Australian Broker Call

Credit Suisse rates ANZ as Downgrade to Neutral from Outperform (3) -

Credit Suisse points out ANZ's recent announcement, that it may have been too conservative in its approach to mortgage lending, has been interpreted by some that this is an inflection point for growth.

The broker suggests this is not the case and the earliest there is likely to be a change is at the end of FY19.

The broker also suspects the bank may pause capital management, and it may be less than expected. Credit Suisse assesses the next initiative is not likely until FY20 and decreases buyback estimates by $1.5bn.

Earnings estimates are downgraded by -3-8% over the forecast period and the target reduced to $28 from $30. Rating is downgraded to Neutral from Outperform.

Target price is $28.00 Current Price is $26.83 Difference: $1.17
If ANZ meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $28.41, suggesting upside of 5.9% (ex-dividends)

The company's fiscal year ends in September.

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

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

Following the proposed acquisition of Figure Eight Citi upgrades to Buy from Neutral. The broker believes this is a complementary acquisition that will provide the technology, platform and expertise to enable material scale and improved productivity.

The Figure Eight business was loss-making in FY18 and the broker's estimates for FY19 operating earnings (EBITDA) drop -8%. although FY20 and FY21 estimates are increased by 6% and 30% respectively. Citi raises the target to $28.04 from $23.29.

Target price is $28.04 Current Price is $22.15 Difference: $5.89
If APX meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

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

UBS rates APX as Neutral (3) -

The company will acquire Figure Eight, a machine learning platform that transforms unstructured text, image and audio data into customised training data. The upfront consideration is US$175m.

The acquisition is expected to be positive for earnings by the second half of 2020, excluding synergies. UBS considers the deal strategically positive, although further analysis is required.

At present estimates are unchanged. Neutral rating and $24 target maintained.

Target price is $24.00 Current Price is $22.15 Difference: $1.85
If APX meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

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

Deutsche Bank rates ASL as Buy (1) -

Ausdrill has reported Barminco and AUMS as a merged segment, but Deutsche Bank hopes segment reporting will be updated and the businesses will be disclosed individually. The broker continues to model the two as individual businesses.

An additional disclosure for Barminco note holders has allowed the broker to adjust forecasts. First half revenue was up 13% and ahead of forecasts while first half EBIT was up 21% and broadly in line with Deutsche Bank's estimates. Buy rating and $2.04 target maintained.

Target price is $2.04 Current Price is $1.64 Difference: $0.4
If ASL meets the Deutsche Bank target it will return approximately 24% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Market Sentiment: 1.0

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

Credit Suisse rates BHP as Neutral (3) -

Credit Suisse upgrades FY19 estimates for operating earnings (EBITDA) by 7% and FY20 by 9%, driven by increases to iron ore price forecasts.

The broker believes the balance sheet is well-positioned and, with a de-risked capex profile and more favourable commodity mix, considers BHP well-placed to perform at least in line with the market.

Neutral rating maintained and the target is raised to $36 from $34.

Target price is $36.00 Current Price is $37.02 Difference: minus $1.02 (current price is over target).
If BHP meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.65, suggesting downside of -1.0% (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: 0.3

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

Deutsche Bank rates CGF as Sell (5) -

Deutsche Bank observes life COE margins have fallen to 3.57%, which has lowered group returns. The broker still assesses returns on equity are healthy, but they are below the company's 18.0% hurdle rate.

The drag from COE margins will prove difficult to recover in the current interest rate environment and the broker suspects margin and return targets are too ambitious. Sell rating and $7 target maintained.

Target price is $7.00 Current Price is $7.94 Difference: minus $0.94 (current price is over target).
If CGF meets the Deutsche Bank target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.95, suggesting upside of 0.1% (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

Credit Suisse rates CWN as Neutral (3) -

Credit Suisse reviews the prospects for the Crown Sydney opening in FY21. The broker concludes that revenue and earnings will increase by more than previously thought, calculating that additional capacity is more than likely to grow the market.

Credit Suisse upgrades net profit estimates by 4.8% for FY21. The broker assumes Crown Sydney achieves FY22 EBITDA of $175m.

The broker considers the stock fully valued and maintains a Neutral rating. Target is raised to $11.40 from $11.20.

Target price is $11.40 Current Price is $11.70 Difference: minus $0.3 (current price is over target).
If CWN meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.79, suggesting upside of 0.8% (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 FMG as Neutral (3) -

Credit Suisse believes the rally in the share price has been justified on the back of the surge in iron ore prices, and considers the stock far from expensive. However, finding the catalysts to push the stock even further is getting increasingly difficult.

Despite raising the target to $6.40 from $6.00 on the back of new iron ore price assumptions, Credit Suisse awaits a cheaper entry point and retains a Neutral rating.

Irrespective of the tragedy at the tailings dam in Brazil, the broker believes a strong investment case for Fortescue Metals was well established, as iron ore prices were resilient and realisations were recovering.

Target price is $6.40 Current Price is $6.54 Difference: minus $0.14 (current price is over target).
If FMG 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 $6.25, suggesting downside of -4.4% (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: -0.1

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

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

The company will raise up to $85m from an institutional placement and share purchase plan. The funds will be used to add flexibility to the balance sheet.

Morgan Stanley notes, after the capital raising, pro forma leverage will reduce to 2.6x from 3.3x.

Rating is Equal-weight. Target is $13. In-Line industry view.

Target price is $13.00 Current Price is $13.81 Difference: minus $0.81 (current price is over target).
If IVC meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.16, suggesting downside of -4.7% (ex-dividends)

The company's fiscal year ends in December.

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 LVH as Add (1) -

The company has entered the US market for the first time, signing a contract to deliver its talent community system to Workforce Logic, a provider of both temporary and permanent employees to medium-large-scale employers.

The deal is not a company-maker as it involves only five implementations. Further afield, Morgans observes a roll-out over a much broader sample would entail a step change in annualised recurring revenue. Add rating and $0.85 target maintained.

Target price is $0.85 Current Price is $0.67 Difference: $0.18
If LVH meets the Morgans target it will return approximately 27% (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 NCM as Buy (1) -

Newcrest will take a 70% stake in the Red Chris copper-gold mine in Canada. The company will fund the acquisition from cash and undrawn facilities.

The company hopes to bring its successful technology to optimise the open pit and plans to build an underground cave, similar to Cadia East.

Citi finds it hard to value the mine on the usual basis until the detailed plans for the asset are known, in particular costs and timing of the block cave. Buy rating and $29 target maintained.

Target price is $29.00 Current Price is $24.45 Difference: $4.55
If NCM meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $23.56, suggesting downside of -3.6% (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: -0.4

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

Macquarie rates NCM as Underperform (5) -

Newcrest will acquire a 70% interest in the Red Chris project in Canada. Macquarie suggests the company is buying what it must believe is a tier-1 geology. The deposit is large and looks like it should be amenable to block caving.

Assuming this is the case, the broker believes the acquisition is in line with the company's overall strategy, although it looks like another long-dated development option.

Macquarie maintains an Underperform rating and raises the target to $21 from $20.

Target price is $21.00 Current Price is $24.45 Difference: minus $3.45 (current price is over target).
If NCM meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.56, suggesting downside of -3.6% (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: -0.4

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

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

Newcrest will acquire a 70% stake in the copper-gold mine, Red Chris, Canada, for US$806.5m. Morgan Stanley considers this a natural fit, as few operators globally have block caving experience.

Newcrest's expertise means there was likely to have been less competition for the transaction. The company's coarse ore processing technology could also help improve recoveries. Mine life is likely to be more than 25 years.

The potential to unlock value from the asset could be sizeable, in Morgan Stanley's opinion. Equal-weight rating. Target is $23. Industry view is Attractive.

Target price is $23.00 Current Price is $24.45 Difference: minus $1.45 (current price is over target).
If NCM meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.56, suggesting downside of -3.6% (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: -0.4

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

UBS rates NCM as Sell (5) -

Newcrest will acquire 70% of the Red Chris copper-gold mine in Canada for US$806.5m. While the mine has potential to be a tier-1 mine, defined as over 300,000 ounces per annum, it is clearly not there now, UBS observes.

UBS suspects other competing buyers may have seen the potential in optimising the open pit and this is likely to have been priced into the sales price.

The real driver of long-term value will occur if a block cave is developed, in the broker's view, and this is where Newcrest's ability to change the value of the asset is superior. UBS maintains a Sell rating and $24 target.

Target price is $24.00 Current Price is $24.45 Difference: minus $0.45 (current price is over target).
If NCM meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.56, suggesting downside of -3.6% (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: -0.4

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

Macquarie rates ORG as Outperform (1) -

Macquarie points out earnings expectations in energy markets now reflect the falling LREC price and the inability for Origin Energy to offset this from other sources.

The broker calculates the impact to FY20 earnings (EBIT) is likely to be around -20%. As this is a government subsidy there is little the company can do to mitigate the impact.

Despite this, the broker considers the stock offers value. Cash generation supports a growing yield and de-gearing of the balance sheet.

APLNG is an increasing value proposition which accounts for more than two thirds of the valuation, with leverage to cost reductions and higher spot LNG prices.

Macquarie maintains an Outperform rating and reduces the target to $8.24 from $8.67.

Target price is $8.24 Current Price is $7.26 Difference: $0.98
If ORG meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $8.33, suggesting upside of 14.8% (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

Macquarie rates PAN as Outperform (1) -

Panoramic Resources will undertake a $22.4m capital raising, split between placements and a rights issue. Some delays to the ramping up of production at Savannah, none of which are significant, have driven the need for the cash injection.

Macquarie is not surprised, given the company's finances appeared tight at the end of December.

Macquarie remains confident that medium-term production forecasts are achievable. The broker maintains an Outperform rating and reduces the target to $0.60 from $0.70.

Target price is $0.60 Current Price is $0.39 Difference: $0.21
If PAN meets the Macquarie target it will return approximately 54% (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

Credit Suisse rates RIO as Neutral (3) -

Credit Suisse believes management's strategy of prudent capital discipline has been highly effective in creating value. However, even with upwardly revised iron ore prices, the broker cannot get its numbers to stack up.

Credit Suisse retains a cautious house view on Chinese steel demand, underpinned by some leading indicators, and maintains a Neutral rating.

Management has been explicit about value over volume and retaining discipline when exploring M&A opportunities.

Credit Suisse agrees this has served Rio Tinto incredibly well but organic growth is limited and it remains a struggle to find what upside risk/catalyst is looming, outside of Chinese housing surprising to the upside. Target is raised to $84 from $79.

Target price is $84.00 Current Price is $91.27 Difference: minus $7.27 (current price is over target).
If RIO 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 $92.45, suggesting upside of 1.3% (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: 0.3

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

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

Morgan Stanley considers the shares relatively fairly valued at 4.9x EV/EBITDA and a 9.3% free cash flow yield on 2019 estimates. This includes a US$84/dmt iron ore price.

Financial risks appear low and the broker notes there will be no net debt at the end of 2020 if spot prices prevail. However, there are few investment opportunities beyond the single biggest growth project, Oyu Tolgoi.

Morgan Stanley maintains an Equal-weight rating. Target is reduced to GBP44 from GBP46. Industry view: Attractive.

Current Price is $91.27. Target price not assessed.

Current consensus price target is $92.45, suggesting upside of 1.3% (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: 0.3

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

Credit Suisse rates SGR as Upgrade to Outperform from Neutral (1) -

Credit Suisse believes the stock could soon break out of its trading range. The broker upgrades FY21 estimates for operating earnings (EBITDA) by 2% and FY22 by 5%.

The stock has been trading at a discount to fair value because of the impending opening of Crown Sydney.

Credit Suisse also believes Star Entertainment's multiple will expand to 9.0x from 8.5x for its domestic casinos, including Brisbane, as investor confidence in the prospects of new capacity grows.

The broker believes the stock is inexpensive and upgrades to Outperform from Neutral. Target is raised to $5.50 from $5.15.

Target price is $5.50 Current Price is $4.39 Difference: $1.11
If SGR meets the Credit Suisse target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $5.55, suggesting upside of 26.5% (ex-dividends)

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 SVW as Buy (1) -

UBS increasingly suspects the guidance issued at the first half results is conservative. Seven Group reiterated EBIT growth guidance of over 25% and the broker expects growth of 38%, or more.

Hence, there is scope for an upgrade catalyst some time in the fourth quarter of FY19. The main drivers of earnings are WesTrac and Coates Hire and ongoing strength in these businesses indicates a material downturn in the second half is highly unlikely.

UBS reiterates a Buy rating and raises the target to $22.20 from $22.00.

Target price is $22.20 Current Price is $18.10 Difference: $4.1
If SVW meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $22.33, suggesting upside of 23.4% (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