Australian Broker Call

Macquarie rates A2M as Outperform (1) -

The inaugural strategy briefing and China market presentation has demonstrated to Macquarie the significance of the opportunity and the depth of management's understanding of the market. Limited quantitative details or targets were provided.

A2 Milk remains focused on brand awareness and share of consumption as well as absolute revenue growth. The broker retains an Outperform rating and $16.70 target.

Target price is $16.70 Current Price is $12.39 Difference: $4.31
If A2M meets the Macquarie target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $14.18, suggesting upside of 14.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

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

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 Downgrade to Hold from Buy (3) -

Post a share price rally of 50% in the past month (!), Ord Minnett has decided it's time to downgrade this stock to Hold from Buy. The target price remains at $2.55 but is now below the share price.

The broker remains positive on the company's outlook and cites further strengthening potential for the oil price as a key risk to its decision. A further US$10/bbl rise in the oil price would translate into a 20%-plus lift in forecasts.

Target price is $2.55 Current Price is $2.60 Difference: minus $0.05 (current price is over target).
If BPT meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.25, suggesting downside of -13.5% (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

Citi rates BSL as Buy (1) -

While near-term sentiment is weak amid falling US steel prices, Citi assesses the North Star expansion project is compelling under long-term pricing assumptions.

BlueScope steel recently approved an expansion project at North Star to raise capacity by 850,000tpa. A key factor in the mill's success, in Citi's view, is the stable and experienced workforce.

With strong cash flow and an ongoing share buyback, the broker considers the stock undervalued. Buy rating and $15 target retained.

Target price is $15.00 Current Price is $12.32 Difference: $2.68
If BSL meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $13.55, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Credit Suisse rates BSL as Outperform (1) -

After visiting North Star, Credit Suisse notes the planned expansion will double EAF melt and caster capacity to over 4.2mtpa, suggesting longer-term growth potential.

Despite a softening in US automotive production, North Star remains at 100% capacity. The company is committed to US growth but has no intention to buy competitor capacity, build new greenfield capacity, or to compete with customers downstream.

Outperform rating and $15.30 target maintained.

Target price is $15.30 Current Price is $12.32 Difference: $2.98
If BSL meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $13.55, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Macquarie rates DCN as Downgrade to Underperform from Neutral (5) -

Net profit in FY19 was stronger than Macquarie expected, largely because of the better depreciation expense. Mount Morgans continues to be essential to meeting guidance in FY20.

Macquarie downgrades to Underperform from Neutral because of recent share price strength. The broker notes the processing plant needs to perform well in excess of nameplate, given the recently revised life of mine plan.

The company is also relying on continuing improvements from the Westralia underground mine. Target is steady at $1.20.

Target price is $1.20 Current Price is $1.40 Difference: minus $0.2 (current price is over target).
If DCN meets the Macquarie target it will return approximately minus 14% (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: -0.5

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

Ord Minnett rates HLO as Buy (1) -

Now that the company has issued guidance for FY20, Ord Minnett believes a lot of the uncertainty has been removed since the company did not provide guidance at the time of releasing FY19 financials.

The company is still in the process of negotiating several commercial agreements, the most important one with Qantas ((QAN)) and Ord Minnett has decided to reduce forecasts. As a direct result, the price target drops to $6.21 from $6.37.

Buy rating retained as the broker continues to see value at present level.

Target price is $6.21 Current Price is $4.60 Difference: $1.61
If HLO meets the Ord Minnett target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Ord Minnett rates JHX as Accumulate (2) -

Ord Minnett comments, post Investor Day in New York, the business appears to be tracking towards its targets for both market share gains and cost savings. Certainly, the stockbroker has seen no signs that would suggest otherwise.

Management is still targeting -US$100m of benefits from "lean" initiatives in North America by FY22. Accumulate rating retained. Target price unchanged at $23.50.

Target price is $23.50 Current Price is $24.14 Difference: minus $0.64 (current price is over target).
If JHX meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $24.39, suggesting upside of 1.0% (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

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

FY19 net profit was at the top end of guidance and above forecasts. Credit Suisse found the results solid, reflecting the full year impact of the Oboz acquisition as well as operating efficiencies.

The company expects Oboz to continue delivering double-digit growth and this should largely offset the FX impact on gross margins in the core retail business. Same-store sales growth in FY20 to date has been strong, up 6.1%.

While continuing to believe Kathmandu has attractive medium-term growth options there was nothing in the result to drive a materially higher valuation, in the broker's view. Rating is downgraded to Neutral from Outperform. Target is raised to NZ$3.15 from NZ$3.00.

Current Price is $2.79. Target price not assessed.

Current consensus price target is $2.67, suggesting downside of -4.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

Macquarie rates KMD as Neutral (3) -

Macquarie observes, despite a good start to FY20, margins are above the long-term target of 61-63% and are likely to moderate over the next few years. The FY19 result was slightly ahead of the update provided in early August.

Macquarie maintains a Neutral rating and raises the target to $2.73 from $2.35.

Target price is $2.73 Current Price is $2.79 Difference: minus $0.06 (current price is over target).
If KMD meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.67, suggesting downside of -4.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY20:

Forecast for FY21:

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

Market Sentiment: 0.0

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

UBS rates REG as Buy (1) -

UBS assesses Regis Healthcare continues to generate the best returns in the aged care sector, with the highest quality portfolio of assets.

The broker expects that after the recommendations of the Royal Commission are tabled, with an extension to November 12, 2020 now approved, the government will move on longer-term sector reforms.

However, in the absence of any one-off packages it is regarded unlikely the sector will obtain funding relief ahead of the FY22 budget. The broker maintains a Buy rating and $3.10 target.

Target price is $3.10 Current Price is $2.72 Difference: $0.38
If REG meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.92, suggesting upside of 7.4% (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 RHC as Upgrade to Outperform from Neutral (1) -

Macquarie expects contributions from Australian brownfield projects will support above-industry hospital growth in the near to medium term, although reduced participation in private health insurance presents a headwind for hospital volumes in Australia.

The outlook for the UK and France has also improved. Valuation appears undemanding at current levels and the broker upgrades to Outperform from Neutral. Target is steady at $71.50.

Target price is $71.50 Current Price is $62.93 Difference: $8.57
If RHC meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $68.30, suggesting upside of 8.5% (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

Morgan Stanley rates SFR as Overweight (1) -

While 2019 has been affected by lower demand and de-stocking, Morgan Stanley remains bullish on near-term copper prices. Inventory levels are low and supply growth is weak. Moreover, there are positive indicators of demand in China, which should support the copper price.

The broker forecasts a price of US$3.00/lb in 2020. The preferred copper play is Sandfire Resources, which has a copper revenue exposure at around 90% of FY20 revenue.

The current 3-year mine life increases leverage to a near-term rise in the copper price and there are upcoming catalysts such as the Black Butte feasibility study, due in the December quarter.

Overweight rating and $7.65 target. Industry view is Attractive.

Target price is $7.65 Current Price is $6.45 Difference: $1.2
If SFR meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $7.13, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

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

Macquarie rates TLS as Neutral (3) -

Macquarie adjusts estimates for earnings per share primarily from recalculating mobile revenue. FY20 and FY21 estimates are reduced by -2.2%.

While there are clear positive moves in mobile pricing, the broker suspects the sector is still absorbing recent competition. The ramp up in data inclusions and the shift to unlimited data plans over the last 12 months have weighed on post-paid revenue trends.

Against the backdrop of a reduction in competitive plans for low-end post-paid, Macquarie expects some consumers will revert to pre-paid and the mix will become a drag on overall service revenue. Neutral rating maintained. Target is reduced to $3.75 from $3.80.

Target price is $3.75 Current Price is $3.64 Difference: $0.11
If TLS meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates VOC as Neutral (3) -

NBN has announced changes to its bundling, including the introduction of lower entry-level wholesale pricing. Macquarie observes TPG Telecom ((TPM)) has the greatest direct financial benefit followed by Vocus and then Telstra ((TLS)).

For Vocus, the broker considers the valuation is now less challenging, but uncertainty remains over the business turnaround. Neutral maintained. Target is raised to $3.35 from $3.30.

Target price is $3.35 Current Price is $3.63 Difference: minus $0.28 (current price is over target).
If VOC meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.56, suggesting downside of -1.8% (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