If STO meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.71, suggesting upside of 5.7% (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: 0.6

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