Australian Broker Call

Credit Suisse rates ASX as Underperform (5) -

First quarter activity trends were marginally stronger than Credit Suisse expected. Strength is predominantly in equity post-trade services and trading, offsetting slightly weaker-than-expected derivative and OTC activity.

Corporate actions were down -17%, with $15.1bn of equity raised. Credit Suisse expects earnings growth of 2-5% per annum in the foreseeable future and considers the valuation full. Underperform rating and $60 target maintained.

Target price is $60.00 Current Price is $80.56 Difference: minus $20.56 (current price is over target).
If ASX meets the Credit Suisse target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.81, suggesting downside of -12.1% (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 ASX as Underperform (5) -

Overall, trading and futures volumes were firm at the start of FY20, Macquarie observes. Interest and dividend income remain a headwind.

The broker notes a recent de-rating of the stock has led to a smaller gap to fundamental valuation. Nevertheless, valuation remains stretched.

Underperform retained. Target rises to $69.50 from $68.00.

Target price is $69.50 Current Price is $80.56 Difference: minus $11.06 (current price is over target).
If ASX meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.81, suggesting downside of -12.1% (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

UBS rates ASX as Sell (5) -

Strong trading levels have been supported by robust equity markets and interest-rate volatility over the September quarter, UBS observes.

Still, the broker raises forecasts by just 0.4% as cash equity turnover is being driven by lower margin trading and higher participant rebates. Capital raising activity is also lower.

A Sell rating is reiterated. Target is raised to $68.00 from $66.70.

Target price is $68.00 Current Price is $80.56 Difference: minus $12.56 (current price is over target).
If ASX meets the UBS target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.81, suggesting downside of -12.1% (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

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

Morgan Stanley expects limited insight into margin trends at the upcoming first quarter update. While operating leverage should materialise, the broker suspects this is likely to be a second-half development.

The risk of plastic pallets is a greater source of uncertainty and it remains unclear whether the company will proceed beyond a trial. The financial impact is also unclear, in the broker's view, as industry feedback indicates other market participants find the economics of plastic equally challenging.

Equal-weight. Target is raised to $11.80 from $11.40. Industry view is Cautious.

Target price is $11.80 Current Price is $10.96 Difference: $0.84
If BXB meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $11.91, suggesting upside of 8.6% (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: 0.0

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

Morgan Stanley rates CSL as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley observes tight immunoglobulin market conditions have absorbed the company's accelerating supply, leaving upside risk to FY20 guidance.

Given low inventory and strong patient demand, the broker expects immunoglobulin volume to accelerate 16% in FY20 as the collection strategy evolves.

Longer-term, the broker is even more convinced about disruption but considers this is unlikely until FY22. Rating is upgraded to Overweight from Equal-weight and the target raised to $251 from $220. Industry view: In-Line.

Target price is $251.00 Current Price is $236.23 Difference: $14.77
If CSL meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $246.99, suggesting upside of 4.6% (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: 0.5

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

Morgan Stanley rates FAR as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley observes the stock price continues to drift, amid uncertainty around project timing, funding and arbitration hearings. Rating is downgraded to Equal-weight from Overweight.

The quality of the project in Senegal remains high and there is significant upside envisaged by the broker over time, depending on how the company finances its share of the asset.

The broker sets the target to $0.06 from $0.10 to reflect the risks around funding. Industry view is In-Line.

Target price is $0.06 Current Price is $0.06 Difference: $0
If FAR meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Morgans rates GDG as Add (1) -

While the attempts to launch the Ascalon Catalysts Growth Fund in Asia are higher risk, Morgans assesses this is a free option for shareholders.

The broker understands that if the fund can raise its target of $500m this would generate around $10m in revenue and broadly double Generation Development's current earnings.

Progress on the launch will be provided at the AGM on November 14. Morgans retains an Add rating and $0.83 target.

Target price is $0.83 Current Price is $0.80 Difference: $0.03
If GDG meets the Morgans target it will return approximately 4% (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 JIN as Overweight (1) -

Morgan Stanley updates proprietary estimates of lottery ticket volumes, noting 13 jackpots in 13 weeks. The company did not provide FY20 guidance at its results and the broker envisages scope for an update on the trading/outlook at the AGM.

The latest data on jackpots appears a clear positive for the company in terms of total transaction growth. Target is $24. Overweight rating reiterated. Industry view is In-Line.

Target price is $24.00 Current Price is $26.90 Difference: minus $2.9 (current price is over target).
If JIN meets the Morgan Stanley target it will return approximately minus 11% (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: 1.0

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

Macquarie rates KLL as Outperform (1) -

The board has formally approved the full development of Beyondie, which has enabled the current early works program to accelerate. Macquarie notes the company is fully funded to execute the $216m development.

Phase 1 will mean production ramps up to 90,000tpa of sulphate of potash. Outperform rating and $0.90 target retained.

Target price is $0.90 Current Price is $0.48 Difference: $0.42
If KLL meets the Macquarie target it will return approximately 88% (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

UBS rates LLC as Downgrade to Neutral from Buy (3) -

UBS downgrades to Neutral from Buy, believing risks are now more balanced. The broker assesses the market is pricing in a solid outcome for the sale of the engineering & services business.

However, net sale proceeds could be materially lower than the market expects, in the broker's opinion, given the higher-than-expected negative working capital balance in that division. Target is raised to $17.50 from $16.30.

Target price is $17.50 Current Price is $16.90 Difference: $0.6
If LLC meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $17.51, suggesting upside of 3.6% (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 MYX as Neutral (3) -

The company has an agreement with Mithra Pharmaceuticals to commercialise a combined oral contraceptive in the US. Citi assesses a wide range of possible outcomes for shareholders.

Mayne Pharma is forecasting peak sales in excess of US$200m per annum 3-4 years after launch. The broker calculates, if that happens, it would be significant and add 31c per share.

Still, there are a number of unknowns, Citi notes, as FDA approval is still required and marketing investment could be a significant variable.

The broker considers it too early to change forecasts and a Neutral/High Risk rating and 50c target are maintained.

Target price is $0.50 Current Price is $0.58 Difference: minus $0.08 (current price is over target).
If MYX meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.64, suggesting upside of 9.9% (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

Morgans rates NVX as Add (1) -

The company is in the final stages of fitting out new premises and expects to commission its first 500tpa of equipment in the current quarter. The first anode contract is expected in the third quarter of FY20.

Novonix has written down the value of its non-core Mt Dromedary deposit and the BTS business by -$11m and -$5m, respectively.

Morgans still believes there is potential value in Mt Dromedary, should it be sold, but based on values of listed graphite peers reduces assumed value.

Growth assumptions for BTS are also reduced in line with inflation. Speculative Buy (Add) rating maintained. Target is reduced to $0.65 from $0.75.

Target price is $0.65 Current Price is $0.44 Difference: $0.21
If NVX meets the Morgans target it will return approximately 48% (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 PPH as Downgrade to Lighten from Hold (4) -

Slower acquisition of new customers has affected revenue expectations, Ord Minnett observes. The broker suggests this highlights the growth challenge in a maturing market.

FY21 revenue forecasts are lowered and the rating is downgraded to Lighten from Hold. Target is reduced to $2.80 from $3.08.

Target price is $2.80 Current Price is $3.00 Difference: minus $0.2 (current price is over target).
If PPH meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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: 0.0

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

UBS rates SUN as Buy (1) -

 UBS believes the sale of 90% of Capital SMART is a smart move on the part of Suncorp.

However the resultant -20 basis points reduction to margins, a higher catastrophe budget and reinsurance costs are likely to mean general insurance margins compress to 11.1% in FY20, in the broker's calculations.

Assuming the sale proceeds are retained, UBS reduces estimates for earnings per share by -2.2% for FY20 and by -3.0% for FY21. Buy rating maintained. Target is raised to $14.15 from $14.10.

Target price is $14.15 Current Price is $13.62 Difference: $0.53
If SUN meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.64, suggesting upside of 0.2% (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

Credit Suisse rates WES as Underperform (5) -

At the investor briefing expansion of the scope of the ammonium nitrate strategy harnessed Credit Suisse's attention. The broker speculates this may require acquisitions.

The company appears to be developing more downstream capability, and the broker ponders whether Downer EDI's ((DOW)) mining service unit may be of interest.

That said, Wesfarmers would be competing from a low base in an industry that is increasingly technically demanding. Credit Suisse maintains an Underperform rating and $32.16 target.

Target price is $32.16 Current Price is $38.74 Difference: minus $6.58 (current price is over target).
If WES meets the Credit Suisse target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.08, suggesting downside of -9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

Macquarie rates WES as Neutral (3) -

Macquarie considers Wesfarmers has a good collection of businesses but the valuation is rich and further investments across around 80% of the portfolio are likely to weigh on FY20 earnings.

The energy outlook is mixed, as domestic demand for LPG is in decline and competitive pressures are increasing as new entrants establish a presence, the broker observes.

However, LNG is likely to remain a key market and mining activity should support growth. Neutral rating and $37.50 target maintained.

Target price is $37.50 Current Price is $38.74 Difference: minus $1.24 (current price is over target).
If WES meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.08, suggesting downside of -9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

Ord Minnett rates WES as Lighten (4) -

Ord Minnett concludes from the investor briefing that the oversupplied Western Australian ammonium nitrate market is a challenge.

There was no financial information presented and the broker does not incorporate the recently-acquired Kidman Resources nor the cost of wage underpayments in the industrial & safety business in its estimates.

Lighten rating and $35 target maintained.

Target price is $35.00 Current Price is $38.74 Difference: minus $3.74 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.08, suggesting downside of -9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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

UBS rates WES as Neutral (3) -

UBS found little to inspire at the investor briefing and leaves estimates unchanged. Wesfarmers has strong brands and should benefit from an improving macro backdrop in 2020, in the broker's view.

UBS envisages a material opportunity in leveraging FlyBuys data and Catch infrastructure to broaden the reach of the retail businesses. The main risk is a further deterioration in Kmart and/or an acquisition that could de-rate the group.

Neutral rating and $37 target maintained.

Target price is $37.00 Current Price is $38.74 Difference: minus $1.74 (current price is over target).
If WES meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $35.08, suggesting downside of -9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.6

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