Australian Broker Call

Citi rates AWC as Upgrade to Buy from Neutral (1) -

Citi makes commodity price revisions, with significant upgrades for bulk commodities. Better-than-expected Chinese growth and supply-side reforms have provided support for the market.

Key 2018 forecasts are US$64/t for iron ore, US$155/t for metallurgical coal and US$78/t for thermal coal. Upgrades are also made to manganese, copper, alumina, and aluminium.

Rating is upgraded to Buy from Neutral. Target is raised to $2.50 from $1.90.

Target price is $2.50 Current Price is $2.22 Difference: $0.28
If AWC meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.22, suggesting upside of 0.1% (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: -0.1

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

Citi rates BBG as Buy (1) -

The company has received a non-binding proposal from Boardriders Inc at $1 a share. Based on a recovery in underlying earnings and historical multiples, Citi suggests the bid price is anywhere from 10-30% below comparable transactions.

The broker also envisages the prospects of a rival bid unlikely at this stage. Billabong has narrowed its focus and delivered margin expansion, which the broker believes will be maintained.

Buy with a high risk rating and $1.25 target.

Target price is $1.25 Current Price is $0.94 Difference: $0.31
If BBG meets the Citi target it will return approximately 33% (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

Citi rates BHP as Upgrade to Buy from Neutral (1) -

Citi makes commodity price revisions, with significant upgrades for bulk commodities. Better-than-expected Chinese growth and supply-side reforms  have provided support for the market.

Key 2018 forecasts are US$64/t for iron ore, US$155/t for metallurgical coal and US$78/t for thermal coal. Upgrades are also made to manganese, copper, alumina, and aluminium.

The broker upgrades to Buy from Neutral. Target is raised to $32 from $29.

Target price is $32.00 Current Price is $27.99 Difference: $4.01
If BHP meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $30.33, suggesting upside of 8.3% (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: 0.8

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

Citi rates DLX as Sell (5) -

The shares have strongly outperformed the market, Citi observes, driven by industry consolidation and a resilient renovation market.

Furthermore, the broker believes the company is unlikely to be a target for global paint companies because of its relatively small scale and exposure to a mature market, as well as high valuation.

The broker considers the stock overbought and retains a Sell rating and $7.50 target.

Target price is $7.50 Current Price is $7.99 Difference: minus $0.49 (current price is over target).
If DLX meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.98, suggesting downside of -12.6% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates FMG as Upgrade to Buy from Neutral (1) -

Citi makes commodity price revisions, with significant upgrades for bulk commodities. Better-than-expected Chinese growth and supply-side reforms  have provided support for the market.

Key 2018 forecasts are US$64/t for iron ore, US$155/t for metallurgical coal and US$78/t for thermal coal. Upgrades are also made to manganese, copper, alumina, and aluminium.

The broker upgrades to Buy from Neutral. Target is raised to $5.40 from $5.10.

Target price is $5.40 Current Price is $4.62 Difference: $0.78
If FMG meets the Citi target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.45, suggesting upside of 17.9% (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: 0.3

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

Morgan Stanley rates IDX as Underweight (5) -

The company has been offered $2.46 a share by Capitol Health ((CAJ)). Capitol noted that, within the ASX filing, it had previously had discussions with Integral in an attempt to merge, without success, and is now seeking to discuss the proposal with shareholders.

Morgan Stanley suspects the previous discount of -10-20% to the ASX200 it applied to the stock may now be unwarranted, given the recent update on FY18 growth.

However, the broker also suspects that, while the shares may gravitate towards the offer price, they may also trade back to base case estimates if a deal is not completed.

Underweight rating maintained. Target is raised to $2.15 from $1.54. Industry view: In-Line.

Target price is $2.15 Current Price is $2.25 Difference: minus $0.1 (current price is over target).
If IDX meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.99, suggesting downside of -11.8% (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

Macquarie rates LOV as Outperform (1) -

Following the announcement regarding a pilot store in the US, Macquarie reviews recent industry feedback which suggests this is a large and attractive market for the company.

The high-density nature of US shopping centres is likely to accelerate awareness of the brand and competitive dynamics are favourable, with relatively limited direct competition.

The broker retains an Outperform rating and lifts the target to $6.75 from $5.42.

Target price is $6.75 Current Price is $6.47 Difference: $0.28
If LOV meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.84, suggesting downside of -9.8% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates PMV as Outperform (1) -

The company has upgraded guidance for Smiggle and reaffirmed growth expectations for Peter Alexander. Sales revenue of $450m is guided for Smiggle by FY20 as expansion continues at a pace.

Credit Suisse considers Smiggle presents one of the few growth stories in its coverage of the sector.

With consumer spending conditions likely to remain tight the broker is forecasting flat EBIT in the first half from the company's legacy clothing brands.

Credit Suisse also believes the company's investment in Myer ((MYR)) appears to be going nowhere and there is no apparent solution to retrieve value.

Outperform retained. Target is $14.91.

Target price is $14.91 Current Price is $14.45 Difference: $0.46
If PMV meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $15.14, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in July.

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

Citi rates RIO as Upgrade to Buy from Neutral (1) -

Citi makes commodity price revisions, with significant upgrades for bulk commodities. Better-than-expected Chinese growth and supply-side reforms have provided support for the market.

Key 2018 forecasts are US$64/t for iron ore, US$155/t for metallurgical coal and US$78/t for thermal coal. Upgrades are also made to manganese, copper, alumina, and aluminium.

Rating is upgraded to Buy from Neutral. Target is raised to $82 from $71.

Target price is $82.00 Current Price is $72.41 Difference: $9.59
If RIO meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $77.31, suggesting upside of 6.8% (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: 0.8

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

Citi rates S32 as Upgrade to Buy from Neutral (1) -

Citi makes commodity price revisions, with significant upgrades for bulk commodities. Better-than-expected Chinese growth and supply-side reforms have provided support for the market.

Key 2018 forecasts are US$64/t for iron ore, US$155/t for metallurgical coal and US$78/t for thermal coal. Upgrades are also made to manganese, copper, alumina, and aluminium.

Rating is upgraded to Buy from Neutral. Target is raised to $3.75 from $3.50.

Target price is $3.75 Current Price is $3.27 Difference: $0.48
If S32 meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.26, suggesting downside of -0.3% (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: 0.0

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

Macquarie rates SAR as Outperform (1) -

Macquarie upgrades production forecasts for Saracen Mineral, based on strong drilling results from Whirling Dervish and Karari.

A smaller but higher-grade underground mine at Thunderbox will reduce capital expenditure and accelerate development without affecting overall production, the broker adds.

Outperformed maintained. Target is raised to $1.80 from $1.60. Earnings estimates for FY18 and FY19 are raised by 14% and 18% respectively.

Target price is $1.80 Current Price is $1.47 Difference: $0.33
If SAR meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

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 TAH as Buy (1) -

The ACCC and CrownBet ((CWN)) have decided not to apply for judicial review of the authorisation of the proposed merger with Tatts ((TTS)). Hence, Deutsche Bank believes the scheme meeting will go ahead as scheduled on December 12.

The broker expects the merger will be accretive to earnings per share by 11%. The broker also notes the regulatory environment is improving in Queensland.

Deutsche Bank maintains a Buy rating and $5.20 target.

Target price is $5.20 Current Price is $4.92 Difference: $0.28
If TAH meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting downside of -1.5% (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 TLS as Sell (5) -

Telstra has issued new earnings guidance, cutting FY18 revenue forecasts by -$700m and operating earnings (EBITDA) by -$600m. Citi downgrades FY18 estimates for earnings per share by -10%.

The broker calculates that, while 80% of the revenue has been delayed, around 20% is a permanent loss, given NBN has increased its allocation to wireless and will not pay Telstra for disconnecting the copper network in those areas.

The broker is surprised the earnings downgrade is so large, which in turn suggests that either the natural hedge is less effective than expected previously, or there has been further deterioration in the core business since original guidance was issued in August.

Sell rating and $3.25 target maintained.

Target price is $3.25 Current Price is $3.42 Difference: minus $0.17 (current price is over target).
If TLS meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.78, suggesting upside of 9.0% (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

Deutsche Bank rates TLS as Buy (1) -

Telstra has lowered FY18 guidance by -2-5% because of the delays to the NBN HFC roll out as well as the release of NBN's 2018 corporate plan.

Deutsche Bank revises FY18 forecasts and is now on the midpoint of income guidance and the low end of operating earnings guidance.

Deutsche Bank retains a Buy rating and reduces the target to $4.04 from $4.05.

Target price is $4.04 Current Price is $3.42 Difference: $0.62
If TLS meets the Deutsche Bank target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 9.0% (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

Macquarie rates TLS as Upgrade to Outperform from Neutral (1) -

The company updates guidance to incorporate NBN ceasing HFC sales for 6-9 months. Telstra expects the anticipated delay to be modestly financially positive over the full roll-out because of the effects of a natural hedge.

The broker acknowledges there are challenges to the operations but believes the dividend is underpinned by NBN payments over the medium term and the yield should provide support.

Rating is upgraded to Outperform from Neutral. Target is steady at $3.70.

Target price is $3.70 Current Price is $3.42 Difference: $0.28
If TLS meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 9.0% (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

Morgan Stanley rates TLS as Underweight (5) -

Telstra has reduced FY18 operating earnings guidance by -5% because of delays to the NBN roll-out. Morgan Stanley considers this only a small incremental negative, as all other parts of guidance are intact and the difference mostly comes down to timing.

The main point for the broker is that HFC disconnection payments will not be lost altogether but shift into FY19-21 from FY18.

Target is $3.40. Underweight weighting retained. Industry view In-Line.

Target price is $3.40 Current Price is $3.42 Difference: minus $0.02 (current price is over target).
If TLS meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.78, suggesting upside of 9.0% (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

Morgans rates TLS as Add (1) -

Telstra has reduced FY18 earnings guidance by -5% because of NBN delays. Morgans assumes the delays will have a knock-on effect in FY19 and downgrades estimates by -10% in FY18 and -6% in FY19.

Dividend guidance has been reaffirmed at $0.22 per share. The reason for the downgrade is that NBN will cease sales of its HFC technology for 6-9 months. Telstra has noted the delay will be modestly positive for its business over the full roll-out of the NBN.

Morgans maintains an Add rating and reduces the target to $4.11 from $4.15.

Target price is $4.11 Current Price is $3.42 Difference: $0.69
If TLS meets the Morgans target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 9.0% (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 TLS as Hold (3) -

The impact from the delay to the NBN HFC roll out is greater than Ord Minnett expected. The broker lowers FY18 earnings estimates but raises forecasts for FY19.

The broker believes the catalysts will have to come from a change in the NBN business model, with an impending new entrant on the mobile side.

This is considered necessary to improve the service being provided in Australia and could be the catalyst for Telstra shares to re-rate higher. Until such an event materialises the broker maintains a Hold rating. Target is $3.85.

Target price is $3.85 Current Price is $3.42 Difference: $0.43
If TLS meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.78, suggesting upside of 9.0% (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