Australian Broker Call

Macquarie rates ABC as Neutral (3) -

The company has reduced 2018 net profit guidance to $188-195m. The downgrade was attributed to project delays in South Australia and a slower WA construction market.

Macquarie downgrades estimates for earnings per share by -8.2% in 2018 and -4.6% in 2019.

The broker remains concerned about management change and uncertainty, despite the new CEO's starting date moving forward to January 30. Target is reduced to $5.00 from $6.45. Neutral retained.

Target price is $5.00 Current Price is $4.26 Difference: $0.74
If ABC meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.19, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.6

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

Morgan Stanley rates ABC as Underweight (5) -

The downgrade to 2018 guidance follows similar updates from sector peers, Morgan Stanley observes. The stock is now trading at a more reasonable valuation but the broker believes caution is warranted, given the pending change in management.

While the broker believes the company is well positioned to leverage the strength of the emerging South Australian infrastructure boom, the downgrade to guidance highlights the importance of a regional mix.

Morgan Stanley maintains an Underweight rating and reduces the target to $4.75 from $6.00. Industry view: Cautious.

Target price is $4.75 Current Price is $4.26 Difference: $0.49
If ABC meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.19, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.6

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

Ord Minnett rates ABC as Lighten (4) -

The company has downgraded 2018 net profit guidance to $188-195m which leads Ord Minnett to lower its estimates. The broker believes the stock's premium over Boral ((BLD)) is too large.

That said, the fully franked dividend yield of 6% and buying support from Barro are likely to limit potential downside. Ord Minnett maintains a Lighten rating and reduces the target to $4.50 from $5.90.

Target price is $4.50 Current Price is $4.26 Difference: $0.24
If ABC meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $5.19, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.6

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

UBS rates ABC as Sell (5) -

The company has downgraded 2018 net profit guidance by -7%, to $188-195m. UBS calculates the downgrade implies a -11% reduction to December half earnings.

Reasons for the downgrade include slower activity in South Australian infrastructure as well as Western Australia, and a slower recovery from adverse weather on the east coast.

UBS maintains a Sell rating and reduces the target to $4.20 from $4.40.

Target price is $4.20 Current Price is $4.26 Difference: minus $0.06 (current price is over target).
If ABC meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.19, suggesting upside of 21.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.6

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

Credit Suisse rates AHY as Neutral (3) -

The company has sold its Australian consumer tissue business. Credit Suisse upgrades the target to $0.95 from $0.78, as this transaction was strongly accretive. Neutral rating maintained, as the share prices quickly factored in the news.

Estimates for earnings per share are upgraded by 65-75% for 2019 and 2020. The broker now models pulp prices moderating in 2020 and 2021, such that gross profit margin should improve by around 100 basis points in each of those years.

Target price is $0.95 Current Price is $0.95 Difference: $0
If AHY meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $1.00, suggesting upside of 5.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

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

The bank is in the process of selling its wealth business to IOOF ((IFL)). The prudential regulator, APRA, has taken action to disqualify three executives and two directors of IOOF.

ANZ has indicated it will assess the various options available, reminding investors that the sale of its life business to Zurich is separate to the sale of the wealth business.

If the sale of the wealth division does not proceed, Morgan Stanley believes ANZ should still be able to undertake buybacks while earnings forecasts would be ratcheted higher. ANZ would then need to consider other strategic options.

Equal-weight rating retained. Target is $27.30. Industry view: In-Line.

Target price is $27.30 Current Price is $24.64 Difference: $2.66
If ANZ meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $29.06, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates ANZ as Accumulate (2) -

APRA has commenced legal proceedings against IOOF ((IFL)) over alleged breaches of superannuation legislation. Ord Minnett suggests this has created a material risk for the sale of ANZ's OnePath pension and investments business to IOOF.

The broker suggests a failure to sell the business would reduce ANZ's buyback capacity by a relatively modest -$600m. Importantly, this will not affect the sale of the Australian life insurance business to Zurich.

Ord Minnett maintains an Accumulate rating and $32.20 target.

Target price is $32.20 Current Price is $24.64 Difference: $7.56
If ANZ meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $29.06, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates AZJ as Underweight (5) -

The Queensland Competition Authority has published its final determination for UT5, increasing the company's revenue allowance for FY18-21 by 6% versus the draft decision.

The QCA accepted the proposal for a higher return of capital but chose to capitalise much of the maintenance expenditure.

Morgan Stanley anticipates Aurizon will initially reserve any rights of appeal pending a review of the entire decision. Target is $4.08. Underweight. Industry view: Cautious.

Target price is $4.08 Current Price is $4.37 Difference: minus $0.29 (current price is over target).
If AZJ meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.30, suggesting downside of -1.6% (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

Ord Minnett rates CHC as Hold (3) -

Charter Hall has acquired rival property fund manager Folkestone ((FLK)), for $212m based on Ord Minnett's estimates.

The broker calculates Charter Hall will generate a 10-15% return on invested capital over the next five years from the acquisition, depending on the pace at which it can grow the Charter Hall Education Trust ((CQE)).

The transaction allows Charter Hall to gain exposure to the child care sector. Hold rating maintained. Target is raised to $7.50 from $5.90.

Target price is $7.50 Current Price is $7.37 Difference: $0.13
If CHC meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.35, suggesting downside of -0.3% (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 HT1 as Neutral (3) -

UBS recalibrates earnings estimates and valuation to reflect a continuing business basis. The broker expects some of the first half earnings growth will be reversed in the second half, as advertising markets softened in September and October.

The broker believes 2019 will be a more appropriate means to gauge the stock, as 2018 financials will not fully reflect the buyback, interest cost savings and corporate cost reductions.

Neutral rating maintained. Target is reduced to $1.80 from $2.60.

Target price is $1.80 Current Price is $1.68 Difference: $0.12
If HT1 meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.08, suggesting upside of 23.6% (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

Citi rates IFL as Downgrade to Neutral from Buy (3) -

The decision by the regulator, APRA, to take action against regulated entities and disqualify a number of senior executives has caught the market by surprise, Citi observes.

While the possibility of drastic action from the company exists, Citi finds it hard to envisage enough of a response to lift what is likely to be a prolonged shadow over the stock.

Rating is downgraded to Neutral/High Risk from Buy/High Risk. Target is reduced to $4.50 from $8.65.

The company intends to defend the proceedings, asserting that the matters are historical in nature and initiatives are already in progress to amend the situation.

Target price is $4.50 Current Price is $4.30 Difference: $0.2
If IFL meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 10.5% (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

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

The regulator, APRA, has announced disciplinary actions against some of the company's entities, directors and executives for failing to act in the best interest of members.

In terms of the sale of its wealth business, ANZ ((ANZ)) is assessing the various options available and seeking information from both IOOF and APRA. The ANZ wealth business contributes around 35% to Credit Suisse's IOOF forecasts for outer year earnings.

While awaiting further developments, the broker downgrades to Neutral from Outperform. Target is reduced to $4.60 from $10.00.

Target price is $4.60 Current Price is $4.30 Difference: $0.3
If IFL meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 10.5% (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 IFL as Downgrade to Neutral from Outperform (3) -

APRA has taken action against the company for failing to act in the best interest of members. Macquarie remains concerned about the implications, given the potential for flow-on effects and civil proceedings as well as risks to the completion of the ANZ transaction.

While there remains significant value at current levels based on fundamentals, the broker is not inclined to take a positive view and downgrades to Neutral from Outperform. Target is reduced to $5.10 from $10.40.

Target price is $5.10 Current Price is $4.30 Difference: $0.8
If IFL meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 10.5% (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

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

APRA's "show cause" notice to the company signals to Morgan Stanley that the regulator is taking issue with the company's conduct in response to its concerns. IOOF has until December 20 to respond, or APRA may proceed to make decisions without further notice.

Disqualification proceedings have already commenced against five individuals. Morgan Stanley acknowledges confidence in near-term earnings and longer term profitability is called into question.

As a result the broker downgrades to Equal-weight from Overweight and reduces the target to $5.00 from $10.80. Industry view: In Line.

Target price is $5.00 Current Price is $4.30 Difference: $0.7
If IFL meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 10.5% (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

UBS rates IFL as Neutral (3) -

The company has become the first target in APRA's increased supervision, with the regulator imposing additional license conditions and disqualifying five executives and directors as responsible persons of a superannuation entity.

In addition, UBS suspects the likely fall-out from brand damage and organisational uncertainty will introduce significant risks. UBS remains cautious about the outlook and retains a Neutral rating. Target is reduced to $4.55 from $7.00.

UBS suspects sustaining the level of net fund flows and rising adviser numbers will be difficult.

Target price is $4.55 Current Price is $4.30 Difference: $0.25
If IFL meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 10.5% (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

Credit Suisse rates IPL as Outperform (1) -

Issues surrounding the gas purification process on the Northern Gas Pipeline have affected the company's Gibson island supply. Meanwhile, there is disruption in the US affecting gas supply to the St Helens plant.

Credit Suisse believes these are temporary problems, quarantined to the first half, and have no ongoing relevance. Along with the announced increase in costs, the broker makes additional changes to forecasts resulting from updated gas cost assumptions and fertiliser prices.

Outperform rating maintained. Target is reduced to $4.26 from $4.30.

Target price is $4.26 Current Price is $3.57 Difference: $0.69
If IPL meets the Credit Suisse target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in September.

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 IPL as Buy (1) -

While third-party gas supply problems could reduce FY19 earnings by -3%, Deutsche Bank believes the issues are temporary.

The Northern Gas Pipeline has been delayed to January 10, 2019, while the US plant at St Helens has been affected by the rupture of a pipeline at a time when gas costs are elevated.

The rupture has now been fixed and the company estimates the impact of earnings will be around -US$10m.

Deutsche Bank maintains a Buy rating and $4.60 target.

Target price is $4.60 Current Price is $3.57 Difference: $1.03
If IPL meets the Deutsche Bank target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates IPL as Outperform (1) -

A delayed start up in Queensland gas supply and higher US West coast gas prices are having an impact, and the company expects additional costs of US$10m.

This is a reminder to Macquarie of the range of external issues that can plague the stock. The combined impact represents around a -3% reduction in estimates for earnings per share.

Macquarie maintains an Outperform rating and lowers the target to $4.19 from $4.41.

Target price is $4.19 Current Price is $3.57 Difference: $0.62
If IPL meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates IPL as Hold (3) -

The company is having problems with gas supply which has affected both its Australian and US operations. Morgans downgrades FY19 net profit estimates by -4.7% and notes there is further downside if the Henry Hub pricing stays elevated.

The broker notes gas supply interruptions are a key risk for the business, unfortunately appearing at a time when fertiliser prices are relatively buoyant and gas prices are high.

The broker believes the stock is fairly priced and maintains a Hold rating. Target is reduced to $3.84 from $3.95.

Target price is $3.84 Current Price is $3.57 Difference: $0.27
If IPL meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.20, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in September.

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

Morgans rates JIN as Add (1) -

The company's trading update significantly exceeded Morgans' expectations. The broker believes the company is high-quality and upgrades forecasts substantially. Transaction value in FY19 is expected to grow 44%.

Operating leverage is being illustrated, with EBITDA growth of 66.5%. The company has signed the Mater Foundation to use its recently launched lottery platform. Powered By Jumbo is a new revenue channel which the broker suggests has highly attractive economics.

Morgans expects returns to shareholders to be forthcoming in the form of special dividends and maintains an Add rating. Target is raised to $10.70 from $6.31.

Target price is $10.70 Current Price is $8.05 Difference: $2.65
If JIN meets the Morgans target it will return approximately 33% (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 LVT as Buy (1) -

The company has reiterated expectations for the December quarter and remains comfortable with how the business is tracking.

N3 is generating high-quality leads but Citi suspects there is some downside in that momentum may be softer than some expect, as the sales cycle is longer for larger transactions.

The broker maintains a Buy/High Risk rating and $0.91 target.

Target price is $0.91 Current Price is $0.29 Difference: $0.62
If LVT meets the Citi target it will return approximately 214% (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

Credit Suisse rates NEC as Outperform (1) -

Credit Suisse updates numbers to reflect the merger with Fairfax. The broker now factors in an increased synergy target of $65m.

The merger is expected to be dilutive to earnings per share for Nine Entertainment shareholders in the near term because it is largely a scrip transaction.

Outperform rating maintained. Target is steady at $2.35.

Target price is $2.35 Current Price is $1.60 Difference: $0.75
If NEC meets the Credit Suisse target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 33.6% (ex-dividends)

The company's fiscal year ends in June.

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 ORG as Outperform (1) -

The company has reiterated FY19 guidance, with a dividend of $0.20 a share. Macquarie notes energy markets remain challenging, particularly with the ongoing political uncertainty.

APLNG has emphasised its cost reduction program while management has indicated a strong cash flow outlook, which the broker expects to be reflected in dividend policy.

Outperform rating maintained. Target is raised to $9.20 from $9.11.

Target price is $9.20 Current Price is $6.86 Difference: $2.34
If ORG meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $9.07, suggesting upside of 32.2% (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

Ord Minnett rates ORG as Buy (1) -

At the investor briefing, management indicated both integrated gas and energy markets are now generating strong free cash flow which will help to materially deleverage the balance sheet. Dividends have been reintroduced at $0.20 a share for FY19.

While risks remain on the political landscape, management has indicated the current environment is not conducive to investing in generation. Ord Minnett maintains a Buy rating and $8.85 target.

Target price is $8.85 Current Price is $6.86 Difference: $1.99
If ORG meets the Ord Minnett target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $9.07, suggesting upside of 32.2% (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

UBS rates ORG as Buy (1) -

Capital management and cost reductions were the two themes at the company's investor briefing. APLNG is now targeting break-even on distributions of around $35/BOE through efficiency improvements.

The company has indicated it will consider additional cash returns to shareholders in the absence of growth opportunities. While estimating the company can achieve increased cash distributions from APLNG amid reduced capital expenditure, UBS suspects Origin Energy will not return surplus cash to shareholders. Rather, it is likely to retain the options to deploy this to a number of growth projects.

Buy rating maintained. Target is raised to $10.00 from $9.90.

Target price is $10.00 Current Price is $6.86 Difference: $3.14
If ORG meets the UBS target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $9.07, suggesting upside of 32.2% (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

Deutsche Bank rates TAH as Buy (1) -

Deutsche Bank considers Jumbo Interactive's ((JIN)) guidance upgrade is positive for Tabcorp as Jumbo is its digital partner in lotteries, which is a higher growth and higher margin segment.

The broker now expects Tabcorp's lotteries business to record revenue growth of 10% in FY19 and 14% in the first half.

However, the broker suggests Tabcorp is reinvesting these benefits in wagering and the net impact could be largely neutral. Buy rating and $5.50 target maintained.

Target price is $5.50 Current Price is $4.26 Difference: $1.24
If TAH meets the Deutsche Bank target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $5.13, suggesting upside of 20.5% (ex-dividends)

The company's fiscal year ends in June.

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 WEB as Buy (1) -

UBS reiterates a Buy rating, believing the company stands out, given 25% organic operating earnings (EBITDA) growth in FY18.

A hot European summer may take some of the shine off the FY19 result but the broker still believes earnings growth of over 17% is still achievable.

The broker incorporates DOTW earnings into forecasts and raises the target to $20.20 from $19.85.

Target price is $20.20 Current Price is $11.32 Difference: $8.88
If WEB meets the UBS target it will return approximately 78% (excluding dividends, fees and charges).

Current consensus price target is $16.49, suggesting upside of 45.6% (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