Australian Broker Call

Credit Suisse rates ABC as Neutral (3) -

The broker has taken on board the admission by sector peer Boral ((BLD)), that increased infrastructure activity will not be enough to offset falling residential construction for concrete and cement, in cutting forecasts for Adelaide Brighton.

Target falls to $3.70 from $3.90, Neutral retained.

Target price is $3.70 Current Price is $4.00 Difference: minus $0.3 (current price is over target).
If ABC 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 $3.86, suggesting downside of -3.6% (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 ABP as Initiation of coverage with Outperform (1) -

The broker initiates coverage of Abacus Property with an Outperform rating, believing the investment fundamentals are becoming more attractive as the business transitions away from being a real estate trader towards acquiring assets offering recurring revenues, specifically self-storage, which the broker sees as continuing to grow strongly.

Abacus trades at a discount to the ASX200 REIT index and the broker suggests near term earnings will continue to slide as assets are sold and strategy is realigned, but by FY20 sustainable earnings growth should emerge. Target $4.00.

Target price is $4.00 Current Price is $4.01 Difference: minus $0.01 (current price is over target).
If ABP meets the Credit Suisse target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.76, suggesting downside of -6.3% (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 AMC as Buy (1) -

The company has received final regulatory clearance from the US Department of Justice for the merger transaction with Bemis.

Citi considers this a positive outcome and likely to lead to upgrades for consensus FY21 and FY22 estimates. Citi reiterates a Buy rating with a $16.10 target.

Target price is $16.10 Current Price is $16.30 Difference: minus $0.2 (current price is over target).
If AMC meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.00, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in June.

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: 0.6

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

Citi rates AWC as Buy (1) -

China's imports of alumina in April were 57,000t, or a net 19,000t. China has been reported actively seeking more alumina to cover a shortage because of the shutdown of the Xinfa refinery in early May.

Citi forecasts an alumina price of US$380/t and US$375/t in 2020 and 2021 respectively. Alumina Ltd is expected to benefit from improved forecast realisations, while caustic soda prices have continued to moderate.

Citi maintains a Buy rating and $2.50 target.

Target price is $2.50 Current Price is $2.40 Difference: $0.1
If AWC meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.55, suggesting upside of 6.3% (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

Citi rates AX1 as Downgrade to Neutral from Buy (3) -

Citi remains a supporter of the company's growth strategies, including the increase in vertical brand/accessory penetration and the acquisition of The Athlete's Foot franchises.

However, the broker downgrades to Neutral from Buy as the share price has increased 24% in the year to date.

Moreover, future growth could be more challenging as the company has largely cycled the benefit of reduced discounting. Citi reduces the target to $1.61 from $1.75.

Target price is $1.61 Current Price is $1.40 Difference: $0.21
If AX1 meets the Citi target it will return approximately 15% (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

Citi rates BLD as Buy (1) -

Management has reaffirmed FY19 guidance for its Australian segment, highlighting that, while a strong June is required, weather conditions remain favourable. Management has also indicated that North American headwinds have been offset, Citi notes.

Negotiations with Knauf on the USG joint venture stake are substantially progressed and the company is confident it can fund the acquisition with existing debt facilities.? Citi reiterates a Buy rating and $5.85 target.

Target price is $5.85 Current Price is $5.20 Difference: $0.65
If BLD meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.77, suggesting upside of 11.0% (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

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

UBS believes the opportunity for Carsales.com lies with lifting depth contributions, repairing display and growing internationally. In South Korea there are many drivers for longer-term growth, the broker observes, including greater penetration of the dealer base.

Forecasts are raised to factor in improved execution, although UBS suspects the market is already pricing in success. Hence, rating is downgraded to Neutral from Buy. Target is raised to $14.00 from $12.50.

Target price is $14.00 Current Price is $12.99 Difference: $1.01
If CAR meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $14.04, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.9

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

Citi rates CCX as Downgrade to Sell from Neutral (5) -

While the growth prospects are good, Citi finds there is insufficient margin of safety at current prices. Moreover, the company has an element of fashion risk and the broker believes the share price needs to be lower to provide a satisfactory reward.

Rating is downgraded to Sell from Neutral. The broker increases estimates for earnings per share by 3% for FY19 and 9% for FY20. Target is raised to $1.60 from $1.45.

Target price is $1.60 Current Price is $1.69 Difference: minus $0.09 (current price is over target).
If CCX meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

UBS rates DMP as Neutral (3) -

UBS suspects store growth may disappoint the market in FY19. The broker believes this is important because of the loss of royalty income and up-front franchise fees. It would also lower confidence around store targets and FY20 growth.

UBS estimates the shortfall could result in a maximum drag of -$6m (-3%) on earnings (EBIT) and adds risk to the guidance for FY19 EBIT at the lower end of $227-247m.

Neutral rating and $48.50 target maintained.

Target price is $48.50 Current Price is $37.81 Difference: $10.69
If DMP meets the UBS target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $43.27, suggesting upside of 14.4% (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 ECX as Buy (1) -

First half earnings were down -46%, characterised, as Citi expected, by a solid performance from the core fleet and novated leasing businesses. New business written during the period grew 10% while financed assets grew 12% and fleet volumes 14%.

While there was no clarity on the proposed divestments of non-core business, Citi believes potential suitors for the company's core businesses should be encouraged by current valuation levels. Buy/High Risk rating and $1.29 target are maintained.

Target price is $1.29 Current Price is $1.39 Difference: minus $0.1 (current price is over target).
If ECX meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.44, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in September.

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 ECX as Equal-weight (3) -

Morgan Stanley observes new management has made a positive start in clearing the decks, with the decision to separate out the performance of the core business allowing the market to have more conviction in its trajectory.

The broker assesses the risks to the balance sheet are easing. Morgan Stanley expects any potential disposal of non-core assets will be a catalyst for the stock. Equal-weight rating. Industry view is In-Line. Target is raised to $1.35 from $1.00.

Target price is $1.35 Current Price is $1.39 Difference: minus $0.04 (current price is over target).
If ECX meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.44, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in September.

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 ECX as Buy (1) -

The first half result has emphasised the core fleet and novated leasing business, with medium-term growth driven by improved operating performance and cost optimisation initiatives.

UBS believes the probability of a breach to debt covenants has materially reduced and, as a result, the market will begin to ascribe value to the core business. The broker retains a Buy rating and raises the target to $1.50 from $1.00.

Target price is $1.50 Current Price is $1.39 Difference: $0.11
If ECX meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.44, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in September.

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 IRE as Neutral (3) -

The company has acquired QuantHouse for EUR38.9m, to be funded by debt. The business is expected to incur a minor loss in 2019 but should be accretive to earnings in FY20.

While the company's high visibility on earnings is likely to be considered favourably, Macquarie believes, at current valuations levels, there is limited upside.

Neutral rating is maintained. Target rises 3.9% to $13.69.

Target price is $13.69 Current Price is $13.11 Difference: $0.58
If IRE meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.45, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates MGX as Neutral (3) -

Mount Gibson has achieved its first shipments from Koolan Island for the current quarter and the focus is now on delivering on targets. Around 80% of ramp-up production is accounted for and Macquarie does not believe the increased complexity in the offtake agreement will be an issue.

The company has approved the transfer of interests within the agreement to Newton from Shougang Concord and two ACe Profit Investments from SCIT Trading. The broker does not believe this will change anything operationally. Neutral rating and $1.10 target maintained.

Target price is $1.10 Current Price is $1.10 Difference: $0
If MGX meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

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

Citi rates MHJ as Upgrade to Buy from Neutral (1) -

Citi upgrades to Buy from Neutral based on the valuation appeal and strategic initiatives being undertaken, including the new promotional strategy and increased focus on Canadian store productivity.

The share price has fallen -25% from its recent peak, the broker observes. Target is steady at $0.63.

Target price is $0.63 Current Price is $0.55 Difference: $0.08
If MHJ meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $0.75, suggesting upside of 37.0% (ex-dividends)

The company's fiscal year ends in March.

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 MTS as Upgrade to Hold from Sell (3) -

The re-signing of Drakes in Queensland for another five years signals to Deutsche Bank that an economically viable alternative for supply could not be found at this stage.

Moreover, the extension of the Drakes contract in South Australia by four months highlights the complexity of establishing a new distribution centre.

While top-line growth looks challenging, the broker notes more cost reductions have been confirmed and food inflation is becoming real.

Deutsche Bank upgrades to Hold from Sell. Target is $2.80.

Target price is $2.80 Current Price is $3.06 Difference: minus $0.26 (current price is over target).
If MTS meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.84, suggesting downside of -7.1% (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

Morgan Stanley rates MTS as Overweight (1) -

Metcash has extended its contract to supply Drakes' Queensland stores for five years while the supply agreement with Drakes in South Australia, due to end June 30, has been extended to the end of September.

The latter suggests upside potential for FY20/21 earnings forecasts, Morgan Stanley points out. The broker retains an Overweight rating and $3.40 target. Industry view: Cautious.

Target price is $3.40 Current Price is $3.06 Difference: $0.34
If MTS meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.84, 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 MTS as Buy (1) -

Drakes will extend its Queensland supply agreement with Metcash for a further five years. The Drakes SA agreement, due to end this month, has been extended for at least four months because of delays in the new distribution centre.

UBS estimates this will add at least 2% to FY20 earnings per share for Metcash. Buy rating and $3.15 target maintained. The broker also believes the outlook for Australia's supermarket sector is improving.

Target price is $3.15 Current Price is $3.06 Difference: $0.09
If MTS meets the UBS target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $2.84, 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

Deutsche Bank rates NUF as Buy (1) -

In response to recent reports regarding glyphosate, Nufarm has acknowledged the potential for litigation and earnings risk.

Nufarm points out it has not been named in any litigation and many of the features of the lawsuits relate specifically to the producer, Monsanto/Bayer.

While the market may be pricing in another downgrade to earnings and likely equity raising, Deutsche Bank believes it is too early, as June and July are key selling months.

Deutsche Bank maintains a Buy rating and $5.70 target.

Target price is $5.70 Current Price is $3.73 Difference: $1.97
If NUF meets the Deutsche Bank target it will return approximately 53% (excluding dividends, fees and charges).

Current consensus price target is $6.33, suggesting upside of 69.6% (ex-dividends)

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

Macquarie rates NUF as Outperform (1) -

The company has provided an update on its glyphosate-based formulation given the significant verdicts from US courts against Monsanto as well as recent media coverage. Glyphosate represents 12% of the company's gross profit.

Importantly, Nufarm does not manufacture glyphosate but purchases the material from manufacturers to formulate into glyphosate-based products for sale.

Monsanto/Bayer has been the main focus of litigation to date. The potential risks are difficult to quantify and Macquarie suggests the valuation is already factoring in a substantial discount in this regard. The shares are down -47% since August 2018.

The broker maintains an Outperform rating and $6.38 target.

Target price is $6.38 Current Price is $3.73 Difference: $2.65
If NUF meets the Macquarie target it will return approximately 71% (excluding dividends, fees and charges).

Current consensus price target is $6.33, suggesting upside of 69.6% (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 PMV as Sell (5) -

Citi expects sales momentum to slow in the second half with moderation across core brands. Retail earnings are expected to grow by around 7% over the three years to FY20.

This is a healthy rate of headline growth for a retailer, however, the expansion of Smiggle into new markets through wholesaling and concession relationships is the main driver and the broker assesses this is higher risk.

Sell rating maintained. Target is reduced to $15.50 from $15.60.

Target price is $15.50 Current Price is $15.97 Difference: minus $0.47 (current price is over target).
If PMV meets the Citi target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.02, suggesting upside of 12.8% (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

Morgans rates PPE as Add (1) -

The company has announced the acquisition of Halcyon Knights, an IT recruitment company, for $13.5m. This will increase People Infrastructure's exposure to the sector and Morgans estimates an increase to FY20 earnings per share of 16%.

Given the attractive growth profile and undemanding FY20 PE of 12.7x the broker maintains an Add rating. Target is raised to $3.10 from $2.63.

Target price is $3.10 Current Price is $2.75 Difference: $0.35
If PPE meets the Morgans target it will return approximately 13% (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

Morgans rates PWH as Add (1) -

Morgans expects momentum to continue, led by motor sports and the automotive aftermarket. Sales from key supercar manufacturers such as Ferrari, Lamborghini and Aston Martin Lagonda suggest demand for super cars remains high and this bodes well for the company's OEM pipeline.

Morgans continues to believe this is a high-quality business with a clear focus on high-end cooling solutions. Add rating maintained. Target is raised to $4.82 from $4.21 as valuation is rolled forward to FY20.

Target price is $4.82 Current Price is $4.04 Difference: $0.78
If PWH meets the Morgans target it will return approximately 19% (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 SBM as Neutral/High Risk (3) -

Gold production at Gwalia has been downgraded, the second such downgrade in FY19 and a disappointment for Citi, given guidance was reiterated on May 15.

The latest downgrade reflects operating issues with a new paste fill circuit. The stock has fallen -44% over the past year, weighed down by downgrades and uncertainty regarding the Atlantic Gold takeover, the broker observes.

Citi keeps a Neutral rating but moves to a High Risk notation until some of the issues are resolved. Target is reduced to $3.10 from $3.49.

Target price is $3.10 Current Price is $2.59 Difference: $0.51
If SBM meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.14, suggesting upside of 21.4% (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