Australian Broker Call
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October 01, 2018
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)
THIS REPORT WILL BE UPDATED SHORTLY
Last Updated: 10:00 AM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
UBS rates AMP as Sell (5) -
UBS remains more interested in the structural changes that may be proposed for wealth managers as a result of the Hayne Royal Commission, rather than AMP-specific issues. The broker refreshes its valuation and reduces the target to $2.80 from $3.15.
The broker highlights the risk of elevated churn and, should the Royal Commission lead to an abrupt change in grandfathered commissions, suspects margins may be squeezed further. Sell rating maintained.
Target price is $2.80 Current Price is $3.19 Difference: minus $0.39 (current price is over target).
If AMP meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $3.79, suggesting upside of 18.8% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY18:
UBS forecasts a full year FY18 dividend of 23.00 cents and EPS of 32.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 20.2, implying annual growth of -31.1%. Current consensus DPS estimate is 23.3, implying a prospective dividend yield of 7.3%. Current consensus EPS estimate suggests the PER is 15.8. |
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 22.00 cents and EPS of 31.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 24.1, implying annual growth of 19.3%. Current consensus DPS estimate is 25.0, implying a prospective dividend yield of 7.8%. Current consensus EPS estimate suggests the PER is 13.2. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $11.02
Morgans rates BOQ as Add (1) -
Morgans believes income growth remains challenging for Bank of Queensland and none is expected in FY18. The bank will report its FY18 result on October 4. Cash earnings of $362m are forecast with a final ordinary dividend of $0.38 per share. Morgans also expects a special dividend of $0.10 per share.
The broker believes a shrinking owner-managed branch footprint and slow home loan turnaround times are working against the bank's credit growth, and it will be difficult to achieve system home loan growth without compromising too much on margin. Add rating and $11.50 target maintained.
Target price is $11.50 Current Price is $11.02 Difference: $0.48
If BOQ meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).
Current consensus price target is $10.65, suggesting downside of -3.4% (ex-dividends)
The company's fiscal year ends in August.
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 76.00 cents and EPS of 92.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 90.4, implying annual growth of -7.4%. Current consensus DPS estimate is 79.0, implying a prospective dividend yield of 7.2%. Current consensus EPS estimate suggests the PER is 12.2. |
Forecast for FY19:
Morgans forecasts a full year FY19 dividend of 76.00 cents and EPS of 90.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 86.8, implying annual growth of -4.0%. Current consensus DPS estimate is 77.5, implying a prospective dividend yield of 7.0%. Current consensus EPS estimate suggests the PER is 12.7. |
Market Sentiment: -0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $27.93
Citi rates WBC as Neutral (3) -
Westpac has announced FY18 cash earnings would be lowered by -$235m amid provisions for customer redress and litigation. Reviews are continuing into FY19 in relation to fees for advice charged by the aligned planner networks.
Citi notes the stock has underperformed the ASX 200 by around -16% since the announcement of the Royal Commission in November 2017. Further to this announcement, the broker reduces FY18 and FY19 estimates for earnings by -3% and -2% respectively. Neutral and $31 target retained.
Target price is $31.00 Current Price is $27.93 Difference: $3.07
If WBC meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).
Current consensus price target is $30.48, suggesting upside of 9.1% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY18:
Citi forecasts a full year FY18 dividend of 192.00 cents and EPS of 228.50 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 234.2, implying annual growth of -1.6%. Current consensus DPS estimate is 188.7, implying a prospective dividend yield of 6.8%. Current consensus EPS estimate suggests the PER is 11.9. |
Forecast for FY19:
Citi forecasts a full year FY19 dividend of 196.00 cents and EPS of 229.90 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 237.8, implying annual growth of 1.5%. Current consensus DPS estimate is 189.7, implying a prospective dividend yield of 6.8%. Current consensus EPS estimate suggests the PER is 11.7. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
UBS rates WBC as Sell (5) -
Westpac has announced cash earnings will be reduced by -$235m to address customer redress and provisions for the litigation. The increase in provisions covers customer refunds for fees charged by salaried financial planners where no service was provided, dating back to 2008. This includes where there is insufficient evidence to verify the service was provided.
UBS believes more provisions are likely and it is too early to quantify additional charges in FY19. The broker downgrades forecasts to take into account the additional provisions. A Sell rating is maintained. Target is reduced to $25 from $26.
Target price is $25.00 Current Price is $27.93 Difference: minus $2.93 (current price is over target).
If WBC meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $30.48, suggesting upside of 9.1% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY18:
UBS forecasts a full year FY18 dividend of 188.00 cents and EPS of 229.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 234.2, implying annual growth of -1.6%. Current consensus DPS estimate is 188.7, implying a prospective dividend yield of 6.8%. Current consensus EPS estimate suggests the PER is 11.9. |
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 188.00 cents and EPS of 225.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 237.8, implying annual growth of 1.5%. Current consensus DPS estimate is 189.7, implying a prospective dividend yield of 6.8%. Current consensus EPS estimate suggests the PER is 11.7. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $49.85
UBS rates WES as Neutral (3) -
UBS observes the stock has outperformed the ASX 200 industrials ex financials by around 13% over the past year, considered to be a function of a leaner business and the proposed Coles de-merger.
The broker believes the stock is pricing in a continuation of current trends, with Bunnings trading at an implied 10% premium to the market for FY19 and Coles a -3% discount to Woolworths ((WOW)).
UBS lifts forecasts to reflect the success of the Coles 'Little Shop' campaign and steady margins at Kmart going forward. Neutral rating maintained. Target is raised to $48.50 from $43.00.
Target price is $48.50 Current Price is $49.85 Difference: minus $1.35 (current price is over target).
If WES meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $48.25, suggesting downside of -3.2% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 226.00 cents and EPS of 263.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 274.9, implying annual growth of 159.7%. Current consensus DPS estimate is 228.6, implying a prospective dividend yield of 4.6%. Current consensus EPS estimate suggests the PER is 18.1. |
Forecast for FY20:
UBS forecasts a full year FY20 dividend of 232.00 cents and EPS of 269.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 274.5, implying annual growth of -0.1%. Current consensus DPS estimate is 236.0, implying a prospective dividend yield of 4.7%. Current consensus EPS estimate suggests the PER is 18.2. |
Market Sentiment: -0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Today's Price Target Changes
| Company | Broker | New Target | Prev Target | Change | |
| AMP | AMP | UBS | 2.80 | 3.15 | -11.11% |
| WBC | WESTPAC BANKING | UBS | 25.00 | 26.00 | -3.85% |
| WES | WESFARMERS | UBS | 48.50 | 43.00 | 12.79% |
Summaries
| AMP | AMP | Sell - UBS | Overnight Price $3.19 |
| BOQ | BANK OF QUEENSLAND | Add - Morgans | Overnight Price $11.02 |
| WBC | WESTPAC BANKING | Neutral - Citi | Overnight Price $27.93 |
| Sell - UBS | Overnight Price $27.93 | ||
| WES | WESFARMERS | Neutral - UBS | Overnight Price $49.85 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 1 |
| 3. Hold | 2 |
| 5. Sell | 2 |
Monday 01 October 2018
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