Australian Broker Call

Citi rates BKL as Sell (5) -

The company has reiterated guidance for modest revenue growth in FY19. A deceleration is being driven by daigou exiting the VDS category because of the enforcement of Chinese e-commerce laws as well as lower short-term demand from reduced promotional activity.

Citi considers the latter the correct strategy for the long-term health of the brand. Forecasts imply revenue growth of 2% in the fourth quarter and an earnings (EBIT) margin of 17%.

However, the broker remains a seller of the stock until there is tangible results from improvements in execution in China and new product development. Target price is $82.50. Sell rating.

Target price is $82.50 Current Price is $93.03 Difference: minus $10.53 (current price is over target).
If BKL meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $84.54, suggesting downside of -9.1% (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

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

Credit Suisse believes Coles can accelerate sales growth over the medium term as it develops digital capability and addresses weakness in its fresh and convenience product range.

A lag in supply chain modernisation is the central competitive risk, in the broker's view, and costs are likely to be above Woolworths ((WOW)) for several years.

Rating is upgraded to Neutral from Underperform and the target raised to $11.83 from $10.81.

Target price is $11.83 Current Price is $12.59 Difference: minus $0.76 (current price is over target).
If COL meets the Credit Suisse target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.08, suggesting downside of -4.1% (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 COL as Neutral (3) -

A visit to Coles' recently refurbished Eastgardens store highlighted to the broker a focus on Convenience and Fresh strategies. Uncertainties remain with regard the cost of  the "strategic refresh" as well as near-term earnings and dividends given a higher cost of doing business than its rival.

But the broker does not see a major earnings rebase and thus still prefers Coles over Woolworths ((WOW)), maintaining an Underweight rating on Woolworths and Neutral for Coles, with an unchanged $12.23 target.

Target price is $12.23 Current Price is $12.59 Difference: minus $0.36 (current price is over target).
If COL meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.08, suggesting downside of -4.1% (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

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

The company's partner in the Murra Warra wind farm project, Senvion GmbH, has filed for self-administration in Germany. Despite Downer's minor share in the project it is jointly and severally liable under the contract.

Downer has indicated it has substantial bank guarantees from Senvion. Credit Suisse suspects the catalyst for the market update is the court-appointed custodian may be attempting to offload the cost of completing the project to Downer and the bank guarantee may be insufficient to cover the liability.

Downer is assessing any impact on guidance for FY19. Rating is downgraded to Underperform from Neutral and the target lowered to $7.10 from $7.40.

Target price is $7.10 Current Price is $7.15 Difference: minus $0.05 (current price is over target).
If DOW meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.83, suggesting upside of 9.5% (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

Deutsche Bank rates DOW as Buy (1) -

Downer EDI has disclosed that its partner at the Murra Warra wind farm, Senvion, has filed for self-administration in Germany. Senvion is responsible for the manufacture, transport, erection and commissioning of the turbines and Downer for the balance of plant works.

Downer's work is substantially complete and on schedule and budget but it remains joint and severally liable for the project. The company will be assessing whether there is any financial impact on FY19 guidance. Deutsche Bank maintains a Buy rating and $8.26 target.

Target price is $8.26 Current Price is $7.15 Difference: $1.11
If DOW meets the Deutsche Bank target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $7.83, suggesting upside of 9.5% (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

Deutsche Bank rates FPH as Hold (3) -

Deutsche Bank considers the slowing OSA mask growth in FY19 as cyclical and not structural. The broker believes double-digit growth rates are sustainable for the hospital business for the next decade and this underpins its target of NZ$15.90. Hold rating maintained.

Current Price is $14.51. Target price not assessed.

Current consensus price target is N/A

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: -0.8

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

Morgan Stanley rates IEL as Overweight (1) -

Morgan Stanley considers the ownership structure of the English test, IELTS, inhibits profitability. The test is co-owned by Cambridge University, the British Council and IDP Education.

Partners compete head-to-head in most markets and, as a result, pricing is competitive, cost to serve is inflated and overheads are duplicated. If these were more aligned the broker envisages more than 50% upside to long-term earnings potential and incorporates the scenario into its bull case.

Target is raised to $19 from $16. Overweight rating. Industry view is In-Line.

Target price is $19.00 Current Price is $16.98 Difference: $2.02
If IEL meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $15.59, suggesting downside of -8.2% (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

Macquarie rates IPL as Outperform (1) -

The broker notes Incitec Pivot's PE discount to peer Orica ((ORI)) is now the largest in a decade, leading the broker to favour the former over the latter.

Orica's outlook is very much dependent on delivery of Burrup improvement and any slip in timing presents downside risk, the broker suggests. Incitec has suffered an acute earnings downgrade cycle this past six months, but signs are that a bottom may now have been reached.

No change to forecasts for either company. Outperform and a $3.70 target retained for Incitec Pivot.

Target price is $3.70 Current Price is $3.36 Difference: $0.34
If IPL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.65, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in September.

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

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

Credit Suisse believes the widening digital capability gap is another headwind for independent food retailers. While making no changes to forecasts, the broker downgrades Metcash to Underperform from Neutral because of the recent appreciation in the share price.

Fragmented decision-making in relation to investment and implementation of digital strategies are likely to be significant structural barriers, Credit Suisse adds. Target is steady at $2.69.

Target price is $2.69 Current Price is $3.00 Difference: minus $0.31 (current price is over target).
If MTS 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 $2.79, suggesting downside of -7.1% (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 RHC as Neutral (3) -

UBS reviews modelling assumptions for the company's Australian hospital division. The outcome of the federal election has removed the risk of a capped 2% private health insurance premium increase.

On the basis of premiums will rise around 2-3%, the broker increases price growth assumptions for Ramsay's overnight cases to 2.25% and 2% for day cases.

Mitigating some of the positive impact, cost growth assumptions have increased to around 3% to account for wage cost inflation. UBS maintains a Neutral rating and raises the target to $68.40 from $63.80.

Target price is $68.40 Current Price is $69.31 Difference: minus $0.91 (current price is over target).
If RHC 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 $65.60, suggesting downside of -5.4% (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

Macquarie rates SGP as Outperform (1) -

The broker has conducted an extensive tour of the Melbourne land lot market, visiting developments by Stockland and several of its rivals. The tour revealed sales volumes are down some -50%, prices are down as much as -12% and defaults are on the rise.

But recent given the election result, APRA's revision of the mortgage serviceability rate and a likely RBA rate cut the broker believes the trough in the residential market is near. Hence Outperform and $4.48 target retained.

Target price is $4.48 Current Price is $4.46 Difference: $0.02
If SGP meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.01, suggesting downside of -10.2% (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 SXY as Neutral (3) -

The Roma North gas facility was commissioned on May 27. The company is on track to deliver processed sales gas to GLNG by mid 2019. The main concern for Credit Suisse is the pace of the production ramp up upstream rather than the processing facility.

Ramp up has proven challenging at other CSG projects, compared with FID expectations. There is limited information on Roma North's upstream ability to deliver.

The broker prefers to wait, with a Neutral rating and $0.36 target, until further production and cost data materialises over the next 12 months.

Target price is $0.36 Current Price is $0.32 Difference: $0.04
If SXY meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $0.44, suggesting upside of 35.9% (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

Ord Minnett rates SXY as Hold (3) -

Senex Energy has been awarded PRL 2018-1-1, granted by the Queensland government on a six-year exploration basis. Three initial wells will be drilled over FY22-23.

Ord Minnett considers this positive for the company, although the acreage could be technically challenging to develop and may not exhibit the same productivity characteristics as nearby blocks.

The broker prefers to await the results of the exploration work program before assessing the incremental value. Ord Minnett maintains a Hold rating and $0.40 target.

Target price is $0.40 Current Price is $0.32 Difference: $0.08
If SXY meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $0.44, suggesting upside of 35.9% (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

UBS rates TPM as Sell (5) -

Vodafone Hutchison ((HTA)) is seeking relief from the Federal Court on its proposed merger with TPG Telecom (opposed by the ACCC). Regardless of the initial result, UBS expects the judgment will be appealed and assumes the process will take around 18 months, and 6-30 months in the event of a High Court appeal.

The broker believes the court process could be drawn out, which drives a reduction to its merged valuation. The market is pricing in a 55% probability of success but UBS suspects it might be materially lower. Sell rating maintained. Target rises to $5.80 from $5.60.

Target price is $5.80 Current Price is $6.26 Difference: minus $0.46 (current price is over target).
If TPM meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.28, suggesting upside of 0.2% (ex-dividends)

The company's fiscal year ends in July.

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

Deutsche Bank rates VOC as Hold (3) -

The company has received a non-binding proposal from Sweden's EQT Infrastructure at $5.25 a share. The proposal is subject to a number of conditions, including satisfactory due diligence and regulatory approvals.

Deutsche Bank maintains a Hold rating and revises the target to $4.70 from $3.30.

Target price is $4.70 Current Price is $4.64 Difference: $0.06
If VOC meets the Deutsche Bank target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting downside of -8.4% (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 WOW as Neutral (3) -

As Woolworths moves through a period of supply chain automation, developing digital capability, Credit Suisse believes it is positioned to become more competitive relative to the independent sector.

Woolworths is expected to retain an advantage through lower cost and stronger sales growth. The broker increases food like-for-like sales growth forecasts to 3% in FY20 and 2.8% in FY21.

Neutral rating maintained. The target is reduced to $29.51 from $29.82 after adjusting the number of shares post completion of the buyback.

Target price is $29.51 Current Price is $31.58 Difference: minus $2.07 (current price is over target).
If WOW meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.91, suggesting downside of -5.3% (ex-dividends)

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