Australian Broker Call

Macquarie rates AMC as Outperform (1) -

Macquarie suspects relief in terms of raw material prices may be on the way as Asian resin prices are down -20% over the last month, although this needs to be sustained.

Macquarie reduces  FY19 and FY20 estimates for earnings per share by -3.6% and -2.1%, respectively, on a lower euro versus the US dollar, as well as incorporating other FX impact.

Outperform rating maintained. Target is reduced to $16.08 from $16.11.

Target price is $16.08 Current Price is $13.26 Difference: $2.82
If AMC meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $15.22, suggesting upside of 14.8% (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: 0.8

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

Credit Suisse rates BHP as Neutral (3) -

BHP is heavily exposed to steel-making raw materials, particularly iron ore, and Credit Suisse believes the stock will come under pressure in this environment.

However, diversity in the remainder of the portfolio should provide some relief and is considered the key advantage over peers.

The broker's strategists consider the Chinese steel sector has negative implications for seaborne iron ore and metallurgical coal.

Neutral rating maintained. Target is reduced to $34 from $35.

Target price is $34.00 Current Price is $32.40 Difference: $1.6
If BHP meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $36.88, suggesting upside of 13.8% (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: 0.6

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

UBS rates CL1 as Buy (1) -

UBS observes the risk levels are stepping up at Class, amid the CEO is stepping down and the federal Labor opposition proposing that excess franking credits become non-refundable.

Around 60% of all excess franking credits are currently claimed by self managed super funds, versus around 7% for APRA-regulated super funds.

While noting the current risks for the company, the broker highlights the core product remains very well regarded by clients.

Buy rating maintained. Earnings estimates are reduced by -9-20% for FY19-20. Target is reduced to $2.40 from $2.90.

Target price is $2.40 Current Price is $1.56 Difference: $0.84
If CL1 meets the UBS target it will return approximately 54% (excluding dividends, fees and charges).

Current consensus price target is $2.49, suggesting upside of 59.8% (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

Credit Suisse rates CSR as Neutral (3) -

Credit Suisse reduces aluminium forecasts for 2019/20. Lower forecast prices are a result of a slowdown in China's property construction that is expected to dampen demand growth and push out the timing of the pricing benefit from Chinese supply-side reform.

Aluminium earnings are reduced significantly for FY20. The sale of the Viridian business is incorporated into the broker's forecasts with total cash proceeds estimated at $215m.

Credit Suisse maintains a Neutral rating and reduces the target to $2.90 from $3.30.

Target price is $2.90 Current Price is $2.69 Difference: $0.21
If CSR meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.56, suggesting upside of 32.3% (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

Morgans rates DLX as Upgrade to Add from Hold (1) -

The share price has pull backed -16% over the past year, Morgans notes. This comes despite the company continuing to deliver solid earnings growth. The broker believes a good buying opportunity has emerged for a high-quality, defensive business with strong brands.

Despite a slowdown in residential building activity, Morgans expects renovation activity to remain resilient, and many of the products that Dulux sells are about maintenance.

Rating is upgraded to Add from Hold. Target is steady at $7.67.

Target price is $7.67 Current Price is $6.88 Difference: $0.79
If DLX meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $7.14, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in September.

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 FMG as Upgrade to Overweight from Underweight (1) -

Morgan Stanley's commodities strategists have lifted long-term iron ore price estimates by 12% to US$63/t. This is the main driver of the upgrade to the stock.

The broker expects Chinese steel mill margins to improve in 2019, largely driven by the winter reductions gathering pace in late December and early January. If this does not occur, there is further upside risk to forecasts, the broker adds.

Morgan Stanley upgrades to Overweight from Underweight and raises the target to $5.05 from $3.30. Industry view is upgraded to Attractive from In-Line.

Target price is $5.05 Current Price is $4.12 Difference: $0.93
If FMG meets the Morgan Stanley target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 15.4% (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: 0.6

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

Macquarie rates MGX as Outperform (1) -

The company has updated on the Koolan island project, expecting first ore sales in the third quarter of FY19. Macquarie believes the company offers unique exposure to high-grade iron ore, as Koolan island will be the highest grade DSO haematite mine in Australia.

The stock presents significant upgrade potential on the spot price and Macquarie maintains a Outperform rating. Target is $0.65.

Target price is $0.65 Current Price is $0.53 Difference: $0.12
If MGX meets the Macquarie target it will return approximately 23% (excluding dividends, fees and charges).

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

Morgan Stanley rates MIN as Overweight (1) -

Despite the deal with Albemarle, Morgan Stanley notes the stock has continued to trade at a significant discount to valuation.

The broker acknowledges the recent downgrade to operating earnings was not well-received but remains comforted by indications that mining services are being maintained at levels consistent with expectations.

Morgan Stanley retains an Overweight rating and raises the target to $22.20 from $20.00. Industry view is upgraded to Attractive from In-Line.

Target price is $22.20 Current Price is $14.30 Difference: $7.9
If MIN meets the Morgan Stanley target it will return approximately 55% (excluding dividends, fees and charges).

Current consensus price target is $20.23, suggesting upside of 41.5% (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

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

Credit Suisse upgrades to Outperform from Neutral on the back of share price weakness, despite the stock being a top performer over 2018. Target is reduced to $4.00 from $4.10.

Target price is $4.00 Current Price is $3.60 Difference: $0.4
If NHC meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.79, suggesting upside of 5.2% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates ORG as Upgrade to Add from Hold (1) -

Origin Energy has resumed paying dividends with $0.20 a share for FY19 and a formal dividend policy to be announced by early FY20. The company's performance since offloading Lattice Energy has improved, in Morgan's view.

Origin Energy is exposed to oil price fluctuations through its 37.5% interest in the APLNG JV. Morgans assumes the spot oil price will rise, with long-term Brent averaging US$70/bbl.

Additionally, the company has limited downside exposure in FY19 if the price falls below US$60/bbl for a sustained period, as it has purchased put contracts.

Morgans upgrades to Add from Hold. Target is reduced to $8.09 from $9.31.

Target price is $8.09 Current Price is $6.99 Difference: $1.1
If ORG meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $8.85, suggesting upside of 26.6% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates RCW as Add (1) -

The company has made two acquisitions which extend its security control software. The deal will be funded via scrip, although an additional $4m in fresh equity was also raised to fund working capital.

The strategic rationale is that the acquisition of Offsite Vision extends the company's expertise to tracking the egress of high-value assets or people via radio frequency identification tags.

The company has also acquired Ticto, which will allow it to move from point-in-time static access control to continuous presence control.

Add rating maintained. Target is $0.38, reduced from $0.46.

Target price is $0.38 Current Price is $0.31 Difference: $0.07
If RCW meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Market Sentiment: 1.0

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

UBS rates RFF as Buy (1) -

UBS believes the company's tenant covenant is under-rated and the drought has little impact on its tenants. The broker also incorporates recent acquisitions in its investment view.

The broker upgrades earnings estimates by 1-3% for FY20-23 and forecasts the cattle leases will show a 50% uplift in rent for FY22-23.

UBS maintains a Buy rating and raises the target to $2.41 from $2.39.

Target price is $2.41 Current Price is $2.25 Difference: $0.16
If RFF meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

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

Credit Suisse rates RIO as Downgrade to Neutral from Outperform (3) -

Credit Suisse is cautious about the outlook for 2019 and finds it hard to justify an increase in portfolio weightings towards Rio Tinto until there is at least some recovery in China or demand indicators.

The broker's strategists consider the Chinese steel sector has negative implications for seaborne iron ore and metallurgical coal.

While the company possesses high-quality assets and free cash flow yields remain healthy, iron ore exposure is substantial. The broker suggests yields will only remain healthy while iron ore prices hold up.

Credit Suisse downgrades to Neutral from Outperform and reduces the target to $79 from $89.

Target price is $79.00 Current Price is $74.52 Difference: $4.48
If RIO meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $87.18, suggesting upside of 17.0% (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: 0.6

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

Deutsche Bank rates SUN as Buy (1) -

Suncorp will sell its life business to Dai-Ichi for $725m. This results in a $880m loss on sale of which $145m will be booked in the first half as a goodwill write-down and the remainder on completion. Deutsche Bank has already factored this into numbers.

The new information is stranded costs of $30m which will remain on completion and be a -$10m drag on FY19 pre-tax earnings. Deutsche Bank retains a Buy rating and $15.10 target.

Target price is $15.10 Current Price is $13.00 Difference: $2.1
If SUN meets the Deutsche Bank target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $15.26, suggesting upside of 17.4% (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

Ord Minnett rates SUN as Hold (3) -

Suncorp has indicated that, on finalising transition services during the process of selling its life insurance business to TAL Dai-ichi there will be around $30m in stranded costs. Management will work to remove almost all the cost by the end of FY20.

Ord Minnett adjusts pre-tax forecasts for a $10m increase in costs for FY19. Following completion of the deal Suncorp will commence a 20-year strategic alliance with TAL Dai-ichi to offer life insurance products through its Australian distribution channels.

Hold rating and $15 target maintained.

Target price is $15.00 Current Price is $13.00 Difference: $2
If SUN meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $15.26, suggesting upside of 17.4% (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 TPM as Sell (5) -

The ACCC has detailed some concerns about the proposed merger with Vodafone in regard to the concentrated market for mobile services. Submissions are being called by January 18. A final decision is expected on March 28.

Citi is surprised by this preliminary view, assessing TPG as only a small competitor in the mobile market.

Sell rating and $6.75 target.

Target price is $6.75 Current Price is $6.30 Difference: $0.45
If TPM meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates TPM as Downgrade to Hold from Add (3) -

The ACCC has outlined a number of concerns over the merger with Vodafone. The concerns centre on the possible reduction in competition in mobile and broadband.

Morgans disagrees with the ACCC argument, given TPG Telecom has been an aggressive operator as a mobile reseller for a number of years and still failed to gain traction.

The broker asserts that TPG is not a significant player in the mobile market and price is not the only measure of value.

As the merger is now somewhat uncertain, Morgans downgrades to Hold from Add. Target is reduced to $6.65 from $10.70, implying a 50:50 chance of approval.

Target price is $6.65 Current Price is $6.30 Difference: $0.35
If TPM meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in July.

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

Ord Minnett rates TPM as Hold (3) -

The ACCC has expressed concern that the proposed merger with Vodafone would lessen competition in both the mobile and fixed broadband segments. Given the concerns, Ord Minnett now assumes a 50% likelihood that the merger will be approved.

The basis for the ACCC concerns surprises Ord Minnett, given there is little overlap between TPG and Vodafone's core businesses. The broker retains a Hold rating and reduces the target to $6.50 from $7.90.

Target price is $6.50 Current Price is $6.30 Difference: $0.2
If TPM meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in July.

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 TPM as Sell (5) -

On balance, UBS had expected the merger with Vodafone would proceed, although acknowledges the ACCC has raised concerns that it would substantially lessen competition in the market for retail mobile services.

This is not altogether a surprise to UBS, which suspects the market was not factoring in the risk that the ACCC would raise objections.

UBS suggests TPG's mobile offering is not as threatening as it once was and does not believe the ACCC concerns are insurmountable. Undertakings may be a solution. UBS maintains a Sell rating and $7 target.

Target price is $7.00 Current Price is $6.30 Difference: $0.7
If TPM meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in July.

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