Australian Broker Call

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

The recovery in steel prices at the beginning of 2019 has stalled, Morgan Stanley observes. The broker still envisages steel prices will support strong earnings and cash flow but in the short term are unlikely to trend higher.

The broker adjusts estimates for earnings (EBIT) across FY19 and FY20, raising by 3.4% and downgrading by -7.1% respectively. One event that may provide a positive catalyst is a formal announcement of a North Star expansion. The broker considers this highly likely to proceed as the returns are potentially attractive.

Rating is downgraded to Equal-weight from Overweight, and Morgan Stanley would look for steel price momentum to re-start before becoming a buyer again. Target is reduced to $17 from $18. Industry view: Cautious.

Target price is $17.00 Current Price is $14.30 Difference: $2.7
If BSL meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $15.79, suggesting upside of 10.4% (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

Morgans rates CGC as Hold (3) -

Morgans attended the investor tour of the Chinese operations, which has reinforced the view that the berry business is on the verge of a step change in earnings. The broker now forecasts FY19 net profit to be up 37.9% and ahead of guidance.

Nevertheless, the broker continues to wait for a more attractive entry point to the stock to provide greater downside protection against the exposure to agricultural risk. Hold rating maintained. Target is reduced to $5.68 from $5.80.

Target price is $5.68 Current Price is $5.05 Difference: $0.63
If CGC meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.87, suggesting upside of 16.1% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates CHC as Outperform (1) -

Macquarie has assessed the potential for Charter Hall to acquire AMP's ((AMP)) real estate platform following media speculation regarding potential acquirers. The broker considers it would be dilutive to earnings per share for Charter Hall to acquire the platform.

The acquisition would also not be entirely in keeping with the company's strategy, given the retail exposure. Macquarie maintains an Outperform rating and raises the target to $10.53 from $9.67, driven by expanded multiples.

Target price is $10.53 Current Price is $10.04 Difference: $0.49
If CHC meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $10.03, suggesting downside of -0.1% (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 CSR as Downgrade to Neutral from Outperform (3) -

Macquarie notes the US market is experiencing incremental improvement and low single-digit growth is considered the most likely outcome for housing starts in 2019. Home builders remain cautiously optimistic entering the spring selling season.

Meanwhile, Australian housing starts are estimated to fall to around 150,000 in 2020. The broker downgrades CSR to Neutral from Outperform as the rally in the stock has rebalanced the risk/reward. Target is $3.45.

Target price is $3.45 Current Price is $3.47 Difference: minus $0.02 (current price is over target).
If CSR meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.20, suggesting downside of -7.8% (ex-dividends)

The company's fiscal year ends in March.

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 CWN as Neutral (3) -

Crown Resorts has received a takeover proposal from Wynn Resorts, from which Wynn Resorts has abruptly walked away. Ahead of this latest development, Credit Suisse believed the proposed price of $14.75 a share was good value, surpassing its valuation by 30%.

There is no material synergy, Credit Suisse assesses, but Australia is considered an attractive gambling market which has shown modest growth for 20 years.

The broker also suggests it is unlikely that Star Entertainment ((SGR)) will put forward a counter proposal. Neutral maintained. Target is raised to $15.00 from $11.40.

Target price is $15.00 Current Price is $12.79 Difference: $2.21
If CWN meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $12.90, suggesting upside of 0.9% (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

Deutsche Bank rates CWN as Hold (3) -

Deutsche Bank considers the Wynn Resorts takeover bid for Crown Resorts - from which Wynn Resorts has now abruptly walked away - at an implied offer price of $14.75 a share was opportunistic.

It valued Crown Resorts on depressed VIP earnings and a subdued main floor performance in Melbourne and Perth.

The broker had believed Wynn could extract synergies across corporate, VIP and premium mass markets. Impediments to the deal could include the ATO dispute and probity.

The broker considers the proposal highlights attractive features in the Australian gambling market and a privileged asset which has an undemanding valuation. Target is raised to the offer price of $14.75 from $11.70 and a Hold rating is maintained.

Target price is $14.75 Current Price is $12.79 Difference: $1.96
If CWN meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $12.90, suggesting upside of 0.9% (ex-dividends)

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

Ord Minnett rates DMP as Lighten (4) -

After a tour of the Japanese business Ord Minnett observes the pizza market share of the segment is low, and corporate stores will remain a significant part of the company's network.

Expanding the addressable market is a key driver of the company's strategy, with smaller and lower-priced pizzas and improved service. Ord Minnett maintains a Lighten rating and $42 target.

Target price is $42.00 Current Price is $43.69 Difference: minus $1.69 (current price is over target).
If DMP meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $44.40, suggesting upside 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

UBS rates DMP as Neutral (3) -

The company has highlighted the size of the opportunity in Japan in an investor briefing. The strategy makes sense to UBS and the main issue is about how the value range resonates, as well as the ability to expand demand outside the occasional purchase.

UBS wants to become more positive on the business, given the size of the opportunity and the upside across both Japan and Europe, but envisages near-term risk is more balanced. Guidance appears fair, although headwinds remain.

Neutral rating and $48.50 target maintained.

Target price is $48.50 Current Price is $43.69 Difference: $4.81
If DMP meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $44.40, suggesting upside 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

Citi rates FNP as Buy (1) -

Citi analysts returned from the company's Investor Day with a general sense the expansion program for dairy is progressing well. Further out, the analysts predict more of UHT product will end up in Asia, which should translate into higher margins for the company.

In addition, liquid lactoferrin production has commenced on schedule this month, with dedicated dryers to come online over the next few weeks for initial powder production up to 16MT, Citi reports. The analysts add incremental capex for further expansion will remain minimal in the bigger scheme of things.

All of the above combined has strengthened the analysts' view that Freedom Foods Group remains a story of expanding margins over the medium term, and this supports the broker's positive view, as witnessed by the Buy rating. Target price unchanged at $6.55.

Target price is $6.55 Current Price is $5.13 Difference: $1.42
If FNP meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $6.01, suggesting upside of 17.2% (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

Morgan Stanley rates MIN as Overweight (1) -

The company has announced an offering of senior unsecured notes to a principal amount of around US$750m. Cash proceeds will be used to refinance some credit facilities and for general corporate purposes.

Morgan Stanley estimates the company's debt will peak at around $811m in June, after which the ramp up of operation should ease the debt burden. Overweight rating, $21.50 target maintained. Industry view: Attractive.

Target price is $21.50 Current Price is $17.05 Difference: $4.45
If MIN meets the Morgan Stanley target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $19.83, suggesting upside of 16.3% (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

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

A gas agreement has been announced with the PNG government. Morgan Stanley believes the probability of Santos ((STO)) farming into P'nyang has increased following this deal. Also, ExxonMobil's inclusion in the project likely underpins a final investment decision.

While Oil Search has underperformed peers over the last couple of years, the broker believes that if the company successfully delivers on expansion milestones this could change.

The broker retains an Equal-weight rating. Target is $8. Industry view is In-Line.

Target price is $8.00 Current Price is $8.06 Difference: minus $0.06 (current price is over target).
If OSH 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 $8.59, suggesting upside of 6.6% (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: 0.3

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

Ord Minnett rates OSH as Hold (3) -

The company and partners have signed the Papua LNG gas agreement. Key features include domestic market obligation and a deferred payment mechanism for past costs. The next step will be gas agreement for P'nyang. A final investment decision is still expected in 2020 and first gas in 2024.

Ord Minnett makes a few adjustments to ownership stakes, lowering the company's share of PNG LNG expansion to 22%. Ownership of the Alaskan project has been increased to 35%, assuming the company exercises its option to buy another 25% and then sells down for zero net cash.

Hold rating maintained. Target is reduced to $8.55 from $8.65.

Target price is $8.55 Current Price is $8.06 Difference: $0.49
If OSH meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.59, suggesting upside of 6.6% (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: 0.3

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

UBS rates OSH as Neutral (3) -

Oil Search has confirmed that parties to its planned expansion of PNG LNG have agreed on the domestic market obligation, deferred payment mechanism and the national content requirement.

No further details of the fiscal terms were outlined but UBS is increasingly confident of the FEED entry for PNG expansion in 2019. A final investment decision is still targeted for 2020. Neutral rating and $8.00 target maintained.

Target price is $8.00 Current Price is $8.06 Difference: minus $0.06 (current price is over target).
If OSH 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 $8.59, suggesting upside of 6.6% (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: 0.3

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

Morgans rates PPS as Add (1) -

The company has lost its largest SMA platform client, ANZ Private, to a rival operator. Morgans observes the loss is further evidence of the intense competition throughout the investment platform industry. Praemium's separately managed account technology is widely regarded as one of the best platforms available.

Morgans downgrades forecasts to reflect the loss of the business, partly offset by new client wins. The business trades on high multiples of earnings and thus needs to maintain a high level of revenue growth to sustain the current share price, the broker believes.

As the stock trades at a discount to valuation the broker maintains an Add rating. Target is reduced to $0.60 from $0.87.

Target price is $0.60 Current Price is $0.43 Difference: $0.17
If PPS meets the Morgans target it will return approximately 40% (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 RMD as Buy (1) -

Deutsche Bank attended the investor briefing in the US. The focus of the briefing was on addressing some of the issues raised in the second quarter results. More insights were provided into the Verily joint venture with an overview of the Propeller Health acquisition.

Deutsche Bank increases earnings forecast by 1-2% for FY21-24. Management has guided to strong double-digit returns from investments which, if achieved, the broker suggests could provide 10% upside to FY22 forecasts. Buy rating and US$129 target maintained.

Current Price is $14.18. Target price not assessed.

Current consensus price target is $15.08, suggesting upside of 6.3% (ex-dividends)

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: 0.3

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

Citi rates SGM as Neutral (3) -

Citi attended a tour visiting the company's operations in Adelaide. They find the timing for commissioning the Zorba separation plant falls into line with the Chinese placing restrictions on category 6 scrap imports.

It is Citi's view that the high-quality, furnace-ready product from Zorba has the potential to avoid China's import restrictions. The plant is the first of its kind in the Southern Hemisphere.

The good news hasn't stopped Citi from reducing forecasts, including for dividends. Neutral rating retained, as well as the $11.50 price target.

Target price is $11.50 Current Price is $10.54 Difference: $0.96
If SGM meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $12.03, suggesting upside of 14.1% (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

Credit Suisse rates SGM as Outperform (1) -

The company's strategy briefing has outlined significant changes, whereby Sims Metal will invest in energy generation and roll out the small Australian landfill gas capture concept in the US and UK. The company is targeting 40% growth in US ferrous business and over 100% growth in non-ferrous over five years.

Credit Suisse finds it positive that the growth is staged and conditional on success from early returns on initial investments that test and demonstrate the concepts. On the negative side, the company is reclaiming the balance sheet to invest in aspirational growth, taking on new risk rather than returning cash to shareholders.

Franking has now largely depleted. Future dividends will only be paid where they can be 100% franked. Almost all the growth appears to be from offshore initiatives, Credit Suisse points out. Outperform rating and $12.90 target maintained.

Target price is $12.90 Current Price is $10.54 Difference: $2.36
If SGM meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $12.03, suggesting upside of 14.1% (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

Deutsche Bank rates SGM as Hold (3) -

The company has showcased its new strategy. Deutsche Bank suspects, while the 15% return target is pleasing, there is unlikely to be significant upside from the waste-to-energy and landfill proposals until FY25 or later.

Including sustaining capital expenditure, the broker now factors in around $240m for FY20/21. US volume growth is expected to eventuate but Deutsche Bank is also conservative about the outcome for gasification and Sims Energy. Hold rating maintained along with a $11 target.

Target price is $11.00 Current Price is $10.54 Difference: $0.46
If SGM meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $12.03, suggesting upside of 14.1% (ex-dividends)

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

Ord Minnett rates SGM as Buy (1) -

The company has announced new business initiatives in the waste-to-energy segment, as well as the offshore expansion of existing landfill gas capabilities. The company considers the best waste-to-energy implementations are in Australia and the US. The first site is planned for Australia, co-located with the processing facility and operational in 2022. The expected capital cost is $158m over five years.

The company then expects to roll out seven sites over the next 10 years on a case-by-case basis. Ord Minnett envisages some risk that capital from outside the industry could disrupt the waste management value chain but mainly in the municipal channel. The broker still, however, believes this industry is the best positioned to generate returns from this waste-to-energy stream.

Ord Minnett maintains a Buy rating and $13.20 target.

Target price is $13.20 Current Price is $10.54 Difference: $2.66
If SGM meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $12.03, suggesting upside of 14.1% (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

Ord Minnett rates STO as Buy (1) -

Santos has completed the phase 1 of the Moomba South appraisal drilling. All wells intersected gas. Ord Minnett believes this is positive for joint-venture partners, although the incremental supply will not balance the east coast gas market.

The broker estimates increasing the well count in the Cooper Basin by 50% over the next 5-10 years will increase supply by only 10 petajoules per annum, not enough to offset the declines from offshore Victoria.

Buy rating maintained. Target is $7.50.

Target price is $7.50 Current Price is $6.98 Difference: $0.52
If STO meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $6.94, suggesting downside of -0.6% (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

Macquarie rates SUN as Underperform (5) -

With pressure on guidance for net interest margin and cash returns targets, Macquarie envisages downside risk to earnings in FY20. The broker updates its numbers on the back of changes to its economic forecasts.

FY19 estimates for earnings per share are downgraded by -2.8% and FY20 by -1.5%. Target is raised to $13.00 from $12.50. Underperform rating maintained.

Target price is $13.00 Current Price is $13.29 Difference: minus $0.29 (current price is over target).
If SUN meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.97, suggesting upside of 5.1% (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