Australian Broker Call

Morgans rates BAP as Add (1) -

The company has recently reiterated net profit growth guidance for FY19 of 9% and will host an investor briefing on July 3. Morgans assesses the company is capable of sustaining a solid single-digit organic growth profile across the forecast years.

The growth profile may have slowed from lofty heights but the valuation is considered undemanding and there are reasonably defensive industry dynamics that create an investment proposition, particularly within the consumer sector, in the broker's view.

Target is reduced to $6.31 from $6.54. Add rating maintained.

Target price is $6.31 Current Price is $5.62 Difference: $0.69
If BAP meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.93, suggesting upside of 23.3% (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

Credit Suisse rates CSR as Underperform (5) -

The company has outlined a plan to consolidate five brick manufacturing sites in western Sydney into one at Badgery's Creek, thereby creating surplus property, independently valued at $600m.

Credit Suisse assesses a trade-off between valuing the operating bricks business and the property portfolio. The combined business is valued at $800m, with $200m in upside.

The main issue for the broker is the extent to which the value of the bricks business must be decreased in order to realise the property value. Underperform rating maintained. Target rises to $2.85 from $2.80.

Target price is $2.85 Current Price is $4.01 Difference: minus $1.16 (current price is over target).
If CSR meets the Credit Suisse target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.53, suggesting downside of -11.9% (ex-dividends)

The company's fiscal year ends in March.

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

Deutsche Bank rates CSR as Hold (3) -

The company has updated on its property division and, while the longer-term outlook is bright, Deutsche Bank expects current earnings to be below the historical average.

Building products demand has held up in the first two months of the company's financial year but the broker expects volumes and earnings will decline, assuming a reduction of -20% in earnings (EBIT) over the next two years. Hold maintained. Target is $4.

Target price is $4.00 Current Price is $4.01 Difference: minus $0.01 (current price is over target).
If CSR meets the Deutsche Bank target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.53, suggesting downside of -11.9% (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

Macquarie rates CSR as Outperform (1) -

CSR has updated on its property business, highlighting a 450ha NSW land portfolio that could see a 60% valuation increase on the rehabilitation and rezoning of some parcels, including land at Badgery's Creek. Meanwhile, demand for building products has not dropped in the June quarter from levels seen in the March quarter.

The broker sees macro conditions providing support, along with the property portfolio and a strong balance sheet. Outperform and $4.70 target retained.

Target price is $4.70 Current Price is $4.01 Difference: $0.69
If CSR meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.53, suggesting downside of -11.9% (ex-dividends)

The company's fiscal year ends in March.

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 CSR as Sell (5) -

The outlook for the property division in western Sydney is bright, UBS assesses. The new airport, due in 2026, and the proposed developments are leading to escalating land values.

With this backdrop, the company has reiterated an intention to realise value through balancing the needs of existing and future operations with what land could be sold.

UBS remains confident in the long-term earnings outlook although, given the improving outlook for land prices and a limited need for capital any time soon, suspects realisation of value will remain long dated.

Sell rating maintained. Target rises to $3.24 from $2.70.

Target price is $3.24 Current Price is $4.01 Difference: minus $0.77 (current price is over target).
If CSR meets the UBS target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.53, suggesting downside of -11.9% (ex-dividends)

The company's fiscal year ends in March.

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

Morgan Stanley rates FAR as Overweight (1) -

The company has underperformed its peers following drilling results last year and a recent equity raising. Morgan Stanley finds a number of catalysts are brewing for the next 6-12 months.

An arbitration hearing is scheduled for July while the development for Senegal needs to be approved by the government.

The broker updates the valuation based on the recent equity raising and maintains an Overweight rating, owing to the potential for catalysts to realign value expectations. Target is reduced to $0.10 from $0.11. Industry view is In-Line.

Target price is $0.10 Current Price is $0.08 Difference: $0.02
If FAR meets the Morgan Stanley target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Credit Suisse rates FMG as Outperform (1) -

Credit Suisse again lifts its numbers, by 4%, for FY19 to account for strong iron ore benchmark prices and the company's product realisations.

The same price per iron unit for the company's Kings and W PF products is being sought as per medium grades. Credit Suisse assumes a second half pay-out of 65% which infers a $0.12 per share dividend.

The broker maintains an Outperform rating and $8.20 target.

Target price is $8.20 Current Price is $9.16 Difference: minus $0.96 (current price is over target).
If FMG meets the Credit Suisse target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.63, suggesting downside of -16.7% (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: 0.1

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

Credit Suisse rates IGO as Downgrade to Underperform from Neutral (5) -

Credit Suisse finds the environment for base metal demand challenging, given US/China tensions and tariffs elsewhere, as well as the deterioration in global economic conditions.

The broker downwardly revises estimates for nickel, alumina and aluminium and only lifts copper forecasts, largely because of supply factors.

Independence Group is downgraded to Underperform from Neutral while the target is reduced to $4.00 from $4.10.

Target price is $4.00 Current Price is $4.75 Difference: minus $0.75 (current price is over target).
If IGO meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.85, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates ORA as Outperform (1) -

2019 started slowly for Orora, management revealed at a presentation, due to US weather and the government shutdown, although picked up a bit thereafter. US box demand remained weak -- an observation also made by US peer Bunzl. Management also reported signs of slowing in the Australian economy, with glass volumes down on lower wine exports.

While the broker suggests a tougher backdrop will subdue Orora's share price in FY20, the stock is inexpensive at current levels. Performance should strengthen thanks to investments and M&A. Target falls to $3.55 from 3.79, Outperform retained. The broker prefers Amcor ((AMC)) in the space.

Target price is $3.55 Current Price is $3.23 Difference: $0.32
If ORA meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.43, suggesting upside of 6.2% (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 OSH as Sell (5) -

Oil Search will exercise its option to increase its equity interest in the Alaskan assets to 51% from 25%. Citi currently expects the company will need to raise US$200-500m in new equity in 2020, depending on the tolerance for corporate debt and discretionary expenditure.

If the company does not farm down Alaska, it will have to incur 51% of the capital expenditure in addition to LNG expansion.

Citi considers the stock fair value and retains a Sell rating, suspecting equity markets are being too dismissive of the risks in LNG, including price reviews for PNG LNG. Target is raised to $7.09 from $7.08.

Target price is $7.09 Current Price is $7.15 Difference: minus $0.06 (current price is over target).
If OSH 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 $8.21, suggesting upside of 14.8% (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: 0.0

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

Deutsche Bank rates OSH as Hold (3) -

Oil Search is exercising its option to double its interest in Alaskan leases. A smaller production development will be fast-tracked from 2022 before the full development is launched from 2024.

This delay should help address some of the funding and timing issues, in Deutsche Bank's view. The broker notes an upgrade to the resource estimate is currently lacking, and full results of drilling are unlikely until well into 2020.

Hold rating maintained with an $8 target.

Target price is $8.00 Current Price is $7.15 Difference: $0.85
If OSH meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.21, suggesting upside of 14.8% (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: 0.0

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

Ord Minnett rates OSH as Hold (3) -

Oil Search will exercise its option over the existing Alaskan assets and will continue with its plans to sell-down to a 35% stake. A resource upgrade is indicated to be forthcoming prior to front-end engineering design and following the analysis of recent drilling results.

The resource upgrade potential and disclosure of an earlier conditional offer for the Alaskan assets is encouraging but Ord Minnett remains concerned about the prospects for the PNG LNG expansion project. Hold rating maintained. Target rises to $7.90 from $7.80.

Target price is $7.90 Current Price is $7.15 Difference: $0.75
If OSH meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $8.21, suggesting upside of 14.8% (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: 0.0

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

Credit Suisse rates PGH as Outperform (1) -

The company has refinanced its July 2020 debt facility, reducing the near-term liquidity risk. Credit Suisse suggests this opens the door for investors to evaluate Pact Group as a turnaround play.

The company has guided to FY19 operating earnings (EBITDA) at the lower end of the $230-245m guidance range.

Credit Suisse maintains an Outperform rating and $3.85 target, expecting earnings growth in FY20 to be sourced from the full-year inclusion of the TIC garment hanger pool acquisition, part of the year for the Aldi crate pooling contract and improved volumes in contract manufacturing.

Target price is $3.85 Current Price is $2.68 Difference: $1.17
If PGH meets the Credit Suisse target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $3.27, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates PRU as Downgrade to Neutral from Outperform (3) -

Credit Suisse increases gold price forecasts, given the recent momentum based on a confluence of supportive macro economic and geopolitical factors.

The broker now estimates gold to average US$1327/oz in 2019, rising to US$1350/oz in 2020. The broker downgrades Perseus Mining to Neutral from Outperform and raises the target to $0.59 from $0.57.

Target price is $0.59 Current Price is $0.55 Difference: $0.04
If PRU meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $0.65, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Credit Suisse rates RIC as Neutral (3) -

The company expects FY19 net profit of $22-24m. Credit Suisse understands this guidance refers to reported profit and incorporates a negative impact from CEO termination fees, lower aqua-feed volumes and reduced mono-gastric feed earnings.

CEO Tim Hart will leave the company, with the board stating a belief that this is the right time for a change in leadership. Credit Suisse will look to see if a different approach and strategic direction emerges under new leadership.

Neutral rating maintained. Target is reduced to $1.20 from $1.35.

Target price is $1.20 Current Price is $1.26 Difference: minus $0.06 (current price is over target).
If RIC meets the Credit Suisse 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 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 RIO as Buy (1) -

Rio Tinto appears encouraged by its copper-gold discovery at Winu in Western Australia. In the next 6-12 months Citi expects Rio Tinto to form a view on whether the greenfield project could be of the scale relevant to its operations, as a sizeable higher-grade zone may need to be defined.

Mineralisation has been intersected over a sizeable area at a comparatively shallow depth. Regardless, the broker does not expect this project will move the dial for Rio Tinto. Buy rating and $114 target maintained

Target price is $114.00 Current Price is $104.89 Difference: $9.11
If RIO meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $99.64, suggesting downside of -5.0% (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: 0.3

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

Macquarie rates RMD as Underperform (5) -

While the broker sees medium term potential for greater uptake of ResMed's products, it does not feel the market is pricing in the risks of changes to US regulated reimbursement charges and competition from other products.

Slight earnings adjustments and a reduction in the "risk free rate" (lower bond yields) provide for a target increase to $$15.00 from $14.25.? Underperform retained on a skew of risk to the downside.

Target price is $15.00 Current Price is $17.54 Difference: minus $2.54 (current price is over target).
If RMD meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.77, suggesting downside of -4.4% (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: 0.5

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

Credit Suisse rates S32 as Outperform (1) -

Credit Suisse increases copper forecasts while trimming nickel and aluminium. The broker also takes the opportunity to factor in coal price changes from May into the South32 numbers.

The net impact is a -6-7% reduction to estimates for earnings per share in FY19 and FY20. Outperform rating maintained. Target is reduced to $3.70 from $4.00.

Target price is $3.70 Current Price is $3.21 Difference: $0.49
If S32 meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.70, suggesting upside of 15.2% (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: 0.6

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

Deutsche Bank rates S32 as Buy (1) -

Deutsche Bank is pleased with the apparent turnaround in the operations at the Appin underground coal mine. Nevertheless, the outlook for costs and capital expenditure is somewhat disappointing.

Once operations stabilise, the broker believes management's attention should turn to costs. Buy rating and $4.10 target maintained.

Target price is $4.10 Current Price is $3.21 Difference: $0.89
If S32 meets the Deutsche Bank target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.70, suggesting upside of 15.2% (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

Ord Minnett rates SHL as Accumulate (2) -

Sonic Healthcare has sold its stake in GLP Systems, a German laboratory automation business. A profit of $48m will be realised on the sale.

Ord Minnett considers the sale a sound decision, given the operations are not core to the company's global laboratory business.

Ord Minnett maintains an Accumulate rating and $27.60 target.

Target price is $27.60 Current Price is $27.16 Difference: $0.44
If SHL meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $26.13, suggesting downside of -3.8% (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

Deutsche Bank rates TAH as Buy (1) -

Deutsche Bank notes the performance of the lotteries division continues to accelerate. Revenue is expected to be up 29% in the first half.

While this will set a high bar for FY20, the year will be off to a strong start with the $60m Powerball and a Lucky Lotteries jackpot of $77.5m.

Wagering, remains extremely competitive and no improvement is expected in the second half. Buy rating maintained. Target is $5.50.

Target price is $5.50 Current Price is $4.48 Difference: $1.02
If TAH meets the Deutsche Bank target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $5.04, suggesting upside of 12.4% (ex-dividends)

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

Ord Minnett rates TAH as Lighten (4) -

The company has received a statement of claim from Racing Queensland regarding the point of consumption tax (POCT). Ord Minnett understands the dispute relates to a provision in the agreement related to the calculation of fees and the "no worse off" clause.

The clause may imply a -17% funding shortfall to compensate for both the decline in product, channel and bet type in addition to the potential impact the tax may have on turnover. Ord Minnett maintains a Lighten rating and $4.10 target.

Target price is $4.10 Current Price is $4.48 Difference: minus $0.38 (current price is over target).
If TAH meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.04, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates URW as Hold (3) -

Ord Minnett envisages some room to be positive from a valuation perspective on the stock, with a -23% discount to gross asset value and a 8.5% dividend yield.

However, the absence of near-term catalysts and challenging news flow suggests there is little reason to expect a re-rating any time soon.

The stock is also looking vulnerable to being deleted from the Euro Stoxx 50 annual review in September. On the positive side, funding costs have declined which should support earnings. Hold rating and $12.60 target maintained.

Target price is $12.60 Current Price is $10.71 Difference: $1.89
If URW meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $11.63, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

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

Market Sentiment: -0.5

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