Australian Broker Call

Deutsche Bank rates CIM as Upgrade to Hold from Sell (3) -

Deutsche believes CIMIC's market valuation has moved to a more realistic level and, given the stock's more balanced risk-reward profile, upgrades to Hold from Sell. CIMIC's 12-month price-earnings multiple has fallen from 22x to 18x and the stock's previous close was $41.68 - just above the broker's target of $40.50, which is unchanged.

Target price is $40.50 Current Price is $43.73 Difference: minus $3.23 (current price is over target).
If CIM meets the Deutsche Bank target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $43.81, suggesting upside of 0.2% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Credit Suisse rates HUB as Outperform (1) -

Credit Suisse raises specialist wealth management platform earnings valuations across the board as part of an industry review. HUB24's target price rises to $14.10 and Outperform rating retained.

The broker expects funds under administration to jump 85% to $15.4bn and margin expansion of 44%, translating into strong earnings per share growth.

The broker expects specialist platforms gaining territory, particularly from net inflows (HUB24 gained 12% of share flows and 1% of funds under administration), as customer churn accelerates as advisers shift from AMP ((AMP)) and the banks to independents (after the recent bad bank/AMP press). The banning of grandfathered commissions is also expected to remove barriers to platform switching and boost churn rates.

Target price is $14.10 Current Price is $11.65 Difference: $2.45
If HUB meets the Credit Suisse target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates IFL as Outperform (1) -

Credit Suisse raises specialist wealth management platform earnings valuations across the board as part of an industry review. IFL's target price rises to $12.00 and Outperform rating retained.

The broker expects specialist platforms gaining territory, particularly from net inflows, as customer churn accelerates as advisers shift from AMP ((AMP)) and the banks to independents (after the recent bad bank/AMP press). The banning of grandfathered commissions is also expected to remove barriers to platform switching and boost churn rates.

Target price is $12.00 Current Price is $9.23 Difference: $2.77
If IFL meets the Credit Suisse target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $11.62, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Morgan Stanley rates MTS as Overweight (1) -

In response to a question from the broker as to why there was not more clarity on further potential contract losses with the FY18 result, Metcash noted SA contract negotiations should be completed soon. The broker feels Drakes is likely to sign other customers to justify the cost of its distribution centre.

The broker believes food & grocery losses may have bottomed out but Metcash is not as confident. More investment may be needed, but hardware opportunity remains significant and a lift to the buyback is still possible.

The broker retains Overweight and a $3.90 target. Industry view: Cautious.

Target price is $3.90 Current Price is $2.60 Difference: $1.3
If MTS meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $2.98, suggesting upside of 14.7% (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

Credit Suisse rates NWL as Neutral (3) -

Credit Suisse raises specialist wealth management platform earnings valuations across the board as part of an industry review. Netwealth's target price rises to $7.90 from $6.50. Neutral rating retained.

The broker says the platform industry grew funds administration 8% for the year, with specialist platforms gaining territory, particularly from net inflows. Netwealth gained 22% of share flows and 2% of funds under administration.

The broker expects customer churn to keep accelerating as advisers shift from AMP ((AMP)) and the banks to independents (after the recent bad bank/AMP press), particularly given the growing quality of specialist offerings. The banning of grandfathered commissions is also expected to remove barriers to platform switching and boost churn rates.

Credit Suisse's valuation incorporates the impact of 3% fee caps on low balance accounts and the strong June quarter and the broker increases Netwealth's FY20 earnings per share forecast 9%, but notes the stock is trading on an FY20 price-earnings multiple of 42x - hence the neutral valuations.

Target price is $7.90 Current Price is $8.22 Difference: minus $0.32 (current price is over target).
If NWL meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.05, suggesting downside of -14.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Deutsche Bank rates ORI as Hold (3) -

Deutsche maintains its Hold rating and $18 target price for Orica, believing news of the Anti-Dumping Commission's investigation into imports from China, Sweden and Thailand should help support the domestic ammonium nitrate market.

It notes the timing is fortuitous given several large contracts are due for renewal.

Target price is $18.00 Current Price is $17.80 Difference: $0.2
If ORI meets the Deutsche Bank target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $18.29, suggesting upside of 2.8% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Macquarie rates RWC as Outperform (1) -

Macquarie has resumed coverage with an Outperform rating and $6.20 price target. The broker likes the proposed acquisition of John Guest, a UK-based plastic PTC fitting specialist, for GBP687.5m.

Macquarie has surveyed UK plumbers, and the results are now underpinning confidence and conviction, report the analysts. Estimates (Adjusted EPS) for FY19, FY20 and FY21 have increased by 19%, 11% and 15%, respectively, mainly accounting for the JG acquisition but also revised FX estimates, explain the analysts.

Target price is $6.20 Current Price is $5.38 Difference: $0.82
If RWC meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.20, suggesting downside of -3.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

UBS rates SCP as Neutral (3) -

Following on from Vicinity Centre's ((VCX)) declared intention to sell $1bn in assets by year-end, UBS suggests Shopping Centres Australasia should be "a natural portfolio buyer".

The reasoning then goes that equity in Charter Hall Retail ((CQR)) is likely to be sold to raise the capital to fund any such acquisition. The analysts make several adjustments to their modeling.

Price target lifts to $2.44 (was $2.16). Neutral rating retained.

Target price is $2.44 Current Price is $2.50 Difference: minus $0.06 (current price is over target).
If SCP 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 $2.23, suggesting downside of -10.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Citi rates SEK as Sell (5) -

As Citi analysts point out, ANZ Employment will contribute 55% of group EBITDA in FY18 and has benefited from four years of strong volume growth. The analysts also emphasise there is a cyclical element.

They observe job ads have now been flat for nine months. In addition, leading indicators are pointing to the risk of declines in the near term. Citi analysts have reduced forecasts by -3% and reiterate their Sell rating. Target price remains at $15.10.

Updated estimates also imply no dividend increases for the foreseeable future (46c) post FY18.

Target price is $15.10 Current Price is $21.76 Difference: minus $6.66 (current price is over target).
If SEK meets the Citi target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.70, suggesting downside of -14.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

Credit Suisse rates SGM as Underperform (5) -

Credit Suisse lifts Sims Metal Management's target price to $14.80 from $14.50 after revaluations stemming from the acquisition of the other 50% of the Sims Pacific JV from Fletcher Building ((FBU)).

The broker notes the purchase is accretive, shifting the low rate on idle cash to a 25% return on additional capital deployed.

Underperform rating retained.

Target price is $14.80 Current Price is $16.17 Difference: minus $1.37 (current price is over target).
If SGM 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 $16.33, suggesting upside of 1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Morgan Stanley rates TAH as Overweight (1) -

The government has passed a ban on synthetic lotteries, such as is offered by Lottoland, effective in six months' time. The broker sees this as a positive for Tabcorp, increasing conviction on its view for the lotteries business.

The broker feels Tabcorp's lotteries business, which is virtually a monopoly but for state-run WA, is being undervalued by the market. Add in online growth, a price hike from Powerball and this new ban and the broker maintains preference for Tabcorp in the sector.

Overweight and $5.20 target retained. Industry view: Cautious.

Target price is $5.20 Current Price is $4.47 Difference: $0.73
If TAH meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.19, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Morgan Stanley rates TWE as Overweight (1) -

Constellation Brands reported a soft first quarter result due to weakness in wine and spirits, driven by higher grape and transport costs. The broker believes Constellation sources a greater proportion of its wine externally than Treasury Wine, and thus has a greater cost exposure.

The broker also sees tightening in grape supply a positive for Treasury Wine given a more premium portfolio. While the broker has low expectations for the June quarter US result, it feels the sell-off amid Chinese trade concerns has been overdone. Also recent AUD weakness should provide a tailwind.

Overweight and $20 target retained. Industry view: Cautious.

Target price is $20.00 Current Price is $17.19 Difference: $2.81
If TWE meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $17.13, suggesting downside of -0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Ord Minnett rates VVR as Downgrade to Accumulate from Buy (2) -

Ord Minnett downgrades Viva Energy Reit to Accumulate from Buy on valuation grounds.

The target prices is steady at $2.35, the broker noting news on the capital management front (two institutional 8-10-year term loans totalling $60m and delayed-start interest rate swaps totalling $368m) has done little to change valuations.

Target price is $2.35 Current Price is $2.27 Difference: $0.08
If VVR meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.44, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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