Australian Broker Call

Morgan Stanley rates AGL as Underweight (5) -

Morgan Stanley suggests the uncertainty in Australia's policy environment recently and political developments have caused the shares to decline around -3-4%. Based on the performance of share prices through previous similar political developments, which have involved energy policy debates, the broker believes the impact is now reflected in AGL's share price.

The broker believes there is an urgency for self-help initiatives, and earnings are likely to peak in FY19 for AGL Energy and decline thereafter. Projected returns are near the bottom of returns for stock coverage and Morgan Stanley envisages downside risk. Underweight rating maintained. Target is $19.44. Industry view is Cautious.

Target price is $19.44 Current Price is $19.17 Difference: $0.27
If AGL meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $21.18, suggesting upside of 10.5% (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 EVN as Neutral (3) -

After reflecting on the company's strategy briefing and a site visit, UBS has lifted production forecasts for Cowal to 300,000 ounces per annum from 2023. While capital expenditure guidance for FY19-21 is higher than the broker forecasts, much of this is for growth in production or mine life that had not been previously factored in. This is now included.

Much of the extra expenditure at Cowal is in the expansion of the plant or tailings upgrade and these are now included as well as underground mine development. UBS does not yet factor in the aspiration to lift Mungari production back to 150,000 ounces per annum.

Overall, the broker considers the stock fairly valued against peers and maintains a Neutral rating. UBS suggests, for those investors looking for gold price exposure, high cash generation and minimal specific company risk the stock is a good option. Target is $2.90.

Target price is $2.90 Current Price is $2.64 Difference: $0.26
If EVN meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 14.7% (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 HUO as Buy (1) -

Ord Minnett envisages comparatively more earnings-per-share growth for Huon Aquaculture over the next two years because of margin expansion, versus Tassal Group ((TGR)). Production costs are not forecast to rise in FY19 at Huon Aquaculture.

The broker projects a reasonable annual earnings growth rate of 12% over the next two years, despite no volume growth. A Buy rating is maintained with a target of $5.41.

Target price is $5.41 Current Price is $4.45 Difference: $0.96
If HUO meets the Ord Minnett target it will return approximately 22% (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 HVN as Sell (5) -

Citi analysts have now updated their modeling, adjusting for the dilution from the capital raising to fund international expansion intentions. Sell rating retained. Target $3.

Target price is $3.00 Current Price is $3.45 Difference: minus $0.45 (current price is over target).
If HVN meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.72, suggesting upside of 7.7% (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

Morgan Stanley rates ORG as Overweight (1) -

Morgan Stanley suggests the uncertainty in Australia's policy environment recently and political developments have caused the shares to decline around -3-4%. Based on the performance of share prices through previous similar political developments, which have involved energy policy debates, the broker believes the impact is now reflected in Origin Energy's share price.

While not immune to competition in energy retail, Morgan Stanley believes headwinds further Origin Energy are diluted by the short energy strategy and the expansion in free cash flow from APLNG. Overweight rating maintained. Target is $10.08. Industry view is Cautious.

Target price is $10.08 Current Price is $8.19 Difference: $1.89
If ORG meets the Morgan Stanley target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $9.26, suggesting upside of 13.0% (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

Ord Minnett rates RIO as Accumulate (2) -

Ord Minnett retains a relative preference for Rio Tinto over BHP Billiton ((BHP)) following its recent underperformance. The stock now screen slightly more attractive on earnings and valuation.

Still, both appear well-positioned and the key catalyst is likely to be improving macro economic data, as China's stimulus starts to show up in fixed asset investment and infrastructure expenditure. Accumulate rating and $93 target maintained.

Target price is $93.00 Current Price is $72.42 Difference: $20.58
If RIO meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $86.52, suggesting upside of 19.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.7

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

UBS rates TAH as Buy (1) -

The company's lotteries division has made a strong start to the first quarter and UBS notes a 30% price rise has defied historical precedents, in both the quantum and the elasticities of demand from the change. The broker estimates first half lottery revenue is currently on track to achieve 12% revenue growth.

UBS upgrades FY19 estimates for earnings per share by 2%. Analysis suggests the lotteries revenue, up 35% year-on-year, is driven primarily by Powerball with the remainder of the games broadly flat.

The positive impact from changes to the game, more jackpots, and a significant price change begs the question as to how the lotteries business will be managed moving forward and what other growth opportunities might be tested.

Ultimately, UBS believes the market should ascribe a higher multiple to the business because of the near-exclusive market in which it operates, and steady growth as well as low capital requirements. Buy rating and $5.30 target maintained.

Target price is $5.30 Current Price is $4.92 Difference: $0.38
If TAH meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.26, suggesting upside of 6.9% (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

Ord Minnett rates TGR as Lighten (4) -

The company is aiming to grow its average fish size again in FY19, which Ord Minnett believes will result in increased costs for production year-on-year and likely restrict margin expansion.

With M&A and capital expenditure being deployed this takes the broker's forecast net debt/EBITDA multiple to 2.2x for FY19 estimates. Hence, Ord Minnett suggests the risk/reward ratio is skewed to the downside. Lighten rating and $4.05 target maintained.

Target price is $4.05 Current Price is $4.30 Difference: minus $0.25 (current price is over target).
If TGR meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.64, suggesting upside of 7.8% (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 WPL as Neutral (3) -

Citi analysts are entertaining scenarios whereby Woodside's balance sheet would allow for full funding for the Browse project. On their calculations, this is possible if crude oil averages US$65/bbl and with some leniency from credit agencies. The latter is seen as possible.

Also, there remains potential for synergies in between projects which means capex burden might turn out less. If the capex for each project were to reduce by -10%, say the analysts, Citi's risked DCF valuation would lift by $0.27/share, or 0.8%.

Target price remains $34.14. Rating remains Neutral. No changes made to forecasts.

Target price is $34.14 Current Price is $36.73 Difference: minus $2.59 (current price is over target).
If WPL 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 $34.71, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.1

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

Ord Minnett rates WPL as Hold (3) -

Management, after meeting with Ord Minnett, has reiterated that progress between Browse and North West Shelf partners is being made, with a tolling agreement to be submitted in late September or early October. The partners in the Browse JV are due to meet to review budget proposals for the next 12 months including selecting a concept.

Management remains confident in its latest cost estimates for the Browse development concept, at US$25bn, which includes projections for cost and wage escalation. The company has also stated a preference with respect to processing BHP Billiton's ((BHP)) equity share of Scarborough via a direct sales and purchasing agreement to sell gas to Pluto, although no decision has yet been made by BHP.

Management also reiterated a view that the LNG market is progressively tightening. Hold rating and $34.50 target maintained.

Target price is $34.50 Current Price is $36.73 Difference: minus $2.23 (current price is over target).
If WPL meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.71, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.1

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