Australian Broker Call

Morgans rates CL1 as Upgrade to Add from Reduce (1) -

Class has decided to reduce its single-product reliance on Class Super, its SMSF management software system. Expanding the product range will require higher investment capex in the shorter term, Morgans notes, weighing on earnings.

The move is not without risk but if successful, Class should become a more attractive growth investment, Morgans believes. The broker has made multiple changes to its forecasting and valuation models, which lead to a target price increase to $1.41 from $1.34, and a double-upgrade to Add from Reduce.

Target price is $1.41 Current Price is $1.27 Difference: $0.14
If CL1 meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.55, suggesting upside of 22.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

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

Ord Minnett reduces forecasts for the building products division in FY20 and FY21 to better capture the economics of the company's key business units during a downturn.

The main positive is the balance sheet, which places CSR in a strong position whereby it can potentially pick up assets along the way if the opportunity arises.

Ord Minnett reduces estimates for earnings per share by an average of -4% over the forecast period. The impact from lower building product margins and property earnings is partially offset by upward revisions to the aluminium division.

Rating is downgraded to Lighten from Hold and the target reduced to $3.50 from $3.80.

Target price is $3.50 Current Price is $3.71 Difference: minus $0.21 (current price is over target).
If CSR 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 $3.51, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.7

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

Citi rates ING as Neutral (3) -

The company has alerted the market to an announcement from Biosecurity New Zealand about a chicken virus in the South Island.

Bursal disease has been detected, potentially, at a farm for layer eggs in Otago. This disease adversely affects the immune system of young chickens.

Inghams is not affected at this stage but there is a risk that exports are reduced and price competition picks up. Citi estimates exports could be up to 10% of the NZ market.

The risk to earnings in New Zealand could be in the order of -1-4% in FY20, the broker calculates, assuming the issue takes anywhere from two weeks to three months to resolve. Citi maintains a Neutral rating and $3.40 target.

Target price is $3.40 Current Price is $3.13 Difference: $0.27
If ING meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.38, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Ord Minnett rates MYR as Upgrade to Accumulate from Lighten (2) -

The company will report its FY19 result on September 5. Ord Minnett expects underlying net profit of $35.6m, up 9.5% with sales down -2.5%. The broker upgrades to Accumulate from Lighten and raises the target to $0.70 from $0.42.

Ord Minnett notes the range is being optimised to drive gross margins as the company turns its range towards new and exclusive brands that should support sales. Myer is also addressing costs while improving its supply chain.

Target price is $0.70 Current Price is $0.58 Difference: $0.12
If MYR meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $0.55, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in July.

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

Citi rates OSH as Neutral (3) -

The PNG petroleum minister has stated the government intends to honour the existing Papua LNG gas agreement.

This follows a letter provided by operator Total which agrees to meet the government on a number of conditions such as a national content plan and open access of the Papua LNG pipeline for third-party gas.

In the short term Citi believes Oil Search can outperform on de-risking of LNG expansion but remains cautious about LNG exposure. Neutral rating and $6.97 target maintained.

Target price is $6.97 Current Price is $6.89 Difference: $0.08
If OSH meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 10.3% (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 OSH as Underperform (5) -

The new PNG government has accepted the existing Papua LNG agreement after receiving concessions from Total, although Credit Suisse considers these are vague and non-committal.

While the announcement is one positive sign of progress towards a final investment decision, the broker believes a material delay is still underestimated by the market. Price reviews and PNG LNG present downside risk which does not appear to be sufficiently factored into expectations.

Credit Suisse maintains an Underperform rating and raises the target to $6.25 from $6.03, increasing from the risked valuation for PNG LNG to 75% from 65%.

Target price is $6.25 Current Price is $6.89 Difference: minus $0.64 (current price is over target).
If OSH meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.60, suggesting upside of 10.3% (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

Morgans rates OSH as Add (1) -

In a "critical" positive for Oil Search, the broker notes, the PNG government has decided to honour the existing Papua gas agreement, after operator Total offered additional concessions. It's an ideal outcome for the project's partners, the broker believes.

The broker thus increases its risk weighting on Papua trains one and two going ahead to 75% from 50%, increasing its target to $8.72 from $8.33. Add retained.

Target price is $8.72 Current Price is $6.89 Difference: $1.83
If OSH meets the Morgans target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 10.3% (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

UBS rates OSH as Neutral (3) -

The PNG government has confirmed it will honour the gas agreement signed between the Papua LNG joint venture and the previous government.

The minister responsible has also confirmed that Total had made some concessions on local content planned for the development and third-party access to the petroleum pipelines.

UBS is now more confident that FEED will be achieved within the timeframe outlined. The broker considers Papua LNG one of the best brownfield opportunities globally, because of its tie-in with existing facilities at PNG LNG.

UBS maintains a Neutral rating and $7.60 target.

Target price is $7.60 Current Price is $6.89 Difference: $0.71
If OSH meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting upside of 10.3% (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 SYD as Neutral (3) -

The month of August is expected to reflect the impact of the Hong Kong protests on demand for flights out of Sydney. Some 7% of international passengers are bound for Hong Kong on average, and the broker now assumes a reduction in its forecasts.

At the same time, Chinese airlines have reduced their capacity. In terms of valuation the impact is minor, and presumed to be temporary.

Of more importance, the broker notes, is the upcoming and complex renegotiation of the airport's access regime. Neutral and $8.53 target retained.

Target price is $8.53 Current Price is $8.40 Difference: $0.13
If SYD meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.98, suggesting downside of -5.0% (ex-dividends)

The company's fiscal year ends in December.

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 TCL as Equal-weight (3) -

Morgan Stanley considers the company's portfolio, prized for its diversity and growth, is manageable for investors only if it comes with transparency.

Rapid growth over the last three years has also meant rapid growth in structural complexity, and the broker would become incrementally cautious about valuation if company disclosures cease or change.

Morgan Stanley points out distributions are the only comparable consensus metric and, in terms of free cash flow, are currently partially funded by capital releases.

The broker notes first quarter traffic results are due on October 10. Equal-weight rating and Cautious industry view maintained. Target is $15.28.

Target price is $15.28 Current Price is $14.92 Difference: $0.36
If TCL meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $14.50, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.1

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