Australian Broker Call

UBS rates A2M as Neutral (3) -

UBS has surveyed institutional investors and finds the market is bullish on a2 Milk, which signals that earnings upgrades and/or positive news on geographic or category expansion is needed for further outperformance.

Regulatory risk in China is now perceived as less important, which surprised the broker. UBS finds the near-term risk is weighted to the upside but to be more positive in the longer term needs greater confidence in the opportunity for market share in China as well as the US opportunity.

Neutral rating maintained. Target is NZ$14.00.

Current Price is $13.53. Target price not assessed.

Current consensus price target is $13.63, suggesting upside of 0.7% (ex-dividends)

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: 0.1

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

Macquarie rates ALQ as Outperform (1) -

Macquarie expects earnings growth will prove to be robust when the company reports its FY19 result on May 21. Life Sciences produced strong sequential improvement in the first half and the broker expects a margin expansion of 130 basis points in the second half.

Margins are expected to be supported by improving market demand in Canada, Latin America and Australia. Softness in the US is expected to be offset by the strong performance elsewhere.

The broker observes the stock is now trading at a -18% PE discount to global peers, versus the traditional -10% discount. Outperform maintained. Target is raised to $8.76 from $8.58.

Target price is $8.76 Current Price is $7.80 Difference: $0.96
If ALQ meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $8.19, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in March.

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 CGC as Initiation of coverage with Buy (1) -

Cost Group has positioned itself in lucrative produce categories, Citi observes, which will support strong earnings growth.

The broker expects compound revenue growth of 10% and operating earnings (EBITDA) growth of 25% from FY18 to FY21.

The company operates in categories where per capita consumption is growing in Australia and Citi initiates coverage with a Buy rating and $5.80 target.

Target price is $5.80 Current Price is $5.11 Difference: $0.69
If CGC meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.84, suggesting upside of 14.4% (ex-dividends)

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

Macquarie rates CMW as Underperform (5) -

Cromwell has announced an approach to London-listed REIT, RDI, regarding a potential transaction. RDI has a market capitalisation of around GBP500m.

Macquarie believes the most likely outcome would be an unlisted mandate/fund with a Cromwell co-investment. Macquarie also estimates a potential transaction will be 7% accretive to FY20 earnings, using the takeover price speculated in the media.

Underperform rating maintained. Target is $0.91.

Target price is $0.91 Current Price is $1.11 Difference: minus $0.2 (current price is over target).
If CMW meets the Macquarie target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.06, suggesting downside of -4.8% (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

Citi rates CSL as Buy (1) -

Target price of $213 and Buy rating retained as the analysts note the company has received approval for both Privigen (IVIG) and Hizentra (subQ IG) for the treatment of neurological disorder CIDP. The analysts highlight Hizentra is the first and only subcutaneous immunoglobulin approved for CIDP in Japan.

While this approval grants CSL a first mover advantage, Citi also points out the news has probably already been accounted for since management already flagged this back in December. Citi analysts continue to forecast 10%-plus IG growth for the next few years, with CSL expected to increase market share on the basis of its superior position in plasma collection.

In addition, albumin growth is expected to recover in 2H19 and FY20 on the back of anticipated FDA approval for AlbuRx and as CSL begins to sell the product directly into China, reports Citi.

Target price is $213.00 Current Price is $193.17 Difference: $19.83
If CSL meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $204.58, suggesting upside of 5.9% (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 ECX as Equal-weight (3) -

The company has updated the market and provided some comfort regarding debt covenants. However, Morgan Stanley suspects the market will take a "wait and see" approach. A sale of Grays or Right2Drive could provide a catalyst and will be used to pay down debt.

The company is in compliance with covenants as of February 28 2019, reiterating support from funders. Meanwhile, the core fleet & novated business was flat in terms of net operating income for the first five months of the half year.

Equal-weight rating. Industry view In-Line. Target is $1.00.

Target price is $1.00 Current Price is $0.69 Difference: $0.31
If ECX meets the Morgan Stanley target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting upside of 53.3% (ex-dividends)

The company's fiscal year ends in September.

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 IVC as Neutral (3) -

The company has announced an $85m capital raising to pursue strategic growth objectives. Macquarie expects market confidence will improve as the company delivers on its Protect & Grow targets.

Concerns over the balance sheet have now been alleviated and the broker finds the defensive characteristics of the stock attractive. Neutral rating maintained. Target rises 4% to $14.

Target price is $14.00 Current Price is $13.93 Difference: $0.07
If IVC meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $13.22, suggesting downside of -5.1% (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

UBS rates LYC as No Rating (-1) -

Wesfarmers ((WES)) has proposed acquiring the company for $2.25 a share. The transaction is subject to due diligence and ensuring the relevant operating licences in Malaysia remain in force.

The Lynas board has evaluated the proposal and concluded that it will not engage with Wesfarmers on the terms outlined. UBS notes the operating permit in Malaysia needs to be renewed by September 2019 and management remains confident in the outcome.

The company considers there are a number of options available if it cannot convince the Malaysian government to remove the requirement to export waste. The broker is restricted on rating and target at present.

Current Price is $2.11. Target price not assessed.

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

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

Morgans rates MP1 as Add (1) -

The company has recently completed a capital raising to expand into additional locations and markets. Megaport raised $50m in a placement and Morgans assumes $10m will be raised via a share purchase plan.

Morgans expects Megaport will provide positive operating earnings (EBITDA) by June 2022. The broker now forecasts 500 data centres by December 2020.

The expanded data centre footprint increases the broker's valuation, with the target raised to $5.12 from $4.52. Add rating retained.

Target price is $5.12 Current Price is $4.01 Difference: $1.11
If MP1 meets the Morgans target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $4.89, suggesting upside of 21.9% (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

Ord Minnett rates NAB as Accumulate (2) -

Following the market update from Westpac Banking ((WBC)) Ord Minnett revises its FY19 remediation costs forecasts for the other major banks. The changes have meant net profit estimates are reduced by -3% for National Australia Bank.

The broker now assumes no bank conducts capital management in the second half. Ord Minnett reduces National Australia Bank's first half dividend forecast to $0.90 to provide more of a buffer to meet industry challenges and the NZ capital call.

Nevertheless, the broker considers the dividend yield remains healthy. Accumulate rating maintained.

Target price is $30.00 Current Price is $25.13 Difference: $4.87
If NAB meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $27.20, suggesting upside of 8.2% (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

Credit Suisse rates PLS as Outperform (1) -

Credit Suisse assesses the scoping study is further supportive of a stage 3 expansion of processing rates at Pilgangoora to 7.5mtpa in production to 1.2mtpa of spodumene concentrate.

The stock remains the broker's top pick in the lithium space and the study, while early stage, serves to highlight the potential of the Pilgangoora resource.

Outperform rating and $1.15 target maintained.

Target price is $1.15 Current Price is $0.80 Difference: $0.35
If PLS meets the Credit Suisse target it will return approximately 44% (excluding dividends, fees and charges).

Current consensus price target is $1.13, suggesting upside of 40.6% (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

Morgans rates SLC as Add (1) -

Morgans resumes coverage with an Add rating and $2.11 target following new accounting standards and the business segmentation under a new CEO and CFO. The company has also conducted a capital raising to refresh the balance sheet.

The broker believes the second half marks the end of the elevated capital expenditure phase. By June the submarine cable will be live and cash flow should start to be generated.

Superloop is the only on-net provider of communication services in around and between Hong Kong, Singapore and Australia. Morgans is confident sales should accelerate over the next few years.

Target price is $2.11 Current Price is $1.49 Difference: $0.62
If SLC meets the Morgans target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $1.71, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

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

Credit Suisse rates SPK as Underperform (5) -

Credit Suisse considers the market valuation is too rich, while appreciating the confidence being shown in the shorter-term earnings outlook.

The broker struggles to be comfortable, taking into account the company has increased debt to stabilise earnings, while paying out dividends rather than reinvesting.

That said the broker remains confident in the execution and the opportunities to support modest near-term earnings growth.

Underperform rating maintained and the target is raised to NZ$3.39 from NZ$3.28.

Current Price is $3.68. 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