Australian Broker Call

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

AdAlta is targeting treatment of fibrosis, a major component of chronic disease. Scarring of tissues affects multiple organs in the body and the company's first target is idiopathic pulmonary fibrosis. Milestones over the next 12 months include manufacturing, dosing, pharmacokinetics and toxicology studies.

Morgans assumes the company will enter a licensing deal after completing a phase I trial in FY20. The broker initiates coverage with an Add rating and $0.82 target.

The company is developing a new class of protein therapeutics via its proprietary technology known as i-bodies. Following a capital raising in July, the company is now considered in a sound cash position with reserves of $5.7m as of September 30, 2018.

Target price is $0.82 Current Price is $0.28 Difference: $0.54
If 1AD meets the Morgans target it will return approximately 193% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Morgans rates APE as Hold (3) -

The company has provided 2018 net profit guidance of $126-130m. Morgans believes automotive/trucks will offset lower gains on sale of property and investment returns.

The broker lowers forecasts by -6% for 2018 but believes the company's automotive result is likely to be the best from the sector this year.

The broker retains a Hold rating and $7.94 target.

Target price is $7.94 Current Price is $7.08 Difference: $0.86
If APE meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $7.65, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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 considers the upgraded FY19 operating earnings range of $25-27m to be conservative. Like-for-like sales are expected to accelerate over the rest of the first half as weaker comparables are cycled.

There is also upside for store roll-out, and competitiveness is expected to improve as the company leverages its store network to facilitate same day delivery.

Buy rating maintained. Target is reduced to $2.65 from $2.71.

Target price is $2.65 Current Price is $2.12 Difference: $0.53
If BBN meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Morgan Stanley rates BBN as Overweight (1) -

Morgan Stanley was impressed with the trading performance reported at the AGM. Same-store sales growth was 9.6%. Six stores are to open in FY19, of which five are due by December.

Target is $3. Overweight rating reiterated. Industry view is In-line.

Target price is $3.00 Current Price is $2.12 Difference: $0.88
If BBN meets the Morgan Stanley target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Morgans rates BBN as Add (1) -

The company's trading update indicates like-for-like sales growth of 9.6% with gross margin tracking at over 34%. The fact the strong performance has not come at the expense of margin is a positive sign, Morgans believes, and indicates the market share opportunity is flowing through.

The company is investing in key areas such as digital and supply chain and this will curtail what is already a strong growth year, although it should support growth in the outer years, in the broker's opinion. Add rating and $2.78 target maintained.

Target price is $2.78 Current Price is $2.12 Difference: $0.66
If BBN meets the Morgans target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $2.67, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

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

The company will report its first half result on November 28. Morgans expects a solid result, primarily driven by the annualisation of recent acquisitions in addition to underlying growth in the base business.

Morgans remains attracted to the growth prospects, including continued growth in KFC Australia and the ramp up of KFC in Europe as well as margin improvement.

Following the recent rally in the share price, the broker notes the stock is trading at a meaningful premium to the long-term average and downgrades to Hold from Add. Target is raised to $6.92 from $6.84.

Target price is $6.92 Current Price is $6.73 Difference: $0.19
If CKF meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.51, suggesting downside of -3.3% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Morgan Stanley rates CTX as Underweight (5) -

Australian fuel consumption trends signal premium volumes fell -10% in September and total retail volumes across all products fell -6%. Morgan Stanley expects the decline to moderate towards the end of the year and also expects petrol retailers to adjust pricing strategies for premium products, which could have a negative impact on margin.

The key to 2019 will be whether the oil price continues to increase and whether the Australian dollar rebounds or maintains its 2018 trajectory, which would increase fuel prices, the broker asserts.

Morgan Stanley suggests the risk for Caltex trading towards a bear case, in the low $20 range per share, exists if weak retail fuel trends continue into 2019.

Underweight and $26 target retained. Industry view: Attractive.

Target price is $26.00 Current Price is $26.35 Difference: minus $0.35 (current price is over target).
If CTX meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.08, suggesting upside of 21.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Citi rates CYB as Resume Coverage with Neutral (3) -

Citi resumes coverage after a period of restriction with a Neutral rating and reduces the target to GBP2.88 from GBP3.00. The broker likes the bank's strategy for deposit-funded growth, with strong execution on cost reductions and attractive excess capital.

In the near term, however, the UK macro political outlook is highly uncertain amid the risks of an adverse economic reaction to "no deal" on Brexit, or the prospect of a less business-friendly government.

Current Price is $4.48. Target price not assessed.

Current consensus price target is $6.48, suggesting upside of 44.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.8

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

Deutsche Bank rates GEM as Hold (3) -

The stock has rallied around 45% from its lows, Deutsche Bank observes, removing the discount that was in the share price based on a combination of balance sheet, refinancing and earnings risks.

The broker is unconvinced that the industry dynamics and structure have changed enough to become positive and retains a Hold rating. Target is $2.79.

Target price is $2.79 Current Price is $2.86 Difference: minus $0.07 (current price is over target).
If GEM meets the Deutsche Bank target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.98, suggesting upside of 4.1% (ex-dividends)

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

Macquarie rates GOZ as Underperform (5) -

Growthpoint is acquiring an office asset in Brisbane on a 6.1% yield, partly funded from a rights issue. Gearing will increase to 38% after the transaction and decline to 37% following two pending asset sales. Macquarie is not concerned regarding the accessibility of debt or covenants.

Macquarie is cautious about the medium-term outlook for Brisbane but believes the asset is relatively stable and consistent with the existing portfolio strategy. The company has indicated it will continue to review its holdings.

Underperform rating. Target rises to $3.38 from $3.36.

Target price is $3.38 Current Price is $3.61 Difference: minus $0.23 (current price is over target).
If GOZ meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.36, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.7

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

Ord Minnett rates GOZ as Upgrade to Hold from Lighten (3) -

The company has acquired 100 Skyring Terrace, Newstead, Brisbane. The purchase price of $250m reflects a 6.1% pre-cost yield.

Ord Minnett notes the share price has declined -4% since August, which leads to an upgrade to Hold from Lighten. Distribution guidance for FY19 remains unchanged at $0.23 per share.

Target price is $3.50 Current Price is $3.61 Difference: minus $0.11 (current price is over target).
If GOZ meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.36, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.7

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

Ord Minnett rates ILU as Upgrade to Accumulate from Hold (2) -

While the share price has fallen more than -30% over recent months, Ord Minnett is focused on the valuation support and the options around Jacinth-Ambrosia. The broker believes the company has a number of levers that can be pulled if mineral sands markets remain tight.

If expansions at Sierra Rutile do not deliver sufficient return, investors should be able to participate in a cash flow windfall from controlling the world's best mineral sands assets in a tight market.

Rating is upgraded to Accumulate from Hold. Target is reduced to $9.80 from $10.80.

Target price is $9.80 Current Price is $8.31 Difference: $1.49
If ILU meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $11.00, suggesting upside of 32.4% (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

Deutsche Bank rates LNK as Hold (3) -

A range of challenges in the Australian funds management business has been flagged at the AGM, stemming from uncertainty regarding the Hayne Royal Commission and in the UK as a result of Brexit.

Deutsche Bank believes the rapidly increased size and complexity of the group is causing management challenges. Moreover, because of the recent increased stake in PEXA these pressures are expected to mount in the short term.

Nevertheless, the business is generating cash and is the lowest cost provider in administrative services. This keeps the broker on a Hold rating. Target is reduced to $7.60 from $8.00.

Target price is $7.60 Current Price is $7.16 Difference: $0.44
If LNK meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.42, suggesting upside of 17.5% (ex-dividends)

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

Citi rates MPL as Neutral (3) -

Citi reduces estimates for earnings per share in FY20 by -5% to account for the loss of the Australian Defence Force contract from July 1, 2019. The broker is also sticking with a Neutral rating, given the uncertainty surrounding the impact of the Australian Labor Party's proposed 2% price cap, should it win the federal election.

Citi believes the loss of the ADF contract leaves an even less diversified business, with regulated resident health insurance now making up more than 90% of operating earnings. Target is reduced to $2.70 from $3.20.

Target price is $2.70 Current Price is $2.56 Difference: $0.14
If MPL meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.71, suggesting upside of 5.9% (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

Deutsche Bank rates MPL as Buy (1) -

Medibank Private has indicated it is no longer the preferred bidder for the Garrison Health Services contract, which provides healthcare services to the Australian Defence Force.

It now appears the contract will be awarded to a foreign provider, which is considered a setback to Medibank Private's broader health management offering.

Deutsche Bank retains a Buy rating on valuation grounds but reduces the target to $3.00 from $3.40.

Target price is $3.00 Current Price is $2.56 Difference: $0.44
If MPL meets the Deutsche Bank target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.71, suggesting upside of 5.9% (ex-dividends)

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 MPL as Neutral (3) -

Macquarie believes the loss of the Garrison contract is a setback and anticipates lower FY20 guidance for the Medibank Private health division. The broker believes further acquisitions are required to soften the earnings impact of a potential 2% average price rise and the lost earnings from the contract.

Macquarie believes there are a number of material negative catalysts over the next six months which create a high degree of uncertainty. Neutral maintained. Target is reduced to $2.65 from $3.10.

Target price is $2.65 Current Price is $2.56 Difference: $0.09
If MPL meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.71, suggesting upside of 5.9% (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

Morgan Stanley rates MPL as Underweight (5) -

Morgan Stanley observes the surprise loss of the Australian Defence Force contract will reduce FY20 estimates for earnings per share by -5% and raises questions around the company's stakeholder management.

Medibank Private will incur -$5m in exit costs in the second half and expects stranded group cost to be offset through operating efficiency initiatives. The broker finds it hard to reconcile why the company lost the contract given a seemingly strong incumbency.

Morgan Stanley considers the stock multiples expensive, given peak margins, record low inflation and weak volume growth. The loss of the defence contract further concentrates the company's exposure to regulated health insurance earnings.

The broker retains an Underweight rating and lowers the target to $2.30 from $2.40. Industry view: In Line.

Target price is $2.30 Current Price is $2.56 Difference: minus $0.26 (current price is over target).
If MPL meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.71, suggesting upside of 5.9% (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

Morgans rates MPL as Hold (3) -

Medibank Private has not been selected as the preferred tender for the renewal of the Garrison Health Services contract. This will lower FY20 operating profit by -5-6%, Morgans estimates.

The broker considers the loss a disappointing outcome, given the health insurance business is showing evidence of a turnaround.

Despite management indicating there is no lost IP from the termination of the contract, the broker suggests market concerns will linger on whether it will affect the roll-out of other health services such as home treatments.

Morgans maintains a Hold rating and reduces the target to $2.80 from $3.00.

Target price is $2.80 Current Price is $2.56 Difference: $0.24
If MPL meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.71, suggesting upside of 5.9% (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

Ord Minnett rates MPL as Lighten (4) -

The company has lost its contract with the Australian Defence Force, due to expire in June 2019. Ord Minnett adjusts forecast to account for the loss of earnings from the Garrison Health Services unit that currently provides health services to the ADF.

Medibank has not provided guidance on margins for the Garrison business but the broker suspects it was better than the remaining health services of around 10%.

The broker believes significant political risk for Medibank remains amid upcoming health insurance price renegotiation and potential government clawback of recent margin expansion, as well as higher capital requirements.

The broker maintains a Lighten rating and reduces the target to $2.53 from $2.80.

Target price is $2.53 Current Price is $2.56 Difference: minus $0.03 (current price is over target).
If MPL meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.71, suggesting upside of 5.9% (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 OZL as Neutral (3) -

Oz Minerals remains Credit Suisse's preferred Australian copper exposure because of the quality and breadth of its development portfolio amid confidence in the near-term cash generation from Prominent Hill.

Potential ore dilution by caved waste is the biggest risk factor at Carrapateena, the broker suggests. Prominent Hill, meanwhile, presents an efficient operation with no areas where material improvement can be gained.

Neutral rating and $9.50 target maintained.

Target price is $9.50 Current Price is $9.16 Difference: $0.34
If OZL meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $10.63, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Deutsche Bank rates OZL as Buy (1) -

Deutsche Bank has updated its model for the September quarter result and aligned operating assumptions at Prominent Hill to guidance. Valuation is 2% higher while 2018 estimates for earnings per share have fallen by -3%.

The broker maintains a Buy rating and $10.50 target.

Target price is $10.50 Current Price is $9.16 Difference: $1.34
If OZL meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $10.63, suggesting upside of 16.0% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Citi rates RHC as Buy (1) -

The company has maintained guidance at its AGM for up to 2% core earnings growth in FY19. Australia remains weak while the UK is expected to return to growth. Some volume growth is being witnessed in France.

Citi expects softness to continue in the short term, with weakness stemming from a looming federal election and the prospect of a Labor government, which, historically, has been negative for private health care.

The broker maintains a Buy rating and reduces the target to $61.25 from $64.00.

Target price is $61.25 Current Price is $53.76 Difference: $7.49
If RHC meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $58.78, suggesting upside of 9.3% (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

Macquarie rates SYD as Underperform (5) -

The Sydney Airport traffic statistics for October were materially better than September, although Macquarie notes the outlook is unchanged, amid falling capacity. International traffic growth was 6.1% while domestic was up 1.6%. These numbers reflect the timing of school holidays.

While there is limited risk around 2018 earnings , the outlook for 2019 remains challenging, in the broker's view. Underperform rating maintained. Target is $6.74.

Target price is $6.74 Current Price is $6.61 Difference: $0.13
If SYD meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.48, suggesting upside of 13.2% (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

Deutsche Bank rates VEA as Buy (1) -

Refining is behind the company's downgrade to estimates, although Deutsche Bank suggests this should be largely cyclical. The drag from declining Coles volumes is small in comparison but remains more important in the long-term.

Analysis implies Coles has over-earned by taking too much price, but Deutsche Bank remains confident Viva Energy can protect its earnings.

The second earnings disappointment in the four months since IPO is of concern to the broker but a Buy rating is retained on valuation. Target is steady at $2.40.

Target price is $2.40 Current Price is $1.84 Difference: $0.56
If VEA meets the Deutsche Bank target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting upside of 43.3% (ex-dividends)

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

Morgans rates VEA as Add (1) -

The company has downgraded 2018 guidance for refining margins to an average of US$8/bbl. Morgans observes volatile oil prices, a weaker Australian dollar and lower fuel demand have all combined to drag on refining earnings in the second half.

As oil prices slumped in November some of the negative factors are expected to reverse towards the end of the year. Morgans maintains an Add rating and reduces the target to $2.66 from $2.76.

Target price is $2.66 Current Price is $1.84 Difference: $0.82
If VEA meets the Morgans target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting upside of 43.3% (ex-dividends)

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

Morgans rates VHT as Add (1) -

First half results were broadly in line with expectations. The company's target of having 9% of US women screened using its products by March 2019 is reconfirmed.

A major radiology conference starting shortly in the US is considered a key event in order to drive sales. Morgans maintains an Add rating and $1.61 target.

Target price is $1.61 Current Price is $1.30 Difference: $0.31
If VHT meets the Morgans target it will return approximately 24% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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

Ord Minnett rates VHT as Buy (1) -

The company reported first half revenue of NZ$2.7m, up 61.8%. This was driven by continued increases in the US breast imaging market, now at 5.7% of eligible patients.

Attention is now shifting to the radiology conference in North America. Volpara will be featured at the event and this will represent the official launch of the company's new product.

Ord Minnett maintains a Buy rating and raises the target to $1.46 from $0.91.

Target price is $1.46 Current Price is $1.30 Difference: $0.16
If VHT meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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

Ord Minnett rates WES as Hold (3) -

Coles shares are expected to begin trading on the ASX with a code of COL on Wednesday, November 21. Ord Minnett makes modest adjustments to Wesfarmers estimates but does not incorporate the stand-alone costs of a separately-listed Coles.

The broker maintains a Hold rating and lowers the target to $47 from $50.

Target price is $47.00 Current Price is $44.11 Difference: $2.89
If WES meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $47.10, suggesting upside of 6.8% (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