Australian Broker Call

Macquarie rates CIM as Downgrade to Neutral from Outperform (3) -

Macquarie downgrades to Neutral from Outperform as the stock is now trading close to its target. The broker believes the share price has also caught up with the traditional correlation to earnings. Target is raised to $50.90 from $50.26.

Macquarie forecasts growth of 8% in FY19 and believes this is attractive, considering the broader market is challenged. The broker believes the recent difficulties in the sector have strengthened the company's competitive position.

CIMIC is also cooperating with the US Department of Justice in relation to possible breaches of its code of ethics. This first emerged in 2011 and an Australian Federal Police investigation has been ongoing since 2012. Macquarie suspects the US development may expedite potential AFP outcomes.

Target price is $50.90 Current Price is $49.21 Difference: $1.69
If CIM meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $48.33, suggesting downside of -1.8% (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 CLH as Hold (3) -

The company has acquired the PDL portfolio of ACM Group for $40.3m, funded via debt. While current metrics comfortably cover the loan-to-valuation ratio and cash interest, Morgans considers the balance sheet relatively stretched.

The gearing position heightens the risk for any negative portfolio valuation moves in future years. Hold rating maintained. Target is reduced to $1.42 from $1.50.

Target price is $1.42 Current Price is $1.36 Difference: $0.06
If CLH meets the Morgans target it will return approximately 4% (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

Ord Minnett rates CLH as Lighten (4) -

The company has acquired the assets of Sydney-based collections business, ACM Group, for $40.3m and has guided to an expected earnings (EBIT) contribution in FY20 of $5.5m.

Collection House is set for a significant growth in FY20 - Ord Minnett estimates more than 30% - based on underlying FY19 forecasts.

Lighten rating and $1.25 target maintained.

Target price is $1.25 Current Price is $1.36 Difference: minus $0.11 (current price is over target).
If CLH meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Citi rates COH as Upgrade to Buy from Neutral (1) -

Citi downgraded to Neutral on February 20, but has now used a general sector update to reverse that decision on the basis of share price weakness that has gone too far, in the analysts' view.

Underpinning the decision to upgrade to Buy from Neutral is the prediction (conviction?) that the market share issue in the Americas will be resolved, and implant growth will resume in 2H20. Target price lifts to $198 from $190 on slightly higher forecasts.

Target price is $198.00 Current Price is $173.35 Difference: $24.65
If COH meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $169.11, suggesting downside of -2.4% (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 CQR as Neutral (3) -

First half results were ahead of Credit Suisse estimates and FY19 guidance is maintained.

While the broker factors in the defensive characteristics of the portfolio, limited scope is envisaged for near-term outperformance, given the 9% premium to net tangible assets.

Credit Suisse maintains a Neutral rating and $4.17 target.

Target price is $4.17 Current Price is $4.65 Difference: minus $0.48 (current price is over target).
If CQR meets the Credit Suisse target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.11, suggesting downside of -11.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.6

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

Deutsche Bank rates CWN as Hold (3) -

Deutsche Bank considers the Victorian government's denial of an extension to the construction date for the proposed One Queensbridge project is a minor positive for Crown Resorts.

The broker estimates this project would be relatively low-return, given it is not supported by increased gaming capacity and would be adding apartments to an already oversupplied market.

Moreover, Crown and its partner could not obtain satisfactory financing arrangement before the commencement date for construction.

Crown will consider the next step for the property which, the broker surmises, could involve a new application for planning approval, a scaled-down version of the project or a sale of the land itself.

Hold rating and $11.70 target maintained.

Target price is $11.70 Current Price is $11.57 Difference: $0.13
If CWN meets the Deutsche Bank target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.76, suggesting upside of 1.6% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

Morgans rates FDV as Add (1) -

2018 results were in line with expectations. Morgans expects another year of strong revenue growth. Several companies in the portfolio have reached break-even on cash flow but heavy investment by some larger companies will delay the timing of cash flow at a group level.

Morgans maintains an Add rating and raises the target to $0.86 from $0.84.

Target price is $0.86 Current Price is $0.48 Difference: $0.38
If FDV meets the Morgans target it will return approximately 79% (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

Deutsche Bank rates GNC as Buy (1) -

Deutsche Bank considers the sale of the bulk liquid storage business a net positive, as it was delivered at the upper end of price expectations.

It also, with regard to the LTAP due diligence, draws a line in the sand by setting a date by which that company must respond before the sale becomes final.

With the residual business the earnings volatility increases, but Deutsche Bank takes comfort in the terminals sale price.

The issue now turns to what will be done with the proceeds. Buy rating and $10.42 target maintained.

Target price is $10.42 Current Price is $9.39 Difference: $1.03
If GNC meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $9.27, suggesting downside of -1.3% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

UBS rates GNC as Buy (1) -

Graincorp has sold its bulk liquid terminal business for $350m. The divestment price is accretive on the basis of the stand-alone valuation, UBS calculates.

The sale is subject to the company not entering into a change of control transaction before May 10 2019 which, in the broker's view, effectively puts a time limit on the LTAP due diligence period.

Buy rating and $10.42 target maintained.

Target price is $10.42 Current Price is $9.39 Difference: $1.03
If GNC meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $9.27, suggesting downside of -1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Macquarie rates KLL as Outperform (1) -

The company's FEED study has delivered a 10% boost to production and a material reduction in costs because of enhanced recoveries and owner-operating the power plant.

Pre-production expenditure has been lifted to $216m after bringing forward the gas pipeline, taking ownership of the power plant and lifting contingency by $14m.

Outperform rating maintained. Target is raised to $0.70 from $0.65.

Target price is $0.70 Current Price is $0.48 Difference: $0.22
If KLL meets the Macquarie target it will return approximately 46% (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 MTS as Sell (5) -

Citi analysts attended the Metcash Strategy Day and brought home the message that management is investing to safeguard the future of Metcash. More capex in order to achieve more growth thus.

While lifting estimates post FY19, Citi analysts still maintain their Sell rating as they continue to see downside risks to consensus forecasts. The bottom line is: they do not think this strategy is sufficient to overcome the numerous structural challenges awaiting on the horizon. Target $2.45.

Target price is $2.45 Current Price is $2.79 Difference: minus $0.34 (current price is over target).
If MTS meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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

Credit Suisse rates MTS as Neutral (3) -

Credit Suisse believes the company's newly-outlined strategy is well crafted, but the positive implications for shareholders are less obvious. The balance sheet is fully committed for the next several years, thus removing the prospect of increased capital returns.

The broker suggests the stock is likely to trade on the near-term earnings guidance, and even more so while capital is committed to growth.

The trading update was marginally negative, with no improvement foreseen in supermarket sales and decelerating sales growth in hardware. The broker maintains a Neutral rating and raises the target to $2.69 from $2.60.

Target price is $2.69 Current Price is $2.79 Difference: minus $0.1 (current price is over target).
If MTS meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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 MTS as Neutral (3) -

At its strategy briefing Metcash announced another cost reduction program, $50m over FY20 and FY21. Importantly, Macquarie points out these savings are required to offset the impact of inflation and should not, therefore, be considered as outright profit upside.

Growth expenditure of $300m has been flagged across FY20-24. The broker notes the outlook is challenging and growth in FY20 is being hindered by the loss of the Drakes contract.

Still, with cost reductions continuing and valuation appearing reasonable Macquarie maintains a Neutral rating and $2.41 target.

Target price is $2.41 Current Price is $2.79 Difference: minus $0.38 (current price is over target).
If MTS meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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

Morgan Stanley rates MTS as Overweight (1) -

Metcash is refining its strategy and will spend $300m for growth across FY20-24. Management has signalled a 15% minimum return hurdle and, if this is not achieved, expenditure will slow and capital management resume.

Either way, Morgan Stanley expects earnings per share will be supported. The broker observes the company continues to close the sales gap to the major supermarkets as its strategies gain traction.

Moreover, while hardware trading has slowed versus the first half trends, sales growth remains positive. Even if retail sales growth turns negative as the housing cycle worsens, Morgan Stanley believes cost reductions can limit the declines.

The broker retains an Overweight rating and $3.40 target. Industry view: Cautious.

Target price is $3.40 Current Price is $2.79 Difference: $0.61
If MTS meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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 MTS as Accumulate (2) -

The trading update was soft against Ord Minnett's expectations. The company's newly outlined strategy provides a new round of cost savings to help offset inflation while capital expenditure on growth initiatives should moderate further losses of market share, the broker assesses.

The broker also finds scope in hardware, as earnings growth has been strong and is supported by synergies. Accumulate rating maintained. Target is $3.00.

Target price is $3.00 Current Price is $2.79 Difference: $0.21
If MTS meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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

UBS rates MTS as Buy (1) -

UBS likes the decision to invest more in stores and improve the network quality and believes the FY20-24 strategy provides upside potential.

The broker observes the outlook for the Australian supermarket sector is improving, characterised by easing deflation, reduced promotional intensity and a focus on differentiation.

UBS notes the trading update was broadly in keeping with estimates, food is in line, liquor ahead and hardware softer. The broker maintains a Buy rating and $2.90 target.

Target price is $2.90 Current Price is $2.79 Difference: $0.11
If MTS meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in April.

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 OEL as Add (1) -

Morgans upgrades estimates and valuation post the recent discovery at Lightning. First production from Lightning is on track for March. This will be the company's second producing asset, as it explores the on or near-shore targets.

Drilling is now occurring through the primary and secondary formations at Winx and nearing total depth. Once at total depth the JV will conduct comprehensive logging of the well and make a decision on production testing.

First half results were in line with expectations and the company wrote off exploration expenditure of US$17.5m. Morgans maintains an Add rating and raises the target to $0.14 from $0.10.

Target price is $0.14 Current Price is $0.06 Difference: $0.08
If OEL meets the Morgans target it will return approximately 133% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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: 1.0

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

Macquarie rates OGC as Neutral (3) -

Macquarie maintains a mixed view on Haile after a visit to the site. The broker is constructive about the processing and permit approvals but more cautious about grade control and performance of the operator.

The broker looks ahead to the investor briefing on March 7 to learn more about the assets along with potential updates to the outlook. Neutral. Target is $5.00.

Target price is $5.00 Current Price is $4.33 Difference: $0.67
If OGC meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.82, suggesting upside of 11.2% (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

Credit Suisse rates PDL as Underperform (5) -

Credit Suisse upgrades forecasts for funds under management by 7% which leads to upgrades to earnings estimates of 9% for FY19 and 10% for FY20-21.

The Underperform rating is maintained, as the broker envisages near-term pressure on fund flows and earnings, and this does not justify the premium to UK/EU asset managers. Target is raised to $7.80 from $7.00.

Target price is $7.80 Current Price is $9.01 Difference: minus $1.21 (current price is over target).
If PDL meets the Credit Suisse target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.11, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates SCP as Upgrade to Neutral from Underperform (3) -

Following the decline in the share price Credit Suisse now believes the stock is trading at fair value and upgrades to Neutral from Underperform. Target is steady at $2.25.

Target price is $2.25 Current Price is $2.44 Difference: minus $0.19 (current price is over target).
If SCP meets the Credit Suisse target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.36, suggesting downside of -3.3% (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

Ord Minnett rates STO as Buy (1) -

Ord Minnett is more confident of increased upstream production at Gladstone LNG that will likely offset declining third-party purchases into the export facility.

The broker also believes production costs in Queensland are likely to be a driver of higher domestic gas prices. Despite the strong performance and the share price surging 30% in the year to date, the broker remains positive on Santos.

Ord Minnett believes the business offers fully funded growth with production expected to exceed 100mmboe by 2026. Estimated break-even is US$35/bbl.

Buy rating maintained. Target is raised to $7.50 from $7.30.

Target price is $7.50 Current Price is $6.97 Difference: $0.53
If STO meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.93, suggesting downside of -0.6% (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: 0.5

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

Ord Minnett rates SXY as Downgrade to Lighten from Hold (4) -

Ord Minnett has reviewed the company's assets and finds them of lower quality relative to other CSG assets.

Well flow rates at the Western Surat Gas Project, in particular, are expected to be only 200-250gj/d per well versus the average in the area of 700gj/d per well.

Capital expenditure is to be deployed on a compression plant and pipeline and the broker questions the economic viability of the project.

Ord Minnett does not find much corporate appeal in Senex Energy and downgrades to Lighten from Hold. Target is reduced to $0.34 from $0.40.

Target price is $0.34 Current Price is $0.35 Difference: minus $0.01 (current price is over target).
If SXY meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.46, suggesting upside of 32.6% (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

Ord Minnett rates TAH as Downgrade to Lighten from Hold (4) -

Ord Minnett downgrades earnings estimates, driven by weakness in the company's wagering division. The broker notes growth in lotteries is being offset by persistent competition in wagering and the point of consumption tax (POCT) will reduce industry turnover in wagering revenue.

The integration with Ubet systems is also taking longer than anticipated. Ord Minnett downgrades to Lighten from Hold and reduces the target to $4.20 from $4.50.

Target price is $4.20 Current Price is $4.71 Difference: minus $0.51 (current price is over target).
If TAH meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.03, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Credit Suisse rates VCX as Downgrade to Neutral from Outperform (3) -

Credit Suisse takes a more conservative view and continues to envisage a tightening of cap rates across DFO assets in the company's portfolio.

Regional, sub-regional and neighbourhood centres are expected to also experience heightened levels of scrutiny from valuers, nevertheless, and expansion of cap rates is factored in across the tail of the portfolio.

Rating is downgraded to Neutral from Outperform and target reduced to $2.67 from $3.00.

Target price is $2.67 Current Price is $2.48 Difference: $0.19
If VCX meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.75, suggesting upside of 10.8% (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