Australian Broker Call

UBS rates ALL as Buy (1) -

UBS expects 10% growth in earnings (EBIT) from the company's land-based business in FY20. Performance data and survey suggests broad-based strength across most product segments.

The broker believes over $1bn in net profit can be delivered in FY20. Buy rating and $34.10 target maintained.

Target price is $34.10 Current Price is $30.71 Difference: $3.39
If ALL meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $33.54, suggesting upside of 9.2% (ex-dividends)

The company's fiscal year ends in September.

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 AMA as Buy (1) -

The company has entered into a binding agreement with Suncorp ((SUN)) Insurance Ventures to acquire 90% of Capital SMART Repairs Australia at an implied enterprise value of $420m. The acquisition is expected to generate $17m in synergies by the end of FY21.

The company is also acquiring ACM Parts for $20m. ACM is expected to break even in FY20 and contribute $2m in operating earnings (EBITDA) in FY21.

The transaction will be funded by an underwritten equity raising consisting of a non-renounceable entitlement offer for $139m and a placement of $77m. A further $290m will be drawn down from a new senior debt facility.

UBS does not incorporate the earnings or impact on the target from the transaction and maintains a Buy rating and $1.50 target.

Target price is $1.50 Current Price is $1.22 Difference: $0.28
If AMA meets the UBS target it will return approximately 23% (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

UBS rates ANN as Neutral (3) -

UBS reviews macro trends and expectations for FY20. Global PMI data have deteriorated further in the first quarter in the company's two key markets, the US and Europe. The broker suggests, historically, it has been difficult for Ansell to generate organic growth when these two indicators are in decline.

However, nitrile rubber input prices are down -38% which, along with pricing initiatives, should assist gross margins. The broker lowers FY20-22 estimates for earnings per share by -1% as minor industrial growth downgrades are offset by the buyback.

Neutral maintained. Target rises to $27.00 from $26.80.

Target price is $27.00 Current Price is $26.61 Difference: $0.39
If ANN meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $28.31, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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 BXB as Neutral (3) -

After reviewing the outlook for plastic pallets, UBS suspects new capital will likely be deterred by the risks involved and the long-dated return profile.

Less than 5% of customers are willing to pay a sufficient premium for plastic pallets and US pool companies can only justify plastic at a competitive price in selective closed-loop lanes.

If such assumptions prove correct, then the market may be overstating the risk of plastic to Brambles, in the broker's view.

While the earnings profile looks positive over the next three years, UBS finds risks that costs emanating from plant inefficiency, changes to retailer behaviour and capacity issues may prove stubborn.

As a result, a lower entry point is sought before the broker becomes more positive. Neutral rating and $12.10 target maintained.

Target price is $12.10 Current Price is $11.37 Difference: $0.73
If BXB meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $11.84, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

Ord Minnett rates GUD as Accumulate (2) -

The company has briefed investors on the strategic outlook for each of its businesses. Ord Minnett notes GUD Holdings has passed over four potential acquisitions since June because of a lack of strategic fit or failure to meet financial hurdles.

The broker is not surprised, particularly given the major issues the company faces with the acquisition of AA Gaskets. Ord Minnett maintains an Accumulate rating and $12 target.

Target price is $12.00 Current Price is $10.48 Difference: $1.52
If GUD meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $10.66, suggesting upside of 1.8% (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

UBS rates GUD as Sell (5) -

The company has provided positive news surrounding cost reductions and price increases. At its investor briefing GUD Holdings noted that FY20 sales trends have slightly improved across some categories although are not yet positive on a like-for-like basis.

Guidance for modest earnings (EBIT) growth was reaffirmed but UBS suspects this will be difficult to achieve given FX pressure, new competition in filters and consolidation in major customer supply chains. Sell rating maintained. Target is $9.50.

Target price is $9.50 Current Price is $10.48 Difference: minus $0.98 (current price is over target).
If GUD meets the UBS target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.66, suggesting upside of 1.8% (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

Macquarie rates HUB as Underperform (5) -

The broker has reaffirmed its Underperform ratings on both Hub24 and Netwealth following yesterday's RBA rate cut to 0.75%, noting the cut will mean the majority of accounts will generate negative returns on their cash holdings net of administration fees.

This assumes the platforms pass on the rate cut fully to customers but the broker sees limited ability to offset the cuts with bank-style re-pricing. Target unchanged at $8.72.

Target price is $8.72 Current Price is $11.31 Difference: minus $2.59 (current price is over target).
If HUB meets the Macquarie target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.44, suggesting upside of 10.0% (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

Macquarie rates KMD as Neutral (3) -

The broker has increased Kathmandu earnings forecasts by 12-14% in FY21-22 to reflect the opportunity and synergies available in the mountain-wear company's acquisition of iconic surf-wear company Rip Curl. Forecasts are net of equity raising dilution. Target rises to $2.92 from $2.73.

The transaction provides further expansion for Kathmandu on the back of the Oboz acquisition as well as diversification, the broker notes, and Rip Curl's international exposure will help offset domestic currency risk. Neutral retained.

Target price is $2.92 Current Price is $2.79 Difference: $0.13
If KMD meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.76, suggesting downside of -1.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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 continues to widen distribution channels and has added three new partners in the September quarter. Morgans points out new partners do not increase revenue immediately but increase the odds of meeting revenue forecasts over time.

The company has just signed new channel partner deals with Cognitus Consulting, Proactive Talent and Manpower Group Australia. This will have no near-term impact on revenue as partners typically take 4-6 months to get up to speed.

Add rating maintained. Target is reduced to $0.86 from $0.87.

Target price is $0.86 Current Price is $0.28 Difference: $0.58
If LVH meets the Morgans target it will return approximately 207% (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 NUF as No Rating (-1) -

FY19 results were in line with expectations. The company has sold its South American business to Sumitomo for $1.19bn. Citi notes the share price lifted sharply on the back of the announcement.

Proceeds will help restore the balance sheet and enable capital management to be explored. The company expects FY20 operating earnings (EBITDA) to incrementally lift in Australia and Europe.

Citi is involved in the transaction regarding Sumitomo and is unable to provide a rating and target at present.

Current Price is $6.48. Target price not assessed.

Current consensus price target is $6.58, suggesting upside of 1.5% (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

Macquarie rates NWL as Underperform (5) -

The broker has reaffirmed its Underperform ratings on both Hub24 and Netwealth following yesterday's RBA rate cut to 0.75%, noting the cut will mean the majority of accounts will generate negative returns on their cash holdings net of administration fees.

This assumes the platforms pass on the rate cut fully to customers but the broker sees limited ability to offset the cuts with bank-style re-pricing. Target unchanged at $6.20.

Target price is $6.20 Current Price is $8.79 Difference: minus $2.59 (current price is over target).
If NWL meets the Macquarie target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.68, suggesting downside of -12.6% (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 SGM as Equal-weight (3) -

A rapid fall in scrap prices and the increasing cost of freight are expected to put significant pressure on earnings, particularly in the first half. Morgan Stanley downgrades estimates across FY20-22 as a result.

The broker continues to believe there are long-term opportunities for the company but the stock is unlikely to outperform in the face of uncertain end markets.

Equal-weight rating retained. Price target reduced to $10.00 from $11.50. Industry view is Cautious.

Target price is $10.00 Current Price is $9.98 Difference: $0.02
If SGM meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $10.25, suggesting upside of 2.7% (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

UBS rates SPK as Neutral (3) -

The upgrade to the Southern Cross Next subsea cable network between New Zealand, Australia and the US will go ahead. Spark NZ's shareholding has been diluted to 40% from 50% with Telstra ((TLS)) taking a 25% stake and becoming an anchor customer.

The upgrade is expected to be completed in 2021 and will cost US$300m, funded 50-50 with debt-equity. UBS already incorporates an equity top up of NZ$80m over the next three years for Spark NZ with dividends from the cable resuming in FY22.

Neutral maintained. Target is NZ$4.20.

Current Price is $4.22. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

Citi rates SUN as Buy (1) -

Allowing for a small reduction in profit as a result of the sale of Capital SMART and ACM Parts to AMA Group ((AMA)), Citi reduces estimates for earnings per share in FY20 by -1%.

As motor claims frequency has reduced, Suncorp is not generating sufficient repair volumes to maximise the use of these shops. Therefore, Citi believes it makes sense to sell these on to another party.

The broker considers the dividend yield and relative value of the stock is attractive despite some short-term pressures. With new hazard allowances, earnings should also have lower downside risk compared with previous years.

Citi maintains a Buy rating and $14.50 target.

Target price is $14.50 Current Price is $13.62 Difference: $0.88
If SUN meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $13.64, suggesting upside of 0.1% (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

Macquarie rates SUN as Underperform (5) -

Suncorp has sold its Capital SMART business to AMA Group ((AMA)) at a 16% premium to local peers, accompanied by a 25 year servicing arrangement. Smart move, says the broker.

Target rises to $13.40 from $13.10 on sale proceeds. Underperform retained given a lack of near term catalysts, despite valuation being more attractive than peer Insurance Australia Group ((IAG)).

Target price is $13.40 Current Price is $13.62 Difference: minus $0.22 (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 $13.64, suggesting upside of 0.1% (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

Ord Minnett rates SUN as Hold (3) -

The company has sold two motor repair businesses to AMA Group ((AMA)). The first is a 90% stake in its Capital SMART repair business for $420m and the second is 100% of ACM Parts for $20m.

Ord Minnett estimates this would enable Suncorp to fund around $400m in capital returns. The company has not yet indicated what will occur with the proceeds. The after-tax profit on sale is expected to be in the range of $275-295m.

Ord Minnett maintains a Hold rating and raises the target to $13.58 from $13.49.

Target price is $13.58 Current Price is $13.62 Difference: minus $0.04 (current price is over target).
If SUN meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.64, suggesting upside of 0.1% (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