Australian Broker Call

Morgans rates BGA as Upgrade to Hold from Reduce (3) -

Bega's FY19 guidance is well below estimates. A collision of fierce competition for milk supply due to the drought, lower global sales prices and the cost of the Koroit acquisition as led Morgans to cut forecast earnings by -7%.

Target falls to $5.01 from $7.00 but given the share price has already reacted, rating upgraded to Hold from Reduce.

Target price is $5.01 Current Price is $4.92 Difference: $0.09
If BGA meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

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

UBS rates BGA as Buy (1) -

Bega's updated earnings guidance is modestly below the broker but materially below consensus. Weaker dairy market conditions and the ramp-up of Koroit were expected to impact but higher farm gate prices and expectations for higher debt are likely to be the focus in the near term, the broker suggests.

Bega is nevertheless trading at multiples some 21-23% below five year averages which supports the broker's Buy rating. Target falls to $7.30 from $8.80.

Target price is $7.30 Current Price is $4.92 Difference: $2.38
If BGA meets the UBS target it will return approximately 48% (excluding dividends, fees and charges).

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

Morgans rates CAT as Add (1) -

The broker has come away from Catapult's US market update rather impressed. The company expects a significant lift in sales in the second half once a doubling of the sales force begins to hit targets. The new VISION product aimed at US colleges has a lot for potential than the broker assumed.

The broker has thus increased in confidence, while leaving its $1.88 target in place with an Add (high risk) rating.

Target price is $1.88 Current Price is $0.83 Difference: $1.05
If CAT meets the Morgans target it will return approximately 127% (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

Citi rates CTX as Buy (1) -

Caltex' updated 2018 profit guidance is -3% below the broker due to lower refiner margins. The broker forecasts gasoline oversupply to continue to impact on margins through the fist half 2019 before normalising thereafter.

Earnings forecasts are cut and target falls to $29.58 from $33.09 but the broker retains Buy on a "compelling" 12x PE.

Target price is $33.09 Current Price is $25.34 Difference: $7.75
If CTX meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $31.15, suggesting upside of 22.9% (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

UBS rates FXL as Neutral (3) -

A softening macroeconomic outlook, heightening regulatory risks with regard the Royal Commission and the housing market correction could all impact on FlexiGroup's ability to maintain current momentum, the broker suggests. Retail conditions are softening and consumption typically lags changes in household wealth by some six months, the broker notes.

Value is undemanding but the broker retains Neutral, awaiting further strategy information from the new CEO. Target falls to $1.45 from $2.25.

Target price is $1.45 Current Price is $1.36 Difference: $0.09
If FXL meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.36, suggesting upside of 73.7% (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

Macquarie rates IFN as Outperform (1) -

Infigen has announced financial close on the Cherry Tree wind farm on a "capital lite" basis with John Laing Group, which will acquire 100% of the project. The company also took an impairment on its development book due to higher costs and delays.

The impairments, along with lower commodity prices, potentially lowers asset prices more generally, the broker suggests, but the broker sees value at the current share price and notes the potential for corporate interest.

Target price is $0.78 Current Price is $0.45 Difference: $0.33
If IFN meets the Macquarie target it will return approximately 73% (excluding dividends, fees and charges).

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 KDR as Buy (1) -

Kidman Resources has signed an MoU with one of the largest lithium ion battery producers in the world, Korea's LG Chem, to supply 12tpa lithium hydroxide at market prices from its Mt Holland project in WA, the broker reports.

But and $2.80 target retained.

Target price is $2.80 Current Price is $1.01 Difference: $1.79
If KDR meets the Ord Minnett target it will return approximately 177% (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

Credit Suisse rates MPL as Neutral (3) -

The government has announced an average premium increase from April of 3.25%. Medibank will lift by 3.3%. The broker has allowed for a slightly higher rate increase than previously assumed, leading to slightly higher margins.

Management is demonstrating its ability to turn around negative trends but the broker suggests the market may become concerned about lower outer year premium increases. Lowering its price/earnings assumption sees the broker drop its target to $2.50 from $2.70, Neutral retained.

Target price is $2.50 Current Price is $2.49 Difference: $0.01
If MPL meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.60, suggesting upside of 4.6% (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 MPL as Neutral (3) -

Medibank will increase premiums by an average 3.3% from April 1, being 5 basis points above industry.  But given multiple industry reforms and discounts to be implemented from April 1, the reported rate is higher than "real" repricing, the broker notes, which is more like 2.8%.

So positive, but not as positive as it may appear at face value. The broker continues to see downside risk through the February result release and on to the federal election. Neutral and $2.65 target retained.

Target price is $2.65 Current Price is $2.49 Difference: $0.16
If MPL meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.60, suggesting upside of 4.6% (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's 3.3% premium rate increase is down some -50 basis points on last year but 40-50bps better than the broker expected. The broker lifts earnings forecasts as a result.

Target rises to $2.85 from $2.80. Hold retained.

Target price is $2.85 Current Price is $2.49 Difference: $0.36
If MPL meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.60, suggesting upside of 4.6% (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 NHF as Upgrade to Neutral from Underperform (3) -

The government has announced an average premium increase from April of 3.25%. nib will lift by 3.38%. Credit Suisse has allowed for a slightly higher rate increase than previously assumed, leading to slightly higher margins.

Current conditions are favourable but the risk id for a more subdued longer term outlook, the broker warns. Shifting towards a discounted cash flow model and away from premium to market PE model sees Credit Suisse' target fall to $4.90 from $6.30. Recent price weakness sparks an upgrade to Neutral.

Target price is $4.90 Current Price is $4.96 Difference: minus $0.06 (current price is over target).
If NHF meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.03, suggesting upside of 21.5% (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

Morgans rates NHF as Add (1) -

nib's 3.38% premium rate increase is down some -50 basis points on last year but 40-50bps better than the broker expected. The broker lifts earnings forecasts as a result.

Target rises to $6.63 from $6.49. Add retained.

Target price is $6.49 Current Price is $4.96 Difference: $1.53
If NHF meets the Morgans target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $6.03, suggesting upside of 21.5% (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

Credit Suisse rates ORA as Neutral (3) -

On the back of disappointing container board stats from November, the broker has trimmed Orora earnings forecasts.

Target falls to $3.45 from $3.55, Neutral retained.

Target price is $3.55 Current Price is $3.07 Difference: $0.48
If ORA meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.64, suggesting upside of 18.5% (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

Credit Suisse rates ORG as Neutral (3) -

The broker has adjusted its Origin valuation based on changes to oil price forecasts and the company's investor day.

Brent forecast drops to US$63-67/bbl for 2019-20 from US$75/bbl, cutting FY19 LNG earnings forecasts by -4%. Origin's cost-out targets lift earnings from FY21 but additional retail concessions decrease earnings for Energy Markets in  FY19.

Put it altogether and target drops to $6.90 from $7.50. Neutral retained.

Target price is $6.90 Current Price is $6.20 Difference: $0.7
If ORG meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $8.76, suggesting upside of 41.4% (ex-dividends)

The company's fiscal year ends in June.

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 ORI as Sell (5) -

At its AGM Orica retained guidance and noted Burrup remain on track. Explosives demand remains positive but the broker is concerned about a lack of earnings leverage, with contract renewals causing an overhang.

The market is pricing in a substantial earnings recovery, the broker believes, hence Sell retained. Target unchanged at $16.

Target price is $16.00 Current Price is $16.90 Difference: minus $0.9 (current price is over target).
If ORI meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.73, suggesting upside of 4.9% (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 ORI as Neutral (3) -

Orica's AGM revealed nothing new from the time of the November result release. No change to earnings forecasts, noting a skew to the second half as a result of contract timing. The broker notes the first half 2019 will cycle a weak first half 2018, which was impacted by production issues.

The broker retains Neutral on a relatively full valuation. Target unchanged at $18.06.

Target price is $18.06 Current Price is $16.90 Difference: $1.16
If ORI meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $17.73, suggesting upside of 4.9% (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 WES as Outperform (1) -

In the context of the housing market rolling over, the broker has considered how this may impact on Bunnings, which is 54% of Wesfarmers earnings. The broker notes Bunnings has a track record of taking market share, activity levels remain high, credit is cheap, consumer confidence remains positive and unemployment is low.

On that basis, the broker believes the market is under-appreciating Bunnings' resilience. Outperform and $36.51 target retained.

Target price is $36.51 Current Price is $31.96 Difference: $4.55
If WES meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $33.69, suggesting upside of 5.4% (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