Australian Broker Call

Citi rates BPT as Downgrade to Neutral from Buy (3) -

Citi analysts have used a general sector update to downgrade their rating for Beach Energy to Neutral from Buy. The move was inspired by valuation, the analysts explain. They suggest there will be better entry points ahead.

Citi still isn't keen on LNG exposure and, for investors seeking exposure to the theme/sector, the analysts continue recommending oil producers and/or exposure to domestic gas in Australia. Sector favourite remains Santos ((STO)).

Target price for Beach Energy has risen to $2.48 from $2.33 on revised forecasts.

Target price is $2.48 Current Price is $2.47 Difference: $0.01
If BPT meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.25, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.2

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

Macquarie rates COE as Outperform (1) -

Cooper Energy has confirmed gas at Annie-1. The drill rig will now move to Elanora-1. Macquarie considers the exploration success a positive for the backfill of the newly acquired Minerva gas plant.

Commissioning of the Sole project could transform the earnings outlook for the company, in the broker's view. Outperform rating maintained. Target rises to $0.70 from $0.65.

Target price is $0.70 Current Price is $0.62 Difference: $0.08
If COE meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $0.64, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.7

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

Citi rates CYB as Buy (1) -

A little over one month ago, Citi analysts agreed on taking a broadly neutral view post CYBG's Q3 report release, despite the fact that management's guidance implied a steep fall for the Net Interest Margin (NIM) in the current quarter.

Post last week's profit warning, due to "unprecedented" PPI claims, the analysts are of the view the subsequent sell-off in the equities has been too harsh. The analysts believe the bank will cancel its dividend rather than raising additional capital. The latter would be highly dilutive.

Earnings estimates have been lowered. The price target declines to GBP1.80 (was GBP2.45, then GBP2.15 in August). Buy rating retained.

Current Price is $2.03. Target price not assessed.

Current consensus price target is $2.56, suggesting upside of 25.9% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

This company reports in GBP. 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

Macquarie rates FMG as Outperform (1) -

The company has raised US$600m through a new high-yield bond to enable some of its term loan to be repaid. The debt restructure has pushed out the maturity of the debt profile.

The broker finds upside risk in spot prices, with Fortescue Metals currently trading on a free cash flow yield of 16%. Outperform rating maintained. Target is reduced to $10.60 from $10.90.

Target price is $10.60 Current Price is $8.48 Difference: $2.12
If FMG meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $8.06, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

Morgan Stanley rates JHX as Overweight (1) -

James Hardie will hold an investor briefing in Europe on September 12-13. Morgan Stanley notes the European Fermacell business, acquired in 2018, has increased the footprint to 6 manufacturing plants and two new product suites: fibre gypsum and fire protection.

The broker has found recent sales growth in European fibre cement encouraging, up 37% in the first quarter FY20 in local currency terms. Management is targeting a EUR1bn revenue business with 20% earnings (EBIT) margins within 10 years.

To achieve this target, Morgan Stanley calculates fibre cement sales compound growth of 37% is required. Price target is $25. Overweight rating and Cautious industry view.

Target price is $25.00 Current Price is $23.43 Difference: $1.57
If JHX meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $24.39, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.9

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

Citi rates MGR as Upgrade to Buy from Neutral (1) -

Citi analysts have used a general update on AREITs to express their ongoing bearish assessment for retail landlords, for which they believe the outlook continues to deteriorate further.

Looking back to the recent August reporting season, the analysts observe sharp differences remain in operating conditions across sub-sectors. In other words: earnings growth and upside surprises have become more concentrated.

Lendlease ((LLC)) has become the new Top Pick in the sector. Mirvac Group is the sole recipient of an upgrade; to Buy from Neutral, inspired by valuation. Price target moves to $3.50 from $3.41. No changes have been made to forecasts.

Target price is $3.50 Current Price is $3.09 Difference: $0.41
If MGR meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.20, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.2

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

Morgan Stanley rates QBE as Overweight (1) -

Morgan Stanley notes the company's high-performing London market specialty business, historically, has experienced margins declining -10 percentage points since 2012.

However, positive pricing is being observed and there are double-digit rate increases in some London market lines.

QBE has highlighted very strong rates in the first half. Given the company's strong relative performance compared with other London market participants, any sustained pricing creates meaningful upside, in the broker's view.

Overweight rating maintained. Target is $13.00. Industry view is In-Line.

Target price is $13.00 Current Price is $12.57 Difference: $0.43
If QBE meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $12.84, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates REH as Neutral (3) -

Citi analysts suggest it is not widely appreciated among Australian investors, but Morsco in the US, now the designated offshore growth engine for Reece Australia, has been quite the consolidator since 2012.

On Citi's numbers, the recent Todd Pipe acquisition is Morsco's twelfth over the past seven years. The latest purchase is only estimated to add 2% to the group EPS forecasts for FY20-FY22. Citi has lifted the price target by 2% to $11.42. Neutral rating retained.

Target price is $11.42 Current Price is $10.82 Difference: $0.6
If REH meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Market Sentiment: 0.5

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

Ord Minnett rates RIO as Buy (1) -

Ord Minnett is trimming 2020 iron ore price forecasts to US$81/t from US$85/t, suspecting the market will become more cautious about global growth over the next 12-18 months.

However, Ord Minnett continues to envisage value in the iron ore names and the rotation in sentiment should present near-term trading opportunities.

Slightly lower iron ore prices and higher freight costs have led the broker to reduce forward estimates for the miners by -6-12%. They are considered likely to enjoy free cash flow yields of 8-10% that should translate to strong dividends.

Buy rating maintained. Target is reduced to $103 from $105.

Target price is $103.00 Current Price is $90.33 Difference: $12.67
If RIO meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $101.25, suggesting upside of 12.1% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates SXY as Downgrade to Neutral from Buy/High Risk (3) -

Citi analysts have used a general sector update to downgrade their rating for Senex Energy to Neutral from Buy/High Risk. The move was inspired by valuation, the analysts explain. They suggest there will be better entry points ahead.

Citi still isn't keen on LNG exposure and, for investors seeking exposure to the theme/sector, the analysts continue recommending oil producers and/or exposure to domestic gas in Australia. Sector favourite remains Santos ((STO)).

Target price for Senex Energy has risen to $0.46 from $0.43 on revised forecasts.

Target price is $0.46 Current Price is $0.40 Difference: $0.06
If SXY meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $0.44, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

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

Macquarie rates TPM as No Rating (-1) -

Underlying FY19 operating earnings (EBITDA) were down -1.0%. Macquarie notes FY20 is challenging, as the NBN headwinds are due to peak.

There is room for improvement if the current pricing review by the NBN leads to relief on entry-level pricing. The broker envisages scope for further growth in corporate and notes Singapore will launch early next year as a commercial service.

The broker is advising with regard the proposed merger with Vodafone Australia and as such is currently restricted from making a recommendation.

Current Price is $6.80. Target price not assessed.

Current consensus price target is $6.47, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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

UBS rates TPM as Upgrade to Neutral from Sell (3) -

FY19 results were in line with UBS estimates. The broker suggests the NBN aspirations could begin to affect forward earnings. The company expects FY20 to be the peak in headwinds from the NBN with the drag on earnings lifting to -$110m.

Uncertainty about the merger process with Vodafone Australia is also having its impact. The Federal Court hearing is scheduled for September 10, although UBS envisages the potential for appeals to prolong the process further.

As the stock has underperformed over the last 12 months the broker upgrades to Neutral from Sell. Target is raised to $6.60 from $5.80.

Target price is $6.60 Current Price is $6.80 Difference: minus $0.2 (current price is over target).
If TPM 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 $6.47, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.3

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