Australian Broker Call

Credit Suisse rates BLD as Neutral (3) -

The company has reaffirmed FY20 net profit guidance despite a soft first quarter. Credit Suisse was disappointed with the decline in first quarter earnings in North America, although notes a second half improvement has been flagged, given confident US home builder reports and a weak comparable half.

The broker retains a Neutral rating, with the downside view on Australian construction offset by the improving US outlook. Target is raised to $4.50 from $4.10.

Target price is $4.50 Current Price is $4.96 Difference: minus $0.46 (current price is over target).
If BLD meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.74, suggesting downside of -4.4% (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

Macquarie rates CTD as Neutral (3) -

Corporate Travel has confirmed underlying FY20 operating earnings guidance of $165-175m. A higher-than-usual contribution is expected from the second half, which Macquarie believes reflects improvement in Europe and Asia.

However, the broker notes the US is slightly softer. Target is steady at $21.50. Neutral retained.

Target price is $21.50 Current Price is $19.73 Difference: $1.77
If CTD meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $26.65, suggesting upside of 35.1% (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

Morgans rates CTD as Add (1) -

Trade wars, Brexit and the Hong Kong protests made for a particularly tough first half for Corporate Travel Management, but there are signs of life returning in the second half. The company has reiterated FY guidance and Morgans assumes modest first half earnings growth followed by double-digit growth in the second half as macro headwinds gradually ease.

The broker retains Add and a $23.40 target but acknowledges that despite a discount to other growth stocks, Corporate Travel will need to show evidence of a second half comeback before a re-rating is likely.

Target price is $23.40 Current Price is $19.73 Difference: $3.67
If CTD meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $26.65, suggesting upside of 35.1% (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

Macquarie rates DOW as Outperform (1) -

Downer EDI has reaffirmed net profit guidance of $365m for FY20, 7% ahead of FY19. The cash performance will not be as strong as the 90% conversion experienced in recent years because of the impact of the Murra Warra wind farm, the winding down of large projects and the timing of cash payments for the bogie overhaul for Waratah trains.

Macquarie believes the growth target is solid amid a broader challenged economic backdrop. The broker suggests the stock offers above-market growth at a sub market PE and maintains an Outperform rating. Target is raised to $8.65 from $8.63.

Target price is $8.65 Current Price is $7.99 Difference: $0.66
If DOW meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.40, suggesting upside of 5.1% (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 DOW as Downgrade to Neutral from Buy (3) -

The shares have recently outperformed and UBS downgrades to Neutral from Buy. The share price has increased around 20% in the year to date. The company has reiterated guidance for FY20 net profit of around $365m.

Downer EDI has indicated that cash conversion in FY20 would not be as strong as previously because of the impact of the Murra Warra wind farm, the run down in NBN/LNG projects and higher cash costs. UBS reduces the target to $8.15 from $8.35.

Target price is $8.15 Current Price is $7.99 Difference: $0.16
If DOW meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.40, suggesting upside of 5.1% (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

Morgans rates FDV as Add (1) -

Frontier Digital reported strong results in the Sep Q, with A$ revenues up 69% year on year. A growing number of portfolio companies are now cash flow and earnings positive, the broker notes, reflecting growing maturity.

Transaction-based models are delivering outstanding growth as property developers choose pay-for-performance advertising. The broker retains Add, but warns Frontier invests in early stage ventures in high risk economies so this is not one for the faint hearted. Target rises to 96c from 94c.

Target price is $0.96 Current Price is $0.82 Difference: $0.14
If FDV meets the Morgans target it will return approximately 17% (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

Citi rates FLT as Downgrade to Neutral from Buy (3) -

Citi notes Flight Centre has either downgraded or issued guidance below consensus five times in the past 12 months. The consistent underlying driver of weakness has been the Australian leisure channel.

The broker downgrades to Neutral from Buy and reduces the target to $42.90 from $50.50.

Citi forecasts an underlying pre-tax profit decline of -32% in the first half before a 12% recovery in the second half. The pre-tax profit margin is expected to contract to 1.3% in FY20.

Target price is $42.90 Current Price is $39.71 Difference: $3.19
If FLT meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

Credit Suisse rates FLT as Outperform (1) -

Credit Suisse believes Flight Centre needs to get ahead of the curve in reducing its leisure cost structure. Overall market softness has contributed to a downgrade to expectations but the broker suspects this is likely to be a buying opportunity.

The EMEA region should generate more than $100m in pre-tax profit in FY20. Both the EMEA region and the Americas are being driven by strong corporate expansion and the company retains a pre-tax profit margin of over 2%.

The miss to expectations for Australia appears to be mainly associated with the Australian shops. Transaction value fell in the first quarter and Australian corporate business also decelerated.

The company's guidance for pre-tax profit in FY20 of $310-330m has a stronger than usual skew to the second half, Credit Suisse points out. However, it is unclear what margin assumptions have been made.

Outperform rating maintained. Target is reduced to $47.49 from $49.91.

Target price is $47.49 Current Price is $39.71 Difference: $7.78
If FLT meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

Macquarie rates FLT as Neutral (3) -

Macquarie observes the mix of channels - low-margin online channel and Australian leisure travel - is pressuring the company's margins. This comes despite strong volume growth.

Higher wages and consultancy fees are also likely to mean costs remain elevated in FY20. While the performance of offshore markets is strong Macquarie is concerned with the outlook for Australian leisure.

Both structural and cyclical issues weigh on the stock and the broker maintains a Neutral rating. Target is reduced to $39.10 from $48.40.

Target price is $39.10 Current Price is $39.71 Difference: minus $0.61 (current price is over target).
If FLT meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

Morgan Stanley rates FLT as Overweight (1) -

Morgan Stanley was not surprised by the challenges the company outlined in the first half although continues to envisage valuation support in the stock. However, the extent of associated profitability weakness was worse than expected.

Pre-tax guidance for FY20 of $310-350m represents a -4% decline at the mid point. The broker lowers first half forecasts by -26% and FY20 by -10%.

Overweight maintained. Target is reduced to $43 from $45. Industry view: Cautious.

Target price is $43.00 Current Price is $39.71 Difference: $3.29
If FLT meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

Morgans rates FLT as Hold (3) -

Flight Centre's FY20 guidance fell short of consensus as the broker expected. Revenue growth is strong, but is not converting into earnings growth strength. Australian Leisure is suffering from both internal issues and external headwinds, with Brexit and Hong Kong but two of the problems. Corporate, on the other hand, continues to perform well.

The broker expects an earnings recovery in the second half, aided by cycling a very weak second half last year. But earnings visibility remains low as headwinds persist. Hold retained, target falls to $40.55 from $43.50.

Target price is $40.55 Current Price is $39.71 Difference: $0.84
If FLT meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

UBS rates FLT as Buy (1) -

Guidance provided at the AGM was softer than UBS expected. First half pre-tax profit is expected to be down -22-36%. The broker reduces its forecast by -9-12% to reflect the update.

Trends are expected to improve into the second half, reflecting easier comparables from November onwards in Australasian leisure. The company stated it would be disappointed if pre-tax profit did not grow over FY20.

UBS believes earnings are approaching a low point and retains a Buy rating. Target is reduced to $50.50 from $54.10.

Target price is $50.50 Current Price is $39.71 Difference: $10.79
If FLT meets the UBS target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $44.32, suggesting upside of 11.6% (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

Credit Suisse rates IFM as Initiation of coverage with Outperform (1) -

The business provides software-as-a-service to global automotive manufacturers and dealers, supporting original equipment manufacturer parts and services.

Of FY19 revenue of $85m more than 80% was generated outside of Australia. Credit Suisse initiates coverage with an Outperform rating and $2.60 target.

Although the business is lower growth than many of its peers, the broker suggests this is offset by the defensiveness of the earnings base.

Target price is $2.60 Current Price is $2.08 Difference: $0.52
If IFM meets the Credit Suisse 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: 0.5

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

Citi rates JHX as Buy (1) -

With a record second quarterly performance, Citi expects concerns about performance will fade. In only the first year of the three-year strategic plan James Hardie's performance has exceeded expectations.

Citi reiterates a Buy rating and raises the target to $30 from $25. On the strength of the quarterly performance and revised guidance the broker upgrades FY20-22 estimates for earnings per share by 2-3%.

Target price is $30.00 Current Price is $27.64 Difference: $2.36
If JHX meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Credit Suisse rates JHX as Outperform (1) -

Net profit was ahead of Credit Suisse forecasts in the September quarter, with the company outperforming on margin in North America. FY20 net profit guidance has been raised to US$340-370m.

The company has emphasised it wants to run a growth business and has, therefore, not raised long-term earnings margin targets for North America.

Hence, increased investment from the second half should be expected and Credit Suisse models elevated margins for 18 months before investment catches up.

The broker increases the target to $29.45 from $28.90 and retains an Outperform rating.

Target price is $29.45 Current Price is $27.64 Difference: $1.81
If JHX meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Macquarie rates JHX as Outperform (1) -

Second quarter results beat Macquarie's expectations, driven by stronger margins in North America and solid Asian Pacific volumes. Guidance has been upgraded for FY20, to profit of US$340-370m.

North American margin guidance has been lifted to 25-27%. Macquarie notes cyclical cost gains and a firmer US housing market have added to the story and the valuation remains attractive.

Outperform rating maintained. Target rises to $32.40 from $25.35.

Target price is $32.40 Current Price is $27.64 Difference: $4.76
If JHX meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Morgan Stanley rates JHX as Overweight (1) -

Second quarter results were strong with US margin and primary demand growth exceeding Morgan Stanley's expectations. The company has raised guidance for the full year on both metrics.

The next level of upside, in the broker's view, is likely to come from a multiple re-rating. Morgan Stanley reiterates an Overweight rating.

The broker assesses the stock is trading at a discount to industrials peers, which disregards the quality and growth attributes. Target rises to $29 from $28. Cautious industry view.

Target price is $29.00 Current Price is $27.64 Difference: $1.36
If JHX meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Ord Minnett rates JHX as Accumulate (2) -

Net profit was ahead of estimates in the second quarter, largely because of the margin performance. The North American fibre cement division achieved an EBIT margin of 27.1%.

Ord Minnett notes sentiment is very positive towards the stock and expectations for earnings growth continue to rise. This lifts the hurdle for results to surprise on the upside and also raises the risk of a correction if the performance falters.

The broker maintains an Accumulate rating and raises the target to $28.50 from $27.00.

Target price is $28.50 Current Price is $27.64 Difference: $0.86
If JHX meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

UBS rates JHX as Buy (1) -

The company has delivered a second consecutive result that was better than UBS expected. The broker was surprised by the upgraded guidance for earnings margins and US primary demand growth.

A resumption of growth in US housing and consistency in primary demand growth should support a continued PE re-rating in the broker's view.

UBS is impressed by the company's 20% share of new US siding sales, although suspects taking additional market share over the long-term will become more expensive and challenging.

Buy rating maintained. Target rises to $30.00 from $23.80.

Target price is $30.00 Current Price is $27.64 Difference: $2.36
If JHX meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $29.89, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in March.

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: 0.9

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

Citi rates NAB as Buy (1) -

Citi believes National Australia Bank's FY19 result was the best out of the recent major bank results. The broker believes, with little earnings growth in the sector, returns on equity (ROE) and the ability to sustain the dividend are the key factors in determining the relative attractiveness of the stock.

In FY20, the broker estimates National Australia Bank will record a 12% ROE, well ahead of Westpac ((WBC)) and ANZ Bank ((ANZ)) at around 11%. Buy rating and $30.50 target maintained.

Target price is $30.50 Current Price is $28.47 Difference: $2.03
If NAB meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Neutral (3) -

Credit Suisse found National Australia Bank's FY19 outlook not dissimilar from that provided by Westpac ((WBC)), noting stifled growth in the balance sheet.

The broker liked the good margin management and cost guidance but not National Australia Bank's declining asset quality and low housing growth.

The broker retains a Neutral rating and $27.90 target.

Target price is $27.90 Current Price is $28.47 Difference: minus $0.57 (current price is over target).
If NAB meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates NAB as Neutral (3) -

Macquarie assesses the FY19 result is "not bad" but "hardly inspiring". There was no growth in the balance sheet although margin trends were superior to peers.

The broker suspects the bank may run out of steam in its cost reductions, having benefitted form the initial increase in investment and capitalised software write-offs.

Neutral rating maintained. Target is reduced to $27 from $29.

Target price is $27.00 Current Price is $28.47 Difference: minus $1.47 (current price is over target).
If NAB meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Underweight (5) -

Cash profit in FY19 was below Morgan Stanley's forecasts although there were no major surprises. The bank estimates it will raise around $900m from the regular dividend reinvestment plan and around $700m from a partial underwriting.

Morgan Stanley maintains an Underweight rating and $25.60 target. Industry view: In-line.

Target price is $25.60 Current Price is $28.47 Difference: minus $2.87 (current price is over target).
If NAB 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 $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates NAB as Hold (3) -

National Bank's result was slightly below expectation but the dividend was in line. Weakness was mostly in market trading, which is inherently volatile, and in group loan growth, which was absent in the second half. But net interest margin, asset quality and expenses were all in line with the broker.

NAB opted for a discounted, partially underwritten DRP instead of raising fresh capital as Westpac has done. The market was expecting NAB to follow Westpac, the broker suggests, which is why the share price responded positively yesterday.

The broker has lowered earnings forecasts and its target to $26 from $27, Hold retained.

Target price is $26.00 Current Price is $28.47 Difference: minus $2.47 (current price is over target).
If NAB meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Accumulate (2) -

Second half cash net profit of $2.14bn was -2% below Ord Minnett's forecast. The broker believes the result demonstrates common trends with major peers and the outlook is clouded by low interest rates that are putting pressure on returns.

However, these headwinds are considered less severe at National Australia Bank. The broker acknowledges some investors may be disappointed the bank did not address the capital position but finds it hard to argue strongly against the strategy being taken.

Accumulate rating is maintained.Target is reduced to $29.30 from $29.50.

Target price is $29.30 Current Price is $28.47 Difference: $0.83
If NAB meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Sell (5) -

FY19 result was softer than UBS expected. Net interest margin fell to 1.78%, with mortgage re-pricing offset by competition and low rates.

The broker found the commentary from the bank relatively upbeat compared with the more sobering statements from its peers.

The CET1 ratio was 10.75% post its capital raising. The bank envisages a pathway to a CET1 ratio in line with its peers (over 11%) but this assumes no further one-off or large notable items and UBS suspects the target may be optimistic.

Sell rating maintained. Target is raised to $25 from $23.

Target price is $25.00 Current Price is $28.47 Difference: minus $3.47 (current price is over target).
If NAB meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.33, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in September.

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 PRN as Buy (1) -

Perenti Global (formerly Ausdrill) has announced a tragic security incident involving its workforce at Semafo's Bongou mine site in Burkina Faso.

A convoy of five buses including employees and other suppliers of Semafo was attacked, resulting in multiple fatalities and injuries.

UBS has limited detail and is not in a position to assess whether there will be a substantial impact on the business.

Buy rating and $2.55 target maintained.

Target price is $2.55 Current Price is $2.26 Difference: $0.29
If PRN meets the UBS target it will return approximately 13% (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 RIO as Equal-weight (3) -

Morgan Stanley adds an Australian target of $95 to its London-listed stock coverage. The broker expects a rapid decline in iron ore prices over 2020-22 which leads to a declining earnings trajectory in its base case for Rio Tinto over the next three years.

The scope to accelerate accretive volume growth appears limited in the near term and the iron ore division faces cost headwinds. Moreover, Morgan Stanley highlights the lack of visibility around Oyu Tolgoi's operating metrics.

Still, the balance sheet is robust and the company has sound capital discipline and the broker maintains an Equal-weight rating. Industry view is In-Line.

Target price is $95.00 Current Price is $95.04 Difference: minus $0.04 (current price is over target).
If RIO meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $96.23, suggesting upside of 1.3% (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

UBS rates S32 as Neutral (3) -

South32 has progressed with its intention to sell its South Africa Energy Coal to Seriti Resources. UBS considers progress on the divestment important, given the deteriorating market backdrop to the negotiations.

It appears that much of the proceeds are now subject to deferral and a completion date is delayed to around 9-12 months, indicating closure may now be around August-October 2020.

UBS maintains a Neutral rating and raises the target to $2.90 from $2.80.

Target price is $2.90 Current Price is $2.74 Difference: $0.16
If S32 meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.04, suggesting upside of 10.8% (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 SIG as Neutral (3) -

As Sigma Healthcare has been approached by former client Chemist Warehouse to potentially resume the distribution of FMCG (fast moving consumer goods) products ($700m contract that went to competitor DHL), Citi analysts wish to emphasise there is no concrete evidence this contract could return, in part or in full.

Yet, if Sigma were to resume supply for all of the $700m FMCG this would translate, on Citi's assessment, to a 50% EPS boost in FY21, followed by a further 45% in FY22. The target price (currently at 52c) would likely surge to 61c.

Also, the company is hosting a site tour of its new Western Sydney distribution centre on 26 November 2019. Neutral rating retained. No changes to forecasts.

Target price is $0.52 Current Price is $0.68 Difference: minus $0.16 (current price is over target).
If SIG meets the Citi target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.50, suggesting downside of -26.1% (ex-dividends)

The company's fiscal year ends in January.

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

Macquarie rates SUN as Underperform (5) -

Macquarie believes Suncorp is most at risk from changing NSW and Queensland CTP schemes. The broker's analysis found changes to these schemes could decrease Suncorp's ITR margin by -150 basis points or cash earnings by -$140m pre-tax.

The NSW regulator has released detail on its guidelines for acceptable profit margins and the profit clawback mechanism. As a result, Macquarie suspects Suncorp could re-base its NSW CTP margins in FY20.

Underperform rating and $13.40 target maintained.

Target price is $13.40 Current Price is $13.35 Difference: $0.05
If SUN meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $13.48, suggesting upside of 1.0% (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

Citi rates XRO as Neutral (3) -

Citi considers the outlook solid. Subscriber growth was 30% in the first half and the main question for the broker, given subscriber growth benefited from regulatory changes, is whether this rate can be maintained.

A main risk to consider, in Citi's view, is competition, particularly from Intuit. Intuit is gaining share in the UK and added more subscribers than Xero over the last year.

Continuing investment in product is expected and the broker maintains a Neutral rating. Target rises to $74.50 from $61.50.

Target price is $74.50 Current Price is $75.77 Difference: minus $1.27 (current price is over target).
If XRO meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $65.24, suggesting downside of -13.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Credit Suisse rates XRO as Underperform (5) -

First half revenue was up 32% and in line with expectations. Operating earnings (EBITDA) were up 88%. Credit Suisse notes customer metrics are strong and improving.

The stock is up 3% over the last 12 months, which the broker believes reflects a high degree of confidence in what may be possible to achieve in the UK.

Credit Suisse retains an Underperform rating on valuation, although remains a supporter of the company's strategy. Target is raised to $55.91 from $41.00.

Target price is $55.91 Current Price is $75.77 Difference: minus $19.86 (current price is over target).
If XRO meets the Credit Suisse target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $65.24, suggesting downside of -13.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Macquarie rates XRO as Outperform (1) -

Macquarie believes Xero is executing well across its platform and has many options for gaining traction in geographies and products & services.

The broker remains cautious about the second half because of comparables but considers the long-term opportunity intact.

Subscriber growth accelerated in the UK and Australia in the first half amid cashflow conversion of 109%. Target is raised 9% to $83.50 and an Outperform rating is retained.

Target price is $83.50 Current Price is $75.77 Difference: $7.73
If XRO meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $65.24, suggesting downside of -13.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Morgan Stanley rates XRO as Overweight (1) -

Morgan Stanley found the first half results robust, noting continued momentum in revenue and subscribers. Net profit was positive for the first time, at NZ$1.3m.

No specific guidance was provided and the company continues to reinvest cash in order to grow. FY20 free cash flow as a proportion of operating revenue is also expected to be similar to FY19.

Overweight rating maintained. Industry view is Attractive. Target is $65.

Target price is $65.00 Current Price is $75.77 Difference: minus $10.77 (current price is over target).
If XRO meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $65.24, suggesting downside of -13.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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

Ord Minnett rates XRO as Lighten (4) -

First half operating earnings (EBITDA) were up 91% and well ahead of Ord Minnett's forecasts because of better revenue and lower R&D expenditure.

The broker believes subscriber additions are likely to moderate to historical levels for the more mature markets in New Zealand, Australia and the UK.

Ord Minnett notes the share price has appreciated 10% after the results and this is expanding the already-high valuation multiple. Lighten maintained. Target is $60.

Target price is $60.00 Current Price is $75.77 Difference: minus $15.77 (current price is over target).
If XRO meets the Ord Minnett target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $65.24, suggesting downside of -13.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in NZD. 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 Z1P as Add (1) -

Zip Co has entered into an agreement to be a payment option on Amazon Australia. The broker reminds that Amazon is Very Big. But Zip does have to pay up for access. No change to earnings forecasts.

Management continues to execute well and provide impressive growth, the broker acknowledges, but the stock is up 300% this year. Hold retained, target rises to $3.86 from $3.56.

Target price is $3.86 Current Price is $3.92 Difference: minus $0.06 (current price is over target).
If Z1P meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.20, suggesting upside of 7.2% (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

UBS rates Z1P as Upgrade to Buy from Sell (1) -

The company has announced a strategic agreement with Amazon, whereby it will be offered as a payment option for customers shopping on Amazon.com.au.

With the share price falling significantly over recent weeks, UBS upgrades to Buy from Sell. The target of $4.80 is unchanged.

The broker prefers Zip Co to its main peer Afterpay Touch ((APT)) as it has less exposure to the associated risks with 'buy now pay later' and a revenue model that relies on both consumers and merchants.

Target price is $4.80 Current Price is $3.92 Difference: $0.88
If Z1P meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting upside of 7.2% (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