Australian Broker Call

Macquarie rates AGI as Underperform (5) -

The company has downgraded FY19 guidance, citing "competitive market pressure" and "delays encountered in new product approvals".

Macquarie believes the company is challenged, with newly-released content underperforming, which is adversely affecting customer appetite. Stabilisation, or a recovery, in FY20 requires an improvement in new game performance and this is not guaranteed, in the broker's view.

Underperform rating maintained. Target is reduced to $0.50 from $0.75.

Target price is $0.50 Current Price is $0.80 Difference: minus $0.3 (current price is over target).
If AGI meets the Macquarie target it will return approximately minus 38% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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 ALL as Outperform (1) -

Credit Suisse observes the data from the company's digital business has not supported its forecasts. However, land-based slot machine business has been solid and, aided by a weakening AUD/USD, the overall earnings changes are immaterial.

Outperform rating maintained. Target is $30.

Target price is $30.00 Current Price is $25.48 Difference: $4.52
If ALL meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $31.39, suggesting upside of 23.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

UBS rates ALL as Buy (1) -

While Australia will struggle to grow its 60% ship share further, the US market holds an opportunity for Aristocrat, UBS suggests. Analysis suggests Aristocrat has 28% of FY19 revenue share, or just 21% if the US state of Oklahoma is excluded.

Other operators have had a much higher share in the past and Aristocrat's business share remains below its closest competitors in class 3 outright. Hence, UBS retains a bullish call on the stock and retains a Buy rating and $34 target.

Target price is $34.00 Current Price is $25.48 Difference: $8.52
If ALL meets the UBS target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $31.39, suggesting upside of 23.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

Citi rates ASB as Buy (1) -

Austal has missed out on US$932m in LCS planning yard contract from the US Navy (it went to competitor Huntington Ingalls) and analysts at Citi have been taken by surprise. They saw Austal as well placed to win the contract.

Missing out on what should have been a significant earnings opportunity does not mean the company has no further options for growth, suggest the analysts.

They remain confident Austral will still be awarded further contracts as the US Navy would want to distribute work across shipyards to keep facilities busy. Buy. Target $2.76.

Target price is $2.76 Current Price is $2.50 Difference: $0.26
If ASB meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.60, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in June.

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 COH as Equal-weight (3) -

Morgan Stanley looks for detail on the rolling out of Profile Plus, shifts in market share and the sustainability of upgrade revenue when the company holds its investor briefing on May 10.

The broker believes the Profile Plus product puts Cochlear on an equal footing with Advanced Bionics and Med-EL. The broker notes developed market growth has now shifted to adults and seniors, where awareness and penetration remains low.

Morgan Stanley retains an Equal-weight rating, believing the valuation is rich, and raises the target to $179 from $163. In-Line industry view.

Target price is $179.00 Current Price is $191.91 Difference: minus $12.91 (current price is over target).
If COH meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $170.30, suggesting downside of -11.3% (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

Ord Minnett rates FMG as Buy (1) -

Vale has suspended production at the Brucutu mine, again, following another court ruling. This was unexpected and Ord Minnett suggests it will spark another wave of positive sentiment on iron ore.

The broker believes the latest closure at Brucutu has occurred at a point where physical iron ore supply is already tightening. With the potential for iron ore to trade higher, the broker reiterates a Buy rating and $8.60 target for Fortescue Metals.

Target price is $8.60 Current Price is $7.50 Difference: $1.1
If FMG meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $7.12, suggesting downside of -5.0% (ex-dividends)

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 GDG as Add (1) -

March quarter was softer for investment bonds sales, down -14%. More positively, funds under management rose 8% and benefited from positive net flows and market movements.

Morgans downgrades FY19 and FY20 forecasts for earnings per share by -10% and -27%, respectively. The broker considers the longer-term growth story is intact. Add rating maintained. Target is reduced to $0.82 from $1.06.

Target price is $0.82 Current Price is $0.59 Difference: $0.23
If GDG meets the Morgans target it will return approximately 39% (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

Deutsche Bank rates GNC as Buy (1) -

LTAP has withdrawn its $10.42 per share non-binding indicative acquisition proposal. While this is negative, Deutsche Bank considers the de-merger proposed by Graincorp has compelling value.

The broker suggests the takeover approach prompted a complete re-think of the business model, leading to the grains derivative, which has the potential to significantly smooth earnings.

Deutsche Bank remains comfortable with a Buy rating and $10.96 target.

Target price is $10.96 Current Price is $7.95 Difference: $3.01
If GNC meets the Deutsche Bank target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $9.56, suggesting upside of 20.3% (ex-dividends)

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

UBS rates GNC as Buy (1) -

LTAP has walked away from its proposal to acquire the company for $10.42 a share. Graincorp will now divest the bulk liquid terminals and pursue a de-merger of the malt division.

There was always a risk a potential suitor would discover something negative that is not easily visible, but the broker continues to believe the de-merger proposal will unlock value and moves its target price to sum-of-the-parts valuation, at $10.35 versus the $10.42 takeover offer.

Buy rating maintained. The company will report its first half results on May 9.

Target price is $10.35 Current Price is $7.95 Difference: $2.4
If GNC meets the UBS target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $9.56, suggesting upside of 20.3% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates HVN as Downgrade to Neutral from Outperform (3) -

Macquarie acknowledges Harvey Norman is executing well in its global business, shielding it from weaker domestic outcomes. Property is also resilient. Given the rally in the share price and a sharp slowing in shopping centre sales, the broker suspects the risks are building.

Rating is downgraded to Neutral from Outperform. Target is $4.20. The company is successfully pivoting the business to enjoy a greater proportion of earnings from offshore. Still, Macquarie believes the underlying business may start to struggle.

Target price is $4.20 Current Price is $3.94 Difference: $0.26
If HVN meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $3.75, suggesting downside of -4.8% (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

Citi rates IVC as Sell (5) -

The broker has reviewed its forecasts for InvoCare to account for the $88m capital raising, which it sees as EPS neutral after expense savings, an accounting standard change and minor upward revisions otherwise. The result is a target price increase to $13.50 from $12.25, but Sell retained given the stock price is well above at what the broker sees as an elevated 27x PE.

While the company's gearing issue is now sorted, earnings uncertainty remains given increased competition, the broker notes.

Target price is $13.50 Current Price is $15.33 Difference: minus $1.83 (current price is over target).
If IVC meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.40, suggesting downside of -12.6% (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 JBH as Downgrade to Neutral from Outperform (3) -

Macquarie suspects the buy case for the stock will likely become harder. The business is considered a well-run retailer capitalising on gaming, smart home and a shorter PC replacement cycle, in order to offset structural & cyclical headwinds.

Nevertheless, the stock has rallied, and the bulk of catalysts have now played out, so the broker downgrades to Neutral from Outperform. Target is reduced to $25.83 from $28.80.

Target price is $25.83 Current Price is $25.25 Difference: $0.58
If JBH meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $24.37, suggesting downside of -3.5% (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

Ord Minnett rates MFG as Downgrade to Hold from Buy (3) -

Ord Minnett notes strong absolute returns have benefited global fund managers. Magellan Financial has rallied, returning 87% in 2019, following a 16% absolute return in its global fund, strong retail and institutional net flows.

The stock has now run past fundamental value and Ord Minnett downgrades to Hold from Buy. Target is raised to $40.33 from $34.34.

Target price is $40.33 Current Price is $43.94 Difference: minus $3.61 (current price is over target).
If MFG meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.63, suggesting downside of -16.6% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates MIN as Buy (1) -

March quarter production was mixed, although Deutsche Bank notes FY19 operating earnings (EBITDA) guidance has been upgraded by 25% to $360-390m.

The broker suspects this could be conservative, given assumptions about June quarter iron ore prices. Buy rating and $18.50 target maintained.

Target price is $18.50 Current Price is $15.29 Difference: $3.21
If MIN meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $20.00, suggesting upside of 30.8% (ex-dividends)

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

Credit Suisse rates NWS as Neutral (3) -

Credit Suisse expects an increase in operating earnings (EBITDA) when third quarter results are released on May 10. This will be driven by the consolidation of Foxtel.

Net income is expected to be well below the prior corresponding period because of unfavourable FX movements, declines in news and information services and subscription video.

The broker retains a Neutral rating and reduces the target to $19.80 from $20.25.

Target price is $19.80 Current Price is $16.79 Difference: $3.01
If NWS meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $21.24, suggesting upside of 26.5% (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

Ord Minnett rates PNI as Buy (1) -

Ord Minnett retains a Buy rating as strong funds growth and flows propel earnings into FY20. The broker envisages growth is on offer at a reasonable price as the stock is trading on an FY20 PE/growth ratio of less than 1x. Target is raised to $7.00 from $6.92.

Target price is $7.00 Current Price is $5.79 Difference: $1.21
If PNI meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $6.40, suggesting upside of 10.6% (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

Ord Minnett rates PTM as Upgrade to Hold from Sell (3) -

The stock has underperformed the Small Ordinaries index by -19% despite its international fund rising 13% and Ord Minnett upgrades to Hold from Sell on valuation.

The broker raises the target to $4.77 from $4.72.

Target price is $4.77 Current Price is $4.57 Difference: $0.2
If PTM meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.43, suggesting downside of -3.1% (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

Citi rates QAN as Buy (1) -

The broker expects Qantas to report a slowdown in the growth rate of revenue per available seat-kilometer (RASK) in the March quarter due to the timing of Easter and school holidays relative to last year.

The broker believes RASK growth will ultimately slow on weaker demand but not until FY20 given competition remains rational in the domestic market and capacity has been reduced in international.

Buy and $6.90 target retained ahead of tomorrow's update.

Target price is $6.90 Current Price is $5.45 Difference: $1.45
If QAN meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $6.02, suggesting upside of 10.5% (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 QBE as Outperform (1) -

Macquarie does not expect any changes to FY19 guidance at the AGM and an Outperform rating is maintained, as portfolio remediation is expected to show results. Buybacks are likely to continue as well.

In reviewing offshore results, Macquarie observes the global margin and pricing outlook continues to improve slowly, although it is too early to assess any outcomes from US crop performance. Target is raised to $13.20 from $13.10.

Target price is $13.20 Current Price is $12.75 Difference: $0.45
If QBE meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.14, suggesting upside of 3.0% (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: 0.8

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

UBS rates QBE as Buy (1) -

On reviewing results from the company's US competitors, UBS takes the opportunity to adjust estimates to account for lower investment yields. At this stage, most indicators suggest QBE should still be on track to achieve the better half of its 94.5-96.5% combined ratio target for FY19.

Rates were generally positive across most lines and accelerating, the broker found, particularly in specialty classes. UBS maintains a Buy rating and raises the target to $13.75 from $12.90. UBS concludes that there is significantly reduced risk around meeting the company's FY19 yield guidance.

Target price is $13.75 Current Price is $12.75 Difference: $1
If QBE meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $13.14, suggesting upside of 3.0% (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: 0.8

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

Citi rates SUN as Buy (1) -

Suncorp management seems to regard separating the bank from other business is the best way to close the valuation gap to Insurance Australia Group ((IAG)), the broker notes. The broker agrees it would be a good idea, but also sees hurdles to successful execution and a risk value could actually be destroyed.

Even if a split is accretive, the broker does not see enough to suggest the valuation gap can be fully closed. That said, the broker still sees the stock as attractive and retains Buy and a $14.40 target.

Target price is $14.40 Current Price is $13.50 Difference: $0.9
If SUN meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $13.97, suggesting upside of 3.5% (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

Ord Minnett rates SUN as Hold (3) -

Ord Minnett notes media speculation that the company has called in investment bankers to assess the merits of divesting its banking business. The broker considers such a move would be a major change to the commitment to a bankassurance model that Suncorp has followed for many years, even though life insurance has recently been divested.

The broker notes the investor briefing has now been postponed, signalling any changes to the strategy may not have been agreed with the board as yet. Ord Minnett maintains a Hold rating and $14.13 target.

Target price is $14.13 Current Price is $13.50 Difference: $0.63
If SUN meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $13.97, suggesting upside of 3.5% (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

UBS rates WBC as Sell (5) -

First half results were broadly in line with UBS forecasts and heavily affected by remediation charges. UBS believes there are three factors that will determine if Westpac cuts its dividend.

These include the speed of credit impairment normalisation, the extent and timing of official rate cuts and whether APRA will stop 'double-gearing'  NZ capital in its APS222 review.

As the stock is trading on a 6.9% yield, the broker suspects the market is not prepared to price in dividend sustainability. The broker maintains a Sell rating and $24.50 target.

Target price is $24.50 Current Price is $27.10 Difference: minus $2.6 (current price is over target).
If WBC meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.93, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates WOR as Outperform (1) -

Macquarie suspects there is re-rating potential, with a solid core business that is boosted by $130m in cost savings. The company has now completed the Jacob's ECR acquisition.

Macquarie believes there is potential for revenue synergies from the new global chemicals footprint, integrated oil & gas position and taking advantage of a low-cost delivery centre in India.

Outperform maintained. Target is raised to $21.38 from $21.15.

Target price is $21.38 Current Price is $13.51 Difference: $7.87
If WOR meets the Macquarie target it will return approximately 58% (excluding dividends, fees and charges).

Current consensus price target is $18.57, suggesting upside of 37.4% (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