Australian Broker Call

Morgans rates AGL as Downgrade to Reduce from Hold (5) -

Morgans downgrades to Reduce from Hold with the analysts observing AGL Energy’s share price has steadily increased while the outlook for earnings is softening. Share price target does increase by 2% to $17.88 but remains well below the share price.

Morgans points out unit 2 at Loy Yang A was expected to be online by mid-December but is still not running. This lowers forecasts for H1 earnings plus the broker believes it clouds the earnings outlook for H2. In addition, electricity futures prices for FY21 have fallen -9% since October 2019.

Also, the broker highlights AGL Energy's competitive advantage over the last several years has been its large coal fleet, but this now comes with rising costs to replace its aging fleet.

Target price is $17.88 Current Price is $20.65 Difference: minus $2.77 (current price is over target).
If AGL meets the Morgans target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.09, suggesting downside of -7.6% (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

Citi rates ALL as Buy (1) -

Buy rating and $39.50 price target maintained as Citi analysts, on the basis of industry survey data, observe Aristocrat Leisure's market leadership in US land-based gaming machines may be eroding.

If this proved to be correct, Citi analysts suggest their forecast for the company's 41% participation rate in this market by FY22 might prove too optimistic. No changes made at this stage.

Target price is $39.50 Current Price is $34.53 Difference: $4.97
If ALL meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $37.29, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Ord Minnett rates AMS as Initiation of coverage with Buy (1) -

Ord Minnett has initiated coverage with a Buy rating and a maiden price target of $1.75. Atomos is described as being an "innovative media device business". The broker observes NinjaV is a hit product with Pro Video users.

Ord Minnett believes after three years of heavy investments, Atomos is now poised to leverage its significant R&D. Operating leverage is projected to drive ebitda and net profits growth to 49% and 71% per annum respectively for FY20-FY25. Revenues should grow by 21% per annum over the period.

Target price is $1.75 Current Price is $1.36 Difference: $0.39
If AMS meets the Ord Minnett target it will return approximately 29% (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

Citi rates ASB as Neutral (3) -

With the US Navy looking to downsize, possibly including early retirement of four LCS ships, Citi analysts note the move signals downside risks to Austal’s short term support revenues. The analysts are equally of the view this may result in greater autonomous shipbuilding opportunities further out.

Citi analysts believe investors should not be counting on extra LCS orders in the short term, while timing for the FFG(X) contract might be postponed, and potential contracts of lesser value for the company. At the same time, Citi believes opportunities for autonomous vessels are increasing; the company's proposed light weight design should come with reduced fuel usage.

No changes made to Neutral rating or $4.30 price target or to forecasts.

Target price is $4.30 Current Price is $3.93 Difference: $0.37
If ASB meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.38, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgans rates AZJ as Upgrade to Add from Hold (1) -

Morgans upgrades to Add from Hold following weakness in Aurizon Holdings' share price. Minor changes have been incorporated into forecasts, while rolling forward the valuation modeling has pushed up the price target to $5.78 from $5.51.

The broker likes the relatively high yield on offer, an aggressively pursued buyback, as well as the relatively predictable earnings (albeit low growth) that should have a low correlation to the Australian economy.

Target price is $5.78 Current Price is $5.39 Difference: $0.39
If AZJ meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $5.73, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Ord Minnett rates CLW as Buy (1) -

Ord Minnett's update follows some $619m in acquisitions which have caused EPS growth to grow to 5.2% in FY20 and to a further 5% in FY21. Charter Hall LWR remains a preferred exposure across the 26 real estate vehicles under the stockbroker's coverage.

Ord Minnett has retained its Buy rating, while lifting the price target to $6 from $5.75.

Target price is $6.00 Current Price is $5.46 Difference: $0.54
If CLW meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $5.67, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Morgan Stanley rates CSL as Overweight (1) -

Could the CSL share price reach $350 in 2020? Morgan Stanley analysts note the persistent large cap growth scarcity means investors are pricing in a valuation outcome that very much resembles the stockbroker's bull case scenario.

For the year ahead, the analysts see a number of catalysts that should test their bull case which is currently worth an estimated $117. Of this, the analysts assess, some $38 is already in today's share price.

Further adding to an ongoing positive outlook for the company, Morgan Stanley's projections are for 13% CAGR in EPS growth for the three years ahead, versus 11% for the healthcare sector and 3% for the ASX200. The anticipated combination of strong lg growth, but with lower flu vaccines return, supports the view FY20's performance will once again be near or above the top end of guidance.

Combining all of the above, Morgan Stanley has pushed up its price target to $290 (from $251). Rating remains Overweight with an In-Line sector view.

Target price is $290.00 Current Price is $281.90 Difference: $8.1
If CSL meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $279.70, suggesting downside of -0.8% (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: 0.6

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

Morgan Stanley rates CTD as Overweight (1) -

As the company has announced the acquisition of Corporate Travel Planners (CTP), a Texas based corporate agency, Morgan Stanley add this increases the overall exposure to the defensive and internationally skewed education segment.

Overall, the deal remains rather small in terms of the group's size, but it is seen as yet another step to build scale and competitive differentiation in the US market. Overweight rating retained. Price target $31. Industry view is In-Line.

Target price is $31.00 Current Price is $20.65 Difference: $10.35
If CTD meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $26.65, suggesting upside of 29.1% (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

Ord Minnett rates CTX as Hold (3) -

Caltex Australia will shed the Caltex brand and convert all retail outlets to the Ampol brand. Ord Minnett notes the former will save around $18-20m in licence fees, but the latter will cost about -$165m.

Making matters doubly interesting is that Caltex licence owner Chevron recently acquired Puma Energy's commercial and retail fuels business in Australia. The analysts point out these now will have access to the Caltex brand.

Hold rating and $35 price target retained.

Target price is $35.00 Current Price is $34.73 Difference: $0.27
If CTX meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $34.75, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.2

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

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

Post a rise in the share price, Morgans has downgraded to Hold from Add. The broker notes not only is the share price now in the vicinity of its target, the yield on offer has now shrunk to 2%, albeit fully franked.

The analysts have incorporated minor changes to forecasts (Perth facility damaged by fire in late 2019). Share price target has rolled forward by 3c to $2.03.

Also, the analysts remind investors management's latest guidance was for flat H1 earnings.

Target price is $2.03 Current Price is $2.03 Difference: $0
If CWY meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 5.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Ord Minnett rates EVT as Upgrade to Buy from Hold (1) -

Village Roadshow ((VRL)) has received an approach from private equity suitor Pacific Equity Partners and to the surprise of Ord Minnett both parties are now engaged in talks about a potential takeover.

This, suggests the broker, puts the limelight on Event Hospitality and Entertainment: what are THEY going to do with their Cinema JV?

The broker believes EVT will either sell its stake to PEP or buy Village Roadshow's stake from PEP, on the assumption the proposed takeover proceeds. The buy option is seen as the most advantageous for EVT.

Upgrade to Buy from Hold. Price target lifts to $15.13 from $13.34.

Target price is $15.13 Current Price is $13.98 Difference: $1.15
If EVT meets the Ord Minnett target it will return approximately 8% (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

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

To say that iSentia has had a chequered past since listing on the ASX would be a grave understatement. But stockbroker Morgans believes the company is back, and on the back of a major board refresh, new key management positions and a new strategy, the outlook looks positive.

The broker's forecasts sit below management's aspirational target of 50% editda growth by FY22, the analysts note. Even partial achievement of management's targets would create substantial upside for the share price, in Morgans' view.

Price target $0.43. Forecasts still anticipate FY20 will be another year of going backwards (underlying EPS), but EPS growth stands to resume in FY21.

Target price is $0.43 Current Price is $0.31 Difference: $0.12
If ISD meets the Morgans target it will return approximately 39% (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 JIN as Overweight (1) -

Investors have been disappointed, and somewhat confused, by management's market update in late 2019, comment the analysts. The key issue is whether the disappointment stems from softer execution or from proactive reinvestment or from one-off transaction costs.

Morgan Stanley has decided this will prove but a stumble in a long term growth trajectory. Short term, FY20 EPS forecasts are cut by up to -15% for the years FY20-FY22.

Target falls to $21 from $24. Overweight rating remains. Industry view is In-Line.

Target price is $21.00 Current Price is $15.36 Difference: $5.64
If JIN meets the Morgan Stanley target it will return approximately 37% (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

Morgan Stanley rates KAR as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley predicts 2020 will be the year that Karoon Energy's underperformance ends. The stock has now underperformed its peers for many years, the analysts recall. They blame cash burn and limited success on asset acquisitions.

Having carried the stock as an Equal-Weight for four years, the analysts have now upgraded to Overweight. Price target jumps to $1.60 from $0.86. Prior forecasts for ongoing losses have now disappeared.

It appears the analysts are in particular optimistic on the Bauna deal, projected to generate in excess of $200m in ebitda in FY21. Risks remain, but they are manageable, in the analysts' opinion. Industry view is In-Line.

Target price is $1.60 Current Price is $1.26 Difference: $0.34
If KAR meets the Morgan Stanley target it will return approximately 27% (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

Morgans rates KLL as Initiation of coverage with Spec Buy (1) -

Morgans has initiated coverage with Speculative Buy rating and a price target of 86c. The analysts view Kalium Lakes as a long term investment that aims to pay steady dividends as soon as practically possible.

Kalium Lakes is still emerging as an WA-based potash producer with the broker ascribing strategic value to its flagship asset, the 100% owned Byondie Sulphate of Potash project.

The company already has a binding offtake agreement with K+S for 100% of phase one production for ten years. Total life of the project is estimated in excess of 30 years. Once up and running, the company should enjoy an ebitda margin of circa 60%.

Target price is $0.86 Current Price is $0.50 Difference: $0.36
If KLL meets the Morgans target it will return approximately 72% (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

Ord Minnett rates MWY as Hold (3) -

It has been a rocky ride since ASX-listing, and that's probably putting it mildly. Ord Minnett remains a believer in the longer term thesis and prospects for the global pulp and woodchip markets, but sees no clear turnaround in sight for the shorter term.

The analysts believe the price outlook has improved, but uncertainty persists regarding volumes for FY20. Recommendation remains on Hold. Target price falls to $2.07 from $2.20 on lowered forecasts.

They also point out weaker cashflows are expected to impact on shareholders' dividends. Ord Minnett anticipates a more conservative dividend approach pending improvements in market conditions. Dividend forecasts have received the sledgehammer treatment.

Target price is $2.07 Current Price is $1.93 Difference: $0.14
If MWY meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

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

Morgan Stanley notes the projected ramp-up for the new operation at Carrapateena has been shortened to 12 months from a prior 18 months. Also, first concentrate has been produced on schedule.

Equal-weight rating and $10.50 target maintained. Industry view is Attractive. Morgan Stanley believes overall risk is reducing.

Target price is $10.50 Current Price is $10.66 Difference: minus $0.16 (current price is over target).
If OZL meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.79, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in December.

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 OZL as Lighten (4) -

Ord Minnett refuses to warm towards OZ Minerals and its promising Carrapateena project. Lighten rating retained alongside a $9.60 price target.

The analysts maintain 2021 guidance remains uncertain despite the company suggesting it was now targeting a faster 12-month ramp-up due to the larger sub-level footprint and project optimisation.

Target price is $9.60 Current Price is $10.66 Difference: minus $1.06 (current price is over target).
If OZL meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.79, suggesting upside of 1.2% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates PAL as Add (1) -

Palla Pharma has negotiated an early exit from a legacy, non-opiate CMO contract and extended its Codeine Phosphate tableting agreement with Karo Pharma. Both events are considered positive for its shareholders.

The broker highlights the former frees up in excess of 1bn in tableting capacity for higher-margin opiate-based manufacturing. In addition, the company also negotiated better terms on debt facilities.

Price target declines to $1.23 from $1.31 on lowered forecasts. Add rating remains in place.

Target price is $1.23 Current Price is $1.07 Difference: $0.16
If PAL meets the Morgans target it will return approximately 15% (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

Ord Minnett rates REG as Hold (3) -

Was that another profit warning? Ord Minnett reports it was not overly surprised. Negative publicity surrounding the sector and rising staff costs continue to take their toll.

The analysts see minimal likelihood of improved funding until FY22. Hold rating retained, while the price target falls to $2.55 from $3.15.

Target price is $2.55 Current Price is $2.49 Difference: $0.06
If REG meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 9.6% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

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

Rio Tinto has resumed operations at Richard Bay Minerals, South Africa and Morgan Stanley sees a slight upward bias to forecasts for the year 2020. Overall, however, the announcement is seen as rather neutral for the share price.

Equal-weight rating retained. Industry view is In-Line.

Target price is $96.00 Current Price is $100.69 Difference: minus $4.69 (current price is over target).
If RIO meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $96.88, suggesting downside of -3.8% (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: 0.1

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

Morgans rates S32 as Add (1) -

Morgans suggests market forecasts look "very conservative" with much of the current earnings weakness seemingly priced in. Upside potential should be material, on the back of events such as a resolution in the trade conflict between USA and China.

Apart from all that, the divestiture of the energy coal assets in South Africa, expected to be finalised mid-2020, should act as a positive catalyst, in the broker's view.

Add rating maintained. Target is reduced to $3.24 from $3.30. Morgans updated forecasts imply FY21 is the low point in the company's earnings cycle, for now.

Target price is $3.24 Current Price is $2.78 Difference: $0.46
If S32 meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.90, suggesting upside of 4.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.4

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

Ord Minnett rates SYD as Lighten (4) -

Ord Minnett notes Sydney Airport total passenger numbers declined by -0.1% in November, and domestic passengers are to blame. But international passenger growth disappointed as well, China in particular is no longer the strong growth engine it once was.

The broker does highlight Sydney Airport has very attractive development opportunities, in particular the Jetbase and Northern Lands, but these are considered medium-term opportunities, not short term.

Lighten rating retained. Price target $8.20.

Target price is $8.20 Current Price is $8.85 Difference: minus $0.65 (current price is over target).
If SYD meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.38, suggesting downside of -5.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.2

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

Ord Minnett rates VCX as Hold (3) -

Vicinity Centres has acquired a 50% interest in Uni Hill Factory Outlet in Bundoora, north of Melbourne, for $67.8m on a 6.5% capitalisation rate. The broker observes Vicinity will rebrand the centre under its DFO brand and assume full management control.

In the same breath, the company's 50% interest in Lennox Village was sold for $31.5m, in line with the asset's June 2019 book value and on a 6.75% capitalisation rate. Ord Minnett has retained its Hold rating alongside a $2.80 price target.

Target price is $2.80 Current Price is $2.51 Difference: $0.29
If VCX meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.55, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

Ord Minnett rates VRL as Hold (3) -

Village Roadshow is reportedly in negotiations for a full takeover of the company and Ord Minnett has raised its target price to the indicative offer price, being $3.90.

See also Event Hospitality And Entertainment ((EVT)) in today's Australian Broker Call Report.

Target price is $3.90 Current Price is $3.81 Difference: $0.09
If VRL meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.33, suggesting downside of -12.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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