Australian Broker Call

Ord Minnett rates BHP as Hold (3) -

BHP has hosted briefing on its tailings dams because of the safety issues and litigation risks following some failures in recent years. Of the highest risk assets, a significant proportion relate to historical mining activities in North America, as some dams are 100 years old and no longer being used.

A 2016 dam review showed no immediate concerns regarding integrity but revealed 400 action points to improve management of dams. While Ord Minnett finds it hard to pinpoint what has changed following recent accidents, the fact the company held the briefing is considered positive, a first of its kind from Australian miners.

Hold rating and $40 target maintained.

Target price is $40.00 Current Price is $38.71 Difference: $1.29
If BHP meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $38.03, suggesting downside of -1.7% (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: 0.0

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

Citi rates BOQ as Neutral (3) -

Bank of Queensland has appointed George Frazis as CEO, to take over September 5. Mr Frazis was formally the chief executive of the consumer bank at Westpac ((WBC)). Citi expects investors will be optimistic about the appointment and believes Bank of Queensland is well-placed as a likely participant in any industry consolidation.

As a stand-alone entity, upside earnings risk and falling funding costs, as well as improved property sentiment, need to be balanced with downside risk associated with any potential investment to position the bank for growth, the broker assesses. Neutral rating and $9.50 target maintained.

Target price is $9.50 Current Price is $9.56 Difference: minus $0.06 (current price is over target).
If BOQ meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.74, suggesting downside of -8.5% (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

Citi rates BWP as Sell (5) -

Citi reiterates a Sell rating, retaining a negative view on retail landlords because of a large overhang of assets on the market. The broker estimates the potential for disposals of around $11bn in Australian retail assets, or close to 3 years of typical transaction volume.

Selling appears to be broad-based. The broker maintains a clear preference for non-retail exposures within A-REITs. Target is $2.66.

Target price is $2.66 Current Price is $3.75 Difference: minus $1.09 (current price is over target).
If BWP meets the Citi target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.00, suggesting downside of -20.0% (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

Citi rates CQR as Sell (5) -

Citi reiterates a Sell rating, retaining a negative view on retail landlords because of a large overhang of assets on the market. The broker estimates the potential for disposals of around $11bn in Australian retail assets, or close to 3 years of typical transaction volume.

Selling appears to be broad-based. The broker maintains a clear preference for non-retail exposures within A-REITs. Target is $3.71.

Target price is $3.71 Current Price is $4.68 Difference: minus $0.97 (current price is over target).
If CQR meets the Citi target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.15, suggesting downside of -11.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.6

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

Deutsche Bank rates CWN as Hold (3) -

Deutsche Bank believes the opportunity for an alternative bidder to Melco has dissipated as that company has completed the first tranche of its acquisition of a 19.99% interest in Crown Resorts.

The broker believes the stock is likely to trade closer to fundamentals, which remain very weak. VIP turnover in Australia is down -30% and Victorian gaming machine expenditure down -2%. The WA economy is also subdued.

Meanwhile, Crown Sydney is on schedule and an improved outlook for the housing market should assist apartment sales. Deutsche Bank maintains a Hold rating with an $11.70 target.

Target price is $11.70 Current Price is $12.12 Difference: minus $0.42 (current price is over target).
If CWN meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.65, suggesting upside of 4.4% (ex-dividends)

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

Deutsche Bank rates GNC as Buy (1) -

The company has executed its grain derivative agreement. Deutsche Bank believes this is a positive, as it is a key milestone in the restructure of the business and de-risks the de-merger.

The derivative will cover the FY20 crop, shaping up to be tough year. The cost of the derivative is in line with the broker's valuation. Buy rating and $11.08 target.

Target price is $11.08 Current Price is $8.20 Difference: $2.88
If GNC meets the Deutsche Bank target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $9.34, suggesting upside of 13.8% (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

Citi rates GPT as Sell (5) -

Citi reiterates a Sell rating, retaining a negative view on retail landlords because of a large overhang of assets on the market. The broker estimates the potential for disposals of around $11bn in Australian retail assets, or close to 3 years of typical transaction volume.

Selling appears to be broad-based. The broker maintains a clear preference for non-retail exposures within A-REITs. Target is $5.47.

Target price is $5.47 Current Price is $6.14 Difference: minus $0.67 (current price is over target).
If GPT meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.72, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates LVH as Add (1) -

The company has appointed Rizing as a distribution partner. Rizing will promote the company's Talent Community sourcing system in return for a share of recurring licence income. The deal is non-exclusive.

Morgans believes the company offers investors the opportunity to participate in the growth of a game-changing recruitment system and the rewards could be substantial.

However, as it is an early-stage technology business, Livehire is yet to become self-sustaining from a cash flow perspective. Morgans maintains an Add rating and $0.90 target.

Target price is $0.90 Current Price is $0.39 Difference: $0.51
If LVH meets the Morgans target it will return approximately 131% (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 ORE as Add (1) -

Worsening trade tensions between China and the US has meant commodity prices have been affected, as growth projections drop from previous forecasts. Morgans finds this is evident in the current lithium carbonate price, down to US$9,451/t in the March quarter.

The broker retains a view that, in the longer term, a price of US$10,500/t for battery grade lithium carbonate will be required to stimulate adequate supply and meet demand. Morgans maintains an Add rating and reduces the target to $5.19 from $5.30.

Target price is $5.19 Current Price is $3.23 Difference: $1.96
If ORE meets the Morgans target it will return approximately 61% (excluding dividends, fees and charges).

Current consensus price target is $4.61, suggesting upside of 42.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

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

The company has advised of retail tariff changes. Morgan Stanley estimates that the latest update signals the earnings impact, previously guided to be -$64-120m in FY20, is likely to be at the upper end of the range.

Origin Energy has indicated it is going beyond the strict requirements of the default market offer in aligning customers on low discount market offers. The broker believes this investment in customers is likely to be better received by stakeholders and more uniform reference pricing is also better for incumbent retailers.

Equal-weight. Target is $7.67. Industry view is Cautious.

Target price is $7.67 Current Price is $7.20 Difference: $0.47
If ORG meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.09, suggesting upside of 12.3% (ex-dividends)

The company's fiscal year ends in June.

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 ORG as Add (1) -

The impact of reductions to electricity prices will be deeper than Morgans previously estimated. Estimates for the costs of fuel at the Eraring power station have also increased. This lowers estimates for FY20 electricity gross margins to around $35/megawatt-hour.

Morgans also notes that recent volatility in the Brent oil price has weighed on the sector and, while Origin Energy is less leveraged to oil than others in the energy sector, it nevertheless has suffered. The broker reduces the target to $7.69 from $8.40. Add rating maintained.

Target price is $7.69 Current Price is $7.20 Difference: $0.49
If ORG meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.09, suggesting upside of 12.3% (ex-dividends)

The company's fiscal year ends in June.

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 REG as Hold (3) -

The company has reconfirmed prior FY19 guidance, noting lower net profit in FY20 resulting from costs from the Royal Commission and higher depreciation costs.

Morgans revises down earnings (EBITDA) forecasts for FY20 and FY21 by -15.5% and -10.5%, respectively.

As a result the target drops to $2.70 from $3.11. Hold rating maintained.

Target price is $2.70 Current Price is $2.59 Difference: $0.11
If REG meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.80, suggesting upside of 8.1% (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 SCG as Sell (5) -

Citi reiterates a Sell rating, retaining a negative view on retail landlords because of a large overhang of assets on the market. The broker estimates the potential for disposals of around $11bn in Australian retail assets, or close to 3 years of typical transaction volume.

Selling appears to be broad-based. The broker maintains a clear preference for non-retail exposures within A-REITs. Target is $3.54.

Target price is $3.54 Current Price is $3.84 Difference: minus $0.3 (current price is over target).
If SCG meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.84, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in December.

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 SCP as Sell (5) -

Citi reiterates a Sell rating, retaining a negative view on retail landlords because of a large overhang of assets on the market. The broker estimates the potential for disposals of around $11bn in Australian retail assets, or close to 3 years of typical transaction volume.

Selling appears to be broad-based. The broker maintains a clear preference for non-retail exposures within A-REITs. Target is $2.23.

Target price is $2.23 Current Price is $2.64 Difference: minus $0.41 (current price is over target).
If SCP meets the Citi target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.36, suggesting downside of -10.6% (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

Credit Suisse rates SYR as Outperform (1) -

The company has revised production expectations to 45-50,000t, -5,000t below the prior June quarter guidance. Recovery expectations are unchanged so Credit Suisse assesses there is no tangible benefit of plant optimisation despite the ongoing focus.

The broker notes average realised prices of US$466/t were marginally lower versus the March quarter. Cash draw was in line with expectations and should reduce significantly in the September quarter.

Outperform rating and $3.30 target maintained.

Target price is $3.30 Current Price is $1.05 Difference: $2.25
If SYR meets the Credit Suisse target it will return approximately 214% (excluding dividends, fees and charges).

Current consensus price target is $2.17, suggesting upside of 106.7% (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

Macquarie rates SYR as Outperform (1) -

Flat production, quarter on quarter, is suggesting improved stability and consistency at Balama, in Macquarie's view. Macquarie continues to expect recovery and throughput improvements over 2019.

The long-term outlook remains dependent on progress at the BAM project. Graphite production from Balama is expected to be 45-50,000t in the June quarter, down from 50-55,000t previously. Realised pricing is expected to be slightly softer at US$466/t.

Outperform rating maintained. Target is $2.70.

Target price is $2.70 Current Price is $1.05 Difference: $1.65
If SYR meets the Macquarie target it will return approximately 157% (excluding dividends, fees and charges).

Current consensus price target is $2.17, suggesting upside of 106.7% (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

UBS rates SYR as Buy (1) -

The company has updated on June quarter production, downgrading guidance to 45-50,000t from 50-55,000t. The reason, UBS notes, is the delay to the production improvement plan.

Product split is unchanged and the eventual lift in coarse flake production is one of the keys to better margins and cash flow, given current price differentials, the broker adds.

UBS maintains a Buy rating and reduces the target to $2.40 from $2.55.

Target price is $2.40 Current Price is $1.05 Difference: $1.35
If SYR meets the UBS target it will return approximately 129% (excluding dividends, fees and charges).

Current consensus price target is $2.17, suggesting upside of 106.7% (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

Citi rates VCX as Neutral (3) -

Vicinity Centres has announced a decline of -1.3% in the value of its portfolio. Citi observes the weighted average cap rate was essentially stable which indicates pressure on cash flow within the portfolio. Flagship assets bucked the trend while regional assets were less positive, down -4.5%.

Citi expects the valuation decline will reduce net tangible assets by -5c and increase gearing by 30 basis points. The broker retains a Neutral rating and $2.60 target.

While not surprised to see the book value decline, the broker believes it is further indication that selling assets could prove challenging.

Target price is $2.60 Current Price is $2.62 Difference: minus $0.02 (current price is over target).
If VCX meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.67, suggesting upside of 1.8% (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

Deutsche Bank rates WOW as Hold (3) -

Woolworths has invested $30m into Marley Spoon ((MMM)) as part of a strategic partnership via a convertible note and equity. Woolworths will hold 9% of outstanding shares in the business at the end of June.

The company has the option to convert the convertible note to shares under specific circumstances after two years.

Hold rating and $31 target maintained.

Target price is $31.00 Current Price is $32.03 Difference: minus $1.03 (current price is over target).
If WOW meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.91, suggesting downside of -6.6% (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