Australian Broker Call

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

Credit Suisse expects the company's retail gross margins to bottom in FY20 and net margins to bottom in FY19. AGL Energy is expected to report FY19 net profit of $1.01bn, just below the mid point of guidance.

The broker upgrades to Neutral from Underperform as the stock has underperformed its historical correlation to bonds and utility peers. Target is raised to $19.20 from $18.30.

Target price is $19.20 Current Price is $20.96 Difference: minus $1.76 (current price is over target).
If AGL 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 $19.28, suggesting downside of -8.0% (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

Citi rates AZJ as Neutral (3) -

Citi increases estimates for FY20 earnings (EBIT) by 1% and FY21 by 5% to reflect the company's deal with network customers.

The regulated asset base multiple on the network is increased and the discounts for the above rail division are lowered, following the improved earnings and industry outlook.

Neutral rating maintained. Target is raised to $5.60 from $4.40.

Target price is $5.60 Current Price is $5.48 Difference: $0.12
If AZJ meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.08, suggesting downside of -7.3% (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

Morgans rates BAL as Hold (3) -

Morgans suspects that second half trading has stayed subdued, although rising e-commerce platform prices are a positive sign. The broker also notices increased shelf space from some competitors while Bellamy's Australia has a less favourable position in some stores.

The broker revises forecasts to the lower end of guidance. Brand refresh and ingredient upgrades are critical elements of the company's strategy and are expected to underpin earnings growth in future years, yet Morgans awaits the SAMR approval for the organic range before reviewing the rating.

Hold rating maintained. Target is reduced to $7.95 from $8.85.

Target price is $7.95 Current Price is $8.42 Difference: minus $0.47 (current price is over target).
If BAL meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.48, suggesting upside of 12.6% (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 CTP as Add (1) -

As the company has some production in train, updates have been recently provided on the performance of the Amadeus gas and liquids operations. Morgans has changed its view on where the value mix among the operations is occurring.

The Mereenie field has performed strongly and looks to be providing further development options. Meanwhile, Palm Valley has disappointed since coming back on line and existing wells have failed to perform to plan.

The broker maintains an Add rating and reduces the target to $0.20 from $0.21.

Target price is $0.20 Current Price is $0.14 Difference: $0.06
If CTP meets the Morgans target it will return approximately 43% (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

Deutsche Bank rates EHL as Reinstate Coverage with Buy (1) -

Deutsche Bank reinstates coverage of Emeco Holdings with a Buy rating and $2.70 target. The broker values the stock using a discounted cash flow analysis at $2.31.

The risks to the recommendation, the broker observes, are falling mining demand and the potential inability to source equipment below the cost of capital.

Target price is $2.70 Current Price is $2.06 Difference: $0.64
If EHL meets the Deutsche Bank target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $2.84, suggesting upside of 37.9% (ex-dividends)

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

Macquarie rates HUB as Underperform (5) -

The broker notes that if yesterday's RBA rate cut is fully passed on to cash allocations in portfolios on Hub24's platform, the return on cash will be 50 basis points. Add in the -56 basis point admin fee, and returns are now negative.

The broker also notes the UK market presents downside risk to margins for both Hub24 and Netwealth ((NWL)). On increasing margin compression risk, the broker lowers its target for Hub24 to $8.65 from $10.47. Underperform retained.

Target price is $8.65 Current Price is $10.85 Difference: minus $2.2 (current price is over target).
If HUB meets the Macquarie target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.23, suggesting upside of 21.9% (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

Morgans rates INA as Hold (3) -

The company has made its first foray into asset/funds management within the lifestyle estate industry, acquiring both the manager and 18-20% stake in six unlisted funds which own the assets.

The $5.8m acquisition of the management platform includes the management of $140m of lifestyle villages in south-east Queensland, NSW and Victoria. The $11m investment is in six unlisted funds which own the 10 assets.

Morgans believes the move makes sense in that it affords the company the ability to increase fee income from a low capital perspective. The company expects FY19 earnings (EBIT) at the top end of guidance range, up 15-20%. Hold rating maintained. Target is raised to $3.36 from $3.24.

Target price is $3.36 Current Price is $3.26 Difference: $0.1
If INA meets the Morgans target it will return approximately 3% (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

Morgan Stanley rates JHX as Overweight (1) -

Morgan Stanley envisages meaningful upside if the company can move towards a 35% target for fibre cement share in the US. US Census survey results show fibre cement's share was steady at 20% in 2018.

The broker expects the company's new initiatives will mean it can deliver on its primary demand growth target. Raw material headwinds in pulp and freight have now abated and the broker expects this to support margins in FY20 and beyond.

Morgan Stanley reiterates an Overweight rating, $21 target and Cautious industry view.

Target price is $21.00 Current Price is $18.56 Difference: $2.44
If JHX meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $21.57, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in USD. 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

Ord Minnett rates JHX as Accumulate (2) -

Ord Minnett is backing new management to execute on its strategy to regain market share in fibre cement in the US. Market share has stalled in recent years.

At a national level, US Census data shows vinyl remains the most popular material for external cladding, with 26% share of homes completed, while fibre cement is 20%.

The broker factors in 3% primary demand growth from FY20 for James Hardie and expects the fibre cement category to reach 27% of market share by FY30. Accumulate rating and $22 target maintained.

Target price is $22.00 Current Price is $18.56 Difference: $3.44
If JHX meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $21.57, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in USD. 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

UBS rates MND as Downgrade to Neutral from Buy (3) -

UBS updates its database for iron ore capital expenditure, now estimating total investment in Western Australia could be around US$21bn. This expenditure is expected to be delivered through FY19-22.

The broker downgrades Monadelphous to Neutral from Buy on valuation grounds as the share price has increased around 40% over the past 12 months. Target is steady at $19.

The broker also updates FY21/22 forecasts for earnings per share, reducing FY21 by -10% and increasing FY22 by 5%, while re-profiling iron ore construction forecasts, given increased visibility.

Target price is $19.00 Current Price is $18.70 Difference: $0.3
If MND meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $16.38, suggesting downside of -12.4% (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

Citi rates NAN as Initiation of coverage with Sell (5) -

Nanosonics has created a market for high level disinfection of ultrasound probes and has helped change the clinical guidelines to ensure high-level disinfection is used.

Citi values the existing business on a discounted cash flow basis, expecting improved market penetration of 70% in the Americas by FY24, 48% in the EMEA by FY30 and 50% in APAC by FY30.

The broker initiates coverage with a Sell rating and $4.40 target.

Target price is $4.40 Current Price is $5.45 Difference: minus $1.05 (current price is over target).
If NAN meets the Citi target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.23, suggesting downside of -4.0% (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 NHC as Upgrade to Add from Hold (1) -

Morgans observes sharply weaker seaborne thermal coal prices have contributed to a correction in the stock of almost -40%, attributing the weakness to tepid demand, poor producer discipline and some fuel switching into LNG.

The broker believes, while the stock may temporarily be in the "too hard basket", significant value is on offer. The broker considers the market value ignores the non-cash producing assets and the potential recovery in the coal price.

Rating is upgraded to Add from Hold. Target is reduced to $3.37 from $3.80.

Target price is $3.37 Current Price is $2.74 Difference: $0.63
If NHC meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.12, suggesting upside of 14.0% (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

Citi rates NWL as Neutral (3) -

Citi lowers fourth quarter net flow forecasts, envisaging risk to organic flows from ongoing adviser disruption. FY20 net flows are expected to be underpinned by the transition from ANZ Private.

In the wake of the reduction to the Reserve Bank's cash rate, the broker envisages potential that Netwealth, as well as other platform providers, will need to lower its cash margin in order to provide clients with a better rate.

Neutral rating maintained. Target is reduced to $7.80 from $8.05.

Target price is $7.80 Current Price is $7.22 Difference: $0.58
If NWL meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.10, suggesting upside of 12.1% (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 NWL as Downgrade to Underperform from Neutral (5) -

Macquarie notes that if yesterday's RBA rate cut is fully passed on to cash allocations in portfolios on Netwealth's platform, the return on cash will be 50 basis points. Add in the -59 basis point admin fee, and returns are now negative.

The broker also notes the UK market presents downside risk to margins for both Hub24 and Netwealth. On increasing margin compression risk, the broker lowers its target for Netwealth to $6.05 from $7.83. Downgrade to Underperform.

Target price is $6.05 Current Price is $7.22 Difference: minus $1.17 (current price is over target).
If NWL meets the Macquarie target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.10, suggesting upside of 12.1% (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 ORG as Upgrade to Outperform from Neutral (1) -

Credit Suisse upgrades to Outperform from Neutral as the stock has underperformed electricity and Brent futures as well as its peers in energy. Margins are expected to bottom in FY20.

The broker expects a strong result, at the top end of guidance, when Origin Energy reports on August 22. Target is increased to $8.50 from $7.55.

Target price is $8.50 Current Price is $7.45 Difference: $1.05
If ORG meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $8.21, suggesting upside of 10.2% (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

Macquarie rates ORG as Outperform (1) -

The broker has had an initial look at electricity retailer discounting in the wake of the new Victorian and federal pricing regulations. The broker expects costs to grow and retentions to fall, but in response it appears the big three retailers, including Origin, are backing off on their discounts.

The bulk of Origin's value is nevertheless its APLNG operation, which is providing solid cash generation and balance sheet de-gearing. The next key driver, the broker suggests, will be a reinstatement of the dividend. Outperform and $9.12 target retained.

Target price is $9.12 Current Price is $7.45 Difference: $1.67
If ORG meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $8.21, suggesting upside of 10.2% (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

Ord Minnett rates RHC as Downgrade to Hold from Accumulate (3) -

Ord Minnett is comfortable with expectations for mid single-digit growth from the Australian operations, to be boosted over the next couple of years by the acquisition of Capio.

However, forecast for FY19 and FY20 are lowered following a review of the expected timing and interest costs arising from the Capio acquisition.

Rating is downgraded to Hold from Accumulate and the target is steady at $75. Revised earnings forecasts imply 7% growth in earnings per share in FY20 and FY21, driven by the domestic business.

Target price is $75.00 Current Price is $72.74 Difference: $2.26
If RHC meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $65.60, suggesting downside of -9.8% (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

Credit Suisse rates SDA as Neutral (3) -

The company has surprised with a downgrade to guidance, which suggests to Credit Suisse that original guidance was more ambitious than first thought. The broker reduces FY19 estimates for earnings per share by -26%, with outer adjustments less severe in the hope that the issues will be temporary.

While valuation seems appealing, with an over-geared balance sheet the broker does not believe an upgraded rating is warranted. Neutral maintained. Target is reduced to $2.20 from $3.70.

Target price is $2.20 Current Price is $1.73 Difference: $0.47
If SDA meets the Credit Suisse target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $2.42, suggesting upside of 39.9% (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: 0.0

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

Macquarie rates SDA as Upgrade to Neutral from Underperform (3) -

Operational issues continue to dog SpeedCast, as evidenced by a -12% earnings guidance downgrade for FY19. Leverage is now an issue, with debt covenants at risk, Macquarie notes.

There is thus a risk an equity raising will be required, however there is also a chance SpeedCast could now be itself corporate target having made over 15 acquisitions since 2012. It would depend on whether another player is prepared to take on the debt, but given SpeedCast's lower valuation, Macquarie upgrades to Neutral.

Target falls to $2.25 from $2.85.

Target price is $2.25 Current Price is $1.73 Difference: $0.52
If SDA meets the Macquarie target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $2.42, suggesting upside of 39.9% (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: 0.0

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

UBS rates SDA as Neutral (3) -

While the slump in the share price could be an over-reaction to the earnings downgrade, UBS notes investors now have additional concerns. Concerns centre on the fact that most divisions appear to be growing revenue and the company is executing on synergies, but operating earnings (EBITDA) are still falling.

This indicates bandwidth costs could be outpacing revenue in certain divisions. UBS reduces estimates for earnings per share by -30%-35%.

Neutral rating maintained, as the broker needs signs of stabilisation before considering turning more positive. Target is reduced to $2.30 from $3.75.

Target price is $2.30 Current Price is $1.73 Difference: $0.57
If SDA meets the UBS target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $2.42, suggesting upside of 39.9% (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: 0.0

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