Australian Broker Call

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

The resignation of of the CEO Craig Meller has been announced for the end of 2018, a surprise to Morgan Stanley.

This suggests to the broker the optimal path to realising value for shareholders from the strategic review, to be announced on or before May 10, is the separation of AMP into growth and value.

Equal-weight and $5.75 target retained. Industry view: In line.

Target price is $5.75 Current Price is $5.09 Difference: $0.66
If AMP meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $5.62, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Morgans rates CAT as Add (1) -

The company has announced a $25m equity raising with funds to be used for expanding revenue growth through higher investment in sales and marketing.

The accelerated level of investment will result in higher operating losses, Morgans notes, particularly in FY19 and FY20, but should lead to a more robust business.

Add rating maintained. Target is reduced to $1.76 from $2.02.

Target price is $1.76 Current Price is $1.21 Difference: $0.55
If CAT meets the Morgans target it will return approximately 45% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Deutsche Bank rates CTX as Hold (3) -

Caltex's refiner margin has had a disappointing start to the new calendar year, missing Deutsche Bank's forecast for the full year by quite a margin.

The analysts note CRM has stabilised thus far in March, but at US$11.09/bbl on average, it remains below the December average of US$11.42/bb as well as the broker's full calendar year forecast of US$12.45/bbl.

Earnings estimates have been reduced slightly. Price target falls to $37.65 (-5c). Hold rating retained.

Target price is $37.65 Current Price is $31.23 Difference: $6.42
If CTX meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $36.82, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

UBS rates CTX as Buy (1) -

Refiner margins for January and February were significantly lower than UBS expected. The broker believes the weakness is probably a result of lower global refiner margins which were affected by the oil price rally at a time of seasonally lower demand.

At this point the broker expects the Caltex refiner margin to average US$11.50/bbl for the remainder of 2018. Buy rating maintained. Target is reduced to $38.90 from $39.00.

Target price is $38.90 Current Price is $31.23 Difference: $7.67
If CTX meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $36.82, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Citi rates DMP as Sell (5) -

Now the company has announced it will no longer pursue an enterprise bargaining agreement (too protracted a process, too difficult having to negotiate with unions, etc) Citi analysts have responded by stating the overall impact short term is not significant.

Of much larger importance is the threat of weak sales, the analysts highlight. In addition, there is also the Royal Commission into franchises and that is not without risks either, with Citi analysts suggesting greater transparency on returns and charges for franchisees including cost of goods is not by default a good thing.

Citi is worried margins might be peaking with franchisees demanding a larger slice of the pizza. Sell rating retained. Target $43.60 (unchanged).

Target price is $43.60 Current Price is $42.92 Difference: $0.68
If DMP meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $47.81, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Deutsche Bank rates DMP as Sell (5) -

Management has announced it will no longer pursue the approval of an Enterprise Agreement, meaning everybody working for Domino's directly or through franchised stores will continue to be paid according to the Fast Food Industry Award.

The decision lifts costs by 2%, according to the company. Deutsche Bank takes it as a negative, arguing there is less labour flexibility embedded in the move.

The analysts see continued pressure from franchises to get a larger slice of Domino's Pizza's profits. Sell rating retained. Target untouched at $36.

Target price is $36.00 Current Price is $42.92 Difference: minus $6.92 (current price is over target).
If DMP meets the Deutsche Bank target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $47.81, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates DMP as Overweight (1) -

The company has announced its Australian employees will remain on the Fast Food Industry Award rather than pursue approval for a new enterprise bargaining agreement.

While differences in hourly rates of pay are negligible the greater flexibility that the EBA would have provided has signalled to Morgan Stanley this was a preferred option.

The broker suspects the industry will follow suit and move to the award. Fears that the award modernisation would be an earnings risk look overplayed to Morgan Stanley, as the company has indicated that labour costs versus sales have risen by less than existing guidance.

Overweight rating and Cautious industry view. Target is $55.

Target price is $55.00 Current Price is $42.92 Difference: $12.08
If DMP meets the Morgan Stanley target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $47.81, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Ord Minnett rates GXY as Buy (1) -

Galaxy's result came in weaker than the broker expected on lower revenues, which may well be a timing issue. The key news was the Mt Cattlin reserve upgrade, albeit that was already factored into the broker's numbers.

There was no new news on Sal de Vida, but the broker retains Buy on valuation. Target falls to $3.90 from $4.00.

Target price is $3.90 Current Price is $3.21 Difference: $0.69
If GXY meets the Ord Minnett target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.58, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

UBS rates GXY as Neutral (3) -

2017 results were mixed relative to UBS estimates. The main issue to address at Mount Cattlin is the lift required in recoveries, to the 70-75% targeted post the June quarter, from a December quarter average of 58%.

UBS expects to hear regarding the capital required to develop Sal de Vida this year, with the company hopeful of committing to the project before the end of 2018. Neutral rating maintained. Target is reduced to $3.30 from $3.60.

Target price is $3.30 Current Price is $3.21 Difference: $0.09
If GXY meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.58, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Deutsche Bank rates HVN as Buy (1) -

National Australia Bank ((NAB)) has called in its loan to Harvey Norman's Coomboona JV and Deutsche Bank analysts would not exclude Harvey Norman, or Gerry Harvey himself, putting more capital in the failed dairy JV.

All in all, this remains a marginal event in the bigger scheme of things, but for the analysts this event symbolises why many investors don't like investing in the company.

Deutsche Bank likes Harvey Norman as its analysis suggests the share price implies a low multiple for the retail operations ex-real estate. Hence Buy rating retained. Target $5.

Target price is $5.00 Current Price is $3.67 Difference: $1.33
If HVN meets the Deutsche Bank target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

UBS rates IFL as Upgrade to Buy from Neutral (1) -

UBS notes the shares have fallen -11% since the October announcement of the acquisition of ANZ Wealth and suggests this reflects concerns regarding earnings attrition from the acquisition.

Nevertheless, the broker expects earnings prospects are better going forward, supported by re-pricing opportunities.

Rating is upgraded to Buy from Neutral, as the broker considers the stock trading at an unwarranted -12% discount to the market by FY21, with an average dividend yield of 6.4% over the interim. Target is raised to $11.50 from $10.75.

Target price is $11.50 Current Price is $10.37 Difference: $1.13
If IFL meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $12.16, suggesting upside of 17.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

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

Morgan Stanley upgrades FY18 earnings estimates, driven by better-than-expected first half financials and upgrades to nickel price forecasts.

The broker maintains a Equal-weight rating, Attractive industry view and raises the target to $4.45 from $4.20.

Target price is $4.45 Current Price is $4.84 Difference: minus $0.39 (current price is over target).
If IGO meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.50, suggesting downside of -7.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

UBS rates JHC as Neutral (3) -

The company has acquired Riviera Health, a residential aged care provider that currently operates four facilities across New South Wales. Japara has paid around $39m net of bonds for the acquisition, funded from existing cash and debt.

UBS believes this is a reasonable purchase price. Numbers are updated to reflect the acquisition. Neutral rating and $1.90 target maintained.

Target price is $1.90 Current Price is $1.95 Difference: minus $0.05 (current price is over target).
If JHC meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.92, suggesting downside of -1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Ord Minnett rates JHX as Lighten (4) -

James Hardie's acquisition of German gypsum fibre board producer Fermacell will now be completed in April, not in the March Q as first suggested. The broker views the acquisition positively and expects a modest uplift in European sales from FY20.

There is also longer term upside potential if James Hardie can establish a manufacturing footprint in Europe. In the meantime, however, the broker sees the stock as overvalued. Lighten retained, target falls to $21.00 from $21.25.

Target price is $21.00 Current Price is $22.85 Difference: minus $1.85 (current price is over target).
If JHX meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.50, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.5

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

UBS rates RFF as Buy (1) -

UBS is increasingly comfortable regarding the value creation opportunity that lies in the sale and leaseback transactions in the Queensland cattle sector. The broker upgrades estimates for FY20-21.

As the manager builds out its record in cattle and cotton the broker envisages a competitive advantage in its ability to move successfully into different segments. Buy rating and $2.39 target maintained.

Target price is $2.39 Current Price is $2.25 Difference: $0.14
If RFF meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates TAH as Outperform (1) -

Tabcorp has made changes to the Powerball game so that larger jackpots build. Powerball accounted for 21.8% of FY17 lotteries product revenue and around 9% of total revenue.

Credit Suisse believes the price adjustment could deliver around 20% additional revenue for Powerball. Not all customers will reduce game volumes and fringe customers may be attracted to the bigger-more frequent jackpots.

Outperform maintained. Target is $5.20.

Target price is $5.20 Current Price is $4.34 Difference: $0.86
If TAH meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $5.26, suggesting upside of 21.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Credit Suisse rates TWE as Underperform (5) -

The Chinese government has imposed a 15% tariff on US wines. Credit Suisse suggests poor US/China relations will make it more difficult for Treasury Wine to develop positive consumer attitudes towards American-made wine. The broker suggests long-term value is there should Chinese consumers accept US wines.

In FY19 the company's Chinese earnings are likely to be driven by the release of the 2016 Penfolds Vintage rather than Californian wines and the broker estimates Treasury Wine has a 25-30% increase in luxury wine available in FY19.

Underperform rating and $15.35 target maintained.

Target price is $15.35 Current Price is $17.19 Difference: minus $1.84 (current price is over target).
If TWE meets the Credit Suisse target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.51, suggesting downside of -4.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Credit Suisse rates WES as Outperform (1) -

Credit Suisse finds no significant constraints on the funding of an independent Coles under scenarios where there is more significant price competition and higher requirements for capital expenditure.

A preliminary assessment suggests that 27-37% of the current equity value of Wesfarmers would reside in a de-merged Coles. The broker estimates Coles will have an equity value of between $15-18bn, implying a free cash flow yield of 4.8-5.7%. Outperform rating and $44.98 target maintained.

Target price is $44.98 Current Price is $41.74 Difference: $3.24
If WES meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $43.06, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

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

The company is benefiting from higher coal prices and Morgan Stanley finds value in the equity, despite the rally on repairs to the balance sheet having run its course.

The broker upgrades to Overweight from Equal-weight and raises the target to $5.70 from $5.05. Morgan Stanley believes the company's cash flow and future growth potential underpin compelling value.

The stock also looks cheap versus global thermal coal peers. Industry view: Attractive.

Target price is $5.70 Current Price is $4.49 Difference: $1.21
If WHC meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Morgan Stanley rates WSA as Underweight (5) -

Morgan Stanley upgrades its nickel price forecasts and currency which leads to earnings upgrades across FY19-20 for Western Areas.

Underweight rating, Attractive industry view and target raised to $2.45 from $2.35.

Target price is $2.45 Current Price is $3.25 Difference: minus $0.8 (current price is over target).
If WSA meets the Morgan Stanley target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.89, suggesting downside of -11.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.4

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