Australian Broker Call

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

As 2019 approaches Morgan Stanley observes Australian banks are facing a weaker housing market, a final report from the ACCC on residential mortgages and the fall out from the Royal Commission.

The broker does not expect huge surprises in operating earnings in the second half results but expects the share prices to be influenced by trends in funding costs, expectations for customer remediation, housing loan growth and capital generation, among other issues.

ANZ has more scope than its peers to navigate the transition facing the banks but the broker considers the investment characteristics are well understood. Moreover, revenue headwinds are becoming worse and the stock has re-rated versus peers.

Equal-weight rating retained. Target is reduced to $26.60 from $28.00. Industry view: In-Line.

Target price is $26.60 Current Price is $26.83 Difference: minus $0.23 (current price is over target).
If ANZ meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.16, suggesting upside of 8.7% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates BHP as Buy (1) -

UBS assesses that investors are mostly in favour of a buyback, and predominantly an off-market buyback of ASX listed shares as this can be accomplished quickly. Some prefer an on-market buyback of LSE-listed stock because they believe this would be more supportive of the share price.

BHP has reached the lower end of its net debt target and has stated it plans to return all net proceeds from the sale of its onshore US assets to shareholders in a timely manner.

UBS notes that only 10-20% of those investors surveyed preferred a special dividend and around 10% preferred a combination of both buyback and special dividend. UBS maintains a Buy rating and $35.50 target.

Target price is $35.50 Current Price is $34.63 Difference: $0.87
If BHP meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $36.73, suggesting upside of 6.0% (ex-dividends)

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: 0.7

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

Morgan Stanley rates CBA as Underweight (5) -

As 2019 approaches Morgan Stanley observes Australian banks are facing a weaker housing market, a final report from the ACCC on residential mortgages and the fall out from the Royal Commission.

The broker does not expect huge surprises in operating earnings in the second half results but expects the share prices to be influenced by trends in funding costs, expectations for customer remediation, housing loan growth and capital generation, among other issues.

Morgan Stanley has been Underweight on Commonwealth Bank since 2016 and envisages no reason to change its view, given the combination of downside risk to earnings and returns as well as structural headwinds in full valuations.  Target is reduced to $64.50 from $65.00. Industry view: In-Line.

Target price is $64.50 Current Price is $68.75 Difference: minus $4.25 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $74.00, suggesting upside of 7.6% (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

Morgans rates ICQ as Add (1) -

Morgans believes the company is on track to meet forecasts, after posting 51% growth in revenue in the September quarter. This was underpinned by price rises in all markets and stronger demand for display advertising from the new car sector.

Guidance for Malaysia and Thailand has been reiterated and these two locations are expected to be profitable by the end of the year. Morgans maintains an Add rating and $0.41 target.

Target price is $0.41 Current Price is $0.21 Difference: $0.2
If ICQ meets the Morgans target it will return approximately 95% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Ord Minnett rates JHC as Upgrade to Hold from Lighten (3) -

Ord Minnett is confident the final recommendations from the inquiry into aged care will call for improved funding and increased compliance requirements, and this will raise barriers to entry.

The broker believes there is valuation appeal in the sector, although there is a challenging period ahead with months of negative media coverage and potential cash flow pressures from a downturn in residential property prices.

The broker upgrades Japara Healthcare to Hold from Lighten as it is trading in line with valuation. Target is reduced to $1.25 from $1.50.

Target price is $1.25 Current Price is $1.25 Difference: $0
If JHC meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.56, suggesting upside of 24.4% (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

Morgan Stanley rates JHG as Overweight (1) -

Morgan Stanley expects a firm result in the third quarter, although concedes the challenges are growing for Janus Henderson as leading indicators regarding retail flows remain negative and performance is soft.

There has been limited support to date from cross selling into new geographies and the broker suspects this will not gain momentum until FY20 when inflows are expected to return.

Cheap trading multiples and the potential for positive catalysts keep the broker on Overweight. In-Line industry view maintained. Target is reduced to $50 from $56.

Target price is $50.00 Current Price is $35.92 Difference: $14.08
If JHG meets the Morgan Stanley target it will return approximately 39% (excluding dividends, fees and charges).

Current consensus price target is $45.15, suggesting upside of 25.7% (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: 0.4

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

Morgan Stanley rates NAB as Underweight (5) -

As 2019 approaches Morgan Stanley observes Australian banks are facing a weaker housing market, a final report from the ACCC on residential mortgages and the fall out from the Royal Commission.

The broker does not expect huge surprises in operating earnings in the second half results but expects the share prices to be influenced by trends in funding costs, expectations for customer remediation, housing loan growth and capital generation, among other issues.

Morgan Stanley has been Underweight on National Australia Bank since 2016 and envisages no reason to change its view, given the combination of downside risk to earnings and returns as well as structural headwinds in full valuations. Industry view: In-line. Price target is reduced to $26.30 from $26.40.

Target price is $26.30 Current Price is $26.61 Difference: minus $0.31 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.18, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates NST as Outperform (1) -

Macquarie visited the new Pogo mine in Alaska and came away impressed. The broker considers this a solid asset with excellent geological potential.

There appear to be many opportunities to extract value by applying the company's operating model and there is potential for extensions to mine life through resource conversion and exploration.

The broker maintains an Outperform rating and raises the target to $9.40 from $9.20.

Target price is $9.40 Current Price is $8.38 Difference: $1.02
If NST meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $7.89, suggesting downside of -5.9% (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

UBS rates OSH as Neutral (3) -

UBS believes the next catalyst in Alaska will be the taking up of the option to double equity in the permits to 51% for US$450m before June 2019. The broker expects Oil Search to take up the option, given the resource upgrade that has occurred since acquisition, and potentially sell down the interest to reduce its share of development expenditure.

The broker believes Oil Search should consider retaining an interest greater than 35%. First oil is expected in 2023, which the broker understands is necessary for the company to access accelerated appreciation benefits. Neutral rating and $9.45 target maintained.

Target price is $9.45 Current Price is $8.91 Difference: $0.54
If OSH meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.83, suggesting downside of -0.8% (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: 0.1

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

Credit Suisse rates PTM as Neutral (3) -

Credit Suisse analysts note the Q1 update showed a small rise in funds under management whereby net inflows compensated for the negative investment performance.

The analysts believe the positive was inflated by seasonal reinvestment of distributions. FuM still missed their expectation.

Credit Suisse cannot get past the observation the two flagship funds are generally underperforming benchmarks across multiple horizons with the past twelve months in particular weak. Neutral. Target $5.25.

Target price is $5.25 Current Price is $5.02 Difference: $0.23
If PTM meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.33, suggesting upside of 6.2% (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

Citi rates QUB as Resume Coverage with Sell (1) -

Citi acknowledges considerable potential for the company's Moorebank Logistics Park but believes the outlook for earnings is still unclear and requires considerable faith from investors.

The broker's valuation on a stand-alone basis at $1.1bn requires near-perfect execution, particularly around warehouse occupancy and the penetration of integrated logistics solutions.

Citi resumes coverage with a Sell rating and $2.40 target. The broker believes the company's revenue growth is reliant on market growth which is forecast to be 3-4% over the longer term.

Target price is $2.40 Current Price is $2.60 Difference: minus $0.2 (current price is over target).
If QUB meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.69, suggesting upside of 3.4% (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

Ord Minnett rates REG as Buy (1) -

Ord Minnett expects a negative overhang for listed aged care stocks, as the inquiry into aged care is likely to be a protracted affair for the listed providers and limit any near-term improvement in sentiment.

The broker applies a -15-25% discount to cash flow valuations to reflect this sentiment. Ord Minnett continues to favour Regis Healthcare as the highest quality operator in the sector, with strong systems and cash flows from recently-opened facilities. Buy rating maintained. Target is reduced to $3.30 from $4.00.

Target price is $3.30 Current Price is $2.80 Difference: $0.5
If REG meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.44, suggesting upside of 22.9% (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

Morgans rates SEA as Add (1) -

Morgans believes the investment case for Sundance Energy has gained momentum and the subsequent strength in the oil price has supported a view that the company has made a transforming acquisition at an ideal point in the cycle.

Numbers from wells developed on the recently-acquired Live Oak and Atascosa acreage have impressed the broker, along with two additional wells on the legacy acreage in McMullen County. Add rating and $0.21 target maintained.

Target price is $0.21 Current Price is $0.10 Difference: $0.11
If SEA meets the Morgans target it will return approximately 110% (excluding dividends, fees and charges).

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: 1.0

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

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

As 2019 approaches Morgan Stanley observes Australian banks are facing a weaker housing market, a final report from the ACCC on residential mortgages and the fall out from the Royal Commission.

The broker does not expect huge surprises in operating earnings in the second half results but expects the share prices to be influenced by trends in funding costs, expectations for customer remediation, housing loan growth and capital generation, among other issues.

The broker moves Westpac to its first order of preference among the major banks but retains an Equal-weight rating given a negative stance and downside risk to valuation and price targets. While Westpac is relatively more exposed to the end of the mortgage bull market, near-term expectations have been re-based and the broker envisages potential for some self-help on costs.

Target is reduced to $26.80 from $27.50. Industry view: In Line.

Target price is $26.80 Current Price is $26.97 Difference: minus $0.17 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.39, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates WES as Neutral (3) -

Looking forward to the Q1 sales updates by supermarket competitors Woolworths ((WOW)) and Coles, the analysts have lifted forecasts for the latter while leaving estimates unchanged for the former.

Credit Suisse points out Q1 has been characterised by accelerating inflation in the cost of fruit, vegetables and meat, and improvement at Coles.

Plus, the analysts also believe Coles has benefited from the reusable plastic bags transition and the Little Shop promotion. Target improves to $49.47 from $48.51. Neutral.

Target price is $49.47 Current Price is $48.79 Difference: $0.68
If WES meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $48.39, suggesting downside of -0.8% (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