Australian Broker Call

Credit Suisse rates AGL as Underperform (5) -

Credit Suisse now forecasts a -$40m decline in retail electricity margin in FY19-20 to account for the impact of regulation and elevated competition.

The broker retains an Underperform rating and considers the value does not appropriately reflect the expected earnings downside from a reduction in wholesale electricity and renewables certificate prices in FY20-22. Target is raised to $18.30 from $17.90.

Target price is $18.30 Current Price is $21.70 Difference: minus $3.4 (current price is over target).
If AGL 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 $20.92, suggesting downside of -3.6% (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

Credit Suisse rates AHG as Neutral (3) -

AP Eagers ((APE)) has announced an all-scrip offer to acquire Automotive Holdings. The offer is not subject to any minimum acceptance threshold, financial conditions or due diligence. However, it will be subject to ACCC approval.

Credit Suisse observes the merged entity should, arguably, be able to ride out a cyclical and structural challenge as a larger, more diversified group.

The potential downside is giving away some value at a low point in the cycle. Credit Suisse maintains a Neutral rating and raises the target to $2.02 from $1.95.

Target price is $2.02 Current Price is $2.13 Difference: minus $0.11 (current price is over target).
If AHG 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 $1.91, suggesting downside of -10.3% (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

Deutsche Bank rates AMC as Buy (1) -

Amcor has signalled it is on track with the integration of Bemis. Deutsche Bank attended a briefing which enabled a better understanding of the merged company in regard to sustainability, future leverage and traction with customers.

The deal is expected to be completed on May 15. Deutsche Bank retains a Buy rating and $16.15 target.

Target price is $16.15 Current Price is $15.54 Difference: $0.61
If AMC meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $15.59, suggesting upside of 0.3% (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

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

The company has announced an all-scrip takeover offer for Automotive Holdings ((AHG)). AP Eagers' rationale is to leverage its automotive retail experience across a larger portfolio and obtain greater geographic diversification.

If approved, the combined entity would represent around 12% of Australian new vehicle sales. Using FY20 earnings estimates, Morgan Stanley values Automotive Holdings' core vehicle business at $1.70 versus the current implied bid of $1.0916 on April 4 closing prices.

Equal-weight retained. Target is $7. Industry view: In line.

Target price is $7.00 Current Price is $7.72 Difference: minus $0.72 (current price is over target).
If APE meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.63, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates APE as Accumulate (2) -

AP Eagers has made in all-scrip bid for the 71% of Automotive Holdings ((AHG)) it does not already own. With a national footprint and adjusted strategic outlook, Ord Minnett expects the potential of the combined business will accelerate the competitive advantage versus much of the smaller fragmented competition.

Accumulate rating maintained. Target is raised to $8.50 from $7.50.

Target price is $8.50 Current Price is $7.72 Difference: $0.78
If APE meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.63, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates AQG as Outperform (1) -

The Gediktepe pre-feasibility study was weaker than Macquarie expected, with softer production in the early years along with higher processing costs. Still, the broker notes the project is non-core.

The mineral resource for Ardich is positive, with indicated resources nearly doubling to 639,000 ounces, and this has become the top development priority.

Macquarie maintains an Outperform rating and $4.90 target.

Target price is $4.90 Current Price is $3.78 Difference: $1.12
If AQG meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 26.0% (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

Morgan Stanley rates CBA as Underweight (5) -

Morgan Stanley believes the banks remain in an earnings downgrade cycle, given weaker housing and subdued prospects for SME loan growth. There are also headwinds from competition, potential cuts to official cash rates and pressure on banking & wealth management fees.

The broker expects the upcoming first half results should confirm that credit quality remains stable. Nevertheless, the outlook for the economy is uncertain. Commonwealth Bank's target is reduced to $62.00 from $62.50. Underweight retained. Industry view: In-Line.

Target price is $62.00 Current Price is $70.59 Difference: minus $8.59 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.13, suggesting downside of -0.6% (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

Morgan Stanley rates CPU as Underweight (5) -

Morgan Stanley believes investment income expectations are too high. Supporting its view is declining US M&A, share plans and DRIP/DSPP activity.

With the number of M&A completions down across all major regions in the first three months of 2019 the broker expects corporate actions revenue to be flat or modestly lower in the second half.

Morgan Stanley retains an Underweight rating, In-Line industry view and $14.50 target.

Target price is $14.50 Current Price is $17.27 Difference: minus $2.77 (current price is over target).
If CPU meets the Morgan Stanley target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.91, suggesting upside of 3.7% (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

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

Macquarie downgrades Domain to Underperform from Neutral. This follows the recent rally in the stock. The target is $2.70.

The broker notes properties are taking longer to sell on average and the combination of school holidays, a late Easter and then Anzac Day will mean activity in April is likely to be very subdued. Beyond this, the broker finds the market difficult to call.

The main focus going forward will be execution in Victoria, in the broker's view, and the company's ability to leverage the broader platform of Nine Entertainment ((NEC)).

Target price is $2.70 Current Price is $2.82 Difference: minus $0.12 (current price is over target).
If DHG meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.74, suggesting downside of -3.0% (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

Deutsche Bank rates DMP as Sell (5) -

Deutsche Bank attended an investor briefing in Tokyo. The main development was changes in menu, moving towards a similar 'high volume mentality' that has worked for the company in other territories.

The broker points out that Japan remains a tough market and there is some risk of cannibalisation of existing sales with the company's strategy. Sell rating and $35 target maintained.

Target price is $35.00 Current Price is $44.65 Difference: minus $9.65 (current price is over target).
If DMP meets the Deutsche Bank target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $44.40, suggesting downside of -0.6% (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

Credit Suisse rates EVN as Underperform (5) -

A visit to Cowal has confirmed for Credit Suisse the quality and cash generating nature of the operation.

An exploration hiatus over the six years of prior ownership is rapidly being overcome by Evolution Mining and the GRE46 complex has been upgraded to the next development option.

Underperform rating and $2.55 target maintained.

Target price is $2.55 Current Price is $3.68 Difference: minus $1.13 (current price is over target).
If EVN meets the Credit Suisse target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.43, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates EVN as Neutral (3) -

It was evident to Macquarie from the tour of the Cowal mine that every project is being considered carefully for its financial merits. Management has reiterated its 6-8 asset portfolio strategy.

The broker retains a Neutral rating, with strong margins providing modest gold leverage to the upside yet cushioning the downside risk. Target is $3.90.

Target price is $3.90 Current Price is $3.68 Difference: $0.22
If EVN meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.43, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates FMG as Reduce (5) -

Having sanctioned US$2.6bn development of the Iron Bridge magnetite project, stockbroker Morgans has remodelled Fortescue Metal's future, increasing FY23 operational earnings (ebitda) by 11% but only adding 4c to its valuation.

The analysts do point out, on current spot price, the valuation increase would be 91c. Reduce rating retained. Price target $5.54 (was $5.50). Morgans continues to "like" the business, but simply finds its present valuation excessive.

Target price is $5.54 Current Price is $8.00 Difference: minus $2.46 (current price is over target).
If FMG meets the Morgans target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.02, suggesting downside of -12.3% (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: 0.0

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

Ord Minnett rates FMG as Buy (1) -

Ord Minnett calculates an internal rate of return of 16% from the Iron Bridge magnetite project, with net present value of US$1.5bn or US$0.64 per share. The broker considers the company's 61% share of capital expenditure, at around US$1.85bn, is modest.

Moreover, the benefits to the broader portfolio could be material from a blending perspective. Ord Minnett maintains a Buy rating and raises the target to $8.70 from $7.30.

Target price is $8.70 Current Price is $8.00 Difference: $0.7
If FMG meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $7.02, suggesting downside of -12.3% (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: 0.0

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

Morgans rates JIN as Add (1) -

Jumbo Interactive has enjoyed a strong run of jackpot activity in H2 of FY19 and stockbroker Morgans has taken the view this is likely to result in the company beating its own guidance. Add proposed changes to franking credits and the broker also sees a special dividend on the horizon, supported by a strong cash position.

Earnings estimates have received a boost and the result is for a jump in Morgans' price target to $19.18 from $11.18. Add rating retained. The SaaS-nature of the business, it is highly scalable, point out the analysts. They predict EBITDA margins of circa 80% rising to circa 90% over the next few years.

Target price is $19.18 Current Price is $15.73 Difference: $3.45
If JIN meets the Morgans target it will return approximately 22% (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

Credit Suisse rates ORG as Neutral (3) -

Credit Suisse increases FY20 estimates for LNG operating earnings (EBITDA) because of increases to global oil price forecasts. Forecast net profit is increased by 9.5% for FY20 and 1.3% in FY21.

Neutral rating maintained, as a 5-10% increase in expected APLNG cash flows is likely to be more than offset by a decline in energy market operating earnings in FY19-22. Target is raised to $7.55 from $7.30.

Target price is $7.55 Current Price is $7.25 Difference: $0.3
If ORG meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.11, 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

Credit Suisse rates PRU as Outperform (1) -

March quarter gold production was sequentially softer. Still, the company is on track to deliver FY19 guidance. A stronger Sissingue appears to have offset a weaker Edikan, Credit Suisse observes.

There was no update on Yaoure. Outperform rating and $0.57 target.

Target price is $0.57 Current Price is $0.49 Difference: $0.08
If PRU meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $0.57, suggesting upside of 17.0% (ex-dividends)

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

Macquarie rates REA as Outperform (1) -

Macquarie observes the fundamental drivers of REA Group's business remain intact, despite the cyclical headwinds. April is expected to be a soft month for listings with the combination of school holidays, a late Easter and Anzac Day.

The valuation appears reasonable and the broker raises the target to $93.50 from $90.00. Outperform rating maintained.

Target price is $93.50 Current Price is $74.70 Difference: $18.8
If REA meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $86.94, suggesting upside of 16.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

Macquarie rates RIO as Outperform (1) -

Macquarie believes the Iron Ore Co of Canada stacks up well against the company's Pilbara assets, providing further upside to buoyant iron ore prices, and that may not be fully appreciated by the market.

Rio Tinto has significant leverage to the iron ore price, as 60% of valuation and 70% of group operating earnings (EBITDA) in 2019 come from its iron ore assets, Pilbara and IOC.

First half results are likely to be strong and Macquarie suggests upside at current commodity prices exists. The broker maintains an Outperform rating and $106 target.

Target price is $106.00 Current Price is $101.44 Difference: $4.56
If RIO meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $94.67, suggesting downside of -6.7% (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 RIO as Hold (3) -

Ord Minnett upgrades commodity forecasts. Key changes include iron ore prices rising 12% and 21% for 62% and 58% grades, respectively. Copper is up 8% and nickel up 14%. Gold is broadly unchanged.

The broker continues to recommend investors hold both Rio Tinto and BHP Group ((BHP)) given the ongoing probability that iron ore markets tighten. The broker maintains a Hold rating and raises the target to $99 from $94.

Target price is $99.00 Current Price is $101.44 Difference: minus $2.44 (current price is over target).
If RIO 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 $94.67, suggesting downside of -6.7% (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 RMD as Outperform (1) -

Credit Suisse continues to be cautious about the amount of investment required to pursue the company's strategies, noting its Verily joint venture aims to increase penetration rate of the sleep apnoea market and Propeller Health is targeting patients with mild COPD.

Meanwhile, MatrixCare expands the company's exposure to out-of-hospital care settings. Management expects to earn a return on invested capital that is greater than the weighted average cost of capital within 2-3 years of these investments.

Credit Suisse maintains an Outperform rating and $15.35 target.

Target price is $15.35 Current Price is $14.28 Difference: $1.07
If RMD meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $15.08, suggesting upside of 5.6% (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: 0.3

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

Credit Suisse rates WPL as Outperform (1) -

Woodside has secured a foundation customer for Scarborough. The deal is conditional on a final investment decision. Credit Suisse assumes Woodside has achieved the higher end of the 11.5-12% range for the LNG contract.

The broker believes this will be a start to de-risking the Scarborough project. The foundation contract should help bring more buyers on board, perhaps at higher prices if the long-term contracting market improves over the next 18 months.

The broker maintains an Outperform rating and reduces the target to $37.64 from $37.80.

Target price is $37.64 Current Price is $34.53 Difference: $3.11
If WPL meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $35.64, suggesting upside of 3.2% (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