Weekly Ratings, Targets, Forecast Changes

Oct 15, 2018 By Rudi Filapek-Vandyck, Editor FNArena Guide: The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio. Ratings, consensus target price and forecast earnings tables are published at the bottom of this report. Summary Period: Monday October 8 to Friday October 12, 2018 Total Upgrades: 9 Total Downgrades: 4 Net Ratings Breakdown: Buy 42.33%; Hold 42.20%; Sell 15.47% Amidst severe share market turmoil, stockbroking analysts issued more upgrades than downgrades for ASX listed stocks. No surprise here.

By Friday, 12th October 2018, the week's tally stood at nine upgrades versus four downgrades with receiving two upgrades (both to Buy) and two downgrades (both to Sell). Interestingly, there were no oil & gas companies among the upgrades, which also includes ANZ Bank, but Senex Energy equally received a downgrade to Sell.

Increases to target prices remained rather benign with grabbing the week's pole position (+3.4%), followed by oOh!media, Seek and a2 Milk. On the flipside, InvoCare (-4.5%) suffered the most in a field that saw larger decreases in comparison, followed by Japara Healthcare,FNArena Automotive Holdings, and HT&E. Earnings forecasts changes were considerably more benign on the positive side. Woodside Petroleum earned honours for the week, beating , NRW Holdings and QBE Insurance. But there was a lot more action last week on the negative side with significant cuts coming towards NextDC, Alacer Gold, Myer Holdings, Suncorp, invoCare, and and Fortescue Metals.

Upgrade LIMITED ((A2M)) Upgrade to Neutral from Sell by Citi .B/H/S: 3/3/0 Citi had been expressing concerns around excess inventory in daigou channels and this underpinned its negative view. The analysts have now become more comfortable. If there is any weakness on the horizon, and that still is a chance in Citi's view, it will likely prove temporary. Earnings estimates have been lifted. Price target jumps by 8% to $10.40. Rating upgraded to Neutral from Sell. AMCOR LIMITED ((AMC)) Upgrade to Buy from Neutral by Citi and Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 6/1/0 Citi believes the risk/reward has turned favourable for Amcor, upgrading to Buy from Neutral. Rising bond yields may weigh on the macro outlook but higher oil prices have not affected the company's raw material outlook, with only a modest impact expected in the first half. The Bemis merger is on track, with Citi noting immediate capacity for further acquisitions or share buybacks. Target is raised to $15.00 from $14.50. Amcor reiterated guidance for solid earnings growth in both rigid and flexible packaging. Credit Suisse expects the Bemis merger to go well and, if the company delivers on its synergy objectives in FY20 and FY21, growth should be around 8-9%. The broker upgrades to Outperform from Neutral. Target is $14.80. & BANKING GROUP ((ANZ)) Upgrade to Add from Hold by Morgans .B/H/S: 4/4/0 Morgans does not expect the additional provisions stemming from the Royal Commission to hamper the ability of the major banks to achieve APRA's unquestionably strong CET1 benchmark by January 2020. From this perspective, the broker is comfortable with ANZ's announcement of $374m in charges for customer remediation brought to the accounts in FY18. The broker reduces estimates for cash earnings per share by -7.0% as a result of the announced charges. FY19 and FY20 estimates are reduced by -0.3% and -0.8% respectively, because of share buyback estimates reducing by -$800m. Morgans upgrades to Add from Hold, viewing the recent share price weakness as overdone. Target is reduced to $28.50 from $30.00. INVOCARE LIMITED ((IVC)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/6/1 The company has downgraded expectations for 2018 on the basis of weaker volumes. Historically, Ord Minnett observes seasonal variations in volumes have provided good trading opportunitiesFNArena in the stock. However, given the substantial capital expenditure in train and structural issues facing its UK-listed counterpart, the broker concedes the market is cautious about whether the near-term headwinds are structural. The de-rating of the share price leads the broker to consider the risk/reward equation as more balanced. Rating is upgraded to Hold from Lighten. Target is reduced to $12.00 from $12.30. JAPARA HEALTHCARE LIMITED ((JHC)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/3/1 Ord Minnett is confident the final recommendations from the inquiry into aged care will call for improved funding and increased compliance requirements, and this will raise barriers to entry. The broker believes there is valuation appeal in the sector, although there is a challenging period ahead with months of negative media coverage and potential cash flow pressures from a downturn in residential property prices. The broker upgrades Japara Healthcare to Hold from Lighten as it is trading in line with valuation. Target is reduced to $1.25 from $1.50. NEXTDC LIMITED ((NXT)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 3/3/0 The company has made an unconditional proposal for Asia Pacific Data Centres ((AJD)) at $2 a share. Asia Pacific Data Centres' major shareholder, 360 Capital ((TGP)), has announced its intention to accept the offer. Deutsche Bank observes this transaction would finally resolve a year-long dispute between tenant and landlord. The transaction is to be funded by existing funds and, from a capital allocation perspective, the broker considers this a minor negative. However, Deutsche Bank does believe there is merit in the strategy of owning the data centres. Rating is upgraded to Hold from Sell. Target is steady at $6.30. PACT GROUP HOLDINGS LTD ((PGH)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/3/0 Credit Suisse considers the stock is now less expensive and upgrades to Outperform from Neutral. Acknowledging there are challenges, the broker lowers the target to $4.00 from $4.35 and downgrades estimates for earnings per share by -5-12% over the forecast period. The company is currently seeking a new CEO and it remains possible the new one will not endorse the FY19 guidance issued in August. Credit Suisse is already forecasting earnings below company guidance of $270-285m. RCR TOMLINSON LIMITED ((RCR)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/4/0 The company has an interim alliance agreement with New Zealand's City Rail Link regarding project services. The company's joint venture with Opus International Consultants will develop a proposal that includes the provision of track, overhead line, signalling, control room and building works. Construction is due to commence in June 2019. Ord MinnettFNArena observes the prospect of the JV actually being awarded the contract is unclear but assumes the company's chances are significantly enhanced following the announcement. Rating is upgraded to Hold from Lighten. Target is steady at $1.38. Downgrade NAVITAS LIMITED ((NVT)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 0/4/0 Navitas has received a bid at $5.50 a share from a private equity-led consortium. Macquarie considers the transaction multiple to be fair. The proposal remains subject to further review. The proposal removes uncertainties regarding the incremental investment that is required to optimise the portfolio and would enable the realisation of value at levels consistent with the broker's expectations. Macquarie downgrades to Neutral from Outperform, reflecting the move in the share price and the low probability of a competing bid. Target is raised to $5.50 from $4.80. SENEX ENERGY LIMITED ((SXY)) Downgrade to Lighten from Accumulate by Ord Minnett .B/H/S: 3/1/0 Ord Minnett updates earnings estimates based on a review of the Brent crude forward price curve and its forecasts are now significantly above the market. The broker believes the sector is fully valued on an average price to net present value basis. Hence, Senex Energy is downgraded to Lighten from Accumulate. Brent crude prices have increased 15% to US$85/bbl since the broker's last update and the forward curve remains backwardated. Target is raised to $0.47 from $0.46. WOODSIDE PETROLEUM LIMITED ((WPL)) Downgrade to Underperform from Neutral by Macquarie and Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 3/1/2 Macquarie believes positive revenue momentum in the oil sector was recorded over the September quarter, as oil prices increased 7%. Across the broker's coverage a combination of stronger pricing and higher production is expected to boost free cash flow and earnings. Despite speculation regarding a decision on a Browse tolling fee, Macquarie continues to believe the high cost will mean the project is unlikely to proceed. Rating is downgraded to Underperform from Neutral. Target is reduced to $34.70 from $35.40. Ord Minnett updates earnings estimates based on a review of the Brent crude forward price curve and its forecasts are now significantly above the market. The broker believes the sector is fully valued on an average price to net present value basis. Hence, Woodside is downgraded to Lighten from Hold. The broker's new Brent price estimates average US$75/bbl in 2018 and US$80/bbl in 2019. Target is raised to $37.00 from $34.50.

Total Recommendations Recommendation Changes FNArena Broker Recommendation Breakup

Broker Rating

New Old Order Company Broker Rating Rating Upgrade 1 AMCOR LIMITED Buy Neutral Citi 2 AMCOR LIMITED Buy Neutral Credit Suisse AUSTRALIA & NEW ZEALAND 3 Buy Neutral Morgans BANKING GROUP 4 INVOCARE LIMITED Neutral Sell Ord Minnett 5 JAPARA HEALTHCARE LIMITED Neutral Sell Ord Minnett Deutsche 6 NEXTDC LIMITED Neutral Sell Bank 7 PACT GROUP HOLDINGS LTD Buy Neutral Credit Suisse 8 RCR TOMLINSON LIMITED Neutral Sell Ord Minnett 9 THE A2 MILK COMPANY LIMITED Neutral Sell Citi Downgrade 10 NAVITAS LIMITED Neutral Buy Macquarie 11 SENEX ENERGY LIMITED Sell Buy Ord Minnett 12 WOODSIDE PETROLEUM LIMITED Sell Neutral Macquarie 13 WOODSIDE PETROLEUM LIMITED Sell Neutral Ord Minnett Recommendation Positive Change Covered by > 2 Brokers

New Previous Order Symbol Company Change Recs Rating Rating 1 CARFNArenaCARSALES.COM LIMITED 57.0% 14.0% 43.0% 7 2 AMC AMCOR LIMITED 79.0% 50.0% 29.0% 7 3 PGH PACT GROUP HOLDINGS LTD 40.0% 20.0% 20.0% 5 THE A2 MILK COMPANY 4 A2M 50.0% 33.0% 17.0% 6 LIMITED 5 NXT NEXTDC LIMITED 50.0% 33.0% 17.0% 6 6 SEK -7.0% -21.0% 14.0% 7 AUSTRALIA & NEW 7 ANZ 44.0% 31.0% 13.0% 8 ZEALAND BANKING GROUP JAPARA HEALTHCARE 8 JHC -25.0% -38.0% 13.0% 4 LIMITED 9 IVC INVOCARE LIMITED -14.0% -21.0% 7.0% 7 10 OML OOH!MEDIA LIMITED 88.0% 83.0% 5.0% 4 Negative Change Covered by > 2 Brokers

New Previous Order Symbol Company Change Recs Rating Rating 1 NWH NRW HOLDINGS LIMITED 67.0% 100.0% -33.0% 3 WOODSIDE PETROLEUM 2 WPL 7.0% 29.0% -22.0% 7 LIMITED 3 SXY SENEX ENERGY LIMITED 50.0% 70.0% -20.0% 5 AUTOMOTIVE HOLDINGS 4 AHG -10.0% 10.0% -20.0% 5 GROUP LIMITED SHOPPING CENTRES 5 SCP AUSTRALASIA PROPERTY -30.0% -13.0% -17.0% 5 GROUP DOMAIN HOLDINGS 6 DHG -8.0% 8.0% -16.0% 6 AUSTRALIA LIMITED 7 HT1 HT&E LIMITED 33.0% 40.0% -7.0% 6 Target Price Positive Change Covered by > 2 Brokers

New Previous Order Symbol Company Change Recs Target Target 1 CAR CARSALES.COM LIMITED 15.889 15.367 3.40% 7 2 OML OOH!MEDIA LIMITED 5.813 5.650 2.88% 4 3 SEK SEEK LIMITED 20.651 20.141 2.53% 7 THE A2 MILK COMPANY 4 A2M 11.750 11.500 2.17% 6 LIMITED WOODSIDE PETROLEUM 5 WPL 36.940 36.683 0.70% 7 LIMITED 6 SXY SENEX ENERGY LIMITED 0.502 0.500 0.40% 5 Negative Change Covered by > 2 Brokers

New Previous Order Symbol Company Change Recs Target Target 1 IVC INVOCARE LIMITED 11.820 12.379 -4.52% 7 JAPARA HEALTHCARE 2 JHC 1.555 1.618 -3.89% 4 FNArenaLIMITED AUTOMOTIVE HOLDINGS 3 AHG 2.524 2.624 -3.81% 5 GROUP LIMITED 4 HT1 HT&E LIMITED 2.572 2.660 -3.31% 6 5 NWH NRW HOLDINGS LIMITED 2.083 2.125 -1.98% 3 6 PGH PACT GROUP HOLDINGS LTD 4.636 4.706 -1.49% 5 AUSTRALIA & NEW ZEALAND AUSTRALIA & NEW ZEALAND 7 ANZ 29.163 29.600 -1.48% 8 BANKING GROUP SHOPPING CENTRES 8 SCP AUSTRALASIA PROPERTY 2.368 2.390 -0.92% 5 GROUP 9 AMC AMCOR LIMITED 15.229 15.230 -0.01% 7 Earning Forecast Positive Change Covered by > 2 Brokers

Previous Order Symbol Company New EF Change Recs EF WOODSIDE PETROLEUM 1 WPL 211.841 199.745 6.06% 7 LIMITED 2 OSH OIL SEARCH LIMITED 32.608 30.894 5.55% 6 3 NWH NRW HOLDINGS LIMITED 13.800 13.200 4.55% 3 QBE INSURANCE GROUP 4 QBE 72.283 70.033 3.21% 8 LIMITED 5 SYR SYRAH RESOURCES LIMITED -5.040 -5.187 2.83% 5 6 CKF LIMITED 39.950 39.450 1.27% 3 THE A2 MILK COMPANY 7 A2M 31.316 31.022 0.95% 6 LIMITED MAGELLAN FINANCIAL 8 MFG 171.467 170.483 0.58% 6 GROUP LIMITED NATIONAL AUSTRALIA 9 NAB 217.486 216.343 0.53% 8 BANK LIMITED 10 SBM LIMITED 32.057 31.890 0.52% 5 Negative Change Covered by > 2 Brokers

Previous Order Symbol Company New EF Change Recs EF 1 NXT NEXTDC LIMITED -0.960 0.440 -318.18% 6 2 AQG ALACER GOLD CORP 1.942 7.639 -74.58% 4 3 MYR MYER HOLDINGS LIMITED 3.580 4.367 -18.02% 6 4 SUN LIMITED 88.383 97.900 -9.72% 8 5 IVC INVOCARE LIMITED 49.967 54.250 -7.89% 7 6 BPT BEACH ENERGY LIMITED 21.233 22.600 -6.05% 4 7 FMG 36.639 38.584 -5.04% 8 LTD AUSTRALIA & NEW 8 ANZ 217.486 227.843 -4.55% 8 ZEALAND BANKING GROUP AUTOMOTIVE HOLDINGS 9 AHG 19.400 20.275 -4.32% 5 FNArenaGROUP LIMITED 10 OML OOH!MEDIA LIMITED 21.725 22.550 -3.66% 4

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