Australian Broker Call

Morgans rates ACF as Initiation of coverage with Add (1) -

Acrow Formwork and Construction Services is a hirer of formwork, falsework and scaffolding equipment to the Australian construction industry and Morgans forecasts strong growth ahead.

The key driver of earnings, explain the analysts, will be growth in civil infrastructure construction activity, particularly on the east coast of Australia. Morgans initiates coverage with an Add rating, accompanied by a maiden 37c price target.

Target price is $0.37 Current Price is $0.30 Difference: $0.07
If ACF meets the Morgans target it will return approximately 23% (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

Macquarie rates AHG as Neutral (3) -

News of HNA Group's withdrawal from the Refrigerated Logistics sale due to highly publicised liquidity issues has taken the wind out of Automotive Holdings Group's sails.

The proceeds would have given Automotive greater capital-management flexibility and removed a low-performing asset heading into weaker market conditions in WA and NSW.

Macquarie cuts the target price to $3.00 from $3.30 but adds 2% to FY19 earnings per share. Neutral rating retained with few upside catalysts on the horizon.

Target price is $3.00 Current Price is $2.67 Difference: $0.33
If AHG meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.17, suggesting upside of 18.5% (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

Morgan Stanley rates AHG as Overweight (1) -

China's HNA International has terminated its deal to buy Auto Holdings' cold logistics business, which was still pending FIRB approval anyway. The market had been pricing in such a risk but the broker sees further downside potential given the sale would have realised tangible value for shareholders and provided for strategic options.

The broker nevertheless retains Overweight and a $4.00 target. Industry view: In-Line.

Target price is $4.00 Current Price is $2.67 Difference: $1.33
If AHG meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $3.17, suggesting upside of 18.5% (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

Morgans rates AHG as Hold (3) -

Morgans has cut Automotive Holdings target price to $2.74 from $3.32 following news HNA Group has pulled out of the sale of Automotive's Refrigeration Logistics business due to liquidity issues.

The broker's main concern is that it impacts Automotive's strategy to divest, consolidate and return shareholder capital - not a good thing given sales in WA remain weak and no further guidance has been provided.

Hold rating retained.

Target price is $2.74 Current Price is $2.67 Difference: $0.07
If AHG meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.17, suggesting upside of 18.5% (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

UBS rates AHG as Neutral (3) -

Liquidity-strapped HNA Group has withdrawn its offer for Automotive's Refrigerated Logistics business. EPS forecasts rise slightly but target price falls to $2.65 from $2.90. Neutral rating retained.

The protracted sale, delayed by FIRB issues, has affected Refrigerated Logistics trade, and most likely the transformation program, but no further guidance has been provided. UBS believes falling house prices are a risk and the shock to consumer sentiment would most likely flow through to new car sales.

Target price is $2.65 Current Price is $2.67 Difference: minus $0.02 (current price is over target).
If AHG meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.17, suggesting upside of 18.5% (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

Macquarie rates ALX as Outperform (1) -

Atlas Arteria has paid Macquarie a calendar-year 2018 performance fee of $44.7m and residual performance fees for 2016 and 2017 of $60.7m in a mix of cash ($25m) and equity ($90m at $6.70 a share). The $6.70 figure compares favourably with the previous share price close of $6.43.

Macquarie bumps the target price up to $6.49 (it's worst-case scenario) and tips upside to $7.26.

The new performance fee is yet to be negotiated but the broker's current cash flow estimates suggest the net present value of a fee is $200m, which shareholders can capture if the asset is divested before 2019 and is valued at 20c a share. Currency movements have also added 24c to the valuation.

The broker tinkers with earnings per share estimates and maintains an Outperform recommendation.

Target price is $6.49 Current Price is $6.37 Difference: $0.12
If ALX meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $6.58, suggesting upside of 3.3% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates AMP as Outperform (1) -

The broker suggests confusion around the potential impact from regulatory changes with regard to financial planners is leading the market to undervalue AMP. It is the largest planner in the country, but as a licensee with very few planners actually salaried, the broker points out.

AMP the company derives most of its wealth management revenue from its platform. The greatest risk stemming from the RC is that of brand damage, the broker suggests, rather than regulation related. The broker maintains Outperform and a $4.80 target.

Target price is $4.80 Current Price is $3.60 Difference: $1.2
If AMP meets the Credit Suisse target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 17.4% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates BPT as Neutral (3) -

Woo-hoo! Beach Petroleum has upgraded reserves on the western flank by 19%, and the broker now expects production to hit the upper end of guidance.

Macquarie bumps up the target price 25% to $1.75 and lifts 2018-2020 earnings per share estimates 3%, tipping larger rises further out.

Neutral rating retained, the broker believing the market has factored in a strong performance from the upcoming fourth-quarter results.

Target price is $1.75 Current Price is $1.88 Difference: minus $0.13 (current price is over target).
If BPT meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.55, suggesting downside of -17.4% (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

Morgan Stanley rates BPT as Overweight (1) -

Beach Energy has announced strong reserve upgrades based on completing the Lattice acquisition but, more importantly the broker suggests, also due to field performance and expansion plans. Reserve life increases to 11 from 7 years.

Beach typically trades on lower enterprise value multiples due to a short reserve life and high maintenance capex requirements, the broker notes, but strong cash flow should lead to rapid deleveraging if oil prices remain at current levels.

Overweight and $2.00 target retained. Industry view: Attractive.

Target price is $2.00 Current Price is $1.88 Difference: $0.12
If BPT meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.55, suggesting downside of -17.4% (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

Ord Minnett rates BPT as Upgrade to Hold from Lighten (3) -

Beach Energy has reported a "material increase" in its oil and gas reserves and Ord Minnett has taken the view this event clarifies the medium-term production growth profile, hence an upgrade to Hold from Lighten.

From this moment onwards, the company's production volumes are expected to remain around current levels, explain the analysts. Target price lifts to $1.80 from $1.40. Forecasts have received a substantial shot in the arm, but DPS estimates have fallen.

Target price is $1.80 Current Price is $1.88 Difference: minus $0.08 (current price is over target).
If BPT meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.55, suggesting downside of -17.4% (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

UBS rates BXB as Buy (1) -

Brambles shares have underperformed the broader market by no less than -18% over the past two months, observe UBS analysts, and they believe cost inflation for US CHEP is to blame.

A recovery for CHEP Americas has now pushed out to FY20, they suggest. UBS has further reduced estimates. However, the broker also believes the shares are looking attractive, even assuming possible worst case scenarios.

Price target loses 20c to $11.30. Buy rating retained.

Target price is $11.30 Current Price is $9.06 Difference: $2.24
If BXB meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $10.34, suggesting upside of 14.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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 CGC as Downgrade to Neutral from Buy (3) -

UBS downgrades Costa Group to Neutral from Buy on a valuation basis, noting the stock is trading at roughly 27 times the broker's FY19 earnings-per-share estimate.

Triggers to the upside would include a surprisingly strong FY18 result, an upgrade to China guidance or further M&A activity in the avocado business. UBS reduces near-term earnings-per-share forecasts by -2-3%, noting the positive tailwinds of FY18 are likely to wane in 2019.

Target price rises to $8.40 from $7.50 to reflect a higher return on investment capital in the international business and a one-year roll forward of the broker's discounted cash flow valuation.

Target price is $8.40 Current Price is $8.05 Difference: $0.35
If CGC meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $7.77, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Credit Suisse rates FXL as Upgrade to Outperform from Neutral (1) -

Credit Suisse believes that for the first time in a long time FlexiGroup has a reasonable chance of meeting FY earnings forecasts. FY19 should show flat to modest growth. The broker has thus upgraded to Outperform from Neutral but warns it is not so much of an "upgrade" story as it is "no more downgrades".

Even at a single digit multiple, FlexiGroup is not without its risks, the broker warns. But the Australian card business and cost-outs should prove key earnings drivers. Target rises to $2.45 from $1.85.

Target price is $2.45 Current Price is $2.28 Difference: $0.17
If FXL meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.12, suggesting downside of -7.2% (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

Credit Suisse rates GXY as Initiation of coverage with Neutral (3) -

The broker has taken up coverage of the lithium sector, and initiated on Galaxy Resources with a Neutral rating.

While Galaxy is an established producer boasting genuine long term growth options, the benefits will take many years to realise, the broker points out. With limited catalysts in the near term, th stock is fairly valued in the broker's view.

Target set at $3.15.

Target price is $3.15 Current Price is $3.09 Difference: $0.06
If GXY meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.58, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates HVN as Sell (5) -

Citi analysts note like-for-like sales for Steinhoff's furniture operations in Australia for the March quarter revealed a fall of -9.2%. The analysts were already concerned about the outlook for this particular segment of the retail market (housing slow down related).

Citi analysts are now even more concerned given the apparent acceleration in sales decline for the, admittedly, troubled South-African competitor of ASX-listed peers including Harvey Norman and Nick Scali ((NCK)).

Steinhoff might be signalling pressure for the sector overall. Nick Scali could be in the running to acquire the Australian operations of the South-African retailer and this could create an upside surprise, suggest the analysts. Sell rating and $3.10 target retained.

Target price is $3.10 Current Price is $3.36 Difference: minus $0.26 (current price is over target).
If HVN meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.81, suggesting upside of 13.3% (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

UBS rates IFL as Neutral (3) -

UBS sees revenue risk for IOOF given ANZ Wealth's exposure to higher fee pressure should grandfathered commissions be phased out. It estimates the government's 'Protecting your Super' Budget measures could lower earnings per share by -5%.

Nevertheless, EPS estimates increase 1.4% in FY18 and 2.8% in FY19. Estimates fall -4.5% in FY20 and -9.5% in FY22.

Target price falls to $9.30 from $10. Neutral rating retained.

Target price is $9.30 Current Price is $9.21 Difference: $0.09
If IFL meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.48, suggesting upside of 24.6% (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 MNF as Overweight (1) -

MNF's announced bolt-on acquisition means the company will now own fully connected voice network infrastructure in Singapore and will be able to add its software ecosystem to that offer, the broker notes. FY18 guidance has been reaffirmed.

Meanwhile, the broker believes the market is overly focused on the short term metrics of Pennytel, questioning the logic of the investment in mobile as competition increases and prices deflate. Longer term upside is provided by wholesale capabilities and a growing footprint, the broker suggests.

Overweight and $7.70 target retained. Industry view: In-Line.

Target price is $7.70 Current Price is $5.16 Difference: $2.54
If MNF meets the Morgan Stanley target it will return approximately 49% (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

Citi rates NCK as Neutral (3) -

Citi analysts note like-for-like sales for Steinhoff's furniture operations in Australia for the March quarter revealed a fall of -9.2%. The analysts were already concerned about the outlook for this particular segment of the retail market (housing slow down related).

Citi analysts are now even more concerned given the apparent acceleration in sales decline for the, admittedly, troubled South-African competitor of ASX-listed peers including Harvey Norman ((HVN)) and Nick Scali.

Steinhoff might be signalling pressure for the sector overall. Nick Scali could be in the running to acquire the Australian operations of the South-African retailer and this could create an upside surprise, suggest the analysts. Neutral rating and $7.00 target retained.

Target price is $7.00 Current Price is $6.62 Difference: $0.38
If NCK meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Citi rates ORE as Buy (1) -

Orocobre's June-quarter production, sales and realised pricing figures fell just shy of guidance but remained within the broker's estimates. 

Citi upgrades FY20 earnings-per-share estimates to reflect lower Argentinean tax rates.

Buy rating and $7.60 target price retained, the broker noting better pond management, and a relatively good performance given the effect of cool weather on evaporation rates.

Target price is $7.60 Current Price is $5.55 Difference: $2.05
If ORE meets the Citi target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $6.87, suggesting upside of 23.7% (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

Credit Suisse rates ORE as Initiation of coverage with Outperform (1) -

The broker has taken up coverage of the lithium sector, and initiated on Orocobre with an Outperform rating.

While lithium production is easier from hardrock than from brine, Orocobre has many competitive advantages over hardrock peers, the broker suggests, including lower costs, a long mine life, a clearly defined growth plan, and a high quality resource at its established Olaroz project.

Target set at $5.70.

Target price is $5.70 Current Price is $5.55 Difference: $0.15
If ORE meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.87, suggesting upside of 23.7% (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

Macquarie rates ORE as Outperform (1) -

Orocobre reported its fourth quarter early, announcing its second-highest quarterly production on record. Sales and revenue were strong and margins may also hit a record.

Macquarie tinkers with earnings-per-share estimates, easing FY18 forecasts -1% and increasing FY19 forecasts 3% to account for a delay in contracts.

Outperform rating and $6.60 target retained, the broker tipping Orocobre as its core pick on the Lithium/EV front.

Target price is $6.60 Current Price is $5.55 Difference: $1.05
If ORE meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $6.87, suggesting upside of 23.7% (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 ORE as Underweight (5) -

A pre-release of Orocobre's June Q production numbers show an achieved price -5% below guidance, the broker notes, production was in line, helped by lower evaporation rates.

Underweight and $4.25 target retained.

Target price is $4.25 Current Price is $5.55 Difference: minus $1.3 (current price is over target).
If ORE meets the Morgan Stanley target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.87, suggesting upside of 23.7% (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

Credit Suisse rates PLS as Initiation of coverage with Outperform (1) -

The broker has taken up coverage of the lithium sector, and initiated on Pilbara Minerals with an Outperform rating.

Pilbara offers exposure for those seeking investment in the EV and battery thematic sector, the broker suggests, with superior potential investment returns to peers. The company's Pilgangoora mine is long life and has a clearly defined capacity to grow based on simple technology.

Target set at $1.15.

Target price is $1.15 Current Price is $0.89 Difference: $0.26
If PLS meets the Credit Suisse target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $1.11, suggesting upside of 25.0% (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

Macquarie rates QBE as Outperform (1) -

The broker has been reworking its estimates and believes QBE has posted premium rate rises in its global portfolio in the first half of 2018 of 2.3%.

Add that to a strong mark-to-market performance lifting the yield on the fixed-income portfolio to 2.2% as the buyback continues, and the inclusion of the LATAM sale in estimates, and there was quite a bit of revising to be done.

The upshot: the broker cuts FY18 earnings-per-share forecasts -5.7% to include loss-making LATAM and lifts FY19 1.7% to exclude LATAM.

Target price rises to $11.60 from $11.20 and Outperform rating retained to reflect portfolio remediation, the buyback and the fact the stock is trading at a 20% price-earnings multiple discount to international peers.

Target price is $11.60 Current Price is $9.85 Difference: $1.75
If QBE meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $11.05, suggesting upside of 12.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Macquarie rates RIO as Outperform (1) -

News that RIO may sell its interest in Grasberg imminently for between $US3bn and $US4bn surprised the broker, which had pegged a figure of $US2.6bn.

While it would view such a sale as a positive outcome, the broker retains its target price of $94 and an Outperform rating.

Target price is $94.00 Current Price is $82.04 Difference: $11.96
If RIO meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $89.31, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.8

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

Morgans rates SEK as Reduce (5) -

SEEK has launched new pricing for advertising and database products which will yield an average price rise of 4.5%, with rises skewed to premium products. Morgans says the figures suggest the company could outpace in FY19 but refrains from upgrading a week out from the FY18 results.

Instead, the broker eases the target price to $19.06 from $19.07 to account for adverse currency movements. Reduce rating retained.

Risks to the earnings outlook include a weaker labour market, downturns in the economies of China, South East Asia or Latin America, and Google for Jobs.

Target price is $19.06 Current Price is $21.52 Difference: minus $2.46 (current price is over target).
If SEK meets the Morgans target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.70, suggesting downside of -13.1% (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

Citi rates SIG as Upgrade to Buy from Sell (1) -

Citi upgrades Sigma Healthcare to Buy from Sell, after confirmation the Chemist Warehouse contract will not be renewed.

The broker cuts earnings per share estimates across FY19-FY21 (-15%, -34% and -17% respectively) to reflect new guidance arising from the news. Target price falls to 55c from 70c.

The broker notes the share price has already fallen 40%, hence the upgrade. Capital management and acquisitions remain as upside risks given the slowing in the underlying revenue. The broker says Sigma will have to choose carefully.

Target price is $0.55 Current Price is $0.50 Difference: $0.05
If SIG meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $0.49, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in January.

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

Credit Suisse rates SIG as Neutral (3) -

Chemist Warehouse's decision not to renew its supply contract has led to Sigma cutting FY19 earnings guidance to $75m from $90m and FY20 guidance to -40% lower than FY19. At the end of the contract, Sigma will receive a $300m working capital release.

Valuation will then depend on what Sigma does with the money, the broker suggests. M&A suggests a higher valuation, but if the money stays on the balance sheet, valuation is lower. For now the broker has cut its target to 52c from 82c and retained Neutral at the new, much lower share price.

Target price is $0.52 Current Price is $0.50 Difference: $0.02
If SIG meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $0.49, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in January.

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

Morgan Stanley rates SIG as Underweight (5) -

Chemist Warehouse will not renew its contract with Sigma, which expires end-FY19 and is worth some 41% of FY18 revenue, the broker notes. The broker saw this as a risk, so at least that has now been removed.

An associated $300m working capital release limits some downside but the industry outlook remains challenging, the broker suggests. Underweight retained, target falls to 43c from 80c. Industry view: In-Line.

Target price is $0.43 Current Price is $0.50 Difference: minus $0.07 (current price is over target).
If SIG meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.49, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in January.

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 SIG as Sell (5) -

Confirmation that Sigma's contract with Chemist Warehouse will not be extended beyond June 30, 2019 sees UBS cut its target price to 45c from 75c.

The broker retains its Sell rating, noting several trading headwinds, likely PBS-related price erosion, and a high price-earnings multiple relative to the ASX200, excluding Resources.

Target price is $0.45 Current Price is $0.50 Difference: minus $0.05 (current price is over target).
If SIG 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 $0.49, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in January.

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 TAH as Outperform (1) -

Macquarie has revised estimates for Tabcorp, noting the lotteries prize pool grew 4.5%, which at 60% of ticket sales translates to a likely rise in revenue. The broker now forecasts FY18 revenue growth of 4.4%, reflecting the latest update from its lotteries tracker.

Earnings per share estimates are reduced -2% in FY18/19 and the price target falls to $5.05 from $5.20.

Outperform rating retained, the broker noting the stock is trading on an attractive price-earnings multiple of 20x.

Target price is $5.05 Current Price is $4.51 Difference: $0.54
If TAH meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.17, suggesting upside of 14.7% (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

Morgans rates Z1P as Initiation of coverage with Add (1) -

Morgans has initiated coverage of Zip Co with an Add rating and $1.06 price target, noting the company has successfully carved out a niche in the retail finance sector, with rapid growth in the past three years.

The analysts note, with 628k customers and $540m in transactions (annualised), the company appears on track to achieve monthly cash flow breakeven in FY18. The company operates brands Zip Pay and Zip Money and Morgans believes the addressable market remains large.

Target price is $1.06 Current Price is $0.89 Difference: $0.17
If Z1P meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

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