Australian Broker Call

Citi rates A2M as Downgrade to Sell from Neutral (5) -

Citi remains convinced margin pressure will make consensus forecasts look too optimistic and the analysts have now downgraded to Sell from Neutral. The target price declines to $12.20 from $15.15.

Citi finds a2 Milk needs to increase investment in order to pursue growth in China and the US, and this translates into margin pressure. In addition, the analysts find the daigou channel is no longer reliable to drive growth and competition is increasing.

Forecasts have been reduced following incorporation of lower margins. Target price decrease also includes a reduction in valuation premium.

Target price is $12.20 Current Price is $12.25 Difference: minus $0.05 (current price is over target).
If A2M meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.59, suggesting upside of 10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Ord Minnett rates CLV as Buy (1) -

Revenue was up 22% in FY19, driven by the global DHA uptake and the trend towards premium infant formula.

Ord Minnett notes the company is yet to benefit from several catalysts, including EU regulation and being only one of three infant formula brands receiving Chinese registration in the last 12 months.

The broker envisages strong organic value in the business, and now includes the option for Chinese DHA regulation in its target. Buy rating retained. Target rises to $3.31 from $2.00.

Target price is $3.31 Current Price is $2.80 Difference: $0.51
If CLV meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

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

In FY19 growth occurred in all regions, and while cash flow was weak it improved in the second half. UBS continues to believe the outlook strongly favours the company but, following the share price appreciation of 98% since February, most of the positive outlook appears factored in.

Hence, the rating is downgraded to Neutral from Buy and the target raised to $2.75 from $2.15.

The broker forecasts European revenues to increase out to FY21 as new regulations come into effect while any new competitor is at least 2-3 years away. There is also upside risk to forecasts should China mandate DHA increases.

Target price is $2.75 Current Price is $2.80 Difference: minus $0.05 (current price is over target).
If CLV meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Ord Minnett rates EVN as Hold (3) -

Ord Minnett assesses the company is not immune to the cost inflation across the gold industry, and the natural grade decline that is prevalent in its peer group.

The broker envisages FY20 earnings dropping -11% and increases capital expenditure and exploration estimates. Production growth looks like coming mostly from the Cowal and Mount Carlton operations.

Hold rating maintained. Target is reduced to $4.60 from $4.80.

Target price is $4.60 Current Price is $4.80 Difference: minus $0.2 (current price is over target).
If EVN meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.40, suggesting downside of -8.4% (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

Morgan Stanley rates FMG as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley acknowledges Fortescue Metals is a high-quality company but the stock is now 13% above the target. The broker expects the headline iron ore price and 58% price realisation will recede from current highs in the first half of 2020 as supply rises.

Rating is downgraded to Underweight from Equal-weight. Target is raised to $7.85 from $7.65. Industry view is Attractive.

Target price is $7.85 Current Price is $8.78 Difference: minus $0.93 (current price is over target).
If FMG 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 $8.09, suggesting downside of -7.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

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

Credit Suisse rates NST as Underperform (5) -

Credit Suisse observes management is genuinely impressed with the exploration opportunity at Pogo and confident it will be its best mine within three years.

The broker notes the mine appears to have been operated for closure prior to Northern Star taking ownership, and while renovation is progressing well it appears to be a larger and longer task than previously expected.

The mill expansion to 1.3mtpa will proceed with some capital being allocated to move the next bottleneck to 1.5mt, in anticipation of reserves and production growth. The broker maintains an Underperform rating and $6.30 target predicated on a lower gold price deck.

Target price is $6.30 Current Price is $11.68 Difference: minus $5.38 (current price is over target).
If NST meets the Credit Suisse target it will return approximately minus 46% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.39, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

UBS rates NST as Neutral (3) -

The company plans to expand the processing plant at Pogo in two stages with the first stage to I.3mtpa using US$30m in capital expenditure. A further lift to 1.5mtpa for capital expenditure of US$17m was flagged albeit not yet committed.

From the briefing, UBS concludes the turnaround is achievable but will take some time because of the need for the mine to ramp up to match the plant. Neutral maintained. Target rises to $12.00 from $11.50.

Target price is $12.00 Current Price is $11.68 Difference: $0.32
If NST meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $11.39, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

UBS rates PMV as Buy (1) -

FY19 results were strong and the online business continues to perform well, UBS observes.

The potential in the broad-based roll-out of Smiggle remains intact even if the skew is increasingly to third-party online and wholesale sales.

UBS maintains a Buy rating and raises the target to $20.95 from $19.80.

Target price is $20.95 Current Price is $19.77 Difference: $1.18
If PMV meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $19.46, suggesting downside of -1.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Morgans rates RED as Initiation of coverage with Add (1) -

RED 5 is a multi-asset gold producer with two operating mines in Western Australia: Darlot and King of the Hills. The latter's expansion pre-feasibility study outlines a reserve that supports 140,000 ounces per annum operation with a 10-year mine life.

Bulk mining is expected to commence in early 2022. A study is underway looking to integrate the bulk open pit and underground mining operations with a satellite open pit opportunity. Morgans initiates coverage with an Add rating and $0.50 target.

Target price is $0.50 Current Price is $0.32 Difference: $0.18
If RED meets the Morgans target it will return approximately 56% (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 RRL as Upgrade to Equal-weight from Underweight (3) -

Morgan Stanley introduces a new valuation system for its gold stocks under coverage to better capture value and more accurately represent the current value.

The broker points out gold miners under coverage have continually found new resources and reserves and extended mine life, which is particularly pronounced for the mid-cap miners which operate assets with short lives.

The broker raises estimates for FY20 by 8% for Regis Resources and upgrades to Equal-weight from Underweight. Target is raised to $5.20 from $4.65. Industry view is Attractive.

Target price is $5.20 Current Price is $4.88 Difference: $0.32
If RRL meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.97, suggesting upside of 1.8% (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 TAH as Lighten (4) -

Ord Minnett notes "jackpot fatigue" has caught up with Tabcorp after the recent $150m Powerball. Jackpot fatigue occurs when players wait for a larger prize before purchasing a ticket, resulting in fewer ticket sales and stymied growth in prizes.

In contrast, the fear-of-missing-out threshold, where players fear missing out on large jackpots, creates an increase in ticket sales and new lottery players. Record-breaking jackpots significantly move this threshold higher.

The broker also notes Tabcorp is exposed to a decline in wagering and competitive pressures. Lighten rating maintained. Target is raised to $4.10 from $4.05.

Target price is $4.10 Current Price is $4.87 Difference: minus $0.77 (current price is over target).
If TAH meets the Ord Minnett target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.85, suggesting downside of -0.5% (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

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

Thomas Cook has entered compulsory liquidation with the main impact on Webjet expected to be a reduction of -$7m in operating earnings for FY20 and a total transaction value loss of -$150-200m in B2B.

There is also EUR27m in unpaid receivables from Thomas Cook. Morgan Stanley notes there is no impact on the 3000 hotel contracts the company acquired and these remain available for sale to WebBeds customers at full margin.

The company has noted in the first 10 weeks of FY20 the WebBeds transaction value was up 50%, although this includes the contribution from Destinations of the World. Equal-weight. Target is $13.80. Industry View is In-Line.

Target price is $13.80 Current Price is $11.52 Difference: $2.28
If WEB meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $15.08, suggesting upside of 30.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Morgans rates WEB as Hold (3) -

Webjet expects the collapse of Thomas Cook will reduce FY20 operating earnings (EBITDA) by up to -$7m. Thomas Cook also owes Webjet EUR27m in unpaid receivables.

Morgans removes the incremental contribution to earnings from forecasts and reviews depreciation & amortisation assumptions, which results in material downgrades.

While costs associated with integrating the Thomas Cook contracts have been embedded in the broader WebBeds business, Morgans had assumed an incremental improvement in earnings as the agreement shifted to a volume-based model from June 1, 2019.

Hold rating maintained. Target is reduced to $12.18 from $13.65.

Target price is $12.18 Current Price is $11.52 Difference: $0.66
If WEB meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $15.08, suggesting upside of 30.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

Ord Minnett rates WEB as Buy (1) -

Ord Minnett notes the decision to enter into a sourcing partnership with Thomas Cook has been the source of controversy from the beginning.

The collapse of Thomas Cook is expected to reduce FY20 operating earnings by up to -$7m, and Webjet will also incur an -EUR27m impairment for unpaid receivables.

Nevertheless, the broker concedes the transaction was a crucial building block to Webjet becoming the number two player in the global B2B hotel segment. Buy rating maintained. Target is reduced to $16.77 from $17.35.

Target price is $16.77 Current Price is $11.52 Difference: $5.25
If WEB meets the Ord Minnett target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $15.08, suggesting upside of 30.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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

UBS rates WEB as Buy (1) -

While the liquidation of Thomas Cook is clearly disappointing, UBS notes the arrangement with Webjet leaves the latter with an additional 3000 directly-contracted hotels, that have been sold into the rest of the B2B operations.

While affected by a reduction in direct Thomas Cook revenues, the company has confirmed there is no change to other FY20 earnings drivers. FY20 guidance is expected at the AGM on November 20.

The broker continues to believe Webjet has structural and market share benefits. Buy rating maintained. Target is reduced to $18.65 from $19.50.

Target price is $18.65 Current Price is $11.52 Difference: $7.13
If WEB meets the UBS target it will return approximately 62% (excluding dividends, fees and charges).

Current consensus price target is $15.08, suggesting upside of 30.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

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