Australian Broker Call

Credit Suisse rates AIZ as Neutral (3) -

The airline has presented the outcomes from its business review. Credit Suisse welcomes the initiatives but considers the incremental upside versus existing expectations to be modest.

Given that the recent downgrade to earnings guidance was largely because of softness in the New Zealand leisure market the broker is mindful of the risk from consumer-driven negative earnings revisions.

Still, the broker is comfortable with the current dividend profile. Neutral rating maintained and the target is raised to NZ$2.55 from NZ$2.42.

Current Price is $2.44. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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: -0.3

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

UBS rates AIZ as Neutral (3) -

Air New Zealand has announced initiatives to improve its financial performance centred on network optimisation and cost reductions. FY19 guidance provided in February has been reaffirmed for pre-tax profit between NZ$340-400m.

The airline has lowered its network growth forecasts to 3-5% per annum from 5-7% to reflect slower demand. This includes modest capacity growth across the network.

UBS maintains a Neutral rating and NZ$2.55 target.

Current Price is $2.44. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

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: -0.3

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

UBS rates AQG as Buy (1) -

UBS lifts gold price forecast by 2% for 2019-21. This lifts estimates for net profit by 7% in 2020 while 2019 estimates are reduced by -15% because Alacer Gold has not yet technically declared commercial production at the sulphide plant.

The broker assumes commercial production is declared in April and, if this is not achieved, then 2019 earnings forecasts technically have further downside risk.

Buy rating maintained. Target is raised to $4.90 from $4.25.

Target price is $4.90 Current Price is $3.92 Difference: $0.98
If AQG meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 21.5% (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: 1.0

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

Citi rates ASB as Initiation of coverage with Buy (1) -

Citi has initiated coverage of Australian shipbuilder Austal with a maiden Buy rating and a $2.76 price target. Fully admitting this type of business is highly cyclical and volatile, the analysts nevertheless suggest now seems like a good time to get on board.

On Citi's calculations, the shares are trading at a -17% discount to peers, but with 75% faster growth in operational profits (EBIT) projected for FY19-FY21, supported by a projected steep rise in margins. To obtain a fully informed picture, the analysts combined forces with Citi's US based Aerospace & Defense analysts.

Target price is $2.76 Current Price is $2.25 Difference: $0.51
If ASB meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $2.60, suggesting upside of 15.7% (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

Morgan Stanley rates BOQ as Underweight (5) -

Morgan Stanley suspects the bank could cut its dividend at the April 11 result, given a change in management and compounding concerns from falling margins and sub-system loan growth, amid little room to cut costs. The broker considers the current 90-95% payout ratio is unsustainable.

Morgan Stanley is aware consensus is not forecasting a cut to the dividend. However, with the sale of St Andrews Life no longer proceeding the broker points out there is no excess capital.

The bank has twice re-priced standard variable mortgages by over 10 basis points but the broker still expects margins will be under pressure, given intense front book competition and discounting.

Underweight rating retained. Industry view is In-Line. Price target is reduced to $8.50 from $8.90.

Target price is $8.50 Current Price is $9.13 Difference: minus $0.63 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.19, suggesting upside of 0.7% (ex-dividends)

The company's fiscal year ends in August.

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 IGO as Neutral (3) -

The company has formally approved the Boston Shaker underground development on completion of the feasibility study, declaring a maiden underground reserve.

Decline development is planned for commencement in the June quarter and first ore is expected in the September quarter 2020. The maiden underground reserve is 2.8mt at 3.65g/t for 317,000 ounces.

Target is $4.10. Neutral retained.

Target price is $4.10 Current Price is $4.89 Difference: minus $0.79 (current price is over target).
If IGO meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.51, suggesting downside of -7.7% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates IGO as Underperform (5) -

Independence Group and AngloGold Ashanti will proceed with the development of the Boston Shaker underground project at Tropicana, despite the feasibility study falling short of forecasts. A reduction in grade assumptions from the pre-study has led to 10% higher capex but -7% lower opex than the broker assumed.

The key is long term production guidance, the broker suggests, of 400-450kozpa to FY23. The broker has lowered its forecasts marginally. Underperform and $4.00 target retained.

Target price is $4.00 Current Price is $4.89 Difference: minus $0.89 (current price is over target).
If IGO meets the Macquarie target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.51, suggesting downside of -7.7% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates IGO as Downgrade to Neutral from Buy (3) -

UBS observes the shares have gained around 30% since the start of the year, underpinned by higher nickel prices and a solid operating performance in the December quarter.

While downgrading to Neutral from Buy the stock remains the broker's preferred nickel exposure, trading on a 15-20% free cash flow yield for FY20-21.

The broker suggests exploration success could be very accretive but for now the stock is fair value. Target is raised to $5.00 from $4.90.

Target price is $5.00 Current Price is $4.89 Difference: $0.11
If IGO meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.51, suggesting downside of -7.7% (ex-dividends)

The company's fiscal year ends in June.

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 ORG as Downgrade to Neutral from Buy (3) -

Following changes to retail electricity pricing and the associated impact on energy market earnings, Citi downgrades to Neutral from Buy. The broker believes the stock valuation correctly reflects a US$55/bbl long-term oil price.

Lower revenues are expected to be offset by the -$100m reduction in costs from FY18-21, as churn rates increase and costs to acquire customers become cheaper.

The broker needs more clarity on margin compression and the quantifiable impact on profitability for FY19 and beyond. Target is reduced to $7.42 from $8.62.

Target price is $7.42 Current Price is $7.22 Difference: $0.2
If ORG meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $8.08, suggesting upside of 11.9% (ex-dividends)

The company's fiscal year ends in June.

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

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

Ord Minnett has reviewed the production and earnings outlook for the company, noting production delays at Burrup are expected to continue. Utilisation rates at the Yarwun plant remain critical to meeting increased ammonium nitrate requirements from BHP Group ((BHP)), as anti-dumping provisions create a tight market.

Ord Minnett suspects costs may increase, as a result, in order to meet contracted customer demands. The broker reduces earnings forecast for FY19 by -6.4% and by -5.7% for FY20. Rating is downgraded to Lighten from Hold and the target reduced to $16.20 from $17.15.

Target price is $16.20 Current Price is $17.67 Difference: minus $1.47 (current price is over target).
If ORI meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.67, suggesting downside of -2.0% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates OSH as Downgrade to Sell from Neutral (5) -

The company may be demonstrating a focus on maximising value from current assets but Citi downgrades to Sell from Neutral because of weaker macro conditions in LNG.

The broker believes the next 12 months will still provide potential for positive catalysts, such as the gas agreement in early April and exercising the Alaskan option. Target is reduced to $7.64 from $7.91.

The broker now includes a benefit from late-life gas that provides production backfill for PNG LNG and Papua LNG.

Target price is $7.64 Current Price is $7.90 Difference: minus $0.26 (current price is over target).
If OSH 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 $8.56, suggesting upside of 8.3% (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: 0.4

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

Citi rates PLS as Buy (1) -

Citi has incorporated a lower-than-expected recovery in FY19 as well as a six month delay in Stage 2 commissioning and this has triggered -12% and -11% reductions in estimates for FY19 and FY20 respectively.

The broker's Buy/High Risk rating remains supported by strong cash flow generation from expanded stage 2 volumes, the analysts surmise. Also, they note the company has expressed its intention to sell 20% to 49% of the Pilgangoora project to unlock value, with a decision expected by mid-2019.

Price target has fallen to $1.05.

Target price is $1.05 Current Price is $0.79 Difference: $0.26
If PLS meets the Citi target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $1.02, suggesting upside of 28.7% (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

Macquarie rates PLS as No Rating (-1) -

Pilbara Minerals has announced the Pilgangoora project will go commercial in the December quarter. The miner hopes to leverage stage 3 offtake to fund stage 2 and 3 development while also investigating downstream partners and a possible sell-down.

The broker is advising hence is currently restricted from making a recommendation.

Current Price is $0.79. Target price not assessed.

Current consensus price target is $1.02, suggesting upside of 28.7% (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 RIO as Neutral (3) -

UBS lifts its 2019 iron ore forecast by 12% to US$83/t given revised market assumptions following the Brazilian tailings dam failure. The broker's 2019 copper forecast has lifted 4% and aluminium forecast has been lowered -4%.

The broker will continue to look for updates on the iron ore supply outlook. Following a number of divestments, iron ore is expected to contribute around 75% of Rio Tinto's group earnings (EBIT) in 2019.

Neutral rating maintained. Target rises to $97.50 from $94.00.

Target price is $97.50 Current Price is $98.14 Difference: minus $0.64 (current price is over target).
If RIO meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $93.95, suggesting downside of -4.3% (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

Ord Minnett rates SCG as Hold (3) -

Media reports that the company may be looking at asset sales have not been confirmed but Ord Minnett suggests the company may pursue the sale of part stakes in some assets to strengthen the balance sheet.

REITs globally are trading on asset quality, which is very strong in the case of Scentre Group. Sale proceeds would initially lower gearing and provide capital for a buyback as well as funding for developments.

The broker does not believe the company's portfolio will be immune to the softening of retail capitalisation rates over 2019, given the high level of retail assets on the market.

However, both fiscal and monetary policy are expected to be accommodative for consumers in the second half and the broker suggests this could drive an improvement in retail sales. Hold rating and $4.30 target maintained.

Target price is $4.30 Current Price is $4.14 Difference: $0.16
If SCG meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.98, suggesting downside of -4.0% (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

Ord Minnett rates SEK as Accumulate (2) -

Australian Bureau of Statistics jobs data reveal vacancies increased 9.2% in the February quarter. While this represents a continued slowdown in the growth of job vacancies from the prior quarter, Ord Minnett highlights the data are still positive, versus the negative job listings data reported by Seek.

Ord Minnett maintains an Accumulate rating and $22 target.

Target price is $22.00 Current Price is $17.56 Difference: $4.44
If SEK meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $19.33, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SFR as Upgrade to Neutral from Sell (3) -

Upgrades to commodity price estimates have driven a 5% upgrade to the valuation of Sandfire Resources. UBS observes the valuation is very sensitive to near-term commodity assumptions because of the 3-4 years of remaining mine life at DeGrussa.

Management is trying to extend life through regional exploration. While the stock now trades in line with UBS's valuation, the broker suggests there is risk of M&A. Rating is upgraded to Neutral from Sell and the target raised to $7.00 from $6.70.

Target price is $7.00 Current Price is $6.90 Difference: $0.1
If SFR meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.44, suggesting upside of 7.8% (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

Deutsche Bank rates VEA as Buy (1) -

Regional refining margins are normalising faster than Deutsche Bank originally thought. Singapore benchmark margins have rebounded sharply and held elevated levels over the course of March.

The broker notes recovery has been driven by a strong lift in gasoline crack spreads, which should compound the benefit for Australian refineries.

The broker continues to believe Viva Energy is the best way to capitalise on this theme, as it is more exposed to refining and has access to more retail fuel margin after the re-setting of the Coles ((COL)) deal.

Buy rating and $2.55 target maintained.

Target price is $2.55 Current Price is $2.45 Difference: $0.1
If VEA meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.68, suggesting upside of 9.5% (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

Citi rates WPL as Downgrade to Sell from Neutral (5) -

Citi believes Woodside Petroleum is in a difficult position in a crowded LNG market. Something has to give, and investors may be disappointed.

Any farming down of Scarborough and Pluto T2 is likely to be sold at a risk-adjusted price and the broker suspects consensus still values the project at current equity interest levels. Citi does not expect Scarborough to reach its FID target of 2020. The company appears adamant it will not farm down at a discount to fair value, implying investors could take on the full brunt of the marketing risk.

If Browse were to move forward in a timely manner then new equity is likely required and/or the pay-out ratio reduced, in the broker's view. Citi downgrades to Sell from Neutral and reduces the target to $31.12 from $34.30.

Target price is $31.12 Current Price is $34.76 Difference: minus $3.64 (current price is over target).
If WPL meets the Citi target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.76, suggesting upside of 2.9% (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