Australian Broker Call

Credit Suisse rates APA as Underperform (5) -

The company has signed a new $40m per annum agreement with AGL Energy ((AGL)) over the Moomba Sydney pipeline. There is a $30-35m decrease in revenues, in line with Credit Suisse's expectations, and a long-standing source of uncertainty appears to have been resolved.

The broker notes the contract is short in duration, just three years, and is unsure whether this reflects the new world of reduced APA market power. Credit Suisse suspects it is likely to become more common as high prices and uncertain supply reduce the willingness of both buyer and seller to contract for long-term gas supply.

Underperform rating and $7.95 target maintained.

Target price is $7.95 Current Price is $8.59 Difference: minus $0.64 (current price is over target).
If APA meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.84, suggesting upside of 2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.2

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 released a maiden satellite oxide resource for Cakmaktepe in the Copler district, indicating high probability that the mineralisation can be mined profitably.

Mineralisation is similar to the Copler ore bodies and considered amenable to the same heap leaching and should supplement  Copler reserves, extending mine life and improving production flexibility.

Credit Suisse makes no changes to its Outperform rating or $5.30 target but notes spot gold is below the price used for valuation and the tragic events in Turkey point to increasing country risk.

Target price is $5.30 Current Price is $1.94 Difference: $3.365
If AQG meets the Credit Suisse target it will return approximately 174% (excluding dividends, fees and charges).

Current consensus price target is $4.05, suggesting upside of 106.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

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

Deutsche Bank rates AWC as Hold (3) -

JV AWAC will sell 400,000 tonnes of bauxite from its Huntly mine in Western Australia to a Chinese customer in 2017.The extra sales have raised Deutsche Bank's forecasts for Alumina Ltd earnings by 6%. Target is steady at $1.65.

Despite this minor positive, the broker retains a Hold rating based on valuation. The broker believes that over 10mtpa in Chinese aluminium production is in the process of re-starting and expect the alumina price to retrace during the first half.

Target price is $1.65 Current Price is $1.77 Difference: minus $0.12 (current price is over target).
If AWC 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 $1.61, suggesting downside of -11.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

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

Market Sentiment: -0.4

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

Ord Minnett rates AWC as Accumulate (2) -

AWAC, 40% owned by Alumina Ltd, has secured its first third-party bauxite supply contract from Western Australia, with a deal to supply around 400,000 tonnes to China in 2017.

Ord Minnett estimates the initial volume could add around US$7m to operating earnings for the joint venture and rise to around US$43m per year at spot prices.

The broker expects AWAC to pursue further third-party bauxite supply options, given Alcoa has predicted the seaborne bauxite market will double over 2015-24. Accumulate rating and $1.80 target maintained.

Target price is $1.80 Current Price is $1.77 Difference: $0.03
If AWC meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.61, suggesting downside of -11.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

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

Market Sentiment: -0.4

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

Credit Suisse rates BSL as Outperform (1) -

Credit Suisse adopts updated commodity prices and makes adjustments to its steel spread estimate, noting that spot pricing suggests further upside to modelled earnings in the second half of FY17.

The broker believes rising iron ore and steel prices are a boon for New Zealand and should produce considerable margin expansion. FY17 earnings per share estimates are increased by 5.4%.

The broker retains an Outperform rating and raises the target to $10.30 from $8.30.

Target price is $10.30 Current Price is $9.06 Difference: $1.24
If BSL meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $9.67, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

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

Credit Suisse rates ING as Initiation of coverage with Outperform (1) -

Credit Suisse believes, in a market that is increasingly sceptical about IPOs, that Ingham's will need to do more than just screen cheaply. It will need to deliver on prospectus forecasts and grow earnings thereafter.

Still, while it will face challenges typical in a competitive, mature industry Ingham's could surprise on the upside. The broker's conviction is based on a strong market position, competent management and a plausible margin expansion program.

Credit Suisse initiates coverage with an Outperform rating and $3.60 target.

Target price is $3.60 Current Price is $3.12 Difference: $0.48
If ING meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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

Macquarie rates ING as Initiation of coverage with Outperform (1) -

Ingham's is the market leader in the Australian chicken market with a 40% share by value and the number two in the New Zealand market with 34% share. Macquarie notes these are highly regulated markets which limits the extent of imports.

Australasian poultry consumption has grown substantially and is expected to continue, driven by the cheap relative cost compared with other meats. Macquarie initiates coverage with an Outperform rating and $3.65 target.

Target price is $3.65 Current Price is $3.12 Difference: $0.53
If ING meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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

Morgan Stanley rates ING as Initiation of coverage with Equal-weight (3) -

The company faces longer-term earnings risks in terms of contract negotiations with major customers, but in the near term this is limited in Morgan Stanley's view. The broker cites cost reductions and strong retail chicken volume growth as supporting the stock currently.

The broker considers the 6.7% FY18 yield will be attractive to yield-focused investors. While the valuation is cheap, the earnings risk still needs to be priced, the report states.

The broker notes that major contracts may be in place until end of FY18 but Woolworths' ((WOW)) strong bargaining position may force the company to lower prices, effectively handing back recent gains.

Morgan Stanley initiates coverage with an Equal-weight rating, $3.40 target and In-Line industry view.

Target price is $3.40 Current Price is $3.12 Difference: $0.28
If ING meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.66, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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

Macquarie rates IPL as Outperform (1) -

The consolidation theme continues in fertiliser with Mosaic acquiring Vale's Brazilian assets. Macquarie believes, with the start up of Louisiana, that Incitec Pivot could be more open to strategic options for fertiliser given the industry is on a consolidation footing.

Higher Australian gas costs are a deterrent, the broker notes, for potential acquirers of domestic fertiliser business. The broker retains an Outperform rating and $3.88 target.

Target price is $3.88 Current Price is $3.58 Difference: $0.3
If IPL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.30, suggesting downside of -8.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

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

The broker considers the stock is fairly valued as it adjusts earnings forecasts to factor in The Good Guys acquisition. Synergies of $10m are factored in to FY18, improving to $20m by FY20.

FY17-19 forecasts for earnings per share are upgraded by 6-7%. Equal-weight rating retained. Industry view is In-Line. Target rises to $28.00 from $27.66.

Target price is $28.00 Current Price is $27.42 Difference: $0.58
If JBH meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $29.84, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Macquarie rates MIN as Outperform (1) -

Macquarie updates earnings estimates following its lifting of the FY17 estimated iron ore price to US$60.40/tonne. Mineral Resources expects to grow volumes by 20% in FY18 and FY19 but the broker does not yet fully reflect this rate of growth.

The broker retains an Outperform rating, given the strong track record and large number of opportunities available to the business. Target is raised to $14.53 from $13.37.

Target price is $14.53 Current Price is $11.72 Difference: $2.81
If MIN meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $12.81, suggesting upside of 8.8% (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

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

Galaxy Resources ((GXY)) has announced 2017 lithium concentrate sales at an equivalent price of US$905/t. This is 65% higher than the price Morgan Stanley applies to its modelling for Mineral Resources.

As the offtake agreements of one miner may not be reflected in another, the broker does not revise its forecasts at this time. Yet, testing the scenario suggests a 10% uplift over the combined FY17-18 EBITDA in the base case.

Equal-weight and $11.70 target retained. Industry view: In Line.

Target price is $11.70 Current Price is $11.72 Difference: minus $0.02 (current price is over target).
If MIN meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.81, suggesting upside of 8.8% (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 NCM as Upgrade to Outperform from Neutral (1) -

Macquarie has updated commodity prices forecasts. This has led to ongoing positive outlook for bulks, the nomination of nickel as favourite for calendar 2017 and the view value is emerging in the gold sector where weakness has followed the election of Donald Trump.

Newcrest Mining is upgraded to Outperform from Neutral. Target $20 (was $24).

Target price is $20.00 Current Price is $17.54 Difference: $2.46
If NCM meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $19.82, suggesting upside of 14.1% (ex-dividends)

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 OZL as Downgrade to Neutral from Outperform (3) -

Macquarie has updated commodity prices forecasts. This has led to ongoing positive outlook for bulks, the nomination of nickel as favourite for calendar 2017 and the view value is emerging in the gold sector where weakness has followed the election of Donald Trump.

OZ Minerals' rating has pulled back to Neutral from Outperform. Target $8.40 (was $9.20).

Target price is $8.40 Current Price is $7.66 Difference: $0.74
If OZL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.53, suggesting downside of -4.3% (ex-dividends)

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.0

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

Macquarie rates PRU as Downgrade to Neutral from Outperform (3) -

Macquarie has updated commodity prices forecasts. This has led to ongoing positive outlook for bulks, the nomination of nickel as favourite for calendar 2017 and the view value is emerging in the gold sector where weakness has followed the election of Donald Trump.

Perseus Mining has been downgraded to Neutral from Outperform. Target $0.40.

Target price is $0.40 Current Price is $0.34 Difference: $0.065
If PRU meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $0.58, suggesting upside of 82.5% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

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

Morgan Stanley downgrades its estimates for earnings per share on the back of a re-analysis of GP remuneration/recruitment. The broker is more confident in cash flow.

Yet, for its price target to be achieved, the broker needs demonstrable stability in GP churn and lower recruitment costs across FY17.

Equal-weight retained. Price target is reduced to $4.45 from $4.68. In-Line sector view retained.

Target price is $4.45 Current Price is $3.91 Difference: $0.54
If PRY meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.99, suggesting upside of 1.9% (ex-dividends)

The company's fiscal year ends in June.

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 SYD as Hold (3) -

The Australian government's notice outlining the terms on which SYD can exercise its first right of refusal to develop the proposed western Sydney airport has been issued.

The notice does not contain any procurement protection nor Commonwealth funding. Deutsche Bank has previously suggested the airport needs $1bn in subsidies or support over the first 10 years to make it commercially viable and de-risk the project.

Hold rating and $6.05 target retained.

Target price is $6.05 Current Price is $6.40 Difference: minus $0.35 (current price is over target).
If SYD 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 $6.78, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

Macquarie rates SYD as Outperform (1) -

The company has received the notice of intention from the Commonwealth setting out the terms to develop the western Sydney airport.

Macquarie notes the risk profile has increased with the approach taken by the government but finds it difficult to envisage how a third party could make the economics work better than SYD.

Traffic continues to be a point of strength for the company, with the November statistics confirming this trend, in the broker's assessment. Outperform and $7.45 target retained.

Target price is $7.45 Current Price is $6.40 Difference: $1.05
If SYD meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $6.78, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

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

The surprise aspect for Morgans in the Commonwealth government's notice on the second Sydney airport was that SYD is required to fund all the construction costs without any federal funding or cost protections.

The business is required to take all traffic, operating and political risks in exchange for a 99-year lease. The broker had assumed the government would offer funding for a project it had proposed.

SYD has indicated the terms of the notice makes the airport a challenging investment proposition. Morgans suspects the government is testing the market for private sector funding for the project, as it clings to its AAA credit rating.

The broker reduces its base case valuation and lowers the target to $7.04 from $7.85. Rating is downgraded to Hold from Add.

Target price is $7.04 Current Price is $6.40 Difference: $0.64
If SYD meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $6.78, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

Morgans rates VHT as Add (1) -

The company has completed a capital raising and Morgans observes it is now fully funded to achieve its key milestones.

This includes the expansion of the US sales force, roll out of cloud-based software and appointment of a major distributor in Europe.

Morgans notes the focus on expanding sales of VolparaEnterprise. Add rating retained. Target lifts to 87c from 85c.

Target price is $0.87 Current Price is $0.61 Difference: $0.265
If VHT meets the Morgans target it will return approximately 44% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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 WHC as Upgrade to Neutral from Underperform (3) -

Macquarie has updated commodity prices forecasts. This has led to ongoing positive outlook for bulks, the nomination of nickel as favourite for calendar 2017 and the view value is emerging in the gold sector where weakness has followed the election of Donald Trump.

Whitehaven Coal has been upgraded to Neutral from Underperform. Target $2.70.

Target price is $2.70 Current Price is $2.65 Difference: $0.05
If WHC meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.14, suggesting upside of 15.3% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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