Australian Broker Call

Morgan Stanley rates ALL as Overweight (1) -

As the digital operations are now a key debate among market participants insofar they try to value the shares, Morgan Stanley analysts have been analysing December downloads and rankings to make sure their expectations remain close to what might be happening in the real world.

As it turns out, Big Fish downloads continue to be weak, while RAID continues to beat all other games and revenues from the company's digital suite. On current data, the analysts estimate RAID is annualising some $270m per annum.

The analysts continue to forecast Aristocrat produces two games per annum that retain a spot in the global top 20. Thus far, only RAID is achieving this. Morgan Stanley retains an Overweight rating. Target is $35. Industry view: Cautious.

Target price is $35.00 Current Price is $34.16 Difference: $0.84
If ALL meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $37.29, suggesting upside of 9.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

Credit Suisse rates AMP as Outperform (1) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter.

The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

AMP is the sole stock in the sector that is enjoying an Outperform rating. Price target maintained at $2 on slightly increased forecasts.

Target price is $2.00 Current Price is $1.86 Difference: $0.14
If AMP meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.83, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in December.

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 ASX as Underperform (5) -

Credit Suisse believes that the overall performance in H1 should be sufficient for revenue growth in the vicinity of 5% year-on-year, with the added comment that higher costs might translate into lower progress at the bottom line.

As the analysts are forecasting a general slowing in EPS growth, with tailwinds tapering off, their focus shifts to the stock's premium valuation. Hence why the rating remains Underperform. Target price improves to $70 from $60.

Estimates have been slightly increased, but only for the current financial year.

Target price is $70.00 Current Price is $80.40 Difference: minus $10.4 (current price is over target).
If ASX meets the Credit Suisse target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $72.42, suggesting downside of -9.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.7

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

Credit Suisse rates CGF as Neutral (3) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter. The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Overall, only minor changes have been made to forecasts for Challenger. The analysts observe the shares continue trading at a -15% discount to the broader market whereas they used to enjoy a premium. Target price remains at $7.20, with a Neutral rating.

Target price is $7.20 Current Price is $8.09 Difference: minus $0.89 (current price is over target).
If CGF 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 $7.28, suggesting downside of -10.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Ord Minnett rates EXP as Buy (1) -

In line with the intentions expressed at last year's AGM, management is selling businesses in order to concentrate on the skydiving operations and the marine assets in far North Queensland. Ord Minnett observes Great Barrier Reef Helicopters plus the canyoning businesses are to be sold for combined proceeds of $17.5m, generating an estimated loss on the sale of circa -$4m pre-tax.

More divestments should be expected and the analysts are encouraged by the execution to date. They add the balance sheet is getting into good shape. FY20 will continue to be a "clean-up" year, they argue, not made easier due to ongoing external headwinds.

Buy rating retained alongside a price target of $0.33, up from $0.31 previously. Ord Minnett considers the reduced debt level an apposite compensation for the loss in forecast earnings.

Target price is $0.33 Current Price is $0.24 Difference: $0.09
If EXP meets the Ord Minnett target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Credit Suisse rates IAG as Neutral (3) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter. The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Only minor changes have been made to forecasts with slightly better performance from global markets compensating for increased peril claims from Australian bushfires. Target price remains $8 alongside a Neutral rating.

Credit Suisse continues to expect a share buyback to the tune of $750m.

Target price is $8.00 Current Price is $7.59 Difference: $0.41
If IAG meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $7.63, suggesting upside of 0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Ord Minnett rates LYC as Buy (1) -

Ord Minnett has updated for December quarter price movements, which has caused a -20% reduction in forecast earnings for FY20. Price target falls by -10c to $4.80. Buy rating reiterated as the analysts believe today's valuation remains extremely attractive.

Having said so, the next update by the company is expected to be weak due to already flagged supply disruption and weak product prices.

Ord Minnett analysts note Malaysian political uncertainty remains. The next key regulatory hurdle remains the operating license renewal, due for March 3 this year. They do believe the license will be renewed.

Meanwhile, in the background, Lynas's strategic importance to the US government could become a game changer, the analysts suggest.

Target price is $4.80 Current Price is $2.33 Difference: $2.47
If LYC meets the Ord Minnett target it will return approximately 106% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Citi rates MFG as Sell (5) -

Citi analysts observe there is a lot to like about Magellan Financial. The business continues to track well, with ongoing sector leading inflows, accompanied by a beat on 1H20 performance fees. There remains the added attraction of leverage to global markets.

However, the analysts also note investment outperformance is moderating, while the stock's valuation is considered "fairly rich". In addition, Magellan's key medium-term growth opportunities are likely some time away.

Citi thus sticks by its Sell rating for the shares, with an updated price target of $52.

Target price is $52.00 Current Price is $58.88 Difference: minus $6.88 (current price is over target).
If MFG meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $49.54, suggesting downside of -15.9% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

Credit Suisse rates MFG as Underperform (5) -

Magellan Financial remains the stand-out in a domestic sector of asset managers that are otherwise underperforming and suffering funds outflows, comment analysts at Credit Suisse. It's just that the full valuation of the shares makes it hard to keep a positive view, in their opinion.

Underperform rating maintained with the analysts suggesting the big premium that has been built-in leaves the stock vulnerable to a nasty correction. Short term, they add, fund performance has softened which could translate into one-year relative underperformance kicking in later in the year.

Earnings estimates have been lifted by 3-4%. Target price lifts to $52.50 from $49.30.

Target price is $52.50 Current Price is $58.88 Difference: minus $6.38 (current price is over target).
If MFG 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 $49.54, suggesting downside of -15.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

Credit Suisse rates MPL as Underperform (5) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter. The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Underperform rating and $2.90 target maintained as the analysts only implement minimal changes to estimates. They note the shares are more or less trading in line with their historical 20% premium to the broader market.

Target price is $2.90 Current Price is $3.19 Difference: minus $0.29 (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 $3.01, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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 has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter. The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Underperform rating and target of $5.75 left unchanged as any changes made to estimates remained minimal. The analysts observe the shares have lost the bulk of their traditional valuation premium vis-a-vis the broader market.

Target price is $5.75 Current Price is $6.32 Difference: minus $0.57 (current price is over target).
If NHF 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 $6.56, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

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

Credit Suisse has conducted a general re-assessment of asset managers in Australia. The sector update is mostly negative because of weaker inflows and lower performance fees, with Magellan Financial the notable exception.

The broker's ranking in order of preference is Perpetual first, followed by Magellan Financial, Platinum, then Pendal Group.

The analysts expect FY20 to be yet another challenging year for Pendal Group. They point out industry data are revealing further retail outflows at JO Hambro in the UK. Weak fund performance might skew risk to the downside, and thus the rating has been pulled back to Underperform from Neutral.

Price target drops to $8.15 from $8.40.

Target price is $8.15 Current Price is $8.51 Difference: minus $0.36 (current price is over target).
If PDL meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.35, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Credit Suisse rates PPT as Neutral (3) -

Credit Suisse has conducted a general re-assessment of asset managers in Australia. The sector update is mostly negative because of weaker inflows and lower performance fees, with Magellan Financial the notable exception.

The broker's ranking in order of preference is Perpetual first, followed by Magellan Financial, Platinum, then Pendal Group.

Weak fund performance in particular is weighing down the manager's leverage to otherwise (seemingly) buoyant equity markets. The analysts continue to anticipate further funds outflows. Neutral rating retained. Price target remains $41.

Target price is $41.00 Current Price is $41.59 Difference: minus $0.59 (current price is over target).
If PPT 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 $37.87, suggesting downside of -8.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 Downgrade to Underperform from Neutral (5) -

Credit Suisse has conducted a general re-assessment of asset managers in Australia. The sector update is mostly negative because of weaker inflows and lower performance fees, with Magellan Financial the notable exception.

The broker's ranking in order of preference is Perpetual first, followed by Magellan Financial, Platinum, then Pendal Group.

On current forecasts, Platinum Asset Management's profits are anticipated to remain largely unchanged between FY19-FY22, despite a seemingly buoyant environment for global equity markets. This is seen as utterly disappointing by the analysts.

Credit Suisse downgrades to Underperform from Neutral. Target price drops to $4.05 from $4.15.

Target price is $4.05 Current Price is $4.40 Difference: minus $0.35 (current price is over target).
If PTM 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 $3.78, suggesting downside of -14.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.8

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

Credit Suisse rates QBE as Neutral (3) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter.

The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Neutral and $12.55 target retained on minor adjustments only. The analysts observe the shares are trading at a -20% discount to the broader market, slightly higher compared with the historical discount of -25%.

Target price is $12.55 Current Price is $13.02 Difference: minus $0.47 (current price is over target).
If QBE meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.14, suggesting upside of 0.9% (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: 0.4

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

Credit Suisse rates SGM as Outperform (1) -

Credit Suisse analysts note US competitor CMC has reported ongoing subdued performance and market indications about scrap in the Americas. The analysts see further confirmation of low expectations for what will be a "very weak" H1 performance for Sims Metal in February.

Outperform rating and $10.60 target maintained. Credit Suisse considers the bounce in the share price justified, on indications US scrap has recovered from its cycle low prices. The stock is seen as fairly valued at present prices.

Target price is $10.60 Current Price is $11.06 Difference: minus $0.46 (current price is over target).
If SGM meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.09, suggesting downside of -8.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Morgan Stanley rates SGP as Overweight (1) -

Failed retailer Harris Scarfe will be slimming down, effectively closing down stores and Stockland appears to be the most heavily impacted owner of shopping malls and retail operated properties. The direct impact is rather benign, however, but analysts at Morgan Stanley point out the retailer's administrators will be keen to renegotiate terms for ongoing leases with all landlords, so the impact overall should be larger.

Vicinity Centres ((VCX)) and GPT ((GPT)), as well as Scentre Group ((SCG)) will be equally affected.

Apart from yet another retailer failure (here's a trend for investors to take note of), Morgan Stanley also points at ongoing structural challenges for the sector, currently accompanied by cyclical headwinds. They retain the view it remains difficult to expect pure-play retail mall owners outperforming their most preferred exposures in the sector, which include Goodman Group ((GMG)), Mirvac Group ((MGR)) and Stockland.

Target is $5.50. Rating remains Overweight. Industry view is In-Line. The analysts remain attracted to Stockland because of anticipated resi-market recovery and a general underappreciation of the company's potential in logistics.

Target price is $5.50 Current Price is $4.75 Difference: $0.75
If SGP meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.49, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

Credit Suisse rates SUN as Underperform (5) -

Credit Suisse has marked-to-market forecasts for insurers in Australia, incorporating investment market movements in the December quarter. The broker's updated order of preference for the sector is now AMP, Tower ((TWR)), Steadfast Group ((SDF)), AUB Group ((AUB)), QBE Insurance, Insurance Australia Group, Suncorp, Medibank Private, then nib Holdings.

Today's update has added 2% to this year's EPS forecast, with minimal adjustments for outer years. However, the forecast for H1 has been lowered by -8%, while H2 went up by 13%. No changes made to $12.75 price target or the Underperform rating.

Target price is $12.75 Current Price is $13.01 Difference: minus $0.26 (current price is over target).
If SUN meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.38, suggesting upside of 2.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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