Australian Broker Call

Citi rates ABC as Sell (5) -

Adelaide Brighton has announced an additional $14m provision for the deliberate underpayment by customers for products supplied by them. The company is investigating the incident, including the possible involvement of an employee.

Dry weather across the east coast may have indicated upside risks to guidance but this has not been communicated. Citi suggests the bad debts provision and lack of upside in guidance since the first half may reflect unfavourable geographic exposure towards South and Western Australia.

Citi also notes underlying core net profit has been maintained, but a high seasonal skew requires 70% growth half-on-half. Sell rating and $5.10 target retained.

Target price is $5.10 Current Price is $6.29 Difference: minus $1.19 (current price is over target).
If ABC meets the Citi target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.61, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in December.

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 ABC as Hold (3) -

Adelaide Brighton has revealed it is investigating the incidence of a small number of customers possibly under-paying for supplies, with an employee possibly involved. Management estimates the earnings impact to be in the order of $14m, less than the value of any recoveries that may be made.

With no material cash flow impact expected, the broker retains Hold and a $5.27 target.

Target price is $5.27 Current Price is $6.29 Difference: minus $1.02 (current price is over target).
If ABC meets the Deutsche Bank target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.61, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates AZJ as Sell (5) -

The company has confirmed it is part of a consortium, whereby it could acquire the Wiggins Island Coal Export Terminal (WICET) while other members could buy one or more of the source mines.

In Ord Minnett's opinion there are too many unknowns at this stage to determine whether a potential transaction would be accretive to value.

What the broker does assert is that the company continues to face a number of earnings risks. Sell rating retained along with a $4.15 target.

Target price is $4.15 Current Price is $5.14 Difference: minus $0.99 (current price is over target).
If AZJ meets the Ord Minnett target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.92, suggesting downside of -4.2% (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

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

UBS expects that trading post the FY17 result has been sufficiently positive to support revised market estimates.

Yet, with the stock price closing the value gap, and despite the mark-up on a gain in exchange rates, UBS believes the metrics warrant a downgrade to Neutral from Buy. Target is raised to $147 from $141.

Target price is $147.00 Current Price is $140.89 Difference: $6.11
If CSL meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $141.63, suggesting upside of 0.5% (ex-dividends)

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: 0.6

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

Morgans rates ELD as Downgrade to Hold from Add (3) -

FY17 results beat expectations on all key metrics. Morgans believes the company is now firmly on a path to sustainable earnings growth out to FY20.

The balance sheet has been restored to a position of strength and a dividend has been declared for the first time since FY08. Management remains confident of delivering 5-10% operating earnings growth out to FY20. Morgans upgrades forecasts by 10%.

Given the stock is now trading within 10% of the new target of $6.00, up from $5.05, the broker downgrades to Hold from Add.

Target price is $6.00 Current Price is $5.78 Difference: $0.22
If ELD meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in September.

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 ILU as Upgrade to Outperform from Neutral (1) -

Credit Suisse was impressed with the investor briefing, which included asset upgrades and confirmed a disciplined approach to capital allocation.

The broker believes the company is well placed to capitalise on recovery in mineral sands prices. Rating is upgraded to Outperform from Neutral. Target is raised to $11.10 from $9.90.

Target price is $11.10 Current Price is $9.88 Difference: $1.22
If ILU meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.47, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates IPD as Add (1) -

Morgans observes a number of catalysts have been flagged at the AGM, including the PREVENT study results and SOZO approval for heart failure, which if achieved should mean the shares move higher.

The main risk the broker envisages to its target is a delay in the release of the lymphoedema results and delay in the regulatory approval for SOZO.

Add rating retained. Target is $1.46.

Target price is $1.46 Current Price is $0.86 Difference: $0.6
If IPD meets the Morgans target it will return approximately 70% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates IRE as Neutral (3) -

The company's update indicates revenue growth of 12-13% in 2017, and Credit Suisse suggests higher cost investment during the year has not led to as much growth as previously expected, because of delays around client decisions.

Credit Suisse reduces estimates by -6% and gives the company the benefit of the doubt that growth rates will improve in 2018. Neutral retained. Target is reduced to $11.00 from $12.85.

Target price is $11.00 Current Price is $10.86 Difference: $0.14
If IRE meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.20, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Deutsche Bank rates IRE as Hold (3) -

Iress has issued a profit warning, cutting 2017 constant currency segment profit growth guidance to 2%, or -5% below the broker's forecast. Revenue growth guidance remains unchanged. Management has suggested it is a timing issue.

The broker sees Iress as a high quality business, but recent weak momentum and an increasing reliance on lower quality acquisitions suggest earnings risk is to the downside, the broker believes. Hold retained, target falls to $11.30 from $12.50.

Target price is $11.30 Current Price is $10.86 Difference: $0.44
If IRE meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.20, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Macquarie rates IRE as Neutral (3) -

The company's trading update signalled revenue would be between $435-440m. Macquarie estimates this guidance would be $10-15m lower if the impact of foreign exchange is included.

Management has indicated there has been a delay in the timing of client decisions, which has affected revenue. In order for the company to continue maintaining its premium rating relative to the market, Macquarie believes it will need to deliver on earnings and revenue growth expectations in FY18.

The broker retains a Neutral rating and lowers the target to $11.50. Macquarie prefers Bravura Solutions ((BVS)) in the financial technology space.

Target price is $11.50 Current Price is $10.86 Difference: $0.64
If IRE meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $11.20, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Ord Minnett rates IRE as Lighten (4) -

The company has downgraded near-term earnings estimates, because of clients deferring projects. The disappointing update follows on from the first half result where Ord Minnett observes cost growth ran ahead of revenue.

Given the substantial number of acquisitions made over the last couple of years the broker maintains a Lighten rating, awaiting signs of a sustained recovery in profitability. Target is lowered to $11 from $12.

Target price is $11.00 Current Price is $10.86 Difference: $0.14
If IRE meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.20, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Credit Suisse rates NCZ as Outperform (1) -

Credit Suisse notes further test work across the Century tailings zinc resource has confirmed consistent recoveries. The test results are being used for the feasibility study and conversion to a reserve.

The broker retains an Outperform rating and $2.45 target.

Target price is $2.45 Current Price is $1.34 Difference: $1.11
If NCZ meets the Credit Suisse target it will return approximately 83% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Deutsche Bank rates NEC as Hold (3) -

Nine's AGM trading update was upbeat, highlighting a first half ad market decline not as bad as feared. The second quarter even looks slightly positive. Nine's market share also appears to be well above expectations provided at the company's August result, the broker notes.

Guidance has subsequently been tightened to the upper end of forecasts. The broker lifts its target to $1.50 from $1.40 but suggests in the wake of a less positive update from rival Seven West Media ((SWM), Nine's improvement is about increased ratings and not market-wide improvement. Hold retained.

Target price is $1.50 Current Price is $1.56 Difference: minus $0.06 (current price is over target).
If NEC meets the Deutsche Bank target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.46, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Macquarie rates NEC as Upgrade to Outperform from Underperform (1) -

The company has upgraded its FY18 guidance for operating earnings to the upper end of consensus estimates of $204-230m, a rise of 11.1% at the high point.

Macquarie suggests the second half will be a little trickier for the business, as it faces competition from a locally-hosted Commonwealth Games as well as the Winter Olympics.

Still, the company is executing well and has strong momentum and Macquarie upgrades to Outperform from Underperform. Target is increased to $1.65 from $1.40.

Target price is $1.65 Current Price is $1.56 Difference: $0.09
If NEC meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.46, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

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

Morgan Stanley found the AGM incrementally positive, as the company has formally increased its FY18 operating earnings guidance by around 10%. This comes against a backdrop of a challenging TV advertising market.

The key is winning audience share, and therefore revenue share, whilst keeping costs down, the broker asserts.

Target is $1.20. Equal-weight. Attractive industry view.

Target price is $1.20 Current Price is $1.56 Difference: minus $0.36 (current price is over target).
If NEC meets the Morgan Stanley target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.46, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

UBS rates NEC as Sell (5) -

The company has lifted FY18 guidance for operating earnings to the "upper end" of $204-230m. UBS suggests previous guidance was based on 37.5% FY18 revenue share but, given the first half is likely to eclipse 39%, this now appears conservative.

The broker believes management has done a good job to offset the wider market pressures but the bulk of revenue share tailwinds are now captured, and the outlook will rely on continued monetisation of audience gains in FY19.

Sell rating retained. Target is raised to $1.35 from $1.25.

Target price is $1.35 Current Price is $1.56 Difference: minus $0.21 (current price is over target).
If NEC 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 $1.46, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Macquarie rates PLS as Outperform (1) -

The company has an MOU with Polaris Shipping and LG Chem to examine a joint venture to develop downstream lithium conversion capacity. This comes in the wake of the recent agreement with Great Wall for potential offtake.

Macquarie is impressed with the quality of potential downstream partners and believes the opportunity could significantly expand the scope of the business.

Outperform retained. Target is raised to $1.10 from 90c.

Target price is $0.90 Current Price is $1.02 Difference: minus $0.12 (current price is over target).
If PLS meets the Macquarie target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Citi rates RCR as Buy (1) -

Citi suggests there could be upside risks to FY18 forecasts, given the company's recent contract wins. However, this depends on the projects reaching financial close and the timing.

The Haughton solar farm is a $170m contract and the Clermont and Wemen solar farms combined are $260m.

Buy rating and $5.02 target.

Target price is $5.02 Current Price is $4.48 Difference: $0.54
If RCR meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Ord Minnett rates RCR as Buy (1) -

Ord Minnett is impressed with the number of contract wins over the past month, which total more than $600m. The awards have come faster than the broker expected and drive a 7% increase to FY18 estimates.

The broker remains comfortable with a Buy rating, believing actual growth is likely to be more than the market expects, particularly if the company is able to execute on the significant opportunity in rail. Target is raised to $5.17 from $5.08.

Target price is $5.17 Current Price is $4.48 Difference: $0.69
If RCR meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.94, suggesting upside of 10.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

UBS rates SDA as Buy (1) -

UBS found the latest presentation highlighted why the stock has re-rated significantly. The company is executing on integrating acquisitions and there is potential for material new contract wins.

No quantitative guidance was provided for FY18 but the company has signalled the energy division could return to growth in the second half.

The broker suggests the market will increasingly move to evaluate the stock on FY18 metrics. Buy retained and target raised to $5.20 from $4.10.

Target price is $5.20 Current Price is $4.93 Difference: $0.27
If SDA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.30, suggesting downside of -12.8% (ex-dividends)

The company's fiscal year ends in December.

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: 0.5

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

Citi rates TAH as Upgrade to Buy from Sell (1) -

Citi finds compelling upside in Tabcorp, even in the absence of a merger with Tatts ((TTS)). The broker upgrades to Buy from Sell on the back of upgrades to wagering growth assumptions following recent improvement in the trends.

The broker now expects wagering growth to accelerate from FY19. Target is raised to $5.25 from $3.95.

Despite the upgrades, the broker lowers FY18-19 earnings per share estimates by -2-4%, and now assumes the company will exit SunBets by December 31, 2019.

Target price is $5.25 Current Price is $4.66 Difference: $0.59
If TAH meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates WPL as Sell (5) -

Shell has announced the sale of 71.6m shares in the company, representing 8.5% of the register. Shell's ownership will be reduced to 4.8%.

Historically, Shell has been a large shareholder but had signalled its intention to sell down its ownership. Citi maintains a Sell rating and $27.25 target.

Target price is $27.25 Current Price is $31.29 Difference: minus $4.04 (current price is over target).
If WPL meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.90, suggesting downside of -4.4% (ex-dividends)

The company's fiscal year ends in December.

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: 0.0

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