Australian Broker Call

Morgans rates AJD as Hold (3) -

360 Capital, 19.9% owner of Asia Pacific, a data centre REIT with its sole tenant being NextDC ((NXT)), is seeking to re-internalise the REIT, pay a capital distribution of 45c and implement a growth strategy. Asia Pacific has revealed 360 is not the only suitor to have approached.

The broker retains Hold with potential M&A being a near term catalyst. Target rises to $1.66 from $1.54.

Target price is $1.66 Current Price is $1.79 Difference: minus $0.13 (current price is over target).
If AJD meets the Morgans 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 June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Deutsche Bank rates BEN as Hold (3) -

Deutsche Bank analysts have lifted forecasts for regional lenders following yet another round of mortgage repricing. While the regionals have larger exposures to home loans than the majors, the analysts highlight changes made to forecasts have remained modest as they also lowered credit growth assumptions.

The analysts continue to see challenges ahead for the regionals. Their preference remains with the Majors. Hold rating retained, price target lifts by 30c to $10.70.

Target price is $10.70 Current Price is $11.37 Difference: minus $0.67 (current price is over target).
If BEN 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 $11.12, suggesting downside of -2.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Morgans rates BGA as Hold (3) -

Having acquired Mondelez' grocery business, which includes Vegemite, Bonox and other products including peanut butter and processed cheese, along with a processing facility in Port Melbourne, Bega has diversified its offering with a highly accretive deal, the broker suggests.

The price is fairly full but the deal shifts some risk away from the volatile and competitive dairy-based market, provides greater earnings stability and cash flow upside, as well as enhancing corporate appeal, the broker believes.

Target rises to $6.15 from $4.90. Hold retained.

Target price is $6.15 Current Price is $6.76 Difference: minus $0.61 (current price is over target).
If BGA meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Deutsche Bank rates BOQ as Hold (3) -

Deutsche Bank analysts have lifted forecasts for regional lenders following yet another round of mortgage repricing. While the regionals have larger exposures to home loans than the majors, the analysts highlight changes made to forecasts have remained modest as they also lowered credit growth assumptions.

The analysts continue to see challenges ahead for the regionals. Their preference remains with the Majors. Hold rating retained, price target lifts by 50c to $11.60.

Target price is $11.60 Current Price is $11.95 Difference: minus $0.35 (current price is over target).
If BOQ meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.66, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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

Citi rates CSL as Buy (1) -

Competition in the flu vaccine market is heating up, suggest analysts at Citi. They note Sanofi, the leading flu vaccine manufacturer worldwide, has announced the acquisition of privately held vaccine company Protein Sciences. The deal will expand Sanofi's market positioning by adding an eggfree QIV to its portfolio, suggests Citi.

The analysts seem to have little doubt Sanofi will be able to leverage its commercial distribution network with the newly acquired "Flublok" from FY19 onwards.

In addition, the analysts note Sanofi's Fluzone QIV High-Dose (egg-based) is currently by far the best-selling "premium" flu vaccine. CSL's Fluad, in comparison, has had limited traction to date. Citi has only benign expectations for CSL's Seqirus, expecting the division to be loss-making in FY18 and to only contribute 1% to group profits by FY20.

With regards to the upcoming flu season, Citi reports supply estimates available from major suppliers indicate total supply to be in the range of 156-161m doses, higher than last year’s supply of 146m doses.

Target price is $148.00 Current Price is $132.46 Difference: $15.54
If CSL meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $139.03, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

UBS rates CSL as Buy (1) -

There appears to be some confusion about the real rate of growth in the US plasma market, with UBS analysts pointing out there is very little plasma available on spot market with contracted volumes fully allocated.

In addition, the analysts note Shire in the USA has communicated it will pursue a less capital intense 'brand & price' strategy, rather than resume a volume based plasma strategy. This, the analysts point out, translates into long term structural advantage to the likes of CSL and Grifols.

All in all, it appears "tight supply, modest price gains" best summarises the situation for plasma fractionating at the moment. Buy rating and $145 price target retained.

Target price is $145.00 Current Price is $132.46 Difference: $12.54
If CSL meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $139.03, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Morgans rates EGH as Add (1) -

Eureka has ended an otherwise underwhelming FY with the purchase of two villages in Qld last month. The broker notes the stock has been trading around book value over the last few months given delay in gaining DA approval for the Terranora project.

The slow pace of acquisitions has led the broker to decrease its assumed numbers, leading to a target price cut to 49c from 72c. Add retained.

Target price is $0.49 Current Price is $0.37 Difference: $0.125
If EGH meets the Morgans target it will return approximately 34% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Morgans rates GDF as Add (1) -

Garda has sold one asset and acquired two more, the result of which is an improvement of the fund's weighted averaged lease expiry (WALE) profile, the broker notes. Following a revaluation of the existing portfolio, net tangible assets rise to $1.21ps from $1.11.

Target rises to $1.23 from $1.17 and Add retained, the broker noting Garda offers exposure to east coast industrial property and an attractive yield, paid quarterly.

Target price is $1.23 Current Price is $1.15 Difference: $0.08
If GDF meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Macquarie rates GOZ as Neutral (3) -

Growthpoint has acquired an 18.2% stake in Industria REIT from the 360 Capital Group, fulfilling the broker's expectations of M&A increasing in the sector given challenging conditions and little opportunity for organic growth. Growthpoint can go to 100% and stay within its gearing target, the broker notes.

The broker suspects it would nevertheless undertake a raising to maintain balance sheet flexibility. Given this risk the broker retains Neutral and a $3.05 target, noting that while Growthpoint is relatively defensive and high-yielding, it is also relatively expensive.

Target price is $3.05 Current Price is $3.15 Difference: minus $0.1 (current price is over target).
If GOZ meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

Macquarie rates IDR as Neutral (3) -

Growthpoint has acquired an 18.2% stake in Industria REIT from the 360 Capital Group, fulfilling the broker's expectations of M&A increasing in the sector given challenging conditions and little opportunity for organic growth. Growthpoint can go to 100% and stay within its gearing target, the broker notes.

The broker suggests Growthpoint may need to pay a premium to go to full takeover. In the meantime, positive momentum on leasing is lifting Industria's asset valuations but with key expiries ahead, occupancy risk remains a concern. Neutral and $2.26 target retained.

Target price is $2.26 Current Price is $2.26 Difference: $0
If IDR meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.24, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Macquarie rates MLX as Outperform (1) -

Test drilling at Nifty has confirmed extended mineralisation to the east and west and a new reserve estimate will be released in September. The broker had always assumed material reserve upside and has so far priced in a doubling for a 7-year mine life.

Further drilling success would provide for further upside, the broker notes. Outperform and $1 target retained for Metals X.

Target price is $1.00 Current Price is $0.74 Difference: $0.26
If MLX meets the Macquarie target it will return approximately 35% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Deutsche Bank rates MTS as Hold (3) -

Metcash has found a new CEO, Jeff Adams. Deutsche Bank analysts note Adams had been a consultant since leaving Tesco in 2015. Before that he had a number of senior roles with Tesco for over 20 years.

Strictly taken, Metcash is a wholesaler and not a retailer, point out the analysts. But they add that in the increasingly competitive environment, an experienced leader with deep food retail experience is required, and Adams seems to fit the profile.

Two risks are pointed out by the analysts: the existing CEO of Supermarkets who has done a good job may become disenfranchised after being overlooked; plus there may be increased risk of incremental price investment which could impact on margins. Hold rating and $2.30 price target unchanged.

Target price is $2.30 Current Price is $2.47 Difference: minus $0.17 (current price is over target).
If MTS meets the Deutsche Bank target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.39, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Macquarie rates MTS as Outperform (1) -

The broker applauds the appointment of a very experienced former Tesco executive as the new Metcash CEO from September.

The company has substantially turned the ship around, the broker notes, leaving a more simplified business, lower costs and a balance sheet in good shape. There is enough free cash flow to provide for debt reduction and capital management and/or investment opportunities, which will now be up to the new guy.

Outperform and $2.60 target retained.

Target price is $2.60 Current Price is $2.47 Difference: $0.13
If MTS meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $2.39, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

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

Credit Suisse rates PTM as Underperform (5) -

Platinum had a solid June in terms of market outperformance, but while the pace of outflows seen in May slowed in June, the result were still outflows, the broker notes. Medium term fund performance remains weak.

Persistent outflows continue to present downside risk to the broker's earnings forecasts. The broker sees the recent share price rally as unjustified and retains Underperform and a $4.40 target.

Target price is $4.40 Current Price is $5.20 Difference: minus $0.8 (current price is over target).
If PTM meets the Credit Suisse target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.06, suggesting downside of -20.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -1.0

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

Macquarie rates RSG as Outperform (1) -

Results from test drilling at Resolute's Syama project in Mali continue to point to mine extensions, including the potential for mining underground and of nearby satellites.

The broker believes an extension to mine life is highly likely or, given various possibilities, a higher grade ore mix. No change to valuation as yet. Outperform and $1.80 target retained.

Target price is $1.80 Current Price is $1.11 Difference: $0.695
If RSG meets the Macquarie target it will return approximately 63% (excluding dividends, fees and charges).

Current consensus price target is $1.87, suggesting upside of 62.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Morgan Stanley rates RSG as Overweight (1) -

It appears analysts at Morgan Stanley are getting a little excited about drilling results reported by Resolute Mining. On their observation, increased exploration spend in FY17 is now delivering results in multiple locations.

Reported intercepts may allow satellite ore bodies to improve the head grade processed at Syama, suggest the analysts, adding this is a potential upside but they will need more data to gauge fully.

Also, Morgan Stanley believes the sub-3x EV/EBITDA the shares are currently trading at looks "compelling" for a company with a 12-year mine life. Overweight rating retained. Attractive sector view. Target unchanged at $1.90.

Target price is $1.90 Current Price is $1.11 Difference: $0.795
If RSG meets the Morgan Stanley target it will return approximately 72% (excluding dividends, fees and charges).

Current consensus price target is $1.87, suggesting upside of 62.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Deutsche Bank rates SPO as Sell (5) -

Spotless has announced four contract wins and renewals for a yearly value of $250m in total. However, the analysts point out it's only one new contract win, really, as the other three are simply renewals or extensions.

As such, the announcement only represents a low level of new incremental revenue. The analysts point out achieving FY18 guidance will require new contracts to be won, real wins, not more extensions and renewals.

The analysts have made minor changes to their estimates, also adjusting working capital assumptions and lowering FY17 net debt forecast based on the company's market update provided. Target remains at 88c while the Sell rating remains unchanged as well.

Target price is $0.88 Current Price is $1.15 Difference: minus $0.27 (current price is over target).
If SPO meets the Deutsche Bank target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.95, suggesting downside of -17.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

Macquarie rates TPM as Neutral (3) -

Macquarie had been advising on TPG's spectrum deal but research restriction has now been lifted. The broker believes TPG's ambitions to become the fourth mobile operator could prove a value accretion strategy in the longer term but medium term, downside risk factors continue to weigh on the share price.

Until execution risk subsides and balance sheet demands become clearer, the broker is sticking to a prior Neutral rating. The cost of the move cuts into earnings forecasts, hence target falls to $6.15 from a previous $7.80 (March).

Target price is $6.15 Current Price is $5.55 Difference: $0.6
If TPM meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.82, suggesting upside of 23.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

Deutsche Bank rates VOC as Hold (3) -

The battle is on with Affinity Equity Partners having matched KKR's non-binding take-over proposal at $3.50 per share for 100% of Vocus. The new suitor has been granted due diligence on a non-exclusive basis, similar to KKR.

Looking back at calculations and estimates made earlier, Deutsche Bank remains of the view both private equity suitors must be assuming higher than consensus forecasts and/or more asset divestments than just the data centres.

The analysts also point out, given both proposals are subject to numerous conditions, there is still a reasonable level of risk to an acceptable offer being made for Vocus. Hold rating and $3.50 price target retained.

Target price is $3.50 Current Price is $3.54 Difference: minus $0.04 (current price is over target).
If VOC meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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