Australian Broker Call

Deutsche Bank rates AMC as Buy (1) -

The Bemis scheme booklet has been released. The timetable for completing the acquisition has been delayed by the US federal government shutdown. Completion is scheduled for May 15.

Deutsche Bank maintains a view that the transaction will be accretive by 11%. It is still the subject of regulatory approval in the US and Brazil. Deutsche Bank retains a Buy rating and $16.15 target.

Target price is $16.15 Current Price is $14.84 Difference: $1.31
If AMC meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $15.59, suggesting upside of 5.1% (ex-dividends)

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: 0.6

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

Morgan Stanley rates ANZ as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley believes pressure on the bank's revenue is growing and positive surprises on costs are unlikely.

While ANZ's business mix should have scope to adapt to an increasingly difficult operating environment, the broker believes the bank is currently facing execution challenges in Australian retail & business banking, with housing loan and deposit growth below system.

Recent results have enhanced the bank's credibility on cost management but the broker suggests it is unlikely to beat forecasts for a -1% decline in underlying expenses this year.

Morgan Stanley downgrades to Underweight from Equal-weight and reduces the target to $25 from $26. Industry view: In-Line.

Target price is $25.00 Current Price is $26.32 Difference: minus $1.32 (current price is over target).
If ANZ 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 $28.29, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.1

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

Deutsche Bank rates CBA as Sell (5) -

The bank is suspending preparations for the de-merger of its wealth management and mortgage broking businesses. The bank wishes to focus on the implementation of its response to the Hayne Royal Commission, remediation and refunds to customers.

CBA still remains committed to the exit of these businesses. Deutsche Bank retains a Sell rating and $60 target.

Target price is $60.00 Current Price is $72.31 Difference: minus $12.31 (current price is over target).
If CBA meets the Deutsche Bank target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.59, suggesting downside of -2.4% (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

Morgan Stanley rates CBA as Underweight (5) -

The bank has suspended preparations for the exit of its wealth and mortgage broking businesses. CBA is prioritising its response to the Hayne Royal Commission recommendations and remediating customers.

Morgan Stanley believes this adds to the execution challenges and amplifies earnings uncertainty. Moreover, this is an issue for the sector as three of the major banks have announced plans to exit wealth but none have executed on these plans as yet.

Underweight and $62.50 target retained. Industry view: In-Line.

Target price is $62.50 Current Price is $72.31 Difference: minus $9.81 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.59, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates DCN as Outperform (1) -

A site tour to Dacian's Mt Morgans operation revealed low grades to begin with, although grade is expected to improve over the second half. The broker now expects a later start to the processing of high grade, open pit ore.

Outperform retained, target falls to $3.10 from $3.20.

Target price is $3.10 Current Price is $2.56 Difference: $0.54
If DCN meets the Macquarie target it will return approximately 21% (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 DMP as Neutral (3) -

Following the release of the Australian Parliamentary Inquiry into Franchising, Citi analysts point out the report recommends "substantial changes" to the Franchise Code of Conduct. In addition, it will also provide more power to the ACCC.

One of the direct consequences will be higher compliance costs for franchisors in Australia, predict the analysts. On top of this, a reduction in supplier rebates seems possible, but the analysts find the magnitude is hard to gauge at this stage.

On Citi's calculations, Domino’s Pizza may need 8-9pp in market share gains to offset the earnings risk from the Inquiry. Nevertheless, the "good news", so to speak, is that Citi believes any impacts are unlikely to be seen until 2020 (elections, etc). Neutral. Target price $45.60.

Target price is $45.60 Current Price is $40.87 Difference: $4.73
If DMP meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $44.40, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

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

Deutsche Bank rates DMP as Sell (5) -

Findings from the inquiry into the franchising industry were largely as Deutsche Bank expected. Domino's Pizza was specifically named and accounted for a significant proportion of submissions but was not called out as the most culpable.

Recommendations focus on supplier rebates, marketing funds, financial disclosure to prospective franchisees, mandated expenditure and churn of stores.

Deutsche Bank observes the two thirds of Australian income the company generates from non-royalty streams is at some risk.

With margins falling on an underlying basis, the broker suspects the profit shift to franchisees has already begun and there is more to come. Sell rating and $35 target.

Target price is $35.00 Current Price is $40.87 Difference: minus $5.87 (current price is over target).
If DMP meets the Deutsche Bank target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $44.40, suggesting upside of 8.6% (ex-dividends)

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 FAR as Outperform (1) -

Credit Suisse believes 2019 will be a pivotal year for the company's Senegal project, particularly if it is to reach a final investment decision mid year.

The broker removes The Gambia from calculations, although there is still potential upside, and continues to risk weight a full SNE development at 50%.

The target price is reduced to 12c from 14c and now has no value for interests outside Senegal. Outperform rating is maintained.

Target price is $0.12 Current Price is $0.06 Difference: $0.06
If FAR meets the Credit Suisse target it will return approximately 100% (excluding dividends, fees and charges).

Current consensus price target is $0.13, suggesting upside of 116.7% (ex-dividends)

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 HPI as Downgrade to Hold from Accumulate (3) -

The company's major tenant, Coles ((COL)) has entered a joint venture with Australian Venue Co in relation to its hotel operations.

Ord Minnett expects that bringing in an experienced venue operator should drive an stronger operating performance and, in turn, reduce the risk around the exercise of options, while improving the revaluation outcomes.

The broker also believes Australian Venue Co will be more willing to partner with Hotel Property in exploring growth opportunities in hotels and accommodation compared with Coles.

As the stock is trading in line with the broker's unchanged $3.20 target the rating is downgraded to Hold from Accumulate.

Target price is $3.20 Current Price is $3.34 Difference: minus $0.14 (current price is over target).
If HPI meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.26, suggesting downside of -2.3% (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

Macquarie rates KAR as Neutral (3) -

Karoon Gas posted a first half loss in line with the broker's forecast. The good news is the new chairman has highlighted a need for a clear strategy, to maximise value from existing assets and improve capital management.

The broker is waiting to see if the company might deploy its cash pile in acquiring a producing asset, or buy back shares, but the latter would signal management has run out of ideas. Neutral retained despite the stock trading at a -19% discount to cash. Increased cash and lower costs see the target rise to $1.15 from 95c.

Target price is $1.15 Current Price is $1.05 Difference: $0.1
If KAR meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

UBS rates MP1 as Buy (1) -

The company has announced a capital raising of up to $60m, a little earlier than UBS anticipated. Still, the broker believes this aligns with the company's strategy and further de-risks future growth.

The company posted a strong first half result which highlights the operating leverage potential in the business, UBS notes.

A Buy rating is reiterated. Target is reduced to $4.55 from $4.90.

Target price is $4.55 Current Price is $4.14 Difference: $0.41
If MP1 meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.69, suggesting upside of 13.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Credit Suisse rates MPL as Downgrade to Underperform from Neutral (5) -

Credit Suisse finds considerable uncertainty prevails for FY20 and FY21 earnings and does not envisage much upside for the share price. The broker finds listed health insurers expensive.

Private health insurance profit growth has been slowing recently, driven by a slowdown in premium growth and a stabilising of the margin.

Hence, the broker downgrades to Underperform from Neutral. The main risks to the negative view are acquisitions, funded from the debt-free balance sheet. Target is steady at $2.50.

Target price is $2.50 Current Price is $2.74 Difference: minus $0.24 (current price is over target).
If MPL meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.62, suggesting downside of -4.2% (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

Morgan Stanley rates MQG as Overweight (1) -

More research has been done by Morgan Stanley analysts and it has led to increased confidence regarding Macquarie's growth outlook. The broker sees upside potential in trading commodities, plus suggests the moderating global rate outlook, lower AUD, and renewables are further tailwinds for the company.

Price target shifts to $140 from $133. Overweight rating retained. Stronger asset management and commodities revenues forecasts have pushed up estimates by some 2%.

Target price is $140.00 Current Price is $127.74 Difference: $12.26
If MQG meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $129.31, suggesting upside of 1.2% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Morgans rates NHC as Hold (3) -

Morgans makes adjustments to forecasts ahead of the first half result on March 19. The broker believes improved liquidity, inclusion in the ASX200 index and an expectation of a large franking credit release explain recent strength.

However the broker suspects the market is discounting the risk of delays or even a suspension of the Acland 3 development. Hold rating maintained. Target is raised to $3.90 from $3.36.

The broker suspects the results may be complicated by the fact that the effective date for the company's acquisition of Mitsui's 10% stake is backdated to December 1, 2018, but remains subject to a pre-emptive rights process. A special dividend is considered possible.

Target price is $3.90 Current Price is $4.44 Difference: minus $0.54 (current price is over target).
If NHC meets the Morgans target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.97, suggesting downside of -10.7% (ex-dividends)

The company's fiscal year ends in July.

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 NHF as Underperform (5) -

Credit Suisse finds listed health insurers expensive. Private health insurance profit growth has been slowing recently, driven by a slowdown in premium growth and a stabilising of the margin.

In addition to the political environment, nib Holdings also faces risks around potential changes to capital coming from APRA.

Underperform rating and $4.90 target maintained.

Target price is $4.90 Current Price is $5.50 Difference: minus $0.6 (current price is over target).
If NHF 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 $5.70, suggesting upside of 3.5% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates NUF as Outperform (1) -

Nufarm has pre-guided its first half result ahead of next week's official result release so the key factor will be management's outlook, the broker suggests. With global peers painting a subdued picture of everything from weather to currency, the broker cuts FY19/20 forecasts by -9% and -6%. The crop outlook in Australia remains grim.

The broker nevertheless feels the market has priced this in, and that balance sheet concerns are unfounded post capital raising. There is little value being attributed to the planned omega-3 expansion, and on a discount to peers, the broker retains Outperform. Target falls to $7.19 from $7.67.

Target price is $7.19 Current Price is $5.36 Difference: $1.83
If NUF meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $7.65, suggesting upside of 42.8% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

Morgan Stanley rates ORG as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley downgrades energy market earnings estimates and the company's valuation multiple. The broker revises its renewable power purchase agreement forecasts, deferring an FY20 earnings tailwind of around $65m.

Morgan Stanley is also more cautious about FY21 gas margins. The broker downgrades to Equal-weight from Overweight as the stock is up 11% so far this year.

The broker believes de-leveraging is now factored into the share price. Target is reduced to $7.67 from $8.43. Industry view is Cautious.

Target price is $7.67 Current Price is $7.37 Difference: $0.3
If ORG meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.20, suggesting upside of 11.2% (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

UBS rates RHC as Neutral (3) -

The investor briefing in the UK has revealed the company is intent on growing stand-alone day surgery units and building up in-patient services.

The broker suggests use of the private medical insurance market to drive a further maturing of the independent sector is unlikely and NHS referrals remain the key conduit for volume growth.

UBS maintains a Neutral rating and $63.80 target.

Target price is $63.80 Current Price is $64.83 Difference: minus $1.03 (current price is over target).
If RHC meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $63.02, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates SFR as Hold (3) -

The company has the draft environmental impact statement for the 86%-owned Black Butte copper project in Montana. A public comment period of 60 days will now take place.

If all goes to plan final approvals should arrive by the third quarter of 2019. Hold rating and $7.25 target.

Target price is $7.25 Current Price is $6.60 Difference: $0.65
If SFR meets the Deutsche Bank target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.40, suggesting upside of 12.1% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.3

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

Macquarie rates SGP as Neutral (3) -

Stockland has sold one retail and one retail/commercial asset for a total of $143m. Not significant in regard to portfolio value but notable, the broker believes, for a mixed use development asset being sold as part of the retail divestment strategy.

It may raise concerns, the broker suggests, over the ability to complete the remaining $750m of retail asset sales. Neutral and $3.59 target retained.

Target price is $3.59 Current Price is $3.81 Difference: minus $0.22 (current price is over target).
If SGP meets the Macquarie target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.74, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates SLC as Overweight (1) -

The company has provided operating earnings (EBITDA) guidance of $13-18m for FY19 and $26-30m for FY20. Superloop has also launched a $31m equity raising at $1.25 a share.

While there is still some work to do, Morgan Stanley believes the company is taking steps to simplify its business and reposition towards more profitable segments.

The broker has a bullish view on the connectivity/enterprise segment and believes the company is well-positioned to win market share.

Overweight rating. Industry view is In-Line. Target is reduced to $1.75 from $2.47.

Target price is $1.75 Current Price is $1.45 Difference: $0.3
If SLC meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

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

Macquarie rates SUN as Underperform (5) -

The broker believes Suncorp's bank loan book pricing gap from front book to back book has reached 37 basis points compared to the majors at 45bps.  This alone could reduce the bank's net interest margin by 2-4bps per half over coming years in the absence of repricing.

Each 10bp of NIM is worth 5% of profit, the broker calculates. Underperform retained. Target falls to $12.50 from $12.75.

Target price is $12.50 Current Price is $13.56 Difference: minus $1.06 (current price is over target).
If SUN meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.92, suggesting upside of 2.7% (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

Macquarie rates SYR as Outperform (1) -

Syrah's first quarter update featured production, pricing and cash numbers all below the broker's expectation. Realised pricing is key for Balama cash generation, the broker notes, given cash flow is expected to fund the battery annode material (BAM) project.

That project represents 67% of the broker's stock valuation. Product mix remains critical in realised pricing and Syrah needs to maintain and grow shipments as production increases in order to avoid inventory build as has been the case in the past.

On a retained $2.70 target the broker nonetheless maintains an Outperform rating.

Target price is $2.70 Current Price is $1.08 Difference: $1.62
If SYR meets the Macquarie target it will return approximately 150% (excluding dividends, fees and charges).

Current consensus price target is $2.63, suggesting upside of 143.5% (ex-dividends)

The company's fiscal year ends in December.

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: 0.6

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