Australian Broker Call

Credit Suisse rates AGL as Downgrade to Neutral from Outperform (3) -

Credit Suisse acknowledges that expectations for a moderate passing through of wholesale prices to end consumers in FY19 is unrealistic. Large customers are increasingly being offered below-market prices in exchange for committing to larger volumes and duration.

Moreover, government pressure, competition and a recent fall in both electricity and REC futures mean the the expected increase in retail prices may not eventuate. Credit Suisse downgrades to Neutral from Outperform. Target is reduced to $23.25 from $26.00.

Target price is $23.25 Current Price is $21.79 Difference: $1.46
If AGL meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $24.17, suggesting upside of 10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates ALX as Outperform (1) -

The company has announced the early re-financing of the Greenway acquisition facility, as anticipated, and replaced it with the APRR acquisition facility. The APRR facility is around 400 basis points cheaper, Macquarie observes.

The stock is trading ahead of the broker's valuation but retains some potential upside. The catalyst to test the value of the assets is the sale of the residual interest of MEIF2 in the fund, expected over the next 12 months

Outperform. Target is reduced to $6.25 from $6.47.

Target price is $6.25 Current Price is $6.55 Difference: minus $0.3 (current price is over target).
If ALX 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 $6.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Morgan Stanley rates ALX as Equal-weight (3) -

The company has consolidated two of its holding company debt facilities, which Morgan Stanley estimates saves around $10m per annum in finance costs. The company has also increased holding company debt by a net $75-80m for general corporate purposes.

Equal-weight. Target is $6.36. Industry view: Cautious.

Target price is $6.36 Current Price is $6.55 Difference: minus $0.19 (current price is over target).
If ALX meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.60, suggesting upside of 0.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Morgan Stanley rates AZJ as Underweight (5) -

After meeting with the protagonists Morgan Stanley believes Aurizon's UT5 campaign has little prospect of a negotiated solution. The company has submitted a revised maintenance proposal, which the Queensland Competition Authority appears likely to accept.

Submissions on the maintenance allowance are due by June 20 while a date for the ACCC decision on the Queensland intermodal sale is yet to be finalised. A final decision on UT5 is expected by the end of the year.

Underweight. Target is $4.00. Industry view: Cautious.

Target price is $4.00 Current Price is $4.32 Difference: minus $0.32 (current price is over target).
If AZJ 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 $4.46, suggesting upside of 3.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Credit Suisse rates BSL as Outperform (1) -

Consistent with expectations, the company will endure no tariff or quota on steel exported to the US and can continue to export cold rolled coil without a 25% tariff. The existing 29% dumping tariff on hot rolled coil exports remains under review and may still be removed.

Credit Suisse maintains an Outperform rating and $16.90 target.

Target price is $16.90 Current Price is $17.81 Difference: minus $0.91 (current price is over target).
If BSL meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.51, suggesting upside of 4.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Morgan Stanley rates BSL as Overweight (1) -

Morgan Stanley believes the US decision to resume S232 tariffs for Canada, Mexico and the EU puts upside risk to 2018 hot rolled coil price forecasts of US$810/t.

BlueScope manufactures around 2mtpa of steel in the US and exports around 300,000 tpa from Australia. An extended period of favourable conditions is likely to be a positive for the company, the broker suggests.

Overweight rating. Industry view is Cautious. Target is $20.

Target price is $20.00 Current Price is $17.81 Difference: $2.19
If BSL meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $18.51, suggesting upside of 4.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

UBS rates DMP as Buy (1) -

UBS believes a solid European result is the key to the company hitting its FY18 guidance for around 20% net profit growth.

The broker believes the upcoming Russian football tournament is favourable for the company but this will ultimately depend on the success of the French and German teams and… weather.

Still, the broker considers guidance is becoming more achievable. Buy rating and $57.50 target maintained.

Target price is $57.50 Current Price is $52.41 Difference: $5.09
If DMP meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $48.64, suggesting downside of -7.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates EHE as Neutral (3) -

Macquarie remains cautious about the aged care sector, as operating headwinds are unlikely to be alleviated in the short term. Estia Health remains the broker's preferred pick, having the most attractive distribution profile.

A conservative greenfield development book will reduce earnings drag in the near term, the broker suggests. Macquarie transfers coverage to another analyst. Neutral rating retained. Target is raised to $3.60 from $3.37.

Target price is $3.60 Current Price is $3.22 Difference: $0.38
If EHE meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.65, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

UBS rates GXY as Upgrade to Buy from Neutral (1) -

The company has updated the definitive feasibility study for the Sal de Vida project and announced the sale of the northern tenements to help fund its development.

Capital expenditure guidance is lifted to US$474m. The agreement with POSCO for the sale of the northern tenements provides over half of this requirement.

UBS upgrades to Buy from Neutral. Continued de-risking of Sal de Vida could provide further upside, in the broker's view. Target is raised to $3.95 from $3.10.

Target price is $3.95 Current Price is $3.49 Difference: $0.46
If GXY meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 8.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Citi rates HVN as Sell (5) -

Citi expects housing will weigh on the company's earnings outlook. Offshore growth has diversified the earnings base but the share price remains highly leveraged to Australian housing.

Like-for-like sales growth is observed to be already turning negative. The stock appears cheap and Citi considers the discount reflects the risks of earnings downgrades. Sell rating maintained. Target is reduced to $3.10 from $3.40.

Target price is $3.10 Current Price is $3.61 Difference: minus $0.51 (current price is over target).
If HVN meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.89, suggesting upside of 7.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Credit Suisse rates IDX as Outperform (1) -

Following the NZ transaction, the company has announced a follow-up deal and will purchase Geelong Medical Imaging for $4.7m. The practice  specialises in sporting-related injuries. The vendor has entered into a three-year employment agreement.

The company has reiterated guidance for 20% growth in net profit which Credit Suisse believes is solid, in light of various disruptions. The broker maintains an Outperform rating and raises the target to $3.10 from $3.05.

Target price is $3.10 Current Price is $2.77 Difference: $0.33
If IDX meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

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

Morgans has reviewed its investment thesis in the light of strong appreciation in the share price. The broker continues to expect the company to provide an impressive FY18 result.

Moreover, Morgans remains impressed with management's ability to significantly de-leverage the balance sheet in far from perfect operating conditions.

The broker downgrades forecasts for FY18-20 in the light of several emerging headwinds. Nevertheless, rolling forward the valuation, the target increases to $4.20 from $4.05. Rating is downgraded to Hold from Add, given less than 10% upside to the new target.

Target price is $4.20 Current Price is $3.99 Difference: $0.21
If ING meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.95, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Citi rates JBH as Sell (5) -

Citi envisages risks to the earnings outlook from a softening housing cycle and a re-set of The Good Guys business following a weaker performance.

Gross margin pressure is expected to continue into the first half and The Good Guys' margin is expected to fall to 2.1% in FY19 and 2.0% in FY21. Sell rating maintained. Target is reduced to $20.20 from $20.50.

Target price is $20.20 Current Price is $24.18 Difference: minus $3.98 (current price is over target).
If JBH meets the Citi target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.55, suggesting upside of 5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Macquarie rates JHC as Outperform (1) -

Macquarie believes the company's growth strategy carries the highest execution risk among listed aged care operators. More capital is likely to be needed to support the development book above the current debt facility. The broker transfers coverage to another analyst.

Macquarie expects operating earnings growth of 12.3% and 12.8% in FY19 and FY23 respectively. The broker maintains a Neutral rating and reduces the target to $1.86 from $2.25.

Target price is $1.86 Current Price is $1.88 Difference: minus $0.02 (current price is over target).
If JHC meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.82, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Citi rates LVT as Buy (1) -

The company's Bots acquisition is exceeding early expectations and multiple customers have been secured via a joint campaign with Microsoft. Citi now has considerably more confidence in its forecasts.

The broker was optimistic about the traction of the Bots offering but had not factored in a major contribution for the short term and continued success would suggest upside risk to forecasts. Buy/High Risk rating retained. Target is $0.59.

Target price is $0.59 Current Price is $0.47 Difference: $0.12
If LVT meets the Citi target it will return approximately 26% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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 Neutral (3) -

The company's Home Timber and Hardware acquisition is been a key growth driver, increasing hardware earnings to 12% of group EBIT from 5% pre-acquisition. This will rise to 24% in FY19.

Citi calculates that Metcash is likely to see greater leverage to housing starts than house prices. Housing starts are still operating at a high absolute level, albeit down -8% year-on-year.

Citi remains cautious about the outlook for the stock because of the challenges in food. Neutral rating maintained. Target is reduced to $2.80 from $2.90.

Target price is $2.80 Current Price is $2.90 Difference: minus $0.1 (current price is over target).
If MTS 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 $3.18, suggesting upside of 9.6% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Ord Minnett rates MYO as Downgrade to Hold from Buy (3) -

The company will not proceed with an acquisition of Reckon ((RKN)), instead investing $80m in R&D and sales and marketing. Ord Minnett concedes this is the right thing to do, as the longer term revenue growth guidance appeared a stretch.

The broker struggles to envisage why investors would increase positions until free cash flow has either bottomed in FY19 or there is clear evidence of improved returns.

Given limited upside to the new target the broker downgrades to Hold from Buy. Target is reduced $2.94 from $3.95.

Target price is $2.94 Current Price is $2.87 Difference: $0.07
If MYO meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.46, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

UBS rates MYO as Neutral (3) -

UBS understands the ACCC issues with the acquisition of Reckon ((RKN)) may have been insurmountable and this is the likely reason that MYOB decided to walk away from the transaction.

The broker had been cautious on the stock, suspecting higher costs were not being priced in if the deal were to fall through. Now the stock has fallen -8% the concerns are fading.

Downgraded FY18 operating earnings margin guidance suggests around -$5-10m of sales & marketing investment will come through in FY18 and the rest will be realised in FY19.

Neutral rating maintained. Target is reduced to $2.95 from $3.40.

Target price is $2.95 Current Price is $2.87 Difference: $0.08
If MYO meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.46, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates NGI as Buy (1) -

The company has updated on the acquisition of Mesirow, which is better than Ord Minnett expected. Strategically, the business adds capabilities in the credit and fixed income segment, with a new client base.

Earnings accretion of around 14% is expected in FY19, increasing significantly in FY21. The broker believes the stock remains cheap and retains a Buy rating. Target is raised $4.90 from $3.90.

Target price is $4.90 Current Price is $4.63 Difference: $0.27
If NGI meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates REG as Downgrade to Underperform from Neutral (5) -

RAD inflows from new facilities are likely to mean capital is recycled into developments and will not contribute to net debt reductions in FY19.

Macquarie expects EBITDA growth will be expensed to depreciation & interest payments and result in declines to distributions.

The broker transfers coverage to another analyst and downgrades to Underperform from Neutral. Target is reduced to $3.50 from $4.25.

Target price is $3.50 Current Price is $3.80 Difference: minus $0.3 (current price is over target).
If REG meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.25, suggesting upside of 11.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Macquarie rates SEH as Outperform (1) -

The company's board has unanimously recommended a scheme from Lone Star for a cash consideration of $0.25 per share, a discount to consensus targets. Macquarie is surprised by this, given the stock traded at $0.235 only 11 days ago.

The board believes the scheme provide certainty to shareholders after weighing up the balance of risks. However, the deal is subject to an independent expert report.

Macquarie maintains an Outperform rating and $0.30 target.

Target price is $0.30 Current Price is $0.24 Difference: $0.06
If SEH meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Citi rates WES as Sell (5) -

Strong sales and earnings at Kmart and Bunnings have increased the company's exposure to the housing cycle, to around 40% of earnings and slightly higher than Harvey Norman ((HVN)), Citi assesses. The slowing housing cycle impacts the Bunnings valuation by removing a 10% premium to global peers.

A de-merger of Coles will increase this leverage further. Meanwhile, the broker notes the share price is factoring in significant optimism around the potential for accretive acquisitions or share buybacks. Citi maintains a Sell rating and reduces the target to $41.40 from $41.50.

Target price is $41.40 Current Price is $45.14 Difference: minus $3.74 (current price is over target).
If WES meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.93, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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