Australian Broker Call

UBS rates CGF as Neutral (3) -

UBS notes falling bond yields represent an earnings headwind for general insurers as well as Challenger into FY20, while wealth managers, specifically equity-based managers, should enjoy asset-driven recurring revenue uplift.

Australian risk-free rates have halved over the year to date and, while the company's interest-rate sensitivity is lower than those financials most exposed, such as QBE Insurance ((QBE)) and Computershare ((CPU)), the broker believes Challenger could also experience weaker annuity demand.

Neutral rating and $6.95 target maintained.

Target price is $6.95 Current Price is $6.92 Difference: $0.03
If CGF meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $7.32, suggesting upside of 5.7% (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

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

The company has provided FY20 guidance and a new life of mine plan for Mount Morgans, with 170,000 ounces signalled for the next five years.

The updated plan assumes mill throughput of 2.9mtpa and recovery of 94.3%. These metrics are 16% and 4% higher than respective nameplate capacity and feasibility study outcomes.

Incorporating the updated outlook, Macquarie makes material downgrades in the near term and upgrades in the long term. The broker lowers the target to $0.70 from $0.80 and downgrades to Neutral from Outperform.

Target price is $0.70 Current Price is $0.59 Difference: $0.11
If DCN meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

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

Morgans rates EBO as Upgrade to Add from Hold (1) -

Ebos recently raised NZ$175m to reduce gearing ahead of further acquisitions and organic growth, and Morgans notes the company has delivered 12% compound annual earnings growth over the past four years, with 10% forecast for the next two, partly driven by the new CWG supply agreement.

Upgrades to FY20-21 earnings forecasts lead to a target increase to $24.07 from $20.43. This takes forecast total shareholder return to over 10%, which on Morgans' scale prompts an upgrade to Add from Hold.

Target price is $24.07 Current Price is $22.50 Difference: $1.57
If EBO meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $24.07, suggesting upside of 7.0% (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 EVN as Neutral (3) -

Preliminary production numbers from the June quarter are in line with Citi's estimates. June quarter production was 195,000 ounces at an all in sustainable cost of $915/oz.

FY20 guidance of 725-775,000 ounces is similar over a three-year period but cost estimates are 5% higher. Citi maintains a Neutral rating and reduces the target to $4.30 from $4.40.

Target price is $4.30 Current Price is $4.44 Difference: minus $0.14 (current price is over target).
If EVN meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.66, suggesting downside of -17.7% (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 EVN as Underperform (5) -

The June quarter production numbers were in line with expectations. FY20 guidance appears very similar to FY19 and Credit Suisse notes mature operations, Mungari and Rawdon, continue to miss guidance.

Cost pressure is evident as higher costs have been guided for FY20. The broker maintains an Underperform rating and $2.60 target.

Target price is $2.60 Current Price is $4.44 Difference: minus $1.84 (current price is over target).
If EVN meets the Credit Suisse target it will return approximately minus 41% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.66, suggesting downside of -17.7% (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 EVN as Underperform (5) -

Quarterly production data revealed operations continue to generate strong cash flow and the company has moved back to a net cash position. A steady production outlook was also outlined with FY20 guidance. This was in line with Macquarie's expectations.

However, Macquarie downgraded the stock to Underperform in a sector-wide report the previous day but appears to "maintain Neutral" on the next. Target is steady at $4.30. The full production data will be released on July 24, with the earnings result for FY19 on August 15.

Target price is $4.30 Current Price is $4.44 Difference: minus $0.14 (current price is over target).
If EVN meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.66, suggesting downside of -17.7% (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

Morgans rates EVN as Downgrade to Hold from Add (3) -

Evolution Mining has pre-released quarterly production numbers and updated guidance. FY19 production met guidance but exceeded Morgan's forecast, while costs came in above guidance. Cost guidance has increased for both FY20 and FY21, as capex guidance. A lower Aussie partially offsets the impact.

Target falls to $3.44 from $3.55. Evolution remains the Morgans' preference in the space, and the broker believes a gold allocation is required in any portfolio in uncertain geopolitical times. Recent share price strength nevertheless triggers a downgrade to Hold.

Target price is $3.44 Current Price is $4.44 Difference: minus $1 (current price is over target).
If EVN meets the Morgans target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.66, suggesting downside of -17.7% (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

UBS rates EVN as Neutral (3) -

The company has updated FY20-21 guidance and, while production guidance is maintained, costs and capital expenditure estimates have lifted.

UBS notes guidance implies flat costs over three years, at $900/oz, which are likely to be better than peers when they deliver FY20 guidance.

The broker suspects peers will experience higher cost inflation and this is the reason why Evolution Mining is its most preferred of those gold miners with Australian assets.

 Neutral rating maintained as the stock appears fully priced on an absolute basis. Target is reduced to $4.25 from $4.35.

Target price is $4.25 Current Price is $4.44 Difference: minus $0.19 (current price is over target).
If EVN meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.66, suggesting downside of -17.7% (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 GWA as Neutral (3) -

Credit Suisse expects weak end-market growth when the company reports its results on August 19. A sharp downturn in housing and commentary from peers leads the broker to update its model.

Neutral rating maintained and the target is reduced to $3.50 from $3.65.

The broker also assesses the complementary product range from Methven, which is likely to boost tapware category share to 34%, is outweighing the risk of product overlap.

Target price is $3.50 Current Price is $3.52 Difference: minus $0.02 (current price is over target).
If GWA 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 $3.43, suggesting downside of -2.7% (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

Morgans rates IEL as Hold (3) -

Ahead of IDP Education's August result release, the broker has updated forecasts, not having done so since the February release, to take into account recent student placement data and price rises. This leads to a target price increase to $17.29 from $14.40.

The broker sees a high quality business with substantial growth optionality, but also a full price. Hold retained.

Target price is $17.29 Current Price is $18.87 Difference: minus $1.58 (current price is over target).
If IEL meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.17, suggesting downside of -14.3% (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 IFL as Neutral (3) -

Citi lowers estimates for earnings per share in FY19 by -6%, in FY20 by -43% and in FY21 by -46%. In particular, the broker continues to envisage substantial risk to the company's business model and a need to invest in a significant transition of its advice business.

This may be accompanied by degree of re-basing. Remediation costs are also expected to rise. Citi maintains a Sell, High Risk rating and reduces the target to $4.80 from $5.00.

Target price is $4.80 Current Price is $5.52 Difference: minus $0.72 (current price is over target).
If IFL meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.31, 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

Macquarie rates KLL as Outperform (1) -

The company continues to progress targets for Beyondie and a final investment decision is due. Macquarie updates estimates for the sulphate of potash project to incorporate recent announcements and expects Beyondie to generate strong dividends.

All debt is now in place and approvals are secured. The construction phase will start shortly. First production is expected mid FY21. Macquarie maintains an Outperform rating and $1.00 target.

Target price is $1.00 Current Price is $0.63 Difference: $0.37
If KLL meets the Macquarie target it will return approximately 59% (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

Ord Minnett rates MGR as Lighten (4) -

Ord Minnett re-jigs forecasts following the $750m capital raising. The capital raising has diluted the very strong FY20 to earnings growth forecasts, which is underpinned by three major apartment projects.

There is now funding capacity to drive earnings growth in FY21 and FY22. Ord Minnett maintains a Lighten rating and increases the target to $2.85 from $2.65.

Target price is $2.85 Current Price is $3.30 Difference: minus $0.45 (current price is over target).
If MGR meets the Ord Minnett target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.92, suggesting downside of -11.4% (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

Credit Suisse rates ORG as Outperform (1) -

Credit Suisse updates numbers to account for global oil forecasts. Brent forecasts are increased to US$67.50/bbl for 2019. The minor changes result in a reduction of -3.3% in net profit estimates in FY21 but the broker remains above consensus for FY19/20.

Results on August 22 are expected to be at the top end of guidance, and there is likely to be a positive dividend catalyst. Credit Suisse retains an Outperform rating and $8.50 target.

Target price is $8.50 Current Price is $7.52 Difference: $0.98
If ORG meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $8.23, suggesting upside of 9.4% (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

Morgan Stanley rates PTM as Underweight (5) -

The company recorded outflows of -$228m for June and there was around $1.3bn in gross distributions. Closing funds under management for the second half at $24.77bn were above Morgan Stanley's estimates.

The broker believes the update is a negative, given that stronger markets are largely priced in and deteriorating outflows from negative investment performance as well as the revenue/earnings impact of distributions are being missed by the market.

Underweight rating. In-Line industry view. Target is $3.40.

Target price is $3.40 Current Price is $4.84 Difference: minus $1.44 (current price is over target).
If PTM meets the Morgan Stanley target it will return approximately minus 30% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.38, suggesting downside of -9.4% (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

UBS rates RFF as Buy (1) -

UBS assesses Rural Funds has missed the A-REIT rally as it is up just 10% versus the sector's gains of 22%. The company's revaluation of Rewan and its gulf properties has affirmed the cattle strategy and provides the broker with confidence.

UBS suspects investors may be overlooking the growth and yield of Rural Funds because management sticks to a conservative distribution policy. However, in a low bond yield environment, the stock offers a secure yield play as a small cap, without the structural challenges of smaller retail A-REITs.

Buy rating maintained. Target is raised to $2.65 from $2.42.

Target price is $2.65 Current Price is $2.35 Difference: $0.3
If RFF meets the UBS 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 RIO as Hold (3) -

The broker has reviewed its assumptions and forecasts for Rio Tinto, including marking to new iron ore price forecasts. This leads to a valuation increase to an enterprise multiple of 5.5x for FY20, in line with global peers.

Target rises to $92.95 from $85.66. If the broker used spot iron ore that value would be $171.96 -- not indicative of its true value but indicative of the extent of the upgrade cycle, the broker suggests.

The greatest uncertainty lies with the Oyu Tolgoi underground project, but otherwise Rio is in "great shape", albeit well valued. Hold retained.

Target price is $92.95 Current Price is $104.51 Difference: minus $11.56 (current price is over target).
If RIO meets the Morgans target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $105.16, suggesting upside of 0.6% (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

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

Operating conditions remain challenged and Ord Minnett expects no reprieve in the near term.

Barring any material macro changes, such as a truce in the US/China trade dispute, China relaxing non-ferrous scrap restrictions or a strengthening Turkish economy, the broker suggests the stock may struggle to outperform.

Despite strength in iron ore, ferrous scrap pricing remains weak. Ord Minnett downgrades to Hold from Buy and reduces the target to $11.00 from $13.20.

Target price is $11.00 Current Price is $10.22 Difference: $0.78
If SGM meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $11.36, suggesting upside of 11.1% (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

Ord Minnett rates STO as Buy (1) -

Ord Minnett updates its modelling to incorporate the quarterly review against benchmark oil futures. The broker's long-term oil price forecast remains at US$60/bbl from 2022.

Medium-term forecasts are unchanged. Buy rating maintained. Target is raised to $7.60 from $7.50.

Target price is $7.60 Current Price is $6.93 Difference: $0.67
If STO meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $6.99, suggesting upside of 0.9% (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

Credit Suisse rates SVW as Outperform (1) -

Credit Suisse has assessed the mining aftermarket industry, which is the company's higher multiple division, and believes this offsets weakness within the lower-multiple equipment hire division.

This provides another upgrade angle for the stock when conditions eventually normalise within Coates.

While there are some headwinds currently, as the broker has feedback that the timing of upcoming infrastructure work has not meshed with large projects that are winding down, normalisation is expected late in the first half of FY20.

Credit Suisse maintains an Outperform rating and raises the target to $21.35 from $21.00.

Target price is $21.35 Current Price is $18.96 Difference: $2.39
If SVW meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $22.52, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

Ord Minnett rates WPL as Downgrade to Lighten from Hold (4) -

Marginal returns from development projects, Scarborough and Browse, are hampering the company's ability to convince its JV partners to proceed and Ord Minnett ascertains this is likely to be causing delays to the investment decision schedule.

The risk is that one or both of the projects will be shelved indefinitely which means the trains at the Karratha gas plant will need to be shut down.

The stock is now trading above the broker's target, leading to a downgrade to Lighten from Hold. Target is reduced to $33.85 from $34.60.

Target price is $33.85 Current Price is $36.04 Difference: minus $2.19 (current price is over target).
If WPL meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.30, suggesting downside of -2.0% (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: 0.0

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