Australian Broker Call

Macquarie rates ADI as Resume Coverage with Neutral (3) -

Macquarie recommences coverage following the recent equity raising. A Neutral rating is maintained with the target raised 3% to $2.91. The company did upgrade FY20 guidance for growth of 3.5% following the acquisition of 60 Grindle Rd but then made two dilutive acquisitions, Macquarie observes.

The broker estimates the impact of the three transactions will result in growth of 2.3% which is short of guidance. The broker assesses gearing has now moved to 31.2%, at the lower end of the target range, and provides $50m in head room at the mid point.

Target price is $2.91 Current Price is $2.92 Difference: minus $0.01 (current price is over target).
If ADI meets the Macquarie target it will return approximately minus 0% (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: 0.0

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

Credit Suisse rates API as Underperform (5) -

Australian Pharmaceutical has sold its 12.96% stake in Sigma Healthcare ((SIG)) for $0.60 a share. Credit Suisse calculates this represents a -$3.5m loss vs the price of the acquisition in December 2018.

Since then, Sigma has rejected merger talks and won back the Chemist Warehouse contract. While expecting that Australian Pharmaceutical would sell its stake, given the limited interest shown in the potential merger, the sale confirms for Credit Suisse that consolidation in the wholesale pharmaceutical distribution industry is unlikely.

Underperform maintained. Target is reduced to $1.28 from $1.40.

Target price is $1.28 Current Price is $1.30 Difference: minus $0.02 (current price is over target).
If API meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.38, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in August.

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

Ord Minnett rates CHC as Resume coverage with Buy (1) -

Ord Minnett has resumed coverage with a Buy rating and $14.20 target, assessing the earnings outlook has improved over the past 3-4 months and the shares are materially undervalued.

Based on a review of the company's 45 funds asset under management forecasts are lifted to around $50bn by the end of FY22. Estimates for earnings per share are lifted by 10% for both FY20 and FY21.

Target price is $14.20 Current Price is $11.28 Difference: $2.92
If CHC meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $13.22, suggesting upside of 17.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Morgan Stanley rates CTD as Overweight (1) -

The company has reiterated operating earnings guidance at its AGM of $165-175m. Despite softer conditions, Morgan Stanley believes guidance is achievable and reiterates an Overweight rating. Target is $31. In-Line industry view.

Target price is $31.00 Current Price is $20.53 Difference: $10.47
If CTD meets the Morgan Stanley target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $26.65, suggesting upside of 29.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates FCL as Buy (1) -

The first AGM as a public company has delivered a stronger outlook for revenue in FY20, expected in the range of EUR80-82m and driven by professional services activity, albeit, Ord Minnett notes, with slightly lower software revenue.

The broker considers the market momentum positive and remains attracted to the company's leading position as well as the size of software outsourcing opportunities in life insurance, particularly in the US.

Buy rating maintained. Target is reduced to $3.55 from $3.60.

Target price is $3.55 Current Price is $2.75 Difference: $0.8
If FCL meets the Ord Minnett target it will return approximately 29% (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

UBS rates FMG as Sell (5) -

Fortescue Metals has outperformed the iron ore price, UBS believes. The stock is up 175% in the year to date helped by a iron ore price which is up around 30%.

UBS expects the iron ore price will fall as supply normalises and this should cap the share price.

The broker maintains a Sell rating and $8 target.

Target price is $8.00 Current Price is $10.87 Difference: minus $2.87 (current price is over target).
If FMG meets the UBS target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.68, suggesting downside of -20.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.3

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

Ord Minnett rates IFL as Lighten (4) -

Despite the strong share price performance recently, Ord Minnett still envisages many risks ahead. The company appears to have factored in almost no exposure to the wider industry pressures that have led to banks divesting wealth operations.

The broker suspects the company's earnings forecasts face greater risks than for peers and the cheap valuation metrics may be misleading. Lighten rating maintained. Target is raised to $6.75 from $6.00.

Target price is $6.75 Current Price is $7.99 Difference: minus $1.24 (current price is over target).
If IFL meets the Ord Minnett target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.50, suggesting downside of -6.1% (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 MIN as Outperform (1) -

Mount Marion will receive a December quarter spodumene price of US$521/t, a -14% reduction on the prior quarter's price. Macquarie expects further weakness in spodumene pricing in 2020.

On the other hand, the broker believes there is upside risk to the earnings guidance for the mining services business. Outperform rating and $19.40 target maintained.

Target price is $19.40 Current Price is $17.02 Difference: $2.38
If MIN meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $16.97, suggesting downside of -0.3% (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

Citi rates NST as Buy (1) -

Media reports suggest that Northern Star is closing in on an acquisition of Newmont Goldcorp's 50% stake in KCGM, the so-called Super Pit. The company is in a trading halt pending an announcement on a "potential strategic transaction".

Citi suspects the market will question if this is a logical time to take a stake in KCGM, given the turnaround at Pogo is yet to be achieved and in the wake of the recent Echo Resources acquisition. How far can management be stretched?

The bull case is that the Super Pit will get more attention if it becomes a key asset for local companies. Citi retains a Buy rating and $12.40 target.

Target price is $12.40 Current Price is $9.65 Difference: $2.75
If NST meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $11.10, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

UBS rates PRN as Buy (1) -

The company has reduced FY20 net profit guidance to around $115-120m from $140m. This represents a -14-17% downgrade to prior UBS estimates.

The downgrade highlights the external risks associated with the African component of surface mining, and UBS expects investor sentiment will remain depressed in the near term.

However, end-market conditions remain favourable and the valuation supportive. Buy rating maintained. Target is reduced to $2.30 from $2.55.

Target price is $2.30 Current Price is $1.66 Difference: $0.64
If PRN meets the UBS target it will return approximately 39% (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 SIQ as Downgrade to Neutral from Outperform (3) -

The company's insurance underwriting partner intends to change product terms sold by authorised representatives. Credit Suisse understands this relates to add-on insurance and will affect the price point and service fees SmartGroup receives.

The company estimates a -$4m unmitigated impact for FY20. Credit Suisse had assessed changes to add-on insurance products were already in the earnings base and is surprised by the extent of the earnings hit, and the fact there are evidently service fees outside of the commission structure.

Rating is downgraded to Neutral from Outperform. Target is reduced to $8.25 from $10.10.

Target price is $8.25 Current Price is $7.02 Difference: $1.23
If SIQ meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $9.00, suggesting upside of 28.2% (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

Macquarie rates SIQ as Downgrade to Neutral from Outperform (3) -

Macquarie downgrades to Neutral from Outperform. The company has announced its insurance underwriting partner intends to make changes to the terms, which will affect service fees and commissions.

Macquarie finds the impact and timing extremely disappointing. Based on guidance Smartgroup will receive a reduction of -$11.4m in service fee earnings. Target is reduced to $7.66 from $11.66.

Target price is $7.66 Current Price is $7.02 Difference: $0.64
If SIQ meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $9.00, suggesting upside of 28.2% (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

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

The company's insurance underwriting partner intends to widen what is claimable and reduce pricing. This will impact the profits of insurance sold via novated providers.

Morgan Stanley assesses the changes are most likely the outcome of a regulatory review. The magnitude of the change, in combination with the timing of management transition at Smartgroup, is disappointing for the broker.

Equal-weight. Target is reduced to $8.70 from $10.50. Sector view is In-Line.

Target price is $8.70 Current Price is $7.02 Difference: $1.68
If SIQ meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $9.00, suggesting upside of 28.2% (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 SIQ as Hold (3) -

The company's add-on insurance provider intends to change contract terms. Smartgroup expects the financial impact will be a net profit reduction of -$4m in FY20 and the annualised impact is a -10% downgrade based on 2019 guided earnings.

Morgans has been cautious about add-on insurance for some time and anticipates further downside risk is present. Meanwhile, the organic growth outlook is challenged and the broker would prefer to have greater confidence in forecasts before taking a positive view.

Hold rating maintained. Target is reduced to $8.57 from $10.01.

Target price is $8.57 Current Price is $7.02 Difference: $1.55
If SIQ meets the Morgans target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $9.00, suggesting upside of 28.2% (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

Ord Minnett rates SIQ as Downgrade to Hold from Buy (3) -

Ord Minnett notes the company has made three surprise announcements in the last couple of months, these being a complete sell-down by a major shareholder, the upcoming retirement of the CEO, and now the insurance underwriter is implementing changes to the terms of the products.

As new car sales data remains weak and a headwind for the sector, Ord Minnett suggests the timing of the announcements has not been helpful. As a result, the rating is downgraded to Hold from Buy. Target is reduced to $9.00 from $11.60.

Target price is $9.00 Current Price is $7.02 Difference: $1.98
If SIQ meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $9.00, suggesting upside of 28.2% (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

Macquarie rates VEA as Neutral (3) -

The company has indicated fuel volumes are higher while the Geelong refinery has benefited from higher regional margins, although this is partially offset by rising crude premiums.

The company expects fuel sales volumes of 14.6-14.7bn litres in 2019, up 4.3%. However, Macquarie notes this has come at the expense of margins in retail fuel and awaits a stabilisation before becoming more positive on the stock.

Neutral rating maintained. Target is reduced -24.5% to $2.05.

Target price is $2.05 Current Price is $1.94 Difference: $0.11
If VEA meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 10.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.4

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

Morgans rates WGN as Hold (3) -

Wagners has secured the $40m contract to supply precast concrete tunnel segments to the Brisbane Cross River Rail project. First supply is expected to be in January 2021.

Morgans increases underlying net profit estimates for FY21 and FY22 by 17.9% and 5.4% respectively. The broker continues to envisage the risk/reward profile is evenly balanced and maintains a Hold rating. Target is raised to $2.28 from $2.25.

Target price is $2.28 Current Price is $2.45 Difference: minus $0.17 (current price is over target).
If WGN meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.96, suggesting downside of -20.0% (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 WOR as Buy (1) -

UBS considers the WorleyParsons discount of around -20% to the market is too great but could be partially explained by several issues, including inadequate financial disclosures, a perceived overhang of the Jacobs sell-down and the recent de-rating of global E&C peer multiples.

The next catalyst is expected to be the release of pro forma FY19 financials either at, or before, the first half result in February. UBS reiterates a Buy rating and assesses the valuation as attractive. Target is raised to $17.50 from $16.00.

Target price is $17.50 Current Price is $15.65 Difference: $1.85
If WOR meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $17.45, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Macquarie rates WOW as Neutral (3) -

Shareholders have voted in favour of the Endeavour Drinks restructure. This will allow for a reduction in ethical concerns, with the drinks business being separated, Macquarie assesses.

The broker also notes the AGM was told the second quarter trading was pleasing and the remediation costs for the underpayment of workers are likely to be at the lower end of initial guidance. Neutral rating and $37 target maintained.

Target price is $37.00 Current Price is $37.59 Difference: minus $0.59 (current price is over target).
If WOW meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.66, suggesting downside of -7.8% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates XRO as Neutral (3) -

Credit Suisse appears to have had a change of analyst. Coverage is re-set with a Neutral rating and $80 target.

The broker considers the stock one of the best in its class, although it is now trading at the very high end of global comparables, making valuation support increasingly challenging. The broker awaits any share price weakness for an entry point.

Target price is $80.00 Current Price is $80.86 Difference: minus $0.86 (current price is over target).
If XRO 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 $74.50, suggesting downside of -7.9% (ex-dividends)

The company's fiscal year ends in March.

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