Australian Broker Call

Citi rates ANZ as Neutral (3) -

The bank has announced a further -$559m in customer remediation, the bulk of which relates to banking products. Citi finds it unclear as to whether incorrect charges and customer definition issues are closer to being finalised for the sector.

While disappointed, the broker notes ANZ Bank holds insurance in the form of higher surplus capital. Outside of remediation, challenges regarding potential reinvestment remain. Neutral rating and $29 target maintained.

Target price is $29.00 Current Price is $27.09 Difference: $1.91
If ANZ meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $27.64, suggesting upside 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

Credit Suisse rates ANZ as Underperform (5) -

Cash earnings in the second half will be affected by a remediation charge of -$559m. The surprising aspect is the extent of banking-related remediation, as Credit Suisse had previously held a view that the bank had progressed further.

Credit Suisse retains an Underperform rating based on core earnings fundamentals, believing there is near-term pressure from sub-system balance sheet growth and margin pressure. Target is $27.80.

Target price is $27.80 Current Price is $27.09 Difference: $0.71
If ANZ meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.64, suggesting upside 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

Macquarie rates ANZ as Neutral (3) -

ANZ Bank has announced an additional remediation charge, bringing total provisions in FY19 to -$585m. With limited visibility on the extent and depth of banking-related issues, Macquarie envisages a risk of ongoing remediation beyond FY19.

Given the uncertainties associated with the RBNZ capital requirements and franchise issues in Australia, the broker maintains a Neutral rating. Target is $28.

Target price is $28.00 Current Price is $27.09 Difference: $0.91
If ANZ meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.64, suggesting upside 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

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

ANZ has announced additional remediation costs of -$560m. While this slightly increases the case for no further buybacks, Morgan Stanley believes the main limiting factor are the RBNZ proposals.

The remediation largely relates to fee and interest calculation on banking products in Australia and is larger than expected. The broker forecasts a further -$425m in pre-tax remediation in FY20 and FY21.

Equal-weight rating maintained. Target is $26.00. Industry view: In-Line.

Target price is $26.00 Current Price is $27.09 Difference: minus $1.09 (current price is over target).
If ANZ meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.64, suggesting upside 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

Morgans rates ANZ as Add (1) -

ANZ Bank has announced additional remediation charges of -$559m. Unlike National Australia Bank's ((NAB)) recent additional charges, this does not relate to financial advice but rather to product reviews and fee & interest calculations.

Morgans reduces cash forecasts for earnings per share for FY19 by -8.0%. Add rating and $29 target maintained.

Target price is $29.00 Current Price is $27.09 Difference: $1.91
If ANZ meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $27.64, suggesting upside 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

Ord Minnett rates ANZ as Hold (3) -

ANZ Bank will recognise further costs relating to product reviews in the Australian retail and commercial business as well as remediation for wealth division customers, totalling -$559m.

Ord Minnett revises estimates to include an additional -$300m in remediation costs in assumptions for the first half of FY20.

Ord Minnett maintains a Hold rating and $27.70 target.

Target price is $27.70 Current Price is $27.09 Difference: $0.61
If ANZ meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $27.64, suggesting upside 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 BBN as Buy (1) -

Citi observes the company is well-placed in a competitive landscape amid new growth opportunities in shopping centres and related services.

The AGM trading update implied like-for-like sales growth slowed to 1.5% over the last eight weeks of the first half. However, Citi expects sales will improve over the remainder of the period, as online momentum benefits from an increased focus on conversions and competitor clearance activity is cycled.

Citi maintains a Buy rating and raises the target to $3.94 from $3.05.

Target price is $3.94 Current Price is $3.47 Difference: $0.47
If BBN meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates BBN as Outperform (1) -

The first quarter trading update was softer than expected although gross margin is ahead. Macquarie notes the company has been cycling an abnormal period of competitor clearance activity.

The broker assesses the recent strength in the share price is reflecting elevated market expectations. The stock remains supported by a relatively defensive category and Macquarie maintains an Outperform rating. Target is raised to $3.80 from $3.10.

Target price is $3.80 Current Price is $3.47 Difference: $0.33
If BBN meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgan Stanley rates BBN as Overweight (1) -

Baby Bunting has reiterated FY20 guidance for operating earnings (EBITDA) of $34-37m and net profit of $20-22m. Morgan Stanley notes the expected gross margin of 36.6% is ahead of expectations.

Overweight maintained. Target is $3.50. Industry view is In-line.

Target price is $3.50 Current Price is $3.47 Difference: $0.03
If BBN meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgans rates BBN as Add (1) -

Morgans notes a slowdown in like-for-like sales growth but this is largely because of an abnormally strong period of clearance activity in September.

The slowdown is more than offset by a stronger assumption on gross margins, resulting in the broker making modest upgrades to forecasts. The company has reiterated guidance at its AGM for underlying growth in operating earnings (EBITDA) of 25-36%.

Morgans retains an Add rating and raises the target to $3.64 from $3.02.

Target price is $3.64 Current Price is $3.47 Difference: $0.17
If BBN meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Credit Suisse rates BSL as Outperform (1) -

The Australian Competition and Consumer Commission has advised no criminal cartel proceedings will be commenced against either BlueScope Steel or its former employee, Jason Ellis.

Separate civil cartel proceedings filed by the ACCC remain before the Federal Court and are ongoing. Allegations centre on an attempt to engage in cartel conduct rather than the fact cartel conduct actually occurred.

Outperform rating and $15.30 target maintained.

Target price is $15.30 Current Price is $11.60 Difference: $3.7
If BSL meets the Credit Suisse target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $13.55, suggesting upside of 16.8% (ex-dividends)

The company's fiscal year ends in June.

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 CL1 as Buy (1) -

UBS notes another relatively soft September quarter. The broker considers the risk to accounts growth has reduced significantly since the May federal election.

The next potential catalyst, besides the AGM on October 21 and investor briefing in November, could be any change in the ownership structure of the competing AMP (((AMP)) SuperMate product.

Buy rating and $1.95 target maintained.

Target price is $1.95 Current Price is $1.49 Difference: $0.46
If CL1 meets the UBS target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $1.55, suggesting upside of 4.3% (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

Macquarie rates CVN as Outperform (1) -

Flow testing in the Caley reservoir has indicated potential production rates of up to 30mboe/d which is a positive indicator for the development of the Dorado project.

Macquarie anticipates further guidance on the projected flow rate for the field and expects a Front End Engineering Design decision in early 2020. Carnarvon Petroleum owns a 20% interest in the field and remains well funded.

The broker retains an Outperform rating and $0.50 target.

Target price is $0.50 Current Price is $0.40 Difference: $0.1
If CVN meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgan Stanley rates RMD as Overweight (1) -

ResMed and Cerner have announced a new collaboration with the aim of improving out-of-hospital care transitions. ResMed's Brightree home health and hospice platform is now Cerner's preferred solution. Financial terms have not been disclosed.

Morgan Stanley does not believe the announcement is material to near-term earnings but it is an incremental positive, and ResMed's software investments are expected to underpin long-term growth.

Overweight rating. Target is US$137.83. Industry view: In-Line.

Current Price is $19.48. Target price not assessed.

Current consensus price target is $18.74, suggesting downside of -3.8% (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: 0.4

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

Citi rates RSG as Buy (1) -

The company has pre-released September quarter gold production, the first to include the newly-acquired Mako mine. Overall, production beat Citi's estimates by 5%.

While investors may be concerned by weak numbers at Syama, on further scrutiny the broker notes there is no change to the ramping up of the underground.

Mako, in Senegal, was the positive surprise while Syama missed forecasts as maintenance to the crusher and roaster affected the gold being poured.

Buy/High Risk rating maintained. Target is $2.40.

Target price is $2.40 Current Price is $1.43 Difference: $0.97
If RSG meets the Citi target it will return approximately 68% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 RSG as Outperform (1) -

Preliminary gold production was in line with Macquarie's expectations although mine performance varied. Sulphides at Syama were affected by an unplanned shutdown while the new mine, Mako, performed strongly and was ahead of forecasts.

Macquarie believes getting the Syama underground cash flow to a positive state is becoming increasingly urgent, with the bridging loan to be repaid or refinanced over the next nine months.

Outperform and $2.60 target retained.

Target price is $2.60 Current Price is $1.43 Difference: $1.17
If RSG meets the Macquarie target it will return approximately 82% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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 SKI as Neutral (3) -

The draft determination on the South Australian Power Networks is -6% below Credit Suisse forecasts. The broker decreases FY22 dividend estimates to $0.12 per security, noting that the earnings impact is partially offset by lower capital expenditure.

A final determination is scheduled for April 30, 2020. Neutral and $2.30 target retained.

Target price is $2.30 Current Price is $2.12 Difference: $0.18
If SKI meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates SKI as Neutral (3) -

The Australian Energy Regulator has delivered a draft regulatory decision on the South Australian Power Networks. Allowed revenue is $3.91bn over five years versus the company's application for $4.21bn.

Macquarie observes inflation remains a challenge for the company. Neutral rating and $2.41 target maintained.

Target price is $2.41 Current Price is $2.12 Difference: $0.29
If SKI meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates SKI as Underweight (5) -

The Australian Energy Regulator has published a draft determination for the South Australian Power Networks. The regulator forecasts nominal regulated asset base growth of 0.6%.

Morgan Stanley anticipates little change between the draft and final determination which is due April 2020, and assesses the regulatory re-set risk is becoming more balanced for the company over time.

Underweight rating maintained. Target is $2.24. Industry view is Cautious.

Target price is $2.24 Current Price is $2.12 Difference: $0.12
If SKI meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.30, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates SLK as Buy (1) -

Target price jumps to $5.85 from $4.38 with an unchanged Buy recommendation following what the broker believes will be a "transformational acquisition" of Transit Systems Group. The latter is a major operator of metropolitan bus services to governments in both Australia, UK and Singapore.

Following the acquisition, Ord Minnett points out, Sealink Travel is now primarily an infrastructure management business (85% of revenue) with a small tourism component (15% of revenue). In practice, explains the broker, this translates into a business model that enjoys monthly service payments under long term (6-10 year) government contracts indexed to CPI at both the revenue and cost lines.

In addition, Ord Minnett points out both the vendors and senior management of Sealink will together own more than 40% of the new group; skin in the game! Ord Minnett anticipates the stock will be re-rated.

Target price is $5.85 Current Price is $4.65 Difference: $1.2
If SLK meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates STO as Outperform (1) -

The Caley flow testing has achieved potential production rates of up to 30mboe/d, a positive development for Dorado. Macquarie believes there is a high likelihood Dorado will be developed and a final investment decision could be made in late 2020.

Dorado remains a key asset for Santos, which holds an 80% interest, and ranks highly on the list of potential developments. Macquarie maintains an Outperform rating and $8.20 target.

Target price is $8.20 Current Price is $7.40 Difference: $0.8
If STO meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $7.71, suggesting upside of 4.2% (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: 0.6

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

Morgan Stanley rates STO as Overweight (1) -

Santos has announced an 11,100 bbl/d flow rate from the Dorado oil discovery in Western Australia. The company has noted potential for flow rates of 30,000 bbl/d from the Caley reservoir.

This high flow rate has potential to lower development costs and increase production for the development. Morgan Stanley expects the stock will trade higher on the news.

Overweight rating maintained. Target is $8.00. Industry view: In-Line.

Target price is $8.00 Current Price is $7.40 Difference: $0.6
If STO meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $7.71, suggesting upside of 4.2% (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: 0.6

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

Ord Minnett rates STO as Buy (1) -

Flow testing of the Caley reservoir in the Dorado project has achieved a maximum rate of 11,100 bbl/d. Santos has indicated this rate is one of the highest ever from the North West Shelf appraisal well test.

The latest results further de-risk the development of Dorado, in Ord Minnett's view. The broker hopes further details on Dorado, in order to determine a value, may be forthcoming at the investor briefing on December 3.

Buy rating and $7.90 target maintained.

Target price is $7.90 Current Price is $7.40 Difference: $0.5
If STO meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $7.71, suggesting upside of 4.2% (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: 0.6

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

Credit Suisse rates TAH as Neutral (3) -

The first four months of FY19 presented large lottery jackpots and, taking into account a 'halo' effect, Credit Suisse upgrades lottery revenue sales estimates, suspecting levels could be sustained at a higher rate than originally forecast.

Target rises to $5.00 from $4.56. Neutral maintained.

Target price is $5.00 Current Price is $4.85 Difference: $0.15
If TAH meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.92, suggesting upside of 1.4% (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

Macquarie rates WGX as Outperform (1) -

An incident at the process plant in Meekatharra is expected to reduce second quarter production by 2,500 ounces. Macquarie reduces expectations accordingly.

A more consistent production performance is likely to be a key positive catalyst over FY20. Recouping a relatively modest slippage over the year could be achievable, in the broker's view, given the timing of the incident.

Outperform rating and $3.50 target maintained.

Target price is $3.50 Current Price is $2.47 Difference: $1.03
If WGX meets the Macquarie target it will return approximately 42% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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