Australian Broker Call

Morgans rates AGL as Upgrade to Hold from Reduce (3) -

Morgans suggests the realisation of synergies in the acquisition of Vocus Group ((VOC)) will be challenging for a management team that lacks experience in telecommunications and for a target that is at the beginning of a transformation process.

The broker suspects there is still significant potential downside in the share price, offset by likely dividends in the next 12 months. Rating is upgraded to Hold from Reduce and the target is steady at $17.85.

Target price is $17.85 Current Price is $19.93 Difference: minus $2.08 (current price is over target).
If AGL meets the Morgans target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.23, suggesting downside of -3.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.6

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

Deutsche Bank rates ALX as Buy (1) -

Deutsche Bank notes the French government has shortlisted APRR & Eiffage as the preferred bidder for upgrading a section of the National Road 79 under a 48-year concession. Atlas Arteria owns a 25% stake in APRR.

Investment details and the group's involvement in the project are still under negotiation. However, Deutsche Bank understands the cost of the three-year upgrade will be in excess of EUR500m. Buy rating and $7.25 target.

Target price is $7.25 Current Price is $7.74 Difference: minus $0.49 (current price is over target).
If ALX meets the Deutsche Bank target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.11, suggesting downside of -8.2% (ex-dividends)

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

Morgans rates AMC as Hold (3) -

The combination of Amcor and Bemis creates the largest plastic packaging company in the world, Morgans notes, with the deal significantly enhancing Amcor's presence in North America.

Nevertheless, the broker remains concerned about the fall in return on funds employed (ROFE). ROFE is estimated to fall to 16% in FY22 from 19% in FY18.

The acquisition will therefore be dilutive to returns, despite assumptions that management will deliver on the cost synergy targets. Morgans maintains a Hold rating and raises the target to $15.55 from $14.14.

Target price is $15.55 Current Price is $15.72 Difference: minus $0.17 (current price is over target).
If AMC meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.46, suggesting upside of 4.7% (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: 0.6

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

Ord Minnett rates AMC as Accumulate (2) -

Ord Minnett updates its model to reflect the finalisation of the Bemis transaction. Changes reflect the timing of the close of the transaction, divestments relating to the transaction and updated currency assumptions.

Accumulate rating maintained. Target is raised to $16.00 from $15.50.

Target price is $16.00 Current Price is $15.72 Difference: $0.28
If AMC meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $16.46, suggesting upside of 4.7% (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: 0.6

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

Credit Suisse rates AQG as Outperform (1) -

The company has declared commercial production at the Copler sulphide plant. 2019 oxide production estimates have also been upgraded and costs lowered. Guidance has been increased to 125-145,000 ounces.

Credit Suisse had already forecast production within the revised guidance range after the strong March quarter. No exploration update was provided.

The broker continues to envisage value in Alacer Gold, with ongoing performance at the sulphide plant driving an equity re-rating. Outperform rating and $5.05 target maintained.

Target price is $5.05 Current Price is $4.43 Difference: $0.62
If AQG meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 7.5% (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: 1.0

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

UBS rates AQG as Buy (1) -

Commercial production has been declared at the sulphide plant. Management has reiterated production and cost guidance. UBS forecasts rapid de-gearing, with net debt of $93m by the end of the year.

Oxide production guidance has been upgraded to 125-145,000 ounces at all-in sustainable costs of US$650-700/oz. The upgrade drives a 6% increase to the broker's net profit estimates for FY19.

Buy rating and $4.90 target maintained.

Target price is $4.90 Current Price is $4.43 Difference: $0.47
If AQG meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 7.5% (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: 1.0

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

UBS rates AZJ as Neutral (3) -

Adani will build a dedicated 190km rail line to connect to the Newland system and from there use existing track for 180km to the Abbot Point terminal. Following the formal application for access, a capacity assessment is currently being completed by Aurizon.

UBS does not foresee material upgrades to the track, as additional volume from Adani can be absorbed under the current infrastructure. If Adani chooses to use a third-party rail operator, Aurizon is considered well-positioned to win the contract.

Neutral rating and $5.10 target maintained.

Target price is $5.10 Current Price is $5.35 Difference: minus $0.25 (current price is over target).
If AZJ meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.85, suggesting downside of -9.3% (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

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

Although widely considered a growth stock, Challenger's earnings have actually produced little growth over the last five years and return on equity has continued to decline, Morgan Stanley asserts.

That said, de-risking the asset portfolio and re-setting long-run targets was the right thing to do, in the broker's view, and has put the company on a more sustainable footing.

Nevertheless, Morgan Stanley believes the stock is still not cheap enough. Equal-weight rating maintained. Target is reduced to $6.85 from $7.50. Industry view: In-line.

Target price is $6.85 Current Price is $6.35 Difference: $0.5
If CGF meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $7.28, suggesting upside of 14.6% (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

Ord Minnett rates CTX as Hold (3) -

Ord Minnett updates for recent refining margins and retail fuel margins. The broker considers execution risk is the main issue for the convenience retail business. 2019 estimates for earnings per share are reduced by -1% to reflect lower refining margins.

Hold rating maintained. Target is raised to $28.00 from $27.50 as the model is rolled forward to June 2020.

Target price is $28.00 Current Price is $26.48 Difference: $1.52
If CTX meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $28.95, suggesting upside of 9.3% (ex-dividends)

The company's fiscal year ends in December.

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 CWN as Hold (3) -

Deutsche Bank reduces earnings forecast by -5-7% to reflect softer domestic gambling expenditure in the second half as well as weak VIP trends.

The broker believes the opportunity for an alternative bidder has dissipated following completion of the first tranche of the Melco Resorts acquisition of a 19.99% interest in Crown Resorts.

The broker notes Crown Sydney is on schedule and the improved outlook for the housing market should help apartment sales. Hold rating and $11.25 target.

Target price is $11.25 Current Price is $11.81 Difference: minus $0.56 (current price is over target).
If CWN meets the Deutsche Bank target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.62, suggesting downside of -1.6% (ex-dividends)

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

Morgans rates CYB as Hold (3) -

Morgans expects the company to outline a medium-term strategy at its market briefing on June 19. The broker retains a view that certain IPO targets have not been met, or would not have been met, in the absence of the Virgin Money acquisition.

In hindsight, Morgans also believes the bank may have been too optimistic on other fronts, including the incentivised switching scheme and PPI provisioning. Hold rating maintained. Target is reduced to $3.57 from $3.64.

Target price is $3.57 Current Price is $3.34 Difference: $0.23
If CYB meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.44, suggesting upside of 32.8% (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

UBS rates RHC as Neutral (3) -

The UK NHS has published hospital activity data for April. UBS estimates NHS e-referrals represent around 79% of Ramsay Health Care's UK total admissions. April volumes for Ramsay decreased -2.9% while 12-month rolling growth moderated to 4.9% from 6.5% at the end of March.

UBS believes the current admissions data combined with a tariff increase should support robust growth in NHS-derived revenue in the second half and into FY20.

However, based on increased usage of agency nursing to manage the higher caseload, UBS models a -40 basis points decline in UK earnings (EBIT) margin in the second half. Neutral rating and $68.40 target maintained.

Target price is $68.40 Current Price is $71.46 Difference: minus $3.06 (current price is over target).
If RHC 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 $65.60, suggesting downside of -8.2% (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

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

The company has acquired MRS Systems, a developer of mamography information systems. The transaction will be funded via a placement and entitlement offer.

Ord Minnett notes the transaction has boosted total US market penetration, with Volpara Health expected to reach 27% by the end of FY20.

Rating is upgraded to Hold from Lighten, with Ord Minnett noting further product development potential exists, particularly in risk assessment, although the integration may take some time. Target is raised to $1.65 from $1.54.

Target price is $1.65 Current Price is $1.73 Difference: minus $0.08 (current price is over target).
If VHT meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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