Australian Broker Call

Macquarie rates ALU as Upgrade to Outperform from Neutral (1) -

Macquarie has used a sector update post the February reporting season to sneak in an upgrade for Altium, to Outperform from Neutral, due to excessive share price weakness.

The analysts see a solid medium-term earnings growth path on top of strategic opportunities, while also acknowledging any market shocks have the potential to highlight Altium's near-term reliance on perpetual licence sales and the fact that China is now important for growth.

Target price remains unchanged at $37.50.

Target price is $37.50 Current Price is $28.08 Difference: $9.42
If ALU meets the Macquarie target it will return approximately 34% (excluding dividends, fees and charges).

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: 0.7

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

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

Ord Minnett updates forecasts to allow for the recent passing through of the latest cut to the cash rate and prospects for a further cut in April.

While concerns over the transformation agenda remain, and the bank is the broker's least preferred, the risks appear fairly compensated for in valuation.

Hence, Ord Minnett upgrades to Hold from Lighten. Target is reduced to $8.30 from $9.25.

Target price is $8.30 Current Price is $7.06 Difference: $1.24
If BEN meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $8.81, suggesting upside of 24.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.8

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

Credit Suisse rates CCL as Upgrade to Neutral from Underperform (3) -

Reflecting on the GFC, Credit Suisse believes Coca-Cola Amatil is underpinned by solid revenue, albeit growth is more modest than that achieved a decade ago.

The branded non-alcoholic beverage category has also been growing in the last six months despite the higher prices caused by container deposit schemes.

Credit Suisse upgrades to Neutral from Underperform now the share price has fallen below the target. Target is $11.40.

Target price is $11.40 Current Price is $11.16 Difference: $0.24
If CCL meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $12.28, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in December.

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 DXS as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley believes Dexus is "ideal" for taking shelter during market volatility. The leases are underpinned by fixed 3.5-4%/year increases, while a tight Sydney office market should cushion the impact of uncertainties.

Rating is upgraded to Overweight from Equal-weight. In-Line sector view. Price target is raised to $13.00 from $12.45.

Target price is $13.00 Current Price is $12.39 Difference: $0.61
If DXS meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $13.67, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.9

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

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

Ord Minnett suggests the crisis centred on coronavirus is likely to play out for several months but the shares of Fortescue Metals have reached a point where they cannot be ignored from a valuation perspective.

While finding it impossible to pick the absolute low, the broker expects the situation will continue for months, not years. Hence, investors with a medium-term horizon should be rewarded for owning the stock.

Rating is upgraded to Accumulate from Hold and the target is steady at $11.

Target price is $11.00 Current Price is $9.46 Difference: $1.54
If FMG meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $10.04, suggesting upside of 6.1% (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

Credit Suisse rates IPL as Outperform (1) -

Credit Suisse finds it hard to explain the weakness in Incitec Pivot. Commodity movements have been favourable and, while not subscribing to a bull outlook, the broker notes fertiliser markets are generally firm.

The forecasts for rainfall throughout autumn have also significantly improved the prospects for Australian agriculture. Outperform rating maintained. Target rises to $3.78 from $3.72.

Target price is $3.78 Current Price is $2.15 Difference: $1.63
If IPL meets the Credit Suisse target it will return approximately 76% (excluding dividends, fees and charges).

Current consensus price target is $3.46, suggesting upside of 60.8% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates LVT as Buy (1) -

As the company transitions its product and channel and sustains increasing churn, Citi calls into question growth targets. Growth is not quite as strong as expected, when considering the first quarter would have benefited from the Wizdom acquisition.

The business needs its partner channel to kick in and recurring revenue growth to step up in order to deliver on forecasts and for the share price to re-rate, in Citi's view. Hence, the broker reduces the target to $0.39 from $0.63. Buy/High Risk rating maintained.

Target price is $0.39 Current Price is $0.20 Difference: $0.19
If LVT meets the Citi target it will return approximately 95% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Morgan Stanley rates MIN as Overweight (1) -

Following the first half results, Morgan Stanley updates estimates. Mining services earnings are moved to the upper end of guidance, offset by a reduction in iron ore estimates.

This results in a -2.0% reduction in the broker's base case valuation. Overweight rating maintained. Target is reduced to $17.00 from $17.20. Industry view: In-Line.

Target price is $17.00 Current Price is $14.54 Difference: $2.46
If MIN meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $17.83, suggesting upside of 22.7% (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

Macquarie rates PGL as Downgrade to Underperform from Outperform (5) -

Prospa Group faces a number of risks in the current environment that could threaten its earnings and funding model, Macquarie warns. While Prospa may see additional demand for its products, the broker believes the company will have to lift its underwriting standards. Given 100% exposure to SMEs, the low level of impairments the company has enjoyed to date is unlikely to continue.

Prospa has benefited from lower funding costs that have acted as an offset to lower asset yields, the broker notes. The risk is that the benefit reverses in the current environment. Macquarie downgrades its valuation to book value. Target falls to 94c from $2.88. Downgrade to Underperform from Outperform.

Target price is $0.94 Current Price is $1.18 Difference: minus $0.24 (current price is over target).
If PGL meets the Macquarie target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Citi rates QAN as Neutral (3) -

Qantas will seek to reduce international capacity by -23% until September 2020, or at least until the operating environment is clearer. To ensure the balance sheet can withstand the challenges, the company is cancelling the $150m off-market buyback.

Capacity reductions are largely in Asia but also in the US and UK. Domestic capacity will also be cut to -5% from -3%.

Uncertainty continues for the FY20 earnings outlook, Citi assesses. The broker still envisages the risk/reward trade-off is asymmetric to the downside and retains a Neutral/High Risk rating and $6.70 target.

Target price is $6.70 Current Price is $4.06 Difference: $2.64
If QAN meets the Citi target it will return approximately 65% (excluding dividends, fees and charges).

Current consensus price target is $6.26, suggesting upside of 54.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Macquarie rates QAN as Downgrade to Neutral from Outperform (3) -

Virus uncertainty has led Qantas to further cut its capacity, withdraw earnings guidance and cancel its buyback. Macquarie now forecasts a -41% fall in FY20 profit from FY19. Target falls to $4.80 from $7.90.

The broker remains comfortable with Qantas' balance sheet -- the cancelled buyback helping -- and potentially sees an improved market structure in the medium term supporting longer term share price upside. But for now, the timing of stabilisation or recovery remains unclear so given a high level of operating leverage, Macquarie pulls back to Neutral from Outperform.

Target price is $4.80 Current Price is $4.06 Difference: $0.74
If QAN meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $6.26, suggesting upside of 54.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Morgan Stanley rates QAN as Overweight (1) -

Qantas has announced further reductions in capacity to meet the deterioration in demand. Capacity reductions will remain until mid September 2020.

The company has also cancelled the $150m buyback, instituted a hiring freeze and removed management bonuses.

Morgan Stanley assesses the magnitude of capacity reductions is in line with the drop in demand, noting management has highlighted the opportunity to add capacity if conditions improve before the end of September.

The broker considers the stock oversold and retains an Overweight rating. Target is reduced to $6.50 from $7.50. Industry view is In-Line.

Target price is $6.50 Current Price is $4.06 Difference: $2.44
If QAN meets the Morgan Stanley target it will return approximately 60% (excluding dividends, fees and charges).

Current consensus price target is $6.26, suggesting upside of 54.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

UBS rates QAN as Buy (1) -

Qantas has announced a reduction in capacity of around -17%. While the cost base will be reduced by a range of measures, UBS notes the negative operating leverage resulting from the revenue decline is significant.

The broker reduces pre-tax profit estimates for FY20 to $350m and FY21 to $890m. A recovery in traffic is assumed back to pre-crisis levels by the end of FY21.

While suspecting sentiment will get worse before it gets better, UBS believes Qantas will come out of the crisis in a stronger competitive position. Buy rating maintained. Target is reduced to $6.80 from $7.40.

Target price is $6.80 Current Price is $4.06 Difference: $2.74
If QAN meets the UBS target it will return approximately 67% (excluding dividends, fees and charges).

Current consensus price target is $6.26, suggesting upside of 54.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.4

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

Macquarie rates REA as Upgrade to Neutral from Underperform (3) -

Macquarie has used a sector update post the February reporting season to sneak in an upgrade for REA Group to Neutral from Outperform.

The decision seems to be inspired by the weaker share price and the anticipation that listings volumes will rebound. Target price remains unchanged at $110.

Target price is $110.00 Current Price is $94.51 Difference: $15.49
If REA meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $103.19, suggesting upside of 9.2% (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 SCG as Underweight (5) -

The company has decided to suspend its buyback program, given the volatility. While not expecting this decision, Morgan Stanley was always of the opinion that gearing was on the aggressive side and the completion of the buyback would have added another 1% to leverage.

However, Scentre Group has emphasised that this is not a cancellation of the buyback. Target is $3.58. Underweight. Industry view: In Line.

Target price is $3.58 Current Price is $2.95 Difference: $0.63
If SCG meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.79, suggesting upside of 28.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

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

Macquarie rates SLK as Initiation of coverage with Outperform (1) -

SeaLink Travel's acquisition of Transit Systems transforms the company, the broker suggests, providing exposure to metro bus services in Australia, Singapore and London. Transit Systems' advantage is its ability to manage margins against contract terms, the broker notes, with revenue not exposed to passenger and fare risk.

Contract renewals, new contracts and the trend towards bus privatisation should support SeaLInk's performance over the medium term. The broker initiates coverage with an Outperform rating and $4.48 target.

Target price is $4.48 Current Price is $3.97 Difference: $0.51
If SLK meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Ord Minnett rates SLK as Buy (1) -

Ord Minnett suggests Sealink Travel has provided a reality check for the travel & tourism segment, by announcing two extensions to bus contracts and an additional bus/light rail contract in Adelaide.

This is a reminder the company is in the throes of transforming into a transport/utilities business. The renewals of contracts provide evidence that delivery on the transformation is on track.

Still, the broker makes no changes to earnings estimates, given the potential downside risk in the sector. Buy rating and $5.82 target maintained.

Target price is $5.82 Current Price is $3.97 Difference: $1.85
If SLK meets the Ord Minnett target it will return approximately 47% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

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

Macquarie rates SXL as Neutral (3) -

Macquarie has used a sector update post the February reporting season to sneak in an upgrade for Southern Cross Media to Neutral (we already had Neutral, so we must have missed a recent downgrade).

Target price is 70c.

Target price is $0.70 Current Price is $0.56 Difference: $0.14
If SXL meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $0.85, suggesting upside of 51.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Macquarie rates SYD as Outperform (1) -

Sydney Airport has rushed out its February traffic data, showing a -17% fall in international and -4.5% in domestic. Early March so far indicates -25% and -6% respectively. The broker now forecasts a -16% decline in international for the year from -10% previously, and a subsequent -20% fall on 2020 profit. Target falls to $8.18 from $8.23.

Outperformed maintained on the basis that once virus fear is resolved, airports will bounce back fast, as was the case with SARS.

Target price is $8.18 Current Price is $6.34 Difference: $1.84
If SYD meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $7.93, suggesting upside of 25.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

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

Sydney Airport has released traffic data earlier than scheduled, given the notices being released by the airlines regarding capacity reductions.

International passenger numbers were down -16.8% in February and down -25% for 1-9 March. Domestic passengers were down -4.5% in February and down -6% for the March period.

During February Chinese passenger numbers were down -72%, reflecting Australian government travel restrictions, while South Korean passenger numbers were down -34%, ahead of travel restrictions.

Morgan Stanley estimates China and South Korea traffic is normally around 14% of Sydney's international passenger numbers during February to April.

The broker also envisages further downside risk to domestic passenger numbers owing to business travel reductions.

Equal-weight. Target is $8.50. Industry view is Cautious.

Target price is $8.50 Current Price is $6.34 Difference: $2.16
If SYD meets the Morgan Stanley target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $7.93, suggesting upside of 25.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

Ord Minnett rates SYD as Upgrade to Accumulate from Lighten (2) -

The company has provided traffic numbers for February and March to date following the release of Qantas Airways' ((QAN)) reduced capacity numbers.

Ord Minnett has doubled its estimates of passenger number reductions for 2020 and now assumes a -20% fall in international and -6% in domestic for the first half.

The broker also allows for a -10% reduction in rent over a six-month period for the retail portfolio. While the duration and extent of the impact of coronavirus is unknown, Ord Minnett believes Sydney Airport's earnings are defensive and a rebound is likely in 2021.

Rating is upgraded to Accumulate from Lighten, as the stock is considered more than appropriately priced for the uncertainty. Target is reduced to $7.50 from $8.00.

Target price is $7.50 Current Price is $6.34 Difference: $1.16
If SYD meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $7.93, suggesting upside of 25.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.1

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

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

Wagering and lottery proved defensive in FY08, Credit Suisse observes, and lottery has a history of outperforming when times are tough.

Despite the defensive nature of the business, the broker takes a more conservative view on growth and downgrades estimates for earnings per share by -5-6% for FY21 and FY22.

Following the recent share price performance, the rating is upgraded to Outperform from Neutral. Target is unchanged at $4.50.

Target price is $4.50 Current Price is $3.42 Difference: $1.08
If TAH meets the Credit Suisse target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $4.61, suggesting upside of 34.7% (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

Credit Suisse rates TWE as Neutral (3) -

Credit Suisse downgrades earnings estimates by -15-20%, assessing that wine sales in Asia after Chinese New Year could be very weak. US wine demand is also likely to be weak because of hard seltzer growth, consumption declines and the coronavirus.

The broker considers takeover and break-up scenarios unlikely and warns investors they should not look to break-up scenarios to find value.

It remains difficult to isolate key brand Penfolds and a geographic break-up would not be clean either. The broker retains a Neutral rating and reduces the target to $10.60 from $12.80.

Target price is $10.60 Current Price is $9.48 Difference: $1.12
If TWE meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $13.24, suggesting upside of 39.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

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

Morgan Stanley rates TYR as Overweight (1) -

Morgan Stanley considers Tyro Payments a structural growth story as well as a market share story, although it is also cyclical.

While the company has advised of transaction value growth in March of 26%, versus prospectus estimates of 28.6%, Morgan Stanley considers this too small a negative to be important.

Overweight rating and $4.40 target. Industry view is Attractive.

Target price is $4.40 Current Price is $2.76 Difference: $1.64
If TYR meets the Morgan Stanley target it will return approximately 59% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.8

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