Australian Broker Call

Credit Suisse rates AIZ as Upgrade to Neutral from Underperform (3) -

Credit Suisse observes diverging operating trends. Improving yield and stronger domestic load factors have been offset by an increase in the Singapore jet fuel price.

Given the hedging profile, the broker expects limited impact on the current year but the outlook and potential quantum of downgrades for FY19 and FY20 are considered more uncertain.

Credit Suisse now believes the stock presents a more balanced risk/reward and upgrades to Neutral from Underperform. Target is raised to NZ$2.96 from NZ$2.90.

Current Price is $2.84. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

UBS rates AIZ as Neutral (3) -

Competitive pressures appear to have now peaked for Air NZ and earnings visibility has improved, the broker believes. However a return to positive earnings momentum is unlikely in FY18 given higher fuel costs.

The stock offers an attractive yield and the longer term outlook is positive. For now, target cut to NZ$3.00 from NZ$3.25, Neutral retained.

Current Price is $2.84. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

Morgans rates AOG as Add (1) -

Morgans expects another second half earnings skew in FY18, exacerbated this year by the timing of new developments. The broker's first half net profit forecast of $34.9m represents 30% of its FY18 forecast. The company will report first half results on February 14.

The broker maintains an Add rating and reduces the target to $3.50 from $3.61.

Target price is $3.50 Current Price is $2.59 Difference: $0.91
If AOG meets the Morgans target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $3.68, suggesting upside of 41.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.9

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

Morgans rates AZJ as Hold (3) -

Morgans expects operating earnings to decline by -5%, or by -7-10% on a continuing business basis. First half results are expected on February 12.

The broker's modelling of network revenues has been adjusted to assume excess revenue in FY18 will be returned across the remaining UT5 years on a value neutral basis, rather than entirely in FY20. This creates a smoother earnings profile across FY19-21.

Target is raised to $4.76 from $4.71. Hold rating retained.

Target price is $4.76 Current Price is $4.69 Difference: $0.07
If AZJ meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.72, suggesting upside of 0.6% (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 BDR as Neutral (3) -

December quarter production was weaker than Macquarie forecast. The mill upgrade is the key catalyst over the next six months and the broker is encouraged by the exploration, although a tweaking of production is required before the company can realise the full potential.

Neutral maintained. Target is reduced to $0.14 from $0.20.

Target price is $0.14 Current Price is $0.14 Difference: $0
If BDR meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.19, suggesting upside of 33.3% (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

Macquarie rates BPT as Underperform (5) -

Macquarie resumes coverage with an Underperform rating and $1 target following the completion of the acquisition of the Lattice assets.

The broker estimates that oil-linked production is now 45%, meaning the sensitivity to oil price changes is now less than 2% versus 5% previously.

With limited upside from fixed gas prices and high capital requirements for the undeveloped Lattice reserves, the broker envisages significant downside to market forecasts.

Target price is $1.00 Current Price is $1.37 Difference: minus $0.37 (current price is over target).
If BPT meets the Macquarie target it will return approximately minus 27% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.21, suggesting downside of -11.9% (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 EVN as Downgrade to Hold from Buy (3) -

Ord Minnett found the December quarter production sound but considers the rise in the stock of more than 14% over the past three weeks excessive.

Rating is downgraded to Hold from Buy. Target is $2.80.

Target price is $2.80 Current Price is $2.86 Difference: minus $0.06 (current price is over target).
If EVN meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.70, suggesting downside of -5.6% (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

UBS rates EVN as Buy (1) -

While Evolution's share price has been steadily rising, the broker believes momentum can continue on improving balance sheet strength and limited operational risk. A rich valuation is still below that of other gold mining peers and the broker sees Evolution outperforming.

The broker acknowledges recent gold price strength has been driven by the weaker greenback and this could reverse, but Buy retained. Target rises to $3.16 from $2.70.

Target price is $3.16 Current Price is $2.86 Difference: $0.3
If EVN meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.70, suggesting downside of -5.6% (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

UBS rates FLN as Neutral (3) -

Freelancer's marketplace revenue fell materially in the Dec Q, the broker notes, partly as a result of increased marketing costs. The company has also deliberately tightened membership subscriptions. All up the broker sees a headwind to revenue growth in the first half 2018.

Qualitative commentary nevertheless remains positive. Neutral retained, target falls to 46c from 50c.

Target price is $0.46 Current Price is $0.41 Difference: $0.05
If FLN meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

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

Credit Suisse rates GDI as Upgrade to Outperform from Neutral (1) -

The company has the highest portfolio exposure among the A-REITs to the Perth office market. Credit Suisse believes this makes the stock a counter-cyclical play on a recovery in what is the most challenging of the major CBD office markets in Australia.

The broker believes Perth may be on the road to recovery, expecting stronger leasing conditions going forward. The current valuation differential to the major east coast markets is also expected to narrow.

Rating is upgraded to Outperform from Neutral. Target is raised to $1.31 from $1.15.

Target price is $1.31 Current Price is $1.25 Difference: $0.06
If GDI meets the Credit Suisse target it will return approximately 5% (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 GXL as Neutral (3) -

Citi suggests the Petbarn online offering is becoming more competitive. While Amazon's Australian offer is currently light on pet food, industry sources indicate it could increase the range over the next 12 months.

Citi continues to envisage Amazon as a medium-term threat. The broker's analysis indicates the pet care retail segment is highly conducive to e-commerce. Neutral rating and $5.70 target maintained.

Target price is $5.70 Current Price is $6.40 Difference: minus $0.7 (current price is over target).
If GXL meets the Citi target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.20, suggesting downside of -3.1% (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

UBS rates IOF as Upgrade to Neutral from Sell (3) -

With Cromwell Property ((CMW)) now off the register, that overhang on Investa's share price is gone. Weak cash flow and earnings expectations for FY19 have also been priced in, UBS suggests, and indeed recent leasing success sees the broker move to a flat FY19 forecast.

UBS therefore upgrades to Neutral, retaining a $4.44 target, while recognising that rising global bond yields will weigh.

Target price is $4.44 Current Price is $4.44 Difference: $0
If IOF meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.76, suggesting upside of 7.1% (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 MND as Upgrade to Outperform from Underperform (1) -

Macquarie believes the environment is getting better for contractors, with a synchronised resources and infrastructure recovery underway. Significant tender opportunities await the company in the resources sector and the broker suggests it is well-placed to capture share.

Monadelphous revenues tend to outperform the sector in strong market conditions, Macquarie observes. Rating is upgraded to Outperform from Underperform.

Target is raised to $19.45 from $17.35. The broker includes the potential for accretive acquisitions in its outlook.

Target price is $19.45 Current Price is $18.28 Difference: $1.17
If MND meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $15.15, suggesting downside of -17.1% (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 MPL as Downgrade to Lighten from Hold (4) -

Ord Minnett believes the health insurance industry is facing reduced penetration and affordability concerns and Medibank Private is losing share. The broker believes the efforts to address this issue through retention and customer service initiatives is being thwarted by the company only partially embracing the fast-growing aggregator channel.

While top-line trends could weaken with falling participation rates, Ord Minnett also believes low premium increases will pressure gross margins in FY19. Rating is downgraded to Lighten from Hold. Target rises to $3.16 from $3.05.

Target price is $3.16 Current Price is $3.28 Difference: minus $0.12 (current price is over target).
If MPL meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.04, suggesting downside of -7.3% (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 NEW as Equal-weight (3) -

The company has an agreement to acquire a US solar project for US$270m. Morgan Stanley assumes the transaction will be largely in keeping with previous structures, a 20-year offtake and fixed construction costs.

The company anticipates the project could generate a 5.15% gross yield pre-transaction costs and fees over the first five years when operational in late 2019.

Equal-weight rating and $1.59 target retained. Industry view: Cautious.

Target price is $1.59 Current Price is $1.46 Difference: $0.13
If NEW meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

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

Credit Suisse rates NUF as Upgrade to Outperform from Neutral (1) -

Credit Suisse considers the macro backdrop for crop chemicals will remain sluggish in 2018 amid mixed regional conditions and persistently weak soft commodity prices.

While the contribution from cost reductions beyond FY18 is reduced, and will lead to slower earnings growth, the broker believes the market is under appreciating the long-term benefits that the transformation program will deliver.

Moreover, there appears to be no expectation factored in for a successful development of Omega 3 canola. Credit Suisse upgrades to Outperform from Neutral. Target is reduced to $9.21 from $9.23.

Target price is $9.21 Current Price is $8.34 Difference: $0.87
If NUF meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $9.40, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates OGC as Outperform (1) -

2018 production guidance of 480-530,000 ounces is in line with Credit Suisse estimates. Capital expenditure guidance is higher than the broker modelled and slightly disappointing.

However, much of the increase appears to relate to bringing forward future Haile and Waihi capital in order to gain recovery and production benefits earlier.

Target is $4.00. Outperform retained.

Target price is $4.00 Current Price is $3.28 Difference: $0.72
If OGC meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.42, suggesting upside of 34.7% (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

Macquarie rates RRL as Neutral (3) -

December quarter production was in line with Macquarie's expectations. The definitive feasibility study on McPhillamys has been delayed to the current quarter. Management now expects a strong FY18.

Target is $4.60. Neutral maintained.

Target price is $4.60 Current Price is $4.14 Difference: $0.46
If RRL meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.62, suggesting downside of -12.5% (ex-dividends)

The company's fiscal year ends in June.

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 S32 as Downgrade to Sell from Neutral (5) -

Citi has taken a negative view on the medium to longer term outlook for manganese prices and this has triggered a downgrade to Sell from Neutral, with the target price tumbling to $3.50 from $3.75.

Today's update also includes some balance sheet criticism (company accused of hugging too much cash, being too conservative post spin-off) plus the analysts have updated for currency movements, with the differential between SAR and AUD blowing out to the company's detriment.

Manganese supply is anticipated to increase into a flat demand environment later in the year. Earnings estimates have been reduced.

Target price is $3.50 Current Price is $3.82 Difference: minus $0.32 (current price is over target).
If S32 meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.53, suggesting downside of -7.6% (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

Macquarie rates SUN as Underperform (5) -

As lower premium growth and margins roll through FY18, Macquarie believes this will create around -8% downside to consensus earnings expectations for FY19.

Until the broker witnesses signs of organic premium growth and an improved margin trajectory an Underperform rating will be maintained. Target is raised to $12.80 from $12.65.

Target price is $12.80 Current Price is $13.83 Difference: minus $1.03 (current price is over target).
If SUN meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.16, suggesting upside of 2.4% (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 SYD as Outperform (1) -

Sydney Airport reported strong year-end traffic. In 2018 Macquarie believes upgrades are likely, as confidence in the price path and traffic growth emerges.

A recent drop in the share price restores value to the stock and the broker lifts the target to $7.46 from $7.33. The stronger cash flow provides potential upside to the broker's dividend expectations in 2018 and 2019. Outperform.

Target price is $7.46 Current Price is $6.80 Difference: $0.66
If SYD meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.45, suggesting upside of 9.5% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates VVR as Initiation of coverage with Accumulate (2) -

The company holds a portfolio of more than 430 service stations across metro and regional Australia, leased to Viva Energy Australia and operated by Coles ((WES))  Express.

Ord Minnett considers the stock a low-risk play with a sector-average 6.7% dividend yield. The broker initiates coverage with an Accumulate rating and $2.30 target. The broker envisages potential for growth in convenience store sales, further acquisitions and capitalisation rate compression.

Target price is $2.30 Current Price is $2.07 Difference: $0.23
If VVR meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.52, suggesting upside of 21.6% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates WES as Sell (5) -

Citi observes the sales growth gap between Coles and Woolworths ((WOW)) is narrowing and, if current strategies persist, will remain firmly in Woolworths' favour.

Woolworths' refurbishment program and online growth will support sales growth ahead of Coles in FY19, the broker suggests. Sell rating maintained. Target is raised to $41.50 from $41.00.

Target price is $41.50 Current Price is $44.05 Difference: minus $2.55 (current price is over target).
If WES 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 $41.75, suggesting downside of -5.2% (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

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

Citi expects Woolworths to maintain its lead on sales growth in grocery over the next two years. Superior execution is the primary driver of stronger sales growth and the broker upgrades to Buy from Neutral. Target is raised to $30.50 from $28.50.

The broker does not expect a repeat of FY18's stark improvement in execution in FY19 but does suggest the refurbishment program and online growth will support sales growth ahead of rival Coles ((WES)).

Target price is $30.50 Current Price is $27.36 Difference: $3.14
If WOW meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $26.67, suggesting downside of -2.5% (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