Australian Broker Call

Credit Suisse rates ALL as Outperform (1) -

Game installation data in NSW have revealed Aristocrat Leisure has suffered a -35-40% decline in volumes and captured 55% ship share, its lowest share since 2015. NSW accounts for about half of Australia's gaming machine shipments.

Credit Suisse reduces FY19 estimates for earnings per share by -1.8%. The main upside for the stock is management's ability to set the digital division on a medium-term growth trajectory, in the broker's view.

Outperform rating maintained. Target is $30.

Target price is $30.00 Current Price is $29.12 Difference: $0.88
If ALL meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $33.19, suggesting upside of 14.0% (ex-dividends)

The company's fiscal year ends in September.

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 ASX as Sell (5) -

While ASX has qualities, including a low risk of major earnings disappointment and some inverse correlation to falling bond yields, Citi believes the valuation is full.

Cash equity volumes continue to be strong, with average traded value up to its highest level since the second half of 2010. Growth in auctions trading has outpaced broader volume growth, indicating to the broker there is some support for margins.

Citi retains a Sell rating although lifts the target to $63.00 from $61.40.

Target price is $63.00 Current Price is $87.38 Difference: minus $24.38 (current price is over target).
If ASX meets the Citi target it will return approximately minus 28% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $60.86, suggesting downside of -30.3% (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 BAP as Outperform (1) -

In the wake of Bapcor's investor day, the broker's -17% discount to peers and -15% discount to the market suggests investors are discounting structural issues which are not expected to meaningfully impact on the business in the medium term.

There is scope for the cycling of easier comparables and evidence of such would drive a re-rating, the broker suggests.

Target falls to $6.85 from $7.20, Outperform retained.

Target price is $6.85 Current Price is $5.98 Difference: $0.87
If BAP meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $6.86, suggesting upside of 14.7% (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

Morgan Stanley rates BAP as Overweight (1) -

Competitive concerns and weak consumer spending have meant the stock has de-rated by -25%, Morgan Stanley assesses. There is a lack of near-term catalysts and an earnings risk in FY20, but the broker envisages the risk/reward is compelling, given the strategic value of the asset and ability to generate attractive returns.

The company has highlighted Thailand could support a trade business that is 60-70% of the size of the Australian business and this remains a strategic option. Overweight rating. Target is $7.60. Industry view: In-line.

Target price is $7.60 Current Price is $5.98 Difference: $1.62
If BAP meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $6.86, suggesting upside of 14.7% (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

Deutsche Bank rates BHP as Sell (5) -

Deutsche Bank believes the recent update on potash is an admission of another historical less-optimal allocation of capital and the company is softening the market for a write-down of the $4bn in book value.

The legacy of the potash investment, the broker suggests, is likely to have prompted debate with the new auditor and the mine plan could well change again by the time the project is approved. Sell rating. Target is $28.

Target price is $28.00 Current Price is $41.36 Difference: minus $13.36 (current price is over target).
If BHP meets the Deutsche Bank target it will return approximately minus 32% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $39.03, suggesting downside of -5.6% (ex-dividends)

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: 0.0

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

Ord Minnett rates CCP as Hold (3) -

Ord Minnett reassesses Credit Corp following the recent capital raising. The broker envisages a strong chance that two of the major US banks will sell "charged-off" debt into the market in 2020.

An increase in supply is a clear positive for debt purchasers such as Credit Corp. Noting the recent re-rating of the stock the broker maintains a Hold rating. Target is raised to $25 from $23.

Target price is $25.00 Current Price is $27.16 Difference: minus $2.16 (current price is over target).
If CCP meets the Ord Minnett target it will return approximately minus 8% (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: 0.5

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

Macquarie rates CIM as Neutral (3) -

At Cimic's upcoming first half result, the broker expects a continuation of the theme of mining strong and construction weak. No changes have been made to forecasts but the broker has altered its valuation model.

Target falls to $48.28 on an average net debt basis to better reflect underlying debt levels, down from a discounted cash flow valuation of $51.26.

Target price is $48.28 Current Price is $46.23 Difference: $2.05
If CIM meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $47.92, suggesting upside of 3.7% (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

UBS rates CL1 as Buy (1) -

The company has reported a relatively soft June quarter, UBS observes. The rate of additions was broadly in line with the past two quarters but this is disappointing as the June quarter is generally the strongest, assuming normal ATO lodgment dates.

It remains unclear to the broker why quarterly reporting for some SMSFs did not appear to provide any uplift to Class in the period. Buy rating and $2.15 target maintained.

Target price is $2.15 Current Price is $1.51 Difference: $0.64
If CL1 meets the UBS target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $1.59, suggesting upside of 5.1% (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

Macquarie rates CMW as Underperform (5) -

Cromwell has provided an overall positive update, the broker reports, with FY19 guidance reaffirmed and FY20 better than expected despite the equity raise. Initial signs are that assets under management levels are being retained while gearing is reduced.

However a price to net tangible asset multiple of 1.22x suggests successful execution of the European business and hence the broker retains Underperform. Target rises to $1.04 from 91c.

Target price is $1.04 Current Price is $1.23 Difference: minus $0.19 (current price is over target).
If CMW meets the Macquarie target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.11, suggesting downside of -10.0% (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

Deutsche Bank rates FBU as Hold (3) -

The company has downgraded its underlying earnings (EBIT) outlook for FY19 by -NZ$30m, the result of a disappointing Australian division. Given the sharp decline in Australia, management's view that FY19 was a successful year is a surprise to Deutsche Bank.

The broker reduces FY20 estimates for earnings to NZ$530m from NZ$552m. Hold rating retained. Price target is NZ$5.33.

Current Price is $4.88. Target price not assessed.

Current consensus price target is N/A

Forecast for FY19:

Forecast for FY20:

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

Credit Suisse rates IGO as Underperform (5) -

Preliminary June quarter production results for Nova and Tropicana were solid, in Credit Suisse's view. The broker had expected Nova to achieve guidance, after a record March quarter required only a modest June top up to achieve the top of the range.

Tropicana was in line with June quarter production, meeting the lower half of the 500-550,000 ounces guidance. Underperform rating and $4 target maintained.

Target price is $4.00 Current Price is $4.96 Difference: minus $0.96 (current price is over target).
If IGO meets the Credit Suisse target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.92, suggesting downside of -0.8% (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

Macquarie rates IGO as Outperform (1) -

Independence Group's Nova mine has finished the year with a bang, producing 9% more nickel in the fourth quarter than the broker forecast, 17% more copper and 28% more cobalt. All three metals beat FY production guidance.

Nova has now exceeded feasibiltiy study expectations for five quarter in a row, hence the broker expects an upgrade to FY20 guidance. Exploration remains in focus, offering potential mine life extension. Outperform retained, target rises to $5.20 from $5.10.

Target price is $5.20 Current Price is $4.96 Difference: $0.24
If IGO meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.92, suggesting downside of -0.8% (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

UBS rates IGO as Buy (1) -

Pre-reported June quarter production is slightly better than UBS expected for Nova, while acknowledging forecasts were overly optimistic for Tropicana.

While not reported, UBS suspects copper/cobalt production at Nova is indicating consistent recoveries, noting this has been an issue in the past.

The stock remains the broker's preferred nickel exposure and exploration success could add material value. Buy rating and $5.40 target maintained.

Target price is $5.40 Current Price is $4.96 Difference: $0.44
If IGO meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.92, suggesting downside of -0.8% (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

Deutsche Bank rates NXT as Sell (5) -

Deutsche Bank acknowledges the long-term growth potential of the industry but believes it remains equally important to look at recent changes to the business performance to find a better indication of returns available to shareholders.

The broker notes increased competition from global and domestic peers, operating issues and the extended period of low interest rates need to be factored in. While focusing on the risks surrounding the company's business model longer term, Deutsche Bank analysts have reduced sales momentum and delayed timing for S3 and M3.

Sell rating retained as incorporating a lower discount rate is effectively offset by slower sales momentum. Target is raised to $5.72 from $5.50.

Target price is $5.72 Current Price is $6.72 Difference: minus $1 (current price is over target).
If NXT meets the Deutsche Bank target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.56, suggesting upside of 12.5% (ex-dividends)

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

Macquarie rates PDL as Outperform (1) -

Pendal Group's outflows appear to have slowed in the third quarter, the broker notes, down -$0.3bn compared to -$1.2bn in the previous quarter. Outflows are primarily being seen in European and global funds.

Pendal is trading at a -24% discount to its five-year average and a -27% discount to ASX-listed fund managers, but the broker suggests flows will have to reverse before the stock can look forward to a re-rating. Outperform and $9.00 target retained.

Target price is $9.00 Current Price is $7.44 Difference: $1.56
If PDL meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $8.66, suggesting upside of 16.5% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates RIO as Hold (3) -

As iron ore appears to be remaining stronger for longer, Deutsche Bank believes the capital cycle is accelerating and there is a prospect of Rio Tinto using its historically high share price and excess capital to make acquisitions. Hold rating and $91 target.

Target price is $91.00 Current Price is $103.93 Difference: minus $12.93 (current price is over target).
If RIO 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 $101.38, suggesting downside of -2.5% (ex-dividends)

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

Macquarie rates SGP as Outperform (1) -

Stockland has sold its 50% stake in residential asset Aura at 30% above book value, resulting in a 3% increase to the broker's FY20 funds from operations forecast.

The broker believes residential is likely to bottom in FY20 and recent RBA cuts and APRA changes should help drive sales. Outperform and $4.48 target retained.

Target price is $4.48 Current Price is $4.46 Difference: $0.02
If SGP meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.06, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SGP as Sell (5) -

Stockland has a 50% capital partner, Capital Property, for the Aura project located in Caloundra, Queensland. UBS notes the benefits of the transaction include a recycling of capital, this being Stockland's largest residential investment.

There is also a short-term boost to free funds from operations. While the broker liked the decision to recycle capital, the price underwhelmed - at a 30% premium to book value. Sell rating maintained. Target is steady at $4.

Target price is $4.00 Current Price is $4.46 Difference: minus $0.46 (current price is over target).
If SGP meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.06, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates SPK as Neutral (3) -

UBS has surveyed investors, finding the biggest issue is competition in the NZ telco market. The broker suggests there is a low probability of a dividend reduction, as competition has been more rational in 2019.

There is also some room to manage the company's credit rating thresholds. Neutral rating and NZ$3.85 target maintained.

Current Price is $3.77. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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 WEB as Buy (1) -

UBS expects Webjet to outperform the broader travel market amid market share gains, acquisition synergies and structural tailwinds. Sentiment is being affected by a softer housing market in Australia, continued Brexit uncertainty in the UK and softness in Germany.

The broker believes the fall in the share price of -21% since mid May is excessive. The valuation is appealing and the broker maintains a Buy rating. Target is reduced to $20.25 from $21.00.

Target price is $20.25 Current Price is $13.37 Difference: $6.88
If WEB meets the UBS target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $17.14, suggesting upside of 28.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

UBS rates WOW as Neutral (3) -

Woolworths intends to merge its drinks & hotels business into a new entity, Endeavour Group, by the end of 2019. This will be de-merged subsequently with Woolworths retaining a stake.

UBS believes this could mean Woolworths undertakes further capital management in 2020 and expects, on balance, it would be accretive for shareholders. Neutral rating and $32.90 target maintained.

Target price is $32.90 Current Price is $34.40 Difference: minus $1.5 (current price is over target).
If WOW meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.96, suggesting downside of -12.9% (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