Australian Broker Call

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

Ord Minnett updates commodity price forecasts, noting decelerating global growth. Until there are clear are signs the current cycle has ended, periods of risk-on sentiment lead to a re-rating of key preferences in the bulks and metals sectors.

Aluminium and alumina estimates for 2020 are reduced by -6% and -14% respectively. The broker downgrades to Lighten from Hold and lowers the target to $2.00 from $2.50.

Target price is $2.00 Current Price is $2.23 Difference: minus $0.23 (current price is over target).
If AWC meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.22, suggesting downside of -0.6% (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: -0.2

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

Morgans rates BXB as Hold (3) -

First quarter sales were marginally better than Morgans expected. The company has maintained FY20 guidance for sales growth at the lower end of the mid-single digit objective.

Morgans assesses the sales update reflects a good start to FY20 but the global macro economic outlook is uncertain and there are ongoing cost pressures. Hold rating maintained. Target rises to $11.45 from $11.39.

Target price is $11.45 Current Price is $11.42 Difference: $0.03
If BXB meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $11.92, suggesting upside of 4.3% (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: 0.2

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

Citi rates CCX as Sell (5) -

The company has acquired Avenue, a distressed seller, for a modest price. Citi lifts estimates for earnings per share by 10% in FY20 and 40% by FY22 as a result. Avenue is a plus-sized value-focused fashion brand in the US.

Synergies should come from improving the conversion of website traffic to sales and utilising the customer database.

Citi retains a Sell rating, noting there is a chance the market becomes overly enthusiastic about the deal and, while liking the transaction, is mindful that synergies will take time. Target is raised to $2.30 from $1.70.

Target price is $2.30 Current Price is $2.78 Difference: minus $0.48 (current price is over target).
If CCX meets the Citi target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Citi rates CSL as Neutral (3) -

Citi notes Seqirus is on track to meet the company's target of $200m in earnings (EBIT) in FY20. The broker believes CSL has done an excellent job in turning around the loss-making Novartis flu business, acquired in 2015.

In the short term, Seqirus growth will be driven by increased market share through product differentiation, operating efficiencies and transition to a higher-priced quadrivalent and cell-based product. Neutral maintained. Target rises to $252.60 from $250.60.

Target price is $252.60 Current Price is $243.68 Difference: $8.92
If CSL meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $247.27, suggesting upside of 1.5% (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: 0.5

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

Credit Suisse rates HUB as Neutral (3) -

Funds under administration of $14.4bn in the first quarter were up 12%. Credit Suisse upgrades FY20 estimates for earnings by 7%. Flows have demonstrated an ability to capitalise on current disruption in the industry.

The company's cash margin is the main risk, in the broker's view, with potential downside if rates continue to trend lower. Neutral maintained. Target rises to $13.00 from $12.30.

Target price is $13.00 Current Price is $12.90 Difference: $0.1
If HUB meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $12.58, 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

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

Morgan Stanley believes the company is moving in the right direction. An improved result is expected when the third quarter results are published on October 30. Flows are improving in retail although INTECH is considered a wild card.

Equal-weight rating is maintained. Target is raised to $34.50 from $33.30. Industry view is In-Line.

Target price is $34.50 Current Price is $32.02 Difference: $2.48
If JHG meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $31.46, suggesting downside of -1.7% (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: 0.0

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

Citi rates MHJ as Buy (1) -

First quarter trading has revealed the company's strategies are gaining momentum, with Citi noting the business has stabilised. The broker expects Michael Hill will focus on improving Canadian sales productivity and expanded its product range.

Meanwhile, comparables will become tougher to cycle and Australian retail conditions continue to be challenging. Buy rating maintained. Target rises to $0.81 from $0.71.

Target price is $0.81 Current Price is $0.70 Difference: $0.11
If MHJ meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $0.71, suggesting upside of 1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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

Ord Minnett rates NCM as Resume coverage with Lighten (4) -

Ord Minnett resumes coverage with a Lighten rating based on valuation, and a $32 target. The broker considers gold stocks are largely well priced, although there are several where there is potential upside that the market is yet to pay for.

Preferences in the sector include OceanaGold ((OGC)) and St Barbara ((SBM)).

Target price is $32.00 Current Price is $33.47 Difference: minus $1.47 (current price is over target).
If NCM 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 $33.13, suggesting downside of -1.0% (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: -0.7

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

Morgans rates ORA as Add (1) -

Morgans considers the sale of the Australasian fibre business to Nippon Paper for $1.72bn was an offer too good to refuse. The broker believes the deal will increase Orora's defensiveness, given Australasia will be only exposed to the beverage sector.

Earnings (EBIT) margin and returns should also increase, given this was a lower-margin business.

While North American results have been disappointing over the past two years, and exposure to North America will increase, Morgans believes this was largely because of the roll-out of the new ERP system that has now been fully implemented.

Add rating maintained. Target rises to $3.34 from $2.97.

Target price is $3.34 Current Price is $3.08 Difference: $0.26
If ORA meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.21, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Citi rates PDL as Neutral (3) -

Net outflows for JO Hambro remain weak, Citi observes, with most funds underperforming the benchmark. Funds under management in the fourth quarter were in line but the composition was soft with much of the growth because of favourable FX impact.

Citi remains attracted to the company's diversified operating model and undemanding multiple. Neutral maintained. Target is reduced to $7.45 from $7.60.

Target price is $7.45 Current Price is $6.99 Difference: $0.46
If PDL meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.23, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in September.

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 PDL as Neutral (3) -

Funds under management and flows missed Credit Suisse estimates. The broker expects outflows from the UK business to continue, putting pressure on the operating margin.

While expenses have been contained, offsetting some revenue weakness, this becomes harder to continue and increases the risk, in the broker's view. Neutral maintained. Target reduced to $7.20 from $7.65.

Target price is $7.20 Current Price is $6.99 Difference: $0.21
If PDL meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $8.23, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates PDL as Overweight (1) -

Pendal Group posted net outflows of -$2.3bn in the September quarter, which missed Morgan Stanley's forecasts. JO Hambro retail was better than feared, with $-1.1bn in outflows.

While Brexit remains a key headwind, the broker believes the issues are factored into the price and the medium-term growth options remain attractive.

Overweight rating. Target is $9.60. Industry view: In-Line.

Target price is $9.60 Current Price is $6.99 Difference: $2.61
If PDL meets the Morgan Stanley target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $8.23, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates PDL as Neutral (3) -

Pendal saw net outflows of its funds of -$2.3bn in the Sep Q, taking FY19 (September end) outflows to -$4.7bn. Most of the money was withdrawn from the UK-based JOCHM funds after three years of underperformance. 

The broker sees ongoing risk to flows in the near term and limited scope for performance fees through to FY22. Neutral retained, target falls to $6.90 from $7.30.

Target price is $6.90 Current Price is $6.99 Difference: minus $0.09 (current price is over target).
If PDL 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 $8.23, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in September.

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 PLS as Downgrade to Sell from Hold (5) -

Ord Minnett updates commodity price forecasts, noting decelerating global growth. Until there are clear are signs the current cycle has ended, periods of risk-on sentiment lead to a re-rating of key preferences in the bulks and metals sectors.

The broker expects the lithium sector will have a difficult period for the next 6-12 months. Pilbara Minerals is downgraded to Sell from Hold. Target is reduced to $0.25 from $0.60.

Target price is $0.25 Current Price is $0.32 Difference: minus $0.07 (current price is over target).
If PLS meets the Ord Minnett target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.46, suggesting upside of 44.5% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates PPT as Neutral (3) -

Funds under management of $26.1bn were down -4.0% during the September quarter. Credit Suisse notes the stock is currently trading at a -23% PE discount to the market, close to its historical low.

However, earnings downgrades have been significant recently. A recovery in flows, or stabilisation, should mean Credit Suisse becomes more positive but, for now, a Neutral rating is maintained. Target is reduced to $35.50 from $37.45.

Target price is $35.50 Current Price is $33.79 Difference: $1.71
If PPT meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $36.03, suggesting upside of 6.6% (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 PPT as Equal-weight (3) -

Morgan Stanley notes investment performance improved in September, in part because of a rotation towards value. Yet outflows were almost double forecasts and came entirely from Australian equities.

Equal-weight rating. Target is $36.00. Industry view: In-line.

Target price is $36.00 Current Price is $33.79 Difference: $2.21
If PPT meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $36.03, suggesting upside of 6.6% (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

Ord Minnett rates PPT as Hold (3) -

First quarter funds under management revealed meaningful outflows. Ord Minnett finds it difficult at this stage to assess growth plans, although the focus is on growing the business from acquisitions and the company retains the financial capacity.

Perpetual Private continues to generate organic flows and has taken advantage of market disruption, the broker acknowledges. Hold rating maintained. Target is reduced to $36 from $37.

Target price is $36.00 Current Price is $33.79 Difference: $2.21
If PPT meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $36.03, suggesting upside of 6.6% (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

UBS rates PPT as Neutral (3) -

Perpetual suffered its 10th consecutive quarter of outflows in September, taking rolling 12-month outflows to -$5.1bn or -16.9% of funds under management. While most of the flows came out of lower margin institutional channels where remaining exposure is limited, the malaise has spread to the larger intermediary channel, the broker notes, which is 55% of FUM.

The broker sees further downside risk in this channel due to market underperformance and advisor and platform churn. Neutral retained, target falls to $35.00 from $37.90.

Target price is $35.00 Current Price is $33.79 Difference: $1.21
If PPT meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $36.03, suggesting upside of 6.6% (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

Credit Suisse rates PRU as Upgrade to Outperform from Neutral (1) -

Yaoure remains on schedule for first gold by end of 2020. The potential to extend mine life is significant, Credit Suisse assesses. Meanwhile Edikan has moved to a materially lower mining rate for a modest reduction in production.

The broker upgrades to Outperform from Neutral on higher gold price assumptions. Target is raised to $0.88 from $0.62 as valuation methodology is re-assessed.

Target price is $0.88 Current Price is $0.70 Difference: $0.18
If PRU meets the Credit Suisse target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $0.89, suggesting upside of 27.6% (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

UBS rates RHC as Neutral (3) -

Ramsay's UK NHS admissions rose 1.8% year on year in August -- a good result, the broker notes, given an 8.0% increase in FY19 -- however 12-month rolling growth eased to 3.0% from 3.4%. Current admissions and a tariff increase bode well for NHS revenue in FY20, but the increased use of agency nurses to handle the workload reduces margin expectations, the broker points out.

Australia (78% of earnings) remains the main driver at a time private hospital insurance participation is waning. But the strain on the public system may lead to necessary outsourcing to the private system. The broker awaits an update at the AGM next month. Neutral and $68.40 target retained.

Target price is $68.40 Current Price is $66.35 Difference: $2.05
If RHC meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $68.30, suggesting upside of 2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates RIO as Outperform (1) -

Macquarie has fewer concerns regarding Oyu Tolgoi after a site tour. In July the company announced a material delay was likely as well as an increase in capital costs. Macquarie has now re-set earnings forecasts to incorporate the delayed completion.

The broker's base case now assumes the underground block cave is developed sequentially which, combined with the open pit, can sustain a 50mtpa throughput for more than 70 years. Outperform maintained. Target is reduced to $106 from $110.

Target price is $106.00 Current Price is $91.93 Difference: $14.07
If RIO meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $97.92, suggesting upside of 6.5% (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: 0.3

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

Credit Suisse rates RRL as Upgrade to Neutral from Underperform (3) -

Credit Suisse notes the revised definitive feasibility study for McPhillamys is due in the first half of FY20 and may reveal improved economics on incorporating the higher-grade satellite, Discovery Ridge.

Nevertheless, the severe drought conditions in NSW, as rural properties struggle for water, could add complexity to the granting of permits.

The broker upgrades to Neutral from Underperform, amid higher gold price assumptions. Target is raised $4.95 from $3.90.

Target price is $4.95 Current Price is $4.73 Difference: $0.22
If RRL meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.18, suggesting upside of 9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Credit Suisse rates SBM as Upgrade to Outperform from Underperform (1) -

Further FY20 guidance is to be provided with the September quarter production report. Atlantic Gold is expected to be consistent with the prior owner's guidance for 2019. This could benefit from mining to date that has demonstrated a large portion of previously-assumed waste is mineralised.

Rating is upgraded to Outperform from Underperform as Credit Suisse raises gold price assumptions and re-assesses methodology. Target rises to $3.50 from $2.76.

Target price is $3.50 Current Price is $2.73 Difference: $0.77
If SBM meets the Credit Suisse target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.35, suggesting upside of 22.7% (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 SFR as Downgrade to Hold from Accumulate (3) -

Ord Minnett updates commodity price forecasts, noting decelerating global growth. Until there are clear are signs the current cycle has ended, periods of risk-on sentiment lead to a re-rating of key preferences in the bulks and metals sectors.

Despite potential upside, the broker notes development risk for Sandfire Resources and would become more constructive once risks diminish.

Ord Minnett downgrades to Hold from Accumulate. Target is lowered to $7.00 from $7.70.

Target price is $7.00 Current Price is $6.24 Difference: $0.76
If SFR meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $7.01, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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