Australian Broker Call

Deutsche Bank rates BKW as Hold (3) -

Management suggests the residential housing outlook continues to soften, although FY18 guidance is unchanged.

Deutsche Bank believes the company has done its best to prepare for a decline in demand for building products through the consolidation of its manufacturing. Property and investments will cushion the decline. The broker retains a Hold rating.

Current Price is $16.15. Target price not assessed.

Current consensus price target is $15.80, suggesting downside of -2.1% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Macquarie rates BKW as Neutral (3) -

The company's presentation and site tour of Queensland has signalled that Austral Bricks will continue to underpin building products revenue. This has been greatly assisted by a strategic focus on price as well as a move up the value curve, Macquarie observes.

The company has also increased the value of its property joint venture over the past 10 years and is finding opportunity to develop this further. Macquarie does not envisage a catalyst to drive a re-rating at present and maintains a Neutral rating. Target is $15.60.

Target price is $15.60 Current Price is $16.15 Difference: minus $0.55 (current price is over target).
If BKW 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 $15.80, suggesting downside of -2.1% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Ord Minnett rates BLD as Accumulate (2) -

Some investors hold the view that the company's performance has been underwhelming as construction activity has been robust in recent years. Ord Minnett disagrees, as concrete volumes have kept pace with the broader activity since 2011 and there has been substantial improvement in margin and divisional returns.

The broker forecasts modest volume and price increases over FY17-21 complemented by margin expansion. The broker believes the stock offers compelling value at current prices and that sentiment has turned too negative.

Accumulate rating maintained. Target is $7.70.

Target price is $7.70 Current Price is $6.42 Difference: $1.28
If BLD meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $7.57, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Ord Minnett rates CCL as Downgrade to Lighten from Hold (4) -

Ord Minnett has revisited its investment view and notes an absence of strong valuation support. The performance from Indonesia is not improving and the execution risk in the Australian beverages business remains significant.

The broker downgrades to Lighten from Hold. Target of $8.25 is unchanged.

Target price is $8.25 Current Price is $8.88 Difference: minus $0.63 (current price is over target).
If CCL meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.86, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates GNC as Hold (3) -

Morgans revises forecasts following the release of ABARES' 2018/19 winter crop forecast. The company now looks set to face two consecutive seasons that are well below average. Extremely low carry-over grain will also impact on FY20.

The broker believes existing shareholders will need to be patient to ride out the seasons, maintaining a Hold rating. For new investors the broker would be a buyer closer to $7.00. Target is reduced to $7.50 from $8.00.

Target price is $7.50 Current Price is $8.29 Difference: minus $0.79 (current price is over target).
If GNC 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 $8.39, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Deutsche Bank rates GXL as Sell (5) -

The company has faced intense competition and failed to deliver earnings and returns consistent with being the dominant player in its segment. Deutsche Bank also observes earnings per share has been declining at a compound rate of over -6% for the last three years.

The broker suggests the strategic investment in stores and rolling out services is failing to generate sufficient incremental earnings and remains concerned about the high level of gearing. Sell rating maintained. Target is $3.70.

Target price is $3.70 Current Price is $4.30 Difference: minus $0.6 (current price is over target).
If GXL meets the Deutsche Bank target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.29, suggesting downside of -0.3% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

Citi rates IAG as Neutral (3) -

The company will sell its businesses in Thailand, Indonesia and Vietnam and expects the sale to improve its CET1 ratio by at least 13 basis points, implying an estimated capital release of over $300m. Proceeds are due no later than December 31, 2018.

Citi increases assumptions for share buybacks to $750m in the first half of FY19. The broker acknowledges that this may not be the only way the company could look to return capital. The stock is still considered expensive and a Neutral rating is maintained, with a lift in the target to $8.25 from $7.75.

Target price is $8.25 Current Price is $8.41 Difference: minus $0.16 (current price is over target).
If IAG meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Credit Suisse rates IAG as Neutral (3) -

IAG will sell its interests in Thailand, Indonesia and Vietnam. Credit Suisse suspects the sale price for the loss-making Vietnam operations was probably minimal, given it was undisclosed, while the sale price for the total Thai and Indonesian Holdings was $525m.

The sale of the three assets is expected to add at least 13 basis points to the company's pro-forma first half CET1 ratio. The broker downgraded to a Neutral rating after the first half result on the basis of valuation and opts to remain on the sidelines until there is increased confidence around the premium rate environment. Target is $7.50.

Target price is $7.50 Current Price is $8.41 Difference: minus $0.91 (current price is over target).
If IAG meets the Credit Suisse target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Deutsche Bank rates IAG as Downgrade to Hold from Buy (3) -

Deutsche Bank expects the proceeds from the sale of Asian assets to be returned to shareholders and the capital return may be as large as $520m.

The broker welcomes the return to focus on the Australasian market. With the stock having re-rated from an historic discount to the broader market to a significant premium over the past two years, the rating is now downgraded to Hold from Buy. Target is raised to $8.00 from $7.80.

Target price is $8.00 Current Price is $8.41 Difference: minus $0.41 (current price is over target).
If IAG 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 $7.59, suggesting downside of -9.7% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Macquarie rates IAG as Underperform (5) -

Insurance Australia Group has sold three businesses in Asia for $525m. The transaction is sooner than Macquarie expected and supports expectations of a $400m buyback being announced at the next result.

Each of the three businesses being sold made a loss in FY17 and the broker suggests the outlook was not going to change, particularly for Indonesia and Vietnam.

Three Asian assets remain on the books, Malaysia, India and China. The nature of these remaining joint ventures makes it more difficult for IAG to exit.

While the transaction is positive the broker envisages heightened risk and maintains an Underperform rating and $6.50 target.

Target price is $6.50 Current Price is $8.41 Difference: minus $1.91 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgan Stanley rates IAG as Overweight (1) -

The company has sold its equity stakes in Vietnam, Indonesia and Thailand. The company continues to hold stakes in Malaysian and Indian business. Morgan Stanley currently assumes no buybacks or special dividends and suggests the sale will be a factor in determining capital management initiatives.

Overweight rating reiterated. Industry view In-Line. Price target is $8.00.

Target price is $8.00 Current Price is $8.41 Difference: minus $0.41 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Morgans rates IAG as Hold (3) -

The company has sold its operations in Thailand, Indonesia and Vietnam. Morgans considers the sale price of $525m a good outcome.

The broker believes the company is executing well on its cost reduction plans amid potential for capital management. Yet, IAG is considered expensive for an insurance company and significant expectation is built into the share price.

Hence, Morgans maintains a Hold rating. Target is raised to $7.54 from $7.19.

Target price is $7.54 Current Price is $8.41 Difference: minus $0.87 (current price is over target).
If IAG 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 $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

UBS rates IAG as Neutral (3) -

Insurance Australia Group has sold its operations in Thailand, Indonesia and Vietnam for $525m. The main issue for UBS is how this impacts capital management.

The broker is increasingly confident in a $350m first half buyback. A similar buyback is considered likely in FY20. Neutral rating and $7.30 target.

Target price is $7.30 Current Price is $8.41 Difference: minus $1.11 (current price is over target).
If IAG meets the UBS target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.59, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Deutsche Bank rates IPL as Buy (1) -

Deutsche Bank reduces earnings estimates by -3-6% to reflect the impact of lower fertiliser volumes and higher gas costs at Gibson Island, which net out the gain from the Fortescue Metals ((FMG)) explosives contract.

Once the company resolves an interim gas agreement at Gibson Island Deutsche Bank believes it will recommence the $300m share buyback program.

Buy and $4.40 target retained.

Target price is $4.40 Current Price is $3.47 Difference: $0.93
If IPL meets the Deutsche Bank target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $3.83, suggesting upside of 10.5% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates IVC as Lighten (4) -

Even though the economics of the business model will not change, Ord Minnett expects the company to report a return on equity at its results in August that is set to double to about 40%.

Over the next five years, the broker expects to see consensus upgrades to operating earnings of 16-21%. A Lighten rating is maintained. Target is $11.50.

Target price is $11.50 Current Price is $13.46 Difference: minus $1.96 (current price is over target).
If IVC meets the Ord Minnett target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.36, suggesting downside of -8.2% (ex-dividends)

The company's fiscal year ends in December.

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

Deutsche Bank rates MIN as Hold (3) -

The company has downgraded DSO shipment guidance to 3.6mt for 2018. This has caused Deutsche Bank to further reduce FY18 operating earnings estimates by -5% and FY19 by -16%.

The sell down of Wodgina remains a primary catalyst for the stock, in the broker's opinion. While the Koolyanobbing acquisition is slightly accretive it is marginal to forecasts. Hold rating retained. Target is reduced to $17 from $18.

Target price is $17.00 Current Price is $16.10 Difference: $0.9
If MIN meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $20.20, suggesting upside of 25.5% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Credit Suisse rates MTS as Underperform (5) -

As independent supermarket retailers are likely to lose share and the company's wholesale position is weakening, Credit Suisse believes the challenges will continue. The current valuation is supported by strategies, as yet unidentified, to sustain food distribution earnings.

However, the likelihood of reinvestment is not fully appreciated by the market, in the broker's view, and a short-term injection of capital could be reconsidered at the upcoming results.

The broker retains an Underperform rating, cognisant of the share price risks in the near term from capital management. Target is reduced to $2.65 from $2.70.

Target price is $2.65 Current Price is $2.72 Difference: minus $0.07 (current price is over target).
If MTS meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.13, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Morgans rates OEL as Initiation of coverage with Add (1) -

Otto Energy is confident it can sustain solid cash flow from the oil production at SM71 for its estimated eight-year life. Bivouac Peak will be the third prospect the company will participate in and drilling is expected in FY19.

The company is also working to expand its Houston footprint to maximise access to deal flow on new prospects. Morgans initiates coverage with an Add rating and $0.11 target.

Target price is $0.11 Current Price is $0.07 Difference: $0.04
If OEL meets the Morgans target it will return approximately 57% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Citi rates QAN as Buy (1) -

The company reported international RASK growth of 5.2% in the third quarter. Citi expects this division is likely to remain strong even as headline RASK and load factor statistics return to more normal levels.

The domestic performance is also expected to remain robust. Citi suggests cost challenges faced by the international divisions, particularly from fuel, can be mitigated, although these depend on rational responses from competition. Buy rating and $7.90 target maintained.

Target price is $7.90 Current Price is $6.55 Difference: $1.35
If QAN meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 2.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Macquarie rates RIO as Outperform (1) -

The site tour to the Greater Brockman operations has confirmed for Macquarie the importance of the four mines in not only sustaining medium to longer-term production in the Pilbara business but also short term increases through the final stages of the ramp up at Silvergrass.

Silvergrass is lower in phosphorus than most of the current Marra Mamba mines and is, therefore, a key ingredient in improving the Pilbara blended product.

Outperform rating retained. Target is $94.

Target price is $94.00 Current Price is $82.34 Difference: $11.66
If RIO meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $88.06, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.8

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

UBS rates RIO as Buy (1) -

UBS found no surprises in its visit to the Rio Tinto Pilbara iron ore system. The focus on value over volume remains in place, and from mine to port the infrastructure is continuously being improved. However, this is getting harder and cost pressures are mounting.

The company remains positive about the market, given supply-side reforms in China and that country's environmental policy. AutoHaul is tracking towards completion by the end of this year. Buy rating and $90 target maintained.

Target price is $90.00 Current Price is $82.34 Difference: $7.66
If RIO meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $88.06, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 0.8

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

Macquarie rates SYD as Outperform (1) -

It appears, from an initial assessment of reported May traffic stats, the numbers released are better than what Macquarie had penciled in for the six months up to June 30.

Broadly speaking, and considering there is still one last month left, Macquarie analysts describe today's release as "broadly in line". Outperform rating unchanged, as well as the $6.85 price target.

Target price is $6.85 Current Price is $7.53 Difference: minus $0.68 (current price is over target).
If SYD meets the Macquarie target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.38, suggesting downside of -2.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates SYR as Outperform (1) -

The production update for Balama shows most elements of the process plant are performing well although some problems with level sensors in the flotation cells are affecting production.

The company believes it has found a solution to the issue and expects the performance to improve from here on. Macquarie remains confident that the mine will deliver substantial market share to Syrah Resources. Outperform rating and $5 target maintained.

Target price is $5.00 Current Price is $2.76 Difference: $2.24
If SYR meets the Macquarie target it will return approximately 81% (excluding dividends, fees and charges).

Current consensus price target is $4.93, suggesting upside of 78.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Deutsche Bank rates TAH as Buy (1) -

Victoria and NSW have increased race field product fees from July. The company estimates the move to increase these product fees will impact earnings by around -1%.

Deutsche Bank believes, while the company still needs to deliver on synergies from the Tatts acquisition, it is addressing other issues and improving its competitive position in the market. Buy rating and $5.50 target retained.

Target price is $5.50 Current Price is $4.62 Difference: $0.88
If TAH meets the Deutsche Bank target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.21, suggesting upside of 12.7% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Morgan Stanley rates TAH as Overweight (1) -

Victoria and WA have advised of higher race field fee rates from July 1. Morgan Stanley expected this from Victoria but WA was a surprise.

Rates have not been quantified but the estimated net profit impact for Tabcorp is -$5m. The broker suggests the impact over FY19-21 will be immaterial.

Overweight rating and $5.20 target. Industry view is Cautious.

Target price is $5.20 Current Price is $4.62 Difference: $0.58
If TAH meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $5.21, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Macquarie rates TLS as Neutral (3) -

In an initial response to Telstra's profit warning ahead of today's investor day, kindly described as a re-basing of the base, Macquarie analysts report their back-of-the-envelope calculations following revised guidance range suggest FY19 dividends of 15-19cps.

The analysts do acknowledge some flexibility around these estimates given the board had pledged 75% of NBN one-off payments to be returned “over time”. Earnings are to be re-based over the next 24 months, at the same time as TPG Telecom ((TPM)) is to make its entry into the mobile space, point out the analysts.

For now, Neutral rating and $3.20 price target unchanged. Estimates are cum downgrade.

Target price is $3.20 Current Price is $2.77 Difference: $0.43
If TLS meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $3.38, suggesting upside of 22.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Ord Minnett rates VOC as Accumulate (2) -

The Australian government has awarded Vocus the submarine cable contract connecting PNG and the Solomon Islands to Australia. The contract is valued at $136.6m.

Vocus will oversee the construction of the 18-month project. Ord Minnett considers this a significant positive for the company despite the relatively small impact on the financials.

Ord Minnett maintains an Accumulate rating and $3.30 target.

Target price is $3.30 Current Price is $2.55 Difference: $0.75
If VOC meets the Ord Minnett target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $2.77, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

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