Australian Broker Call
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March 07, 2018
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)
Last Updated: 12:10 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
Today's Upgrades and Downgrades
| MDL - | MINERAL DEPOSITS | Upgrade to Add from Hold | Morgans |
| NUF - | NUFARM | Upgrade to Buy from Neutral | Citi |
| RFG - | RETAIL FOOD GROUP | Downgrade to Sell from Neutral | UBS |
AAD ARDENT LEISURE GROUP
Travel, Leisure & Tourism
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Overnight Price: $1.87
Macquarie rates AAD as Neutral (3) -
First half results were lower than expected. The outlook for Main Event appears mixed to Macquarie, with comparable growth expected to moderate. The theme parks recovery is also behind expectations.
Macquarie envisages limited near-term catalysts for a re-rating and maintains a Neutral rating. Target is raised to $2.05 from $2.00.
Target price is $2.05 Current Price is $1.87 Difference: $0.18
If AAD meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).
Current consensus price target is $2.02, suggesting upside of 7.9% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Macquarie forecasts a full year FY18 dividend of 4.00 cents and EPS of minus 3.40 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is -0.3, implying annual growth of N/A. Current consensus DPS estimate is 4.2, implying a prospective dividend yield of 2.2%. Current consensus EPS estimate suggests the PER is N/A. |
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 5.00 cents and EPS of 4.40 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 4.2, implying annual growth of N/A. Current consensus DPS estimate is 5.1, implying a prospective dividend yield of 2.7%. Current consensus EPS estimate suggests the PER is 44.5. |
Market Sentiment: 0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $23.75
Ord Minnett rates ALL as Accumulate (2) -
After analysing the trends in the social and online gaming market, along with the company's product offering, Ord Minnett suggests intense competition will limit monetisation rates for casual gaming while in-app purchases are the primary source of revenue.
Earnings estimates are adjusted because of a lower US tax rate and to reflect the higher contribution from Plarium and Big Fish in FY18. Accumulate maintained. Target rises to $27.50 from $24.20.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $27.50 Current Price is $23.75 Difference: $3.75
If ALL meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).
Current consensus price target is $27.86, suggesting upside of 17.3% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY18:
Ord Minnett forecasts a full year FY18 dividend of 42.00 cents and EPS of 90.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 107.6, implying annual growth of 38.5%. Current consensus DPS estimate is 45.3, implying a prospective dividend yield of 1.9%. Current consensus EPS estimate suggests the PER is 22.1. |
Forecast for FY19:
Ord Minnett forecasts a full year FY19 dividend of 49.00 cents and EPS of 112.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 129.1, implying annual growth of 20.0%. Current consensus DPS estimate is 62.5, implying a prospective dividend yield of 2.6%. Current consensus EPS estimate suggests the PER is 18.4. |
Market Sentiment: 0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
CGF CHALLENGER LIMITED
Wealth Management & Investments
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Overnight Price: $12.03
UBS rates CGF as Neutral (3) -
UBS highlights the trade-off in trying to simultaneously support both sales and ROE in a falling credit spread environment.
The broker suggests headwinds emanating from domestic lifetime annuity sales and rising risks to Japanese AUD annuity sales mean the company may need to extend pricing support. Margins appears set to continue compressing.
Neutral maintained. Target reduced to $12.85 from $12.90.
Target price is $12.85 Current Price is $12.03 Difference: $0.82
If CGF meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).
Current consensus price target is $12.36, suggesting upside of 2.7% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
UBS forecasts a full year FY18 dividend of 35.00 cents and EPS of 68.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 65.4, implying annual growth of -7.5%. Current consensus DPS estimate is 35.2, implying a prospective dividend yield of 2.9%. Current consensus EPS estimate suggests the PER is 18.4. |
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 39.00 cents and EPS of 74.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 71.0, implying annual growth of 8.6%. Current consensus DPS estimate is 38.1, implying a prospective dividend yield of 3.2%. Current consensus EPS estimate suggests the PER is 16.9. |
Market Sentiment: -0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $3.82
Deutsche Bank rates IPL as Buy (1) -
Deutsche Bank believes Incitec Pivot is positioned to benefit from rising global fertiliser prices, a lower US gas price and improved demand for explosives in North America and Australia. The broker increases earnings forecasts by 5-9%.
A Buy rating is maintained. Target is raised to $4.55 from $4.30.
Target price is $4.55 Current Price is $3.82 Difference: $0.73
If IPL meets the Deutsche Bank target it will return approximately 19% (excluding dividends, fees and charges).
Current consensus price target is $4.04, suggesting upside of 5.9% (ex-dividends)
The company's fiscal year ends in September.
Forecast for FY18:
Deutsche Bank forecasts a full year FY18 dividend of 13.00 cents and EPS of 25.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 22.2, implying annual growth of 17.5%. Current consensus DPS estimate is 11.6, implying a prospective dividend yield of 3.0%. Current consensus EPS estimate suggests the PER is 17.2. |
Forecast for FY19:
Deutsche Bank forecasts a full year FY19 dividend of 15.00 cents and EPS of 29.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 23.5, implying annual growth of 5.9%. Current consensus DPS estimate is 12.2, implying a prospective dividend yield of 3.2%. Current consensus EPS estimate suggests the PER is 16.3. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $1.08
Morgans rates MDL as Upgrade to Add from Hold (1) -
The good news for Mineral Deposits is the Grande Cote mineral sands operation in Senegal, 90% owned by TiZir, which is 50% owned by Mineral Deposits, ramped up production at a time titanium and zircon prices were firming. The bad news is operational problems at the company's smelter in Norway halted production.
The cost turned out to be greater than Morgans had forecast and hence Mineral Deposits' earnings result was a disappointment. However the smelter has now ramped up to a greater efficiency level than first modelled.
Revised production and cost projections lead the broker to increase its target to $1.51 from $1.18. Upgrade to Add from Hold.
Target price is $1.51 Current Price is $1.08 Difference: $0.43
If MDL meets the Morgans target it will return approximately 40% (excluding dividends, fees and charges).
The company's fiscal year ends in December.
Forecast for FY17:
Morgans forecasts a full year FY17 dividend of 0.00 cents and EPS of minus 1.68 cents. |
Forecast for FY18:
Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of 2.70 cents. |
This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $1.12
Macquarie rates MHJ as Outperform (1) -
The company will close 24 of the 30 Emma & Roe stores, leaving a residual 6 stores in a single market area footprint. The company believes this will provide the best opportunity to install its new model quickly.
Macquarie expects the balance of FY18 will be somewhat disrupted as the company completes this re-positioning and its exit from the US. All trading losses are expected to be eliminated by FY19. The broker expects an improving trend in the second half of FY18 from the core geographies.
Outperform maintained. Target is $1.32.
Target price is $1.32 Current Price is $1.12 Difference: $0.2
If MHJ meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).
Current consensus price target is $1.32, suggesting upside of 17.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Macquarie forecasts a full year FY18 dividend of 5.00 cents and EPS of 7.20 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 5.6, implying annual growth of -33.8%. Current consensus DPS estimate is 3.8, implying a prospective dividend yield of 3.4%. Current consensus EPS estimate suggests the PER is 20.0. |
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 6.00 cents and EPS of 11.10 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 8.3, implying annual growth of 48.2%. Current consensus DPS estimate is 4.7, implying a prospective dividend yield of 4.2%. Current consensus EPS estimate suggests the PER is 13.5. |
Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $8.04
Citi rates NUF as Upgrade to Buy from Neutral (1) -
Further analysis suggests to Citi that Nufarm is entering an era of continuous double digit percentage growth, currently calculated as three year CAGR of 11%. The analysts refer to recent acquisitions, which introduce higher margins, as well as the launch of Nufarm's long-awaited Omega-3 canola product.
Earnings estimates have been lifted. Citi suggests the release of interim financials should confirm a strong rebound in profits. There is also an Investor Day scheduled for May. Target increased to $9.50 from $9.07. Upgrade to Buy from Neutral.
Target price is $9.50 Current Price is $8.04 Difference: $1.46
If NUF meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).
Current consensus price target is $9.46, suggesting upside of 17.6% (ex-dividends)
The company's fiscal year ends in July.
Forecast for FY18:
Citi forecasts a full year FY18 dividend of 14.00 cents and EPS of 47.20 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 50.7, implying annual growth of 8.6%. Current consensus DPS estimate is 14.6, implying a prospective dividend yield of 1.8%. Current consensus EPS estimate suggests the PER is 15.9. |
Forecast for FY19:
Citi forecasts a full year FY19 dividend of 16.00 cents and EPS of 54.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 62.2, implying annual growth of 22.7%. Current consensus DPS estimate is 17.9, implying a prospective dividend yield of 2.2%. Current consensus EPS estimate suggests the PER is 12.9. |
Market Sentiment: 0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
RFG RETAIL FOOD GROUP LIMITED
Food, Beverages & Tobacco
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Overnight Price: $1.11
UBS rates RFG as Downgrade to Sell from Neutral (5) -
First half results were weaker than expected. The company has flagged the closure of another 160-200 outlets over the next 15 months and suspended dividends. UBS downgrades earnings per share estimates by -50-60% from FY20 onwards, and downgrades the rating to Sell from Neutral.
The company has cited pressure on major shopping centres, particularly the increasing amount of floor space dedicated to competing food offerings. The broker also believes the new banking covenants will be difficult to comply with. Target is reduced to $0.90 from $2.15.
Target price is $0.90 Current Price is $1.11 Difference: minus $0.21 (current price is over target).
If RFG meets the UBS target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.
Forecast for FY18:
UBS forecasts a full year FY18 dividend of 0.00 cents and EPS of 27.20 cents. |
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 0.00 cents and EPS of 20.40 cents. |
Market Sentiment: -1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Macquarie rates STO as Neutral (3) -
Following the earthquake in PNG, which has impacted production from PNG LNG, Macquarie downgrades the company's 2018 estimates for earnings per share by -6%.
The broker also reduces 2018 production estimates to 59.6mmboe, which remains within the guidance range of 55-60mmboe.
Macquarie maintains a Neutral rating and expects the company to easily achieve its US$2bn target for net debt by the end of 2018. Target is $5.30.
Target price is $5.30 Current Price is $4.99 Difference: $0.31
If STO meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).
Current consensus price target is $5.32, suggesting upside of 6.5% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY18:
Macquarie forecasts a full year FY18 dividend of 0.00 cents and EPS of 20.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 29.7, implying annual growth of N/A. Current consensus DPS estimate is 0.8, implying a prospective dividend yield of 0.2%. Current consensus EPS estimate suggests the PER is 16.8. |
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 4.01 cents and EPS of 17.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 30.0, implying annual growth of 1.0%. Current consensus DPS estimate is 7.4, implying a prospective dividend yield of 1.5%. Current consensus EPS estimate suggests the PER is 16.6. |
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
Overnight Price: $0.38
Ord Minnett rates SXY as Hold (3) -
Ord Minnett updates its model to incorporate adjustments to the timing and ramp up of phases 3 and 4 at the Western Surat and Atlas projects.
Hold rating retained and target raised to $0.42 from $0.41.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Target price is $0.42 Current Price is $0.38 Difference: $0.04
If SXY meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).
Current consensus price target is $0.41, suggesting upside of 8.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Ord Minnett forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 5.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is -2.1, implying annual growth of N/A. Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A. Current consensus EPS estimate suggests the PER is N/A. |
Forecast for FY19:
Ord Minnett forecasts a full year FY19 dividend of 0.00 cents and EPS of 2.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 10.2, implying annual growth of N/A. Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A. Current consensus EPS estimate suggests the PER is 3.7. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
TLS TELSTRA CORPORATION LIMITED
Telecommunication
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Overnight Price: $3.32
Deutsche Bank rates TLS as Buy (1) -
Telstra and News Corp ((NWS)) have agreed to combine Foxtel and Fox Sports Australia. The transaction is expected to enable a better use of assets. News Corp will have a 65% shareholding in the combined entity and Telstra the remainder.
Telstra expects to record a one-off accounting gain of $263m but has indicated there is no change to FY18 guidance from the transaction. A Buy rating is maintained. Target is reduced to $4.05 from $4.07.
Target price is $4.05 Current Price is $3.32 Difference: $0.73
If TLS meets the Deutsche Bank target it will return approximately 22% (excluding dividends, fees and charges).
Current consensus price target is $3.65, suggesting upside of 9.8% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Deutsche Bank forecasts a full year FY18 dividend of 22.00 cents and EPS of 31.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 27.9, implying annual growth of -14.2%. Current consensus DPS estimate is 22.0, implying a prospective dividend yield of 6.6%. Current consensus EPS estimate suggests the PER is 11.9. |
Forecast for FY19:
Deutsche Bank forecasts a full year FY19 dividend of 23.00 cents and EPS of 32.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 29.7, implying annual growth of 6.5%. Current consensus DPS estimate is 21.9, implying a prospective dividend yield of 6.6%. Current consensus EPS estimate suggests the PER is 11.2. |
Market Sentiment: 0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $2.43
Credit Suisse rates VCX as Neutral (3) -
Credit Suisse struggles with the company's view that incremental development expenditure is more accretive to value than further buyback activity.
Despite the stock trading at a -16% discount to NTA the uncertainty regarding the outlook for asset values and negative retail sentiment keeps the broker on a Neutral call. $2.79 target maintained.
Target price is $2.79 Current Price is $2.43 Difference: $0.36
If VCX meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).
Current consensus price target is $2.83, suggesting upside of 16.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY18:
Credit Suisse forecasts a full year FY18 dividend of 16.00 cents and EPS of 18.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 19.6, implying annual growth of 4.8%. Current consensus DPS estimate is 16.2, implying a prospective dividend yield of 6.7%. Current consensus EPS estimate suggests the PER is 12.4. |
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 17.00 cents and EPS of 19.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 18.7, implying annual growth of -4.6%. Current consensus DPS estimate is 16.8, implying a prospective dividend yield of 6.9%. Current consensus EPS estimate suggests the PER is 13.0. |
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Summaries
| AAD | ARDENT LEISURE | Neutral - Macquarie | Overnight Price $1.87 |
| ALL | ARISTOCRAT LEISURE | Accumulate - Ord Minnett | Overnight Price $23.75 |
| CGF | CHALLENGER | Neutral - UBS | Overnight Price $12.03 |
| IPL | INCITEC PIVOT | Buy - Deutsche Bank | Overnight Price $3.82 |
| MDL | MINERAL DEPOSITS | Upgrade to Add from Hold - Morgans | Overnight Price $1.08 |
| MHJ | MICHAEL HILL | Outperform - Macquarie | Overnight Price $1.12 |
| NUF | NUFARM | Upgrade to Buy from Neutral - Citi | Overnight Price $8.04 |
| RFG | RETAIL FOOD GROUP | Downgrade to Sell from Neutral - UBS | Overnight Price $1.11 |
| STO | SANTOS | Neutral - Macquarie | Overnight Price $4.99 |
| SXY | SENEX ENERGY | Hold - Ord Minnett | Overnight Price $0.38 |
| TLS | TELSTRA CORP | Buy - Deutsche Bank | Overnight Price $3.32 |
| VCX | VICINITY CENTRES | Neutral - Credit Suisse | Overnight Price $2.43 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 5 |
| 2. Accumulate | 1 |
| 3. Hold | 5 |
| 5. Sell | 1 |
Wednesday 07 March 2018
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