Australian Broker Call

Deutsche Bank rates BHP as Downgrade to Hold from Buy (3) -

Deutsche Bank downgrades to Hold from Buy after a solid performance over the year to date. The broker believes the easy gains have been made. Capital returns are likely for the large cap miners, as they promised to return asset sale proceeds to shareholders.

While such returns are welcome Deutsche Bank does not believe this is a bullish signal to buy the sector. Target is reduced to $34.50 from $36.00.

Target price is $34.50 Current Price is $30.83 Difference: $3.67
If BHP meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $36.35, suggesting upside of 17.9% (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: 0.7

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

Citi rates CBA as Upgrade to Neutral from Sell (3) -

Citi observes Commonwealth Bank has underperformed over the last 12 months. While specific issues have been addressed there are other limits to the outlook such as falling retail banking profitability.

The more modest valuation and the strategies that have been identified to provide upside, along with the prospect of capital returns, signals a move back to Neutral from Sell is appropriate for the broker. Target is $72.

Target price is $72.00 Current Price is $71.22 Difference: $0.78
If CBA meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $74.06, suggesting upside of 4.0% (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 CSL as Outperform (1) -

Macquarie reviews the outlook for CSL and quantifies medium-longer term opportunities and risks. The broker considers the business well-positioned to meet immunoglobulin demand based on the recent roll-out of the plasma collection centres.

Moreover, there is solid growth of higher margin products such as Idelvion and Haegarda as well as a favourable shift in mix. Outperform rating maintained. Target rises to $230.00 from $223.50.

Target price is $230.00 Current Price is $210.72 Difference: $19.28
If CSL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $216.70, suggesting upside of 2.8% (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: 0.3

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

Ord Minnett rates EVN as Upgrade to Accumulate from Hold (2) -

Ord Minnett upgrades to Accumulate from Hold and raises the target to $3.20 from $3.00. The broker believes the time is right for ASX-listed gold companies to create value through M&A opportunities in North America.

A disparity between the ASX gold sector and the Canadian-listed sector creates the opportunity, despite the challenging operating environment, as North America hosts many large high-grade gold systems.

The broker estimates its ASX gold coverage will generate US$4bn in excess capital over the next three years and flags Newcrest Mining ((NCM)), Evolution Mining and Northern Star ((NST)) as the most likely to make potential acquisitions in the next 12 months.

Target price is $3.20 Current Price is $2.71 Difference: $0.49
If EVN meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 11.7% (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

Deutsche Bank rates FMG as Downgrade to Sell from Buy (5) -

Deutsche Bank downgrades to Sell from Buy, recognising the whole steel complex may turn around before the discount for 58% iron ore narrows. This will also affect the company's peers.

Steel prices are at seven-year highs but iron ore prices are not. This is despite the weaker iron ore supply. The broker notes the bottleneck has moved from the iron ore mines to the blast furnace as a result of Chinese policies. Target is reduced to $3.70 from $5.80.

Target price is $3.70 Current Price is $3.63 Difference: $0.07
If FMG meets the Deutsche Bank target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $4.97, suggesting upside of 36.9% (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: 0.5

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

Morgans rates IPL as Hold (3) -

Morgans was disappointed with the lower production guidance at Phosphate Hill which it believes has taken upside from higher fertiliser prices over FY18. The broker upgrades FY19 and FY20 forecasts but these are dependent on an improvement in manufacturing performance.

The broker believes the share price reflects the outlook and maintains a Hold rating. Target is raised to $3.90 from $3.45.

Target price is $3.90 Current Price is $3.88 Difference: $0.02
If IPL meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.10, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates NAB as Buy (1) -

National Australia Bank will not follow the other major banks in re-pricing its mortgage book higher, for now. Citi believes this is a bold play to reinvigorate mortgage growth that has been weak over 2018.

The broker suspects expanding margins in New Zealand, business banking and retail deposits have enabled NAB to almost offset the higher cost of BBSW rates.

Citi believes the recent outperformance in business banking has created a unique opportunity to improve the retail bank. Buy rating and $32.25 target maintained.

Target price is $32.25 Current Price is $27.72 Difference: $4.53
If NAB meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $30.19, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in September.

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 NAB as Underweight (5) -

National Australia Bank will leave its standard variable home loan unchanged at 5.24%. Morgan Stanley believes the decision suggests scrutiny of conduct and competition is affecting management's decision-making and will weigh on profitability and the performance of the share price.

The delay in re-pricing mortgages by the major banks in recent months suggests their pricing power is peaking. The broker doubts NAB's lower rate will drive a material pick up in new loans, given the amount of front book discounting, but it will reduce the risk of switching by existing customers.

Underweight weighting retained. Industry view: In-line. Price target is $26.40.

Target price is $26.40 Current Price is $27.72 Difference: minus $1.32 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.19, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates NAB as Accumulate (2) -

Ord Minnett was surprised that National Australia Bank will hold its standard variable rate for home loans at 5.24%. Still, the broker observes there is nothing in the announcement that would preclude the bank from re-pricing in the future.

While at some stage Ord Minnett expects the pricing differential to be reduced versus peers it does not reflect this in estimates, nor have mortgage growth rate assumptions been increased. Accumulate rating and $32.20 target maintained.

Target price is $32.20 Current Price is $27.72 Difference: $4.48
If NAB meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $30.19, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates ORG as Upgrade to Accumulate from Hold (2) -

Ord Minnett observes the share price has declined more than -20% versus AGL Energy ((AGL)) since the first half result as confidence has deteriorated regarding the company's financials following the emergence of additional hedging costs.

The broker considers the stock's valuation compelling while the current price adequately compensates for the immediate risks. The company is normally unaffected by wholesale prices, because of its short flexible generation portfolio, but Ord Minnett envisages a risk that reliability issues during the summer peak loads may drive detrimental policy changes.

The broker upgrades to Accumulate from Hold based on valuation but trims the target to $9.30 from $9.40.

Target price is $9.30 Current Price is $8.01 Difference: $1.29
If ORG meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $9.26, suggesting upside of 15.6% (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

Macquarie rates OZL as Outperform (1) -

Macquarie is encouraged by the discovery of higher grade nickel at the Yappsu deposit. Extending the higher grade zone could materially improve the project economics for West Musgrave. The broker does not currently include development of West  Musgrave in forecasts.

The upcoming catalysts are the updates on the development of Carrapateena and release of optimised feasibility studies for Pedra Branca and CentroGold.

Macquarie calculates that the combination of these projects could underpin a 3-5 year copper equivalent production growth rate of 13%. Outperform rating and $12.20 target maintained.

Target price is $12.20 Current Price is $8.34 Difference: $3.86
If OZL meets the Macquarie target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $10.74, suggesting upside of 28.8% (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

Deutsche Bank rates PGH as Buy (1) -

The resignation of Mal Bundey as CEO is considered a minor negative although Deutsche Bank does not foresee a significant change in direction, as there is a reasonable level of management depth.

Strategic priorities remain with the rigid plastics transformation and the integration of recent acquisitions. Buy rating and $5.80 target maintained.

Target price is $5.80 Current Price is $3.89 Difference: $1.91
If PGH meets the Deutsche Bank target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting upside of 21.0% (ex-dividends)

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 PRY as Underperform (5) -

The company has acquired Monserrat Day Hospitals, an operator of seven specialist hospitals and clinics across Queensland, Western Australia and NSW. The payment is $75m upfront with a further deferred payment of $20m upon completion of three facilities in development.

Credit Suisse upgrades FY19 and FY20 estimates by 4.6% and 6% respectively. The broker does not believe the stock's multiples reflect the near-term earnings risks. Underperform rating and $2.95 target maintained.

Target price is $2.95 Current Price is $2.87 Difference: $0.08
If PRY meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 5.5% (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

Deutsche Bank rates PRY as Hold (3) -

Primary Health Care will acquire Montserrat Day Hospitals which operates seven specialty clinics/hospitals. The acquisition is expected to increase exposure to non-Medicare revenue and provide further scale.

Deutsche Bank is cautious regarding the benefits from the transaction because this increases the complexity of the company, especially during a time when there is a significant transformation going on.

Additional pathology volumes from outsourcing are likely to be offset by revenue from tests that were already sourced from Montserrat hospitals, in the broker's opinion. Hold rating and $3.00 target maintained.

Target price is $3.00 Current Price is $2.87 Difference: $0.13
If PRY meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 5.5% (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

Ord Minnett rates PRY as Hold (3) -

Primary Health Care will acquire the Monserrat Day Hospitals. Ord Minnett finds the acquisition has merit as it adds to the scale of day surgery offerings and employs an experienced management team.

As 40% of the hospitals are under construction or being acquired, and the earnings are unaudited, the broker believes there are risks that are only partially mitigated by earn-out clauses. Ord Minnett looks forward to the AGM update for an opportunity to address some of its concerns. Hold rating maintained. Target is reduced to $3.10 from $3.25.

Target price is $3.10 Current Price is $2.87 Difference: $0.23
If PRY meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.03, suggesting upside of 5.5% (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

UBS rates PRY as Sell (5) -

The company will acquire Montserrat Day Hospitals for an upfront consideration of $75m and a further $63.5m through deferral/earn-outs by the end of FY21.

Despite the positives in the acquisition, UBS considers this a reasonably full price to pay for an asset given the current trends in industry volumes in stand-alone day hospitals. The broker maintains a Sell rating and reduces the target to $2.77 from $2.90.

Target price is $2.77 Current Price is $2.87 Difference: minus $0.1 (current price is over target).
If PRY meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.03, suggesting upside of 5.5% (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

Morgan Stanley rates PTM as Equal-weight (3) -

Morgan Stanley estimates $160m in inflows in August versus $375m in July and $30m in May and June. This was not surprising to the broker, given the inflows from trust funds that reflected seasonal tailwinds from the re-investment of retail distributions.

Equal-weight retained. Industry view: In-Line. Target is $6.

Target price is $6.00 Current Price is $5.13 Difference: $0.87
If PTM meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.33, suggesting upside of 3.9% (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 RIO as Hold (3) -

Deutsche Bank envisages potential for off market buybacks of the ASX stock as the company delivers on its promises to return asset sale proceeds to shareholders. While such returns are welcome, the broker does not consider this a bullish signal to buy the sector.

Hold rating maintained. Target is reduced to $78 from $89.

Target price is $78.00 Current Price is $70.66 Difference: $7.34
If RIO meets the Deutsche Bank target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $86.52, suggesting upside of 22.4% (ex-dividends)

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: 0.7

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

Deutsche Bank rates S32 as Upgrade to Buy from Hold (1) -

Deutsche Bank upgrades to Buy from Hold and raises the target to $4.10 from $3.80. The broker believes the easy gains have been made and FY19 is likely to feature challenges to price rises from increasing costs and capital expenditure. Still, earnings remains satisfactory.

Target price is $4.10 Current Price is $3.59 Difference: $0.51
If S32 meets the Deutsche Bank target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 8.4% (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: 0.6

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

Credit Suisse rates SUN as Neutral (3) -

Credit Suisse adjusts earnings and valuation for the sale of the Australian life and wealth management business. On a pro forma basis the sale results in a -6% downgrade to FY19 earnings estimates. Adjusting for the $600m share consolidation results in a -3% downgrade to the outer years.

While Suncorp is operating in a positive premium rate environment there are a number of headwinds that may totally offset price increases. Growth and margin are likely to be affected by the ongoing reductions in CTP and Credit Suisse believes the loss-making Australian commercial lines are at risk of losing more volumes.

The broker maintains a Neutral rating and reduces the target to $14.70 from $15.40.

Target price is $14.70 Current Price is $14.88 Difference: minus $0.18 (current price is over target).
If SUN meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.34, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates TAH as Outperform (1) -

Macquarie continues to find the stock attractive, having reviewed the lotteries business. Lotteries jackpot activity drives upgrades to estimates and the broker now forecasts 12% revenue growth in FY19.

Lotteries account for 40% of the operating earnings but 50% of the broker's valuation. Macquarie believes lotteries should be considered an infrastructure asset because of the long-term exclusive licenses and revenue growth. Outperform rating maintained. Target is raised to $5.20 from $5.05.

Target price is $5.20 Current Price is $4.80 Difference: $0.4
If TAH meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.26, suggesting upside of 9.5% (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

Deutsche Bank rates WHC as Upgrade to Buy from Hold (1) -

Deutsche Bank upgrades to Buy from Hold and raises the target to $5.70 from $5.40. The broker believes the easy gains have been made and FY19 is likely to feature challenges to price rises from increasing costs and capital expenditure. Still, earnings remains satisfactory.

Target price is $5.70 Current Price is $4.98 Difference: $0.72
If WHC meets the Deutsche Bank target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.52, suggesting upside of 10.9% (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