Australian Broker Call

Credit Suisse rates A2M as Outperform (1) -

The company has acquired an 8.2% stake in Synlait Milk, which Credit Suisse observes is largely about risk mitigation. It may serve as a small defensive move against a potential full, or partial, takeover of Synlait Milk by competing brands.

The broker notes this may help demonstrate a close association between a2 Milk, the brand owner, and Synlait Milk, the contract manufacturer, as required by initial legislative changes in China's infant formula industry.These changes were first outlined in 2014 but have not been strictly enforced to date.

Credit Suisse retains an Outperform rating and NZ$2.85  target.

Current Price is $2.28. Target price not assessed.

Current consensus price target is $2.05, suggesting downside of -11.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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

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

First half  underlying net profit was up 7%. The main positive was the growth in life funds under management, Morgans observes.

The negatives were slowing sales growth and higher near-term  costs. The broker downgrades to Hold from Add on valuation grounds, and because of some uncertainty regarding the board structure going forward.

Overall, the broker believes future growth prospects for the investment bond market are solid. The tax effective nature of the company's products is relevant to high income earners and for estate planning. Target is reduced to $0.53 from $0.55.

Target price is $0.53 Current Price is $0.55 Difference: minus $0.02 (current price is over target).
If ACK meets the Morgans target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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 AFG as Outperform (1) -

CEO and founder Brett McKeon will move back to an executive director role to support the broker network. Chief operating officer David Bailey will become interim CEO while a formal recruitment process is undertaken.

Macquarie anticipates little change in direction. The rate of growth is slowing, the broker observes, but, importantly, the business is still growing as there are a number of key drivers maintaining long-term growth in mortgage broking. January lodgements were up 8% and AFG Homeloans up 76%.

Outperform rating and $1.76 target retained.

Target price is $1.76 Current Price is $1.47 Difference: $0.295
If AFG meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Credit Suisse rates APE as Downgrade to Neutral from Outperform (3) -

Credit Suisse observes growth stocks tend to require constant high growth to maintain their multiple. Growth is still expected for AP Eagers, but at a slower pace than previously forecast.

The broker retains a belief that Carzoos is an excellent strategy and consolidation a long-term theme which should benefit the company. Nevertheless, the automotive industry faces some challenges, including the slowing of new car sales and a likely end to flex commissions.

The broker does not envisage a short-term catalyst for a re-rating and downgrades to Neutral from Outperform. Target is reduced to $9.90 from $13.15.

Target price is $9.90 Current Price is $9.50 Difference: $0.4
If APE meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $10.00, suggesting upside of 4.7% (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

Credit Suisse rates BHP as Neutral (3) -

Chinese steel consumption has surprised to the upside, as have Chinese steel prices. The broker does not expect steel prices to give way just yet and believes these can support an iron ore price above US$90/t throughout the first half of the year.

A slowing in infrastructure projects may cut steel demand by -1-2%, which does not suggest a price collapse for either steel or iron ore to the broker, but does indicate 2018 will be weaker than 2017.

FY17 and FY18 EBITDA estimates are revised up 8-9%. The broker suspects the company will wait until net debt is lower before committing to a buy-back.

Neutral rating and $26.50 target retained.

Target price is $26.50 Current Price is $25.34 Difference: $1.16
If BHP meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $27.85, suggesting upside of 8.9% (ex-dividends)

The company's fiscal year ends in June.

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: 0.3

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

Credit Suisse rates CIM as Underperform (5) -

Credit Suisse resumes coverage with a transfer to another analyst. Rating is Underperform and the target is $28. Even adopting revenue growth assumptions that the broker considers generous, FY17-20 growth in earnings per share is expected to be just 3%.

The broker expects construction revenues from major transport infrastructure projects to grow by 11% per annum from 2016-20. Yet, with revenue from such projects accounting for only 14% of total construction revenue in 2016 and around 10% of group EBIT, the broker believes the boost needs to be far larger to justify the current pricing.

Target price is $28.00 Current Price is $37.35 Difference: minus $9.35 (current price is over target).
If CIM meets the Credit Suisse target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.40, suggesting downside of -12.8% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CMA as Buy (1) -

The responsible entity for both Centuria Metropolitan and Centuria Urban ((CUA)) proposes a merger of the two vehicles. UBS finds the respective prices fair for both,  with minimal dilution to net tangible assets.

The broker has previously argued the merits of growing scale and believes Centuria  Metropolitan should trade closer to a 7% distribution yield if the merger completes. Buy rating retained. Target rises to $2.50 from $2.35.

Target price is $2.50 Current Price is $2.38 Difference: $0.12
If CMA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Deutsche Bank rates DMP as Hold (3) -

The recent decision by the Fair Work Commission on penalty rates is positive for the retail and fast food industry, in Deutsche Bank's view.

The size of Domino's wage cost increase is expected to be reduced as it moves to pay penalty rates. Domino's currently benefits from a 2-hour minimum shift versus 3 hours in the award. The broker makes no allowance for this in analysis and it is unclear if the company will continue to enjoy this benefit.

Hold rating retained. Target is $49.

Target price is $49.00 Current Price is $56.02 Difference: minus $7.02 (current price is over target).
If DMP meets the Deutsche Bank target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $70.40, suggesting upside of 27.2% (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

Deutsche Bank rates FLT as Hold (3) -

The recent decision by the Fair Work Commission on penalty rates is positive for the retail and fast food industry, in Deutsche Bank's view.

Most listed retailers operate under enterprise bargaining agreements but Flight Centre does not have one in place.

Hence, while the decision could be positive, the broker notes commission structures are in place which negates the need to pay penalty rates in many cases.

Hold retained. Target is $31.

Target price is $31.00 Current Price is $28.42 Difference: $2.58
If FLT meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $30.64, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

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 FMG as Upgrade to Outperform from Neutral (1) -

Credit Suisse expects the current level of iron ore prices to contract late this year but still considers the company's valuation and prospective 12-month dividend warrants an Outperform rating, upgrading from Neutral. Target is $7.35.

Chinese steel consumption has surprise to the upside, as have Chinese steel prices. The broker does not expect steel prices to give way just yet and believes these can support a iron ore price above US$90/t throughout the first half of the year.

A slowing in infrastructure projects may cut steel demand by -1-2%, which does not suggest a price collapse for either steel or iron ore to the broker, but does indicate 2018 will be weaker than 2017, says Credit Suisse.

Target price is $7.35 Current Price is $6.28 Difference: $1.07
If FMG meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $6.80, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in June.

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: 0.2

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

Deutsche Bank rates HVN as Buy (1) -

The recent decision by the Fair Work Commission on penalty rates is positive for the retail and fast food industry, in Deutsche Bank's view.

Most listed retailers operate under enterprise bargaining agreements but Harvey Norman does not have one in place.

Hence, while the decision could be positive, the broker notes commission structures are in place which negates the need to pay penalty rates in many cases.

Buy rating and $5.75 target retained.

Target price is $5.75 Current Price is $4.80 Difference: $0.95
If HVN meets the Deutsche Bank target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $5.00, suggesting upside of 4.2% (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

Morgan Stanley rates IGO as Upgrade to Overweight from Equal-weight (1) -

The company has outperformed Western Areas ((WSA)) over the past year, Morgan Stanley observes, and it scores better on various financial metrics. On a relative basis, Independence Group is favoured as the Nova project adds both mine life and higher production.

The broker also expects catalysts for Independence Group are more likely to occur at current commodity prices. Rating is upgraded to Overweight from Equal-weight. Target is raised to $4.50 from $3.70. Attractive sector view retained.

Target price is $4.50 Current Price is $3.75 Difference: $0.75
If IGO meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $4.22, suggesting upside of 12.5% (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

Deutsche Bank rates JBH as Hold (3) -

The recent decision by the Fair Work Commission on penalty rates is positive for the retail and fast food industry, in Deutsche Bank's view.

Most listed retailers operate under enterprise bargaining agreements but JB Hi-Fi does not have one in place.

Hence, while the decision could be positive, the broker notes commission structures are in place which negates the need to pay penalty rates in many cases.

Buy rating retained. Target is $32.

Target price is $32.00 Current Price is $25.82 Difference: $6.18
If JBH meets the Deutsche Bank target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $30.76, suggesting upside of 19.2% (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 LLC as Outperform (1) -

Credit Suisse believes consensus estimates remain too low and fail to capture the upside inherent in the company's global funds management, development and construction platforms.

With FY17 apartment settlement skewed heavily to the second half, residential development will again be a key driver of earnings growth for the year.

The broker also observes, while the Australian apartment exposures have received all the attention from investors over the past year, the company has been positioning its other businesses in the US, UK and Asia to drive longer-term earnings growth.

Outperform maintained.Target is $17.50.

Target price is $17.50 Current Price is $14.99 Difference: $2.51
If LLC meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $16.54, suggesting upside of 10.0% (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

Deutsche Bank rates MYR as Hold (3) -

The recent decision by the Fair Work Commission on penalty rates is positive for the retail and fast food industry, in Deutsche Bank's view.

Most listed retailers operate under enterprise bargaining agreements, although the broker observes many have expired.

Deutsche Bank observes the penalty rate changes will prevent a wage cost increase rather than provide a cost benefit for most retailers.

The broker notes Myer is one exception, as it had a particularly generous enterprise agreement and may find some benefit.

Hold rating retained. Target is $1.25.

Target price is $1.25 Current Price is $1.16 Difference: $0.09
If MYR meets the Deutsche Bank target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.29, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in July.

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 PAC as Buy (1) -

The company will soon simplify its structure, which will result in 100% ownership of the Aurora  Trust and increased market capitalisation of $200m.  Ord Minnett forecasts a 40% improvement in FY18 normalised net profit.

The broker believes the simplification is a necessary step to restore investor confidence. The consolidation is expected to be around 4% accretive  for shareholders in FY18. Target is reduced to $7.20 from $7.49. Buy rating retained.

Target price is $7.20 Current Price is $4.72 Difference: $2.48
If PAC meets the Ord Minnett target it will return approximately 53% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Credit Suisse rates RIO as Outperform (1) -

Chinese steel consumption has surprise to the upside, as have Chinese steel prices. The broker does not expect steel prices to give way just yet and believes these can support a iron ore price above US$90/t throughout the first half of the year.

A slowing in infrastructure projects may cut steel demand by -1-2%, which does not suggest a price collapse for either steel or iron ore to the broker, but does indicate 2018 will be weaker than 2017.

Rio Tinto's FY17 and FY18 EBITDA estimates are revised up 34% and 13% respectively. Outperform retained. Target is $72.

Target price is $72.00 Current Price is $60.92 Difference: $11.08
If RIO meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $71.42, suggesting upside of 15.7% (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: 0.7

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

Macquarie rates S32 as Outperform (1) -

Macquarie observes upside risk is building. Chinese supply side policy is in the company's favour, given the proposed winter curtailments of aluminium and alumina output and a resumption of the 276-day policy in some form.

Confirmation of policy changes is considered the most material external catalyst for the business.

Outperform retained. Target is $3.80.

Target price is $3.80 Current Price is $2.70 Difference: $1.1
If S32 meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $3.15, suggesting upside of 14.4% (ex-dividends)

The company's fiscal year ends in June.

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: 0.9

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

UBS rates TGR as Buy (1) -

The company has raised $80m in equity via an institutional share placement and intends to raise up to $20m in a share purchase plan. Tassal intends to spend around $270m over FY17-21 to support its targeted growth.

UBS does not change expectations for FY18 production and increases FY19-21 growth marginally. The company will begin stocking fish in its new farming lease at Okehampton Bay in FY18.

Buy retained. Target is $5.15.

Target price is $5.15 Current Price is $4.45 Difference: $0.7
If TGR meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $5.20, suggesting upside of 14.4% (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 WPL as Overweight (1) -

Morgan Stanley takes a closer look at Woodside and suspects there is more growth there than previously conceived.

While the company's near-term production characteristics are a key differentiator, the broker notes Senegal attracts the most interest in the longer term, given its potential to add 10-15mmbbls of growth net to Woodside.

Expansion at Pluto is now also on the cards and the broker suspects the attitude towards Scarborough is becoming more positive. Target is $40.00. Overweight rating and In-Line industry view retained.

Target price is $40.00 Current Price is $30.70 Difference: $9.3
If WPL meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $32.70, suggesting upside of 6.7% (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: 0.2

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

Morgan Stanley rates WSA as Downgrade to Underweight from Overweight (5) -

Independence Group ((IGO)) scores better on various financial metrics and Morgan Stanley expects there are more catalysts for that stock.

At current prices, Independence Group's Nova project adds both mine life and production that are higher than Western Areas' current producing assets.

Rating is downgraded to Underweight from Overweight. Attractive sector view retained. Target is reduced to $2.15 from $2.90.

Target price is $2.15 Current Price is $2.39 Difference: minus $0.24 (current price is over target).
If WSA meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.49, suggesting upside of 4.8% (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

Morgans rates WTP as Add (1) -

First half underlying net profit was again affected by execution issues, down -54% on the prior corresponding half. Morgans expects poor contract pricing to weigh on margins and profitability into FY18.

The broker still finds value in the company's asset base. Add rating retained. Target falls to $0.88 from $0.98.

Target price is $0.88 Current Price is $0.76 Difference: $0.12
If WTP meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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