Australian Broker Call

Morgans rates AVG as Add (1) -

First half results beat Morgans' forecasts. FY19 guidance has been lowered because of a significant negative SGARA (self generating and regenerating assets) result.

Excluding the adverse SGARA impact, the broker would have made net upgrades to estimates. Still, the interim result illustrates considerable progress in transforming into a quality branded wine company.

Morgans maintains an Add rating and reduces the target to $0.62 from $0.64.

Target price is $0.62 Current Price is $0.52 Difference: $0.1
If AVG meets the Morgans 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: 1.0

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

Morgans rates CMW as Hold (3) -

First half results were underpinned by positive growth in rental income. FY19 guidance is reiterated. There is a solid recurring income base, Morgans observes, and active assets are also expected to deliver returns over the medium to long-term.

Any variability in forecasts will depend on the deployment of capital and timing as well as transactions, the broker suggests.

The company has indicated that there is downside risk in all markets and there may be delays to transactions. Hold rating maintained. Target is raised to $1.13 from $1.09.

Target price is $1.13 Current Price is $1.10 Difference: $0.03
If CMW meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting downside of -3.9% (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 FMG as Upgrade to Buy from Hold (1) -

Ord Minnett raises assumptions for iron ore prices and now expects the disruption to Vale's production to last for around three years, post the most-recent tailings dam disaster and the acceleration of government shutdowns of a number of dams.

The broker believes the stars now align for lower-grade iron ore, with compressed discounts in a rising market. Spot prices for the Fortescue blend are US$70/t, only a -17% discount to the 62% iron benchmark.

The broker believes investors can still make money buying the stock, despite a strong rally in the year to date. This leads to an upgrade to Buy from Hold and an increase in the target to $7.30 from $6.70.

Target price is $7.30 Current Price is $6.38 Difference: $0.92
If FMG meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting downside of -2.8% (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

Citi rates FNP as Buy (1) -

On Friday already, the Australian Broker Call Report reported Freedom Foods' earnings result missed the broker by -15% due to the one-off impact from a strategic decision to terminate private label manufacturing in Cereals & Snacks in order to free up capacity for higher margin brands.

Today, Citi analysts are looking beyond what they describe as "short-term disruption". They continue to see stronger margins on the horizon. As such, the long term growth story is still seen as intact. Shorter term, forecasts have been cut -10%-14%. Target price drops by -15% to $6.55. Buy rating retained.

Target price is $6.55 Current Price is $5.00 Difference: $1.55
If FNP meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $6.02, suggesting upside of 20.3% (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

Morgans rates FNP as Hold (3) -

First half results were below expectations. Morgans forgives some of the miss, given the strategic decision to exit a large number of low-margin contract manufacturing arrangements, because it will build a better business over the medium term.

While making material downgrades to forecasts, the broker still expects strong earnings growth because of demand for the company's products across Australia, Asia and the Middle East.

Freedom Foods will also benefit from the scaling of new facilities and production of higher-margin dairy nutritional products. The broker maintains a Hold rating and reduces the target to $4.90 from $6.01.

Target price is $4.90 Current Price is $5.00 Difference: minus $0.1 (current price is over target).
If FNP meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.02, suggesting upside of 20.3% (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

UBS rates FNP as Buy (1) -

Underlying earnings in the first half were below UBS estimates. The cereals and snacking division was the main cause and the company has ended arrangements for branded and private-label manufacturing to support its own products.

UBS suggests dairy margins may have been weak but operating inefficiencies should unwind. Nutritionals capability will begin in the second half and extend more materially into FY20.

Lactoferrin supply capacity is expected to start in FY20. UBS maintains a Buy rating and reduces the target to $6.60 from $6.70.

Target price is $6.60 Current Price is $5.00 Difference: $1.6
If FNP meets the UBS target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $6.02, suggesting upside of 20.3% (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

Morgans rates GNX as Add (1) -

First half results were ahead of expectations. Morgans believes it likely the company will achieve financial close on K2-Hydro, which opens up possibilities for the remaining renewables projects.

The broker considers the business is not yet a stable source of returns but finds potential once K2-Hydro is complete. Energy Australia is currently negotiating with Genex Power to buy a stake of up to 50% in the project as well as obtaining the capacity in output.

Financial close is expected before the end of FY19. Add rating maintained. Target is reduced to $0.38 from $0.41.

Target price is $0.38 Current Price is $0.26 Difference: $0.12
If GNX meets the Morgans target it will return approximately 46% (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

Macquarie rates KLL as Outperform (1) -

The company has reported a-$9.3m loss for the first half. Macquarie finds catalysts aplenty in the second half, as the company is finalising an offtake agreement and debt discussions continue with the credit agency.

Outperform rating maintained. Target is 65c.

Target price is $0.65 Current Price is $0.44 Difference: $0.21
If KLL meets the Macquarie target it will return approximately 48% (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

Citi rates MTS as Sell (5) -

The company's trading update has indicated sales trends in the second half are in line with the first half. Citi notes, in the first half, like-for-like sales ex tobacco were down -1.9% so this must means sales are continuing to decline.

The company has identified further cost savings to offset inflation of around $25m per annum, with an additional $50m spread over two years from FY20-21 around supply chain efficiency.

The broker observes the company has raised capital expenditure significantly and is relying on cost savings merely to stand still. Sell rating retained.

Current Price is $2.68. Target price not assessed.

Current consensus price target is $2.79, suggesting upside of 3.9% (ex-dividends)

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 NUF as Upgrade to Buy from Hold (1) -

After upgrading to Hold in January Deutsche Bank has now upgraded Nufarm to Buy, as the stock is now trading at a -16% discount to valuation.

The broker's valuation does not yet ascribe any value to Omega-3 canola and some delay for the acquired earnings to flow has also been allowed.

Nufarm is now trading at a -23% discount to the 10-year average of the one-year forward relative operating earnings (EBITDA) multiple, and at a -20% discount on a relative PE multiple basis.

Target price is $6.00 Current Price is $5.32 Difference: $0.68
If NUF meets the Deutsche Bank target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $7.85, suggesting upside of 47.5% (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

Ord Minnett rates PAC as Buy (1) -

The company reported net profit of $7.9m in the first half and resumed interim dividends, declaring a fully franked $0.10 per share.

Ord Minnett is comfortable with FY20 forecasts and, after a period of divestments and reinvestment, believes the portfolio is in a stable position and organic growth will ensue.

Buy rating maintained. Target is raised to $8.24 from $8.09.

Target price is $8.24 Current Price is $5.58 Difference: $2.66
If PAC meets the Ord Minnett target it will return approximately 48% (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

Macquarie rates PAN as Outperform (1) -

Production has commenced at Savannah with the ramp up to a full mining rate underway. Macquarie expects Savannah will come back on line with significantly better economics. Improved grades and payability should lower costs significantly.

First half underlying loss was better than Macquarie expected, while cash flow was in line with estimates. The broker maintains an Outperform rating and reduces the target to $0.70 from $0.72.

Target price is $0.70 Current Price is $0.46 Difference: $0.24
If PAN meets the Macquarie target it will return approximately 52% (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

Morgan Stanley rates QBE as Overweight (1) -

QBE's business momentum is looking the best Morgan Stanley has witnessed in a decade. The broker believes portfolio remediation, cost reductions and more constructive fundamentals are supporting improved margins and a re-rating for the stock.

Using the 2018 combined operating ratio of 95.7% as a starting point, the broker believes the company's recent guidance implies no improvement at the mid point and just 1.2 percentage points at the lower end, and appears conservatively set.

Overweight rating maintained. Target is $13.00. Industry view is In-Line.

Target price is $13.00 Current Price is $12.63 Difference: $0.37
If QBE meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $12.96, suggesting upside of 2.6% (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: 0.8

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

Citi rates REH as Buy (1) -

Reece Australia's H1 numbers proved above Citi's expectations, but the analysts comment they underestimated the interest burden on the company's debt. Target price loses -5% to $12.58. In Australia, Citi highligts Reece's growth like-for-like is above system.

Management has indicated weakness has started to show up in H2. Citi analysts have reduced estimates. The analysts think their freshly updated forecasts now look "undemanding" for FY19, unless weakness in demand exceeds expectations. Buy rating retained.

US acquisition Morsco is meeting management's expectations.

Target price is $12.58 Current Price is $10.26 Difference: $2.32
If REH meets the Citi target it will return approximately 23% (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