Australian Broker Call
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March 08, 2019
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1).
Last Updated: 05:00 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
Overnight Price: $4.92
Macquarie rates BLD as Outperform (1) -
Macquarie observes the company's ratings suffered under the combined influence of weather-induced earnings risks and uncertainty around the plasterboard deal. The USG/Boral JV continues to be a catalyst.
The broker reviews the potential structure of a new Knauf/Boral JV in Asia and Boral buying the Australasian business. Macquarie the market is uncomfortable about the outcome for the balance sheet given the complexity of the restructure.
Nevertheless, the stock is trading near decade lows in relative terms and an Outperform rating is maintained. Target is $5.95.
Target price is $5.95 Current Price is $4.92 Difference: $1.03
If BLD meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).
Current consensus price target is $5.90, suggesting upside of 19.9% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 26.00 cents and EPS of 42.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 40.1, implying annual growth of 6.6%. Current consensus DPS estimate is 26.4, implying a prospective dividend yield of 5.4%. Current consensus EPS estimate suggests the PER is 12.3. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 27.00 cents and EPS of 49.50 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 44.0, implying annual growth of 9.7%. Current consensus DPS estimate is 27.5, implying a prospective dividend yield of 5.6%. Current consensus EPS estimate suggests the PER is 11.2. |
Market Sentiment: 0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $13.72
UBS rates BSL as Buy (1) -
Six months ago management was of the opinion the industry structure was the best in 10 years. Since then, weak Chinese hot rolled coil prices have meant the North Star spread has fallen around -35% to US$360/t and the broker notes incremental new supply is coming to the US.
No material lift in spreads is factored in for the short term and the broker suggests the risk is towards the upside for FY20 earnings.
In Australia, UBS expects a weakening of demand for the company's highest-margin Colorbond product, although notes BlueScope does not appear too worried about a slowdown in housing.
Still, these tonnages are its most profitable. UBS maintains a Buy rating and $16 target.
Target price is $16.00 Current Price is $13.72 Difference: $2.28
If BSL meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).
Current consensus price target is $15.93, suggesting upside of 16.1% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
UBS forecasts a full year FY19 dividend of 13.00 cents and EPS of 182.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 184.1, implying annual growth of 24.1%. Current consensus DPS estimate is 14.2, implying a prospective dividend yield of 1.0%. Current consensus EPS estimate suggests the PER is 7.5. |
Forecast for FY20:
UBS forecasts a full year FY20 dividend of 15.00 cents and EPS of 153.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 152.3, implying annual growth of -17.3%. Current consensus DPS estimate is 15.8, implying a prospective dividend yield of 1.2%. Current consensus EPS estimate suggests the PER is 9.0. |
Market Sentiment: 0.6
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
CSL CSL LIMITED
Pharmaceuticals & Biotech/Lifesciences
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Overnight Price: $199.49
Morgan Stanley rates CSL as Equal-weight (3) -
Morgan Stanley notes CSL was the strongest performer in Australian healthcare since the beginning of February, up 19%. While high growth from offshore exists, the broker envisages some downside risk to earnings.
Consensus estimates for CSL in FY20 could prove too high, in the broker's view, given the growth from flu vaccines may have come one year early. There are also challenges in albumin and potentially slower growth from specialty products.
Target is raised to $183 from $178. Equal-weight retained. Industry view: In line.
Target price is $183.00 Current Price is $199.49 Difference: minus $16.49 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $204.58, suggesting upside of 2.5% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 259.20 cents and EPS of 575.09 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 596.7, implying annual growth of N/A. Current consensus DPS estimate is 269.5, implying a prospective dividend yield of 1.4%. Current consensus EPS estimate suggests the PER is 33.4. |
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 285.77 cents and EPS of 625.51 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 665.5, implying annual growth of 11.5%. Current consensus DPS estimate is 302.6, implying a prospective dividend yield of 1.5%. Current consensus EPS estimate suggests the PER is 30.0. |
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
HVN HARVEY NORMAN HOLDINGS LIMITED
Consumer Electronics
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Overnight Price: $3.82
Macquarie rates HVN as Outperform (1) -
Weak consumer expenditure and housing provide risks to Australian franchisees and, hence, Harvey Norman is focused on growing via its international business.
While Singapore and Malaysia only represent around 7% of group profit, Macquarie observes this region is growing quickly as the company rolls out stores.
Harvey Norman is taking share from competitors in these markets and profitability is expected to improve as the footprint expands.
Macquarie finds the valuation attractive and raises estimates for FY19-21 earnings per share by 1-3%.
Outperform rating maintained. Target is raised to $4.20 from $4.10.
Target price is $4.20 Current Price is $3.82 Difference: $0.38
If HVN meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).
Current consensus price target is $3.72, suggesting downside of -2.7% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 25.20 cents and EPS of 31.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 32.1, implying annual growth of -4.8%. Current consensus DPS estimate is 25.8, implying a prospective dividend yield of 6.8%. Current consensus EPS estimate suggests the PER is 11.9. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 25.20 cents and EPS of 31.30 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 30.7, implying annual growth of -4.4%. Current consensus DPS estimate is 24.2, implying a prospective dividend yield of 6.3%. Current consensus EPS estimate suggests the PER is 12.4. |
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $12.89
Credit Suisse rates LLC as Outperform (1) -
Credit Suisse notes press reports there is foreign interest in the company's engineering & services business. China's State Construction and Engineering Company is allegedly a front runner.
Credit Suisse suspects management is highly motivated to achieve a trade sale rather than a winding down or de-merger.
Outperform and $16.20 target retained.
Target price is $16.20 Current Price is $12.89 Difference: $3.31
If LLC meets the Credit Suisse target it will return approximately 26% (excluding dividends, fees and charges).
Current consensus price target is $15.30, suggesting upside of 18.7% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 53.21 cents and EPS of 81.44 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 83.5, implying annual growth of -39.1%. Current consensus DPS estimate is 46.1, implying a prospective dividend yield of 3.6%. Current consensus EPS estimate suggests the PER is 15.4. |
Forecast for FY20:
Credit Suisse forecasts a full year FY20 dividend of 60.29 cents and EPS of 115.95 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 129.9, implying annual growth of 55.6%. Current consensus DPS estimate is 65.3, implying a prospective dividend yield of 5.1%. Current consensus EPS estimate suggests the PER is 9.9. |
Market Sentiment: 0.9
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $5.26
Morgan Stanley rates NUF as Overweight (1) -
Morgan Stanley observes conditions in Europe and North America have improved, although lowers estimates to reflect continued dry conditions in Australia. Any semblance of normal on Australia's east coast will require significant rainfall out to May, the broker notes.
Drought conditions, however, have eased in Germany and Poland and moisture levels in key cropping areas in North America appear favourable. Morgan Stanley believes the stock is oversold.
Overweight rating. Price target is reduced to $8.00 from $8.70. Industry view: Cautious.
Target price is $8.00 Current Price is $5.26 Difference: $2.74
If NUF meets the Morgan Stanley target it will return approximately 52% (excluding dividends, fees and charges).
Current consensus price target is $7.73, suggesting upside of 47.0% (ex-dividends)
The company's fiscal year ends in July.
Forecast for FY19:
Morgan Stanley forecasts a full year FY19 dividend of 11.00 cents and EPS of 33.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 39.9, implying annual growth of 41.5%. Current consensus DPS estimate is 11.8, implying a prospective dividend yield of 2.2%. Current consensus EPS estimate suggests the PER is 13.2. |
Forecast for FY20:
Morgan Stanley forecasts a full year FY20 dividend of 11.00 cents and EPS of 48.00 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 51.9, implying annual growth of 30.1%. Current consensus DPS estimate is 13.9, implying a prospective dividend yield of 2.6%. Current consensus EPS estimate suggests the PER is 10.1. |
Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $4.66
Credit Suisse rates OGC as Underperform (5) -
OceanaGold has now upgraded the Waihi Martha underground resource to 998,000 ounces. The resource is expected to expand from the drilling that is proceeding over the next 18 months.
Credit Suisse notes mine life is immediately extended and production should rise above the 2019 grade-constrained guidance of 60-70,000 ounces.
Credit Suisse maintains an Underperform rating and $4 target.
Target price is $4.00 Current Price is $4.66 Difference: minus $0.66 (current price is over target).
If OGC meets the Credit Suisse target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $4.82, suggesting upside of 3.4% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Credit Suisse forecasts a full year FY19 dividend of 4.09 cents and EPS of 9.13 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 18.7, implying annual growth of N/A. Current consensus DPS estimate is 5.6, implying a prospective dividend yield of 1.2%. Current consensus EPS estimate suggests the PER is 24.9. |
Forecast for FY20:
Credit Suisse forecasts a full year FY20 dividend of 5.43 cents and EPS of 18.09 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 31.3, implying annual growth of 67.4%. Current consensus DPS estimate is 6.5, implying a prospective dividend yield of 1.4%. Current consensus EPS estimate suggests the PER is 14.9. |
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
Overnight Price: $90.62
Macquarie rates RIO as Outperform (1) -
Macquarie observes momentum is positive in 2019 as strong iron ore prices underpin earnings. Rio Tinto has a 1:1.5x earnings sensitivity to iron ore, the broker calculates.
Underlying earnings are expected to be 25% higher in 2019. The broker also envisages upside at current commodity prices. The aluminium divisions is expected to rebound because of relief on costs, while downside risk to copper continues, in the broker's view.
Outperform rating maintained and the target is lowered to $105 from $108.
Target price is $105.00 Current Price is $90.62 Difference: $14.38
If RIO meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).
Current consensus price target is $91.74, suggesting upside of 1.2% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY19:
Macquarie forecasts a full year FY19 dividend of 553.28 cents and EPS of 930.09 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 878.5, implying annual growth of N/A. Current consensus DPS estimate is 533.7, implying a prospective dividend yield of 5.9%. Current consensus EPS estimate suggests the PER is 10.3. |
Forecast for FY20:
Macquarie forecasts a full year FY20 dividend of 432.00 cents and EPS of 727.72 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 782.2, implying annual growth of -11.0%. Current consensus DPS estimate is 527.0, implying a prospective dividend yield of 5.8%. Current consensus EPS estimate suggests the PER is 11.6. |
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
Today's Price Target Changes
| Company | Broker | New Target | Prev Target | Change | |
| CSL | CSL | Morgan Stanley | 183.00 | 178.00 | 2.81% |
| HVN | HARVEY NORMAN HOLDINGS | Macquarie | 4.20 | 4.10 | 2.44% |
| NUF | NUFARM | Morgan Stanley | 8.00 | 8.70 | -8.05% |
| RIO | RIO TINTO | Macquarie | 105.00 | 108.00 | -2.78% |
Summaries
| BLD | BORAL | Outperform - Macquarie | Overnight Price $4.92 |
| BSL | BLUESCOPE STEEL | Buy - UBS | Overnight Price $13.72 |
| CSL | CSL | Equal-weight - Morgan Stanley | Overnight Price $199.49 |
| HVN | HARVEY NORMAN HOLDINGS | Outperform - Macquarie | Overnight Price $3.82 |
| LLC | LENDLEASE | Outperform - Credit Suisse | Overnight Price $12.89 |
| NUF | NUFARM | Overweight - Morgan Stanley | Overnight Price $5.26 |
| OGC | OCEANAGOLD | Underperform - Credit Suisse | Overnight Price $4.66 |
| RIO | RIO TINTO | Outperform - Macquarie | Overnight Price $90.62 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 6 |
| 3. Hold | 1 |
| 5. Sell | 1 |
Friday 08 March 2019
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