Australian Broker Call

Macquarie rates AGL as Neutral (3) -

Macquarie observes retail business profitability is under pressure. The company's earnings outlook is suffering as LREC pricing is declining quickly and providing downside risk to forecasts.

Market churn has also returned over the last three months to longer run market averages. Macquarie reduces FY20 estimates by -3% and FY21 by -6% as a result. Neutral rating and $20.61 target maintained.

Target price is $20.61 Current Price is $21.78 Difference: minus $1.17 (current price is over target).
If AGL meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.87, suggesting downside of -4.2% (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 AMC as Buy (1) -

The proposed combination Amcor-Bemis, pushing market capitalisation to $17bn, will be one of the largest Paper & Packaging producers in the world, point out analysts at Citi. Irrespectively, Amcor is paying a full price to achieve this tie-in; Citi's view on this hasn't changed.

In addition, Citi analysts remain confident Amcor should be able to overachieve on the cost synergy target of $180mpa, equalling 4-5% of Bemis sales. The broker's pro-forma projections imply 9% EPS accretion by FY22 with 1.2% and 5.9% accretion seen for FY20 and FY21, respectively.

At this point, the analysts haven't changed or incorporated anything just yet, instead awaiting the outcomes of the upcoming shareholder votes. Buy. Price target $16.10.

Target price is $16.10 Current Price is $14.83 Difference: $1.27
If AMC meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $15.59, suggesting upside of 5.1% (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

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

Morgans downgrades to Hold from Add following the outperformance of the share price. Target is $1.73, up from $1.71. The next event is the FY19 results release on May 13, and the broker expects a reduction to earnings.

This should also include first time FY20 distribution guidance, which the broker assumes will be flat.

Morgans believes the share price has been driven by falling government bond rates and a switching to Ausnet from Spark infrastructure ((SKI)) because of the latter's tax issues and reduction in its distribution outlook.

Target price is $1.73 Current Price is $1.78 Difference: minus $0.05 (current price is over target).
If AST meets the Morgans target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.71, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in March.

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

Morgan Stanley rates CTD as Overweight (1) -

Corporate Travel is engaged in discussions regarding the acquisition of the Capita plc travel & events business. Morgan Stanley observes the company's continued interest in acquisitions is consistent with its stated strategy.

However, commentary does indicate that Corporate Travel is not prepared to make any acquisitions in the current financial year. If this transaction were to settle in FY19 this would create doubt around cash flow and perpetuate questions regarding cash conversion, in the broker's view.

Overweight rating. Target is $31. In-Line industry view.

Target price is $31.00 Current Price is $23.93 Difference: $7.07
If CTD meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $31.01, suggesting upside of 29.6% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates DXS as Neutral (3) -

Dexus and its managed fund Dexus Wholesale Property Fund, shortcut DWPF will take full control of the MLC Centre in Sydney, acquiring the remainder of the asset for $800m. Citi believes this transaction is strategically positive and pricing is reasonable.

It will enable Dexus to pursue additional opportunities on the site without the complications arising from a joint venture. Neutral rating and $11.62 target maintained.

Target price is $11.62 Current Price is $12.44 Difference: minus $0.82 (current price is over target).
If DXS meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.31, suggesting downside of -9.1% (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 DXS as Hold (3) -

Dexus has announced the MLC acquisition will be funded through convertible notes. The acquisition of the Sydney office tower for $800m from GPT ((GPT)) will be equally split between Dexus and the Dexus Wholesale Property Fund.

Management highlighted a choice for convertible notes rather than existing debt in order to capitalise on the low coupon rate and diversify funding sources.

Hold rating maintained. Target is $11.34.

Target price is $11.34 Current Price is $12.44 Difference: minus $1.1 (current price is over target).
If DXS meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.31, suggesting downside of -9.1% (ex-dividends)

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

UBS rates DXS as Neutral (3) -

Dexus and Dexus Wholesale Property Fund (DWPF) have acquired 50% of the MLC Centre in Sydney for $800m. While being slightly wary of the complex funding structure, UBS believes it is a solution to MLC's low AFFO yield.

The broker believes the deal structure reflects management's desire to do similar accretive transactions while managing balance sheet flexibility. Neutral rating and $11.45 target maintained.

Target price is $11.45 Current Price is $12.44 Difference: minus $0.99 (current price is over target).
If DXS meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.31, suggesting downside of -9.1% (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

UBS rates FPH as Sell (5) -

After reviewing the Vapotherm results, UBS believes the competitive threat to Fisher & Paykel is modest.

The company's market position appears stable, although Vapotherm's focus on emergency departments, where it has a better offering for undifferentiated respiratory distress, needs to be monitored.

NZ$12.60 target, Sell reiterated.

Current Price is $14.57. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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 GPT as Hold (3) -

GPT will sell its remaining interest in the MLC Centre for $800m to Dexus Property and Dexus Wholesale Property Fund (DWPF). Deutsche Bank notes the asset has experienced significant valuation uplift over the last year.

Although the divestment at a 4.2% passing yield appears a good sell, the broker believes the asset was purchased at fair value, noting the development upside. Hold rating and $5.74 target.

Target price is $5.74 Current Price is $6.21 Difference: minus $0.47 (current price is over target).
If GPT meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.70, suggesting downside of -8.2% (ex-dividends)

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 IVC as Hold (3) -

InvoCare has completed the institutional portion of its capital raising at $14 per share, raising around $65m. Ord Minnett does not expect the additional capital to change the company's expenditure plans for FY19.

Instead, the broker suspects capital will be used for acquisitions. The broker assesses the slowdown in capital expenditure and an expected recovery in volumes should put the balance sheet in a better position by the end of 2019.

Hold rating maintained. Target is reduced to $13.60 from $13.70.

Target price is $13.60 Current Price is $13.88 Difference: minus $0.28 (current price is over target).
If IVC meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.15, suggesting downside of -5.3% (ex-dividends)

The company's fiscal year ends in December.

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

Deutsche Bank rates MP1 as Buy (1) -

The company will raise $60m from a placement and share purchase plan. Funds will be used to accelerate the roll out of the network. Funds will be issued at an underwritten price of $4.00 per share, a -4.8% discount to the last closing price.

Deutsche Bank maintains a Buy rating and $5.00 target.

Target price is $5.00 Current Price is $4.00 Difference: $1
If MP1 meets the Deutsche Bank target it will return approximately 25% (excluding dividends, fees and charges).

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 NCM as Underperform (5) -

Newcrest has entered an agreement with Greatland Gold plc on the Havieron tenement, 45km east of its Telfer mine. The agreement outlines a means to earn 70% by spending US$65m in six years and an additional 5% at fair market value.

Credit Suisse assesses this structure, unlike Newcrest's other joint ventures, provides certainty of 70%, so exploration success will not price the project beyond its value. Telfer toll mining principles are included in the agreement.

Underperform and $20.30 target retained.

Target price is $20.30 Current Price is $25.20 Difference: minus $4.9 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.56, suggesting downside of -6.5% (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: -0.4

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

Morgans rates OEL as Add (1) -

The Winx-1 primary and secondary formations have been shown to be non-commercial. Morgans had been excited by the prospect also it was heavily risked in valuation.

Add rating maintained. Target is reduced to $0.13 from $0.14. On the positive side, the broker lifts the yield on liquids from the Lightning discovery.

Target price is $0.13 Current Price is $0.06 Difference: $0.07
If OEL meets the Morgans target it will return approximately 117% (excluding dividends, fees and charges).

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: 1.0

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

Citi rates PMV as Sell (5) -

Citi expects earnings (EBIT) growth to slow for Smiggle, to 10% per annum from the 17% experienced over the last three years.

This is on the back of negative like-for-like sales growth in Australia and the UK, a maturing UK store network and a slower rolling out of the European concession.

Given the slowing sales growth, in order to reach the target of $450m in sales for Smiggle by FY20, the broker believes the company will need to accelerate its concession and wholesaling strategy. This will, in turn, be challenging.

Citi maintains a Sell rating and reduces the target to $15.90 from $17.00.

Target price is $15.90 Current Price is $16.60 Difference: minus $0.7 (current price is over target).
If PMV meets the Citi target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.64, suggesting upside of 12.3% (ex-dividends)

The company's fiscal year ends in July.

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 SIG as Underweight (5) -

Sigma Pharmaceuticals has rejected the offer from Australian Pharmaceutical Industries ((API)). The company has reiterated its view that there is potential on a stand-alone basis with identified cost savings of over -$100m.

Sigma still expects FY23 operating earnings (EBITDA) to return to similar levels as FY19. Without the merger, Morgan Stanley envisages a risk that profitability deteriorates in both companies, amid challenges in the industry.

The broker had envisaged the bulk of synergies from the merger could come through rationalisation of the distribution centre/network. The broker maintains an Underweight rating, In-Line industry view and a $0.47 target.

Target price is $0.47 Current Price is $0.53 Difference: minus $0.06 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.52, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in January.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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

UBS rates SIG as Neutral (3) -

Sigma has concluded the merger with Australian Pharmaceutical Industries ((API)) is not in the best interests of shareholders. UBS awaits a response from API and further detail regarding Sigma's cost reduction plans at the FY19 results next week.

Sigma has stated there is a sound basis for API's assumed synergies by year three and that these synergies would be incremental to its own -$100m cost reduction program.

UBS still considers the ACCC's view would have been the biggest impediment to the deal. Neutral rating retained. Target price steady at 58c.

Target price is $0.58 Current Price is $0.53 Difference: $0.05
If SIG meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $0.52, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in January.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.5

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