Australian Broker Call

Ord Minnett rates APT as Buy (1) -

Recent channel checks indicate merchant additions are accelerating and combining with increasing levels of customer engagement. Ord Minnett increases top-line expectations.

The company's US base has rapidly grown to over 1m and, while the average expenditure per US customer is below Australasia, the broker assesses that, going back 2.5 years, the starting numbers in Australasia were quite similar.

This bodes well for the US consumer experience. The broker maintains a Buy rating and raises the target to $32.20 from $23.00.

Target price is $32.20 Current Price is $28.51 Difference: $3.69
If APT meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Morgans rates AZJ as Hold (3) -

The broker suggests the agreement Aurizon has reached with customers on a revised access undertaking offers both higher returns and higher risks. The increase in the weighted average cost of capital allowance is positive but likely short-lived. Following an independent assessment, Aurizon may be required to fund capacity upgrades.

The broker lifts its target to $4.59 from $4.53 but retains Hold, suggesting investors should trim overweight positions given minimal potential return at current prices.

Target price is $4.59 Current Price is $4.89 Difference: minus $0.3 (current price is over target).
If AZJ meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.73, suggesting downside of -3.3% (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

Credit Suisse rates BPT as Neutral (3) -

Revenue increased 7% in the March quarter on higher oil prices and volumes. Gas production was up 10%, driven by higher customer nominations and more reliable facilities. Guidance has been reaffirmed.

Material upside is likely from further production growth and reserves replacement, although Credit Suisse is sceptical about whether this can be sustainably achieved, and it may take several years to play out.

The broker likes the potential upside from the increased marketing margins once the company gets hold of more equity gas after 2020, which it suspects the market does not yet fully appreciate. Neutral rating and $2.02 target maintained.

Target price is $2.02 Current Price is $2.01 Difference: $0.01
If BPT meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.08, suggesting upside of 3.7% (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

UBS rates CSR as Sell (5) -

UBS suspects the stock has been rallying on expectations of higher prices for land around Badgery's Creek as well as CSR moving out of the ASX100 and into the small cap segment.

The rally could also be attributed to contrarians looking to get ahead of an eventual turnaround in housing, supported by increasing confidence in a rate cut this year.

The company has not provided explicit earnings guidance for its building products business and, given guidance for other divisions, UBS infers that the core business generated FY19 EBIT of $215-225m.

The company will report its full year result on May 8. Sell rating and $2.70 target maintained.

Target price is $2.70 Current Price is $3.40 Difference: minus $0.7 (current price is over target).
If CSR meets the UBS target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.22, suggesting downside of -5.3% (ex-dividends)

The company's fiscal year ends in March.

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 GNC as Downgrade to Reduce from Hold (5) -

Long Term Asset Partners has withdrawn its $10.42 bid for Graincorp following due diligence that left LTAP disappointed. Morgans finds it concerning that initial operating assumptions were not met.

Graincorp's de-merger proposal may provide some share price support, but with at least two more tough years ahead for grains, Morgans moves to Reduce from Hold ahead of the company's result release on Thursday. Target falls to $7.90 from $9.30.

Target price is $7.90 Current Price is $8.14 Difference: minus $0.24 (current price is over target).
If GNC meets the Morgans target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.58, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates HUB as Downgrade to Sell from Neutral (5) -

Citi continues to believe HUB24 will be a beneficiary of the structural shift towards specialist providers and triple its market share in the next five years. However, because of a 25% increase in the share price since the first half result, the broker downgrades to Sell from Neutral.

Target is lowered to $13.35 from $13.60. The broker does not believe the current share price reflects the downside risk to revenue margins from competition and operating earnings (EBITDA) margin from the ongoing need to invest in the platform to support growth.

Target price is $13.35 Current Price is $14.60 Difference: minus $1.25 (current price is over target).
If HUB meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.44, suggesting downside of -7.9% (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

Deutsche Bank rates IPL as Buy (1) -

Urea prices are up 17% from the lows and, with the Mount Isa rail line re-opening earlier than expected, Deutsche Bank believes earnings are close to passing the trough. Still, the broker acknowledges the ammonia price was down -7% in April and Australia continues to be affected by dry conditions.

Deutsche Bank expects that FY19 will be negatively affected by one-off factors totalling around -$185m, equivalent to 31% of earnings. Deutsche Bank retains a Buy rating and reduces the target to $4.10 from $4.70.

Target price is $4.10 Current Price is $3.33 Difference: $0.77
If IPL meets the Deutsche Bank target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.70, suggesting upside of 11.0% (ex-dividends)

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

Deutsche Bank rates MQG as Hold (3) -

The FY19 result highlights an outsized contribution from more volatile sources of income, Deutsche Bank observes.

While some may be disappointed with the outlook, which indicated FY20 profit is likely to be "slightly down", the broker notes Macquarie Group is customarily conservative with guidance at this stage of the year.

Deutsche Bank maintains a Hold rating and raises the target to $125 from $115.

Target price is $125.00 Current Price is $124.93 Difference: $0.07
If MQG meets the Deutsche Bank target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $129.81, suggesting upside of 3.9% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

UBS rates MYX as Neutral (3) -

UBS revises down revenue and gross margin assumptions for the generic products division while keeping the specialty brands division forecasts relatively unchanged.

The broker now expects second half generic revenue of US$122m, down -23%. Lower gross margin assumptions for the second half are in place, at 56% versus 56.9% in the prior corresponding half.

This translates to downgrades to estimates for earnings per share of -18% in FY19 and -12% in FY20. UBS maintains a Neutral rating and reduces the target to $0.73 from $0.78.

Target price is $0.73 Current Price is $0.68 Difference: $0.05
If MYX meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $0.86, suggesting upside of 26.1% (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

Macquarie rates NWS as Outperform (1) -

Macquarie assesses the outlook for News Corp ahead of the third quarter result on May 9. A weaker Australian housing market, Brexit and the launch of Kayo by Foxtel are likely to have a negative impact.

However, the broker retains an Outperform rating because of potential valuation upside. Macquarie reduces estimates for earnings per share in FY19 by -3.2% and FY20 by -3.1%. Target is $24.42.

Target price is $24.42 Current Price is $17.33 Difference: $7.09
If NWS meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $21.36, suggesting upside of 23.2% (ex-dividends)

The company's fiscal year ends in June.

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: 0.4

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

Credit Suisse rates PRU as Outperform (1) -

The board has approved the Yaoure development in Côte d'Ivoire. Funding is in place for a US$265m development from credit facilities, warrant proceeds, cash and bullion. Yaoure currently contributes $0.20 to valuation of $0.58.

Credit Suisse maintains an Outperform rating and $0.57 target.

Target price is $0.57 Current Price is $0.43 Difference: $0.14
If PRU meets the Credit Suisse target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $0.59, suggesting upside of 37.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Morgans rates SEK as Hold (3) -

Seek used an investor presentation to outline its plans to double the size of the business over the next five years. While this plan is not new, the detail provided should allay fears among investors of the size of the investment, the broker suggests.

Changes to forecasts are immaterial. The broker retains Hold, suggesting investors look to buy on dips. Target trimmed to $20.19 from $20.24.

Target price is $20.19 Current Price is $19.75 Difference: $0.44
If SEK meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $19.33, suggesting downside of -2.1% (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

Credit Suisse rates WBC as Neutral (3) -

Following the first half result Credit Suisse downgrades earnings by -4-7% across forecasts to incorporate lower revenue on the back of margin and fee pressure.

The broker envisages new risks in the form of dilution, with further discounted dividend reinvestment plans and the potential for something more significant.

Neutral rating maintained and the target is reduced to $27.40 from $28.00.

Target price is $27.40 Current Price is $27.09 Difference: $0.31
If WBC meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $26.93, suggesting downside of -0.6% (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

Deutsche Bank rates WBC as Sell (5) -

Deutsche Bank observes Westpac has enjoyed the mortgage boom more than most banks, with interest only loans peaking at 50% of the book in the first half of FY17, now at 31%.

The consumer banking division is around 40% of net profit and used to grow earnings at 6%, with the broker noting today earnings were down -11%.

Deutsche Bank also finds the bank's comments instructive, noting the statement "credit quality is unlikely to get better from here". Westpac also signals further easing in house prices is likely.

Deutsche Bank maintains a Sell rating and $22 target.

Target price is $22.00 Current Price is $27.09 Difference: minus $5.09 (current price is over target).
If WBC meets the Deutsche Bank target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.93, suggesting downside of -0.6% (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

Macquarie rates WBC as Neutral (3) -

Underlying earnings declined by -1.5% in the first half. Macquarie believes the bank's overweight position in Australian mortgages does not bode well for near-term earnings growth.

Given the elevated pay-out ratio, Macquarie expects Westpac to rely on dilutive dividend reinvestment plans, putting pressure on already fragile earnings-per-share growth.

Macquarie maintains a Neutral rating and $27 target and makes minor downgrades to estimates.

Target price is $27.00 Current Price is $27.09 Difference: minus $0.09 (current price is over target).
If WBC meets the Macquarie target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.93, suggesting downside of -0.6% (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 WBC as Underweight (5) -

Morgan Stanley believes revenue is under pressure, there is no capital buffer and the dividend policy will need to be reviewed. Australian loans grew 1.5% in the first half but management expects system credit growth to moderate further.

While there should be some benefit from lower wholesale funding costs and less remediation in the second half, Morgan Stanley expects this to be partially offset by competition for new loans, ongoing switching and lower interest rates.

The bank has stated it is targeting a 70-75% pay-out ratio but this appears increasingly unlikely without a reduction to the dividend and the broker suspects more clarity on regulatory requirements could prompt a review of financial settings in FY20.

Underweight rating and $24.10 target maintained. Industry view: In Line.

Target price is $24.10 Current Price is $27.09 Difference: minus $2.99 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.93, suggesting downside of -0.6% (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 WBC as Add (1) -

It was a messy result, the broker notes, due to accounting changes, but Westpac's cash earnings and dividend met the broker's expectation. Given the difficult climate for retail banking, the broker saw Westpac's consumer bank performance as an outperformance against peers.

The market had assumed the worst for the Consumer Bank on the back of earlier peer results, thus yesterday's further share price fall leads the broker to suggest relative share price weakness is not justified. Fears regarding Westpac's relatively high level of interest-only loans is considered overblown. The broker retains Add and a $33 target, with Westpac its preferred pick among the majors.

Target price is $33.00 Current Price is $27.09 Difference: $5.91
If WBC meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $26.93, suggesting downside of -0.6% (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 WBC as Hold (3) -

Westpac reported first half cash net profit of $3.3bn, down -14%. This was slightly below Ord Minnett's forecasts. The broker observes the result completed a disappointing major bank reporting season that highlighted challenges for remediation costs, fee pressures, the impact of elevated competition on margins and slowing loan growth.

Westpac performed better on retail banking but poorly in treasury and insurance income as well as its business bank, the broker adds. Hold rating is maintained. Target is reduced to $27.40 from $27.90.

Target price is $27.40 Current Price is $27.09 Difference: $0.31
If WBC meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $26.93, suggesting downside of -0.6% (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