Australian Broker Call

Ord Minnett rates ANN as Hold (3) -

Ord Minnett expects the company will announce the sale of its condom business at the AGM, estimating Ansell could raise over US$500m from such a sale.

While management has indicated a preference for further acquisitions the broker believes a sale could also support further capital management. Share price target rises to $24.70 from $24.50. The broker maintains a Hold rating.

Target price is $24.70 Current Price is $23.40 Difference: $1.3
If ANN meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $21.69, suggesting downside of -5.8% (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: 0.0

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

Citi rates AWC as Downgrade to Sell from Neutral (5) -

Citi analysts expect alumina prices to be range bound between US$230-260/t over the next 12 months, capped by potential Chinese capacity that can restart when prices rise higher.

Alumina Ltd's share price has rallied on the back of a favourable agreement with JV partner Alcoa and rising alumina prices. Time for a pause. Citi downgrades to Sell from Neutral. Price target remains $1.30.

Target price is $1.30 Current Price is $1.49 Difference: minus $0.185 (current price is over target).
If AWC meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

Deutsche Bank rates AWC as Hold (3) -

AWAC achieved a September quarter margin of US$52/t, a decline from US$65/t in the prior quarter. This was in line with Deutsche Bank's estimates. Alumina Ltd has received a US$93m dividend and net debt was steady post the payment.

Deutsche Bank does not believe Alumina Ltd will receive a material dividend in the December quarter because of higher capex and restructuring charges. Hold rating and $1.35 target retained.

Target price is $1.35 Current Price is $1.49 Difference: minus $0.135 (current price is over target).
If AWC meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

Macquarie rates AWC as Underperform (5) -

Alumina production in the September quarter was in line with Macquarie's estimates. Margins were reduced to US$52/t from US$65/t. Distributions to Alumina Ltd from AWAC were in line with commentary at US$91.8m for the quarter.

Macquarie makes changes to assumptions on costs and lowers its 2016 distribution forecast from Alumina Ltd by 15%. With recent refinery curtailments the broker expects AWAC will grow third party bauxite sales but a normalisation of freight rates is a key downside risk to Atlantic hub aspirations. Underperform rating and $1.00 target retained.

Target price is $1.00 Current Price is $1.49 Difference: minus $0.485 (current price is over target).
If AWC meets the Macquarie target it will return approximately minus 33% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

Morgan Stanley rates AWC as Overweight (1) -

The September quarter alumina EBITDA margin fell to US$52/t but Morgan Stanley observes targets for cost reductions have been met or exceeded. Distributions to Alumina Ltd are higher than the broker expected.

The broker notes new bauxite sales contracts have been signed and operations are tracking well. With alumina prices improving in the December quarter and cost savings to be consolidated the broker retains a positive stance on the stock. Overweight rating retained. Target is $1.70. Industry view is Attractive.

Target price is $1.70 Current Price is $1.49 Difference: $0.215
If AWC meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

Ord Minnett rates AWC as Downgrade to Hold from Accumulate (3) -

Alcoa's September quarter alumina earnings underwhelmed Ord Minnett. Following a strong run up in the share price, the broker suspects Alumina Ltd is approaching fair value.

The broker acknowledges the good balance sheet and placement of assets on the cost curve but downgrades to Hold from Accumulate. Target is steady at $1.60.

Target price is $1.60 Current Price is $1.49 Difference: $0.115
If AWC meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

UBS rates AWC as Neutral (3) -

Alcoa has maintained its 2016 forecasts for aluminium demand growth with EBITDA margins declining as UBS expected, to US$52/t in the September quarter, from US$65/t. Distributions were strong in the quarter, as flagged in the interim result.

Alumina Ltd has indicated it intends to pass on available free cash flow to its shareholders. Neutral rating and $1.45 target retained.

Target price is $1.45 Current Price is $1.49 Difference: minus $0.035 (current price is over target).
If AWC meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.39, suggesting downside of -5.5% (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: -0.1

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

Deutsche Bank rates AZJ as Buy (1) -

The Queensland Competition Authority has approved the network access undertaking for UT4, confirming the 7.17% WACC return and allowable revenue over the 2013-2017 period.

A $26m sum is allowed in higher recovery. Deutsche Bank calculates this sum plus the FY16 network earnings equates to around 5% in upside for Aurizon.

The broker retains a Buy rating and $4.95.

Target price is $4.95 Current Price is $4.76 Difference: $0.19
If AZJ meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting downside of -1.6% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates BHP as Downgrade to Sell from Neutral (5) -

Citi analysts expect prices for bulk commodities to pull back "significantly" in late-16 and into 2017 on cooling demand and as supply responds. They have downgraded to Sell from Neutral and cut the price target to $20 from $21 as a result.

There is a chance for an offset, say the analysts, were Chinese authorities to implement further policy measures to support coal and steel prices and/or monetary
stimulus to support growth.

Note: on Citi's projections, BHP will be enjoying a big boost to profits in FY17, but yet another drop off in momentum in FY18 when current estimates for both EPS and DPS are significantly lower than estimates for the current year.

Target price is $20.00 Current Price is $23.44 Difference: minus $3.44 (current price is over target).
If BHP meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.23, suggesting upside of 0.3% (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: 0.4

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

Morgan Stanley rates CSL as Underweight (5) -

The AGM has confirmed FY17 profit growth guidance of 11% and a $500m buy-back. The revenue benefit from a full flu season suggests to Morgan Stanley it will make a positive contribution to growth in FY17.

Assuming around 2.2% in the cost of debt and a $105 share price the broker estimates the buy-back will be around 0.3% accretive to earnings per share in FY17. Underweight rating and In-Line industry view retained. Target is $98.29.

Target price is $98.29 Current Price is $106.54 Difference: minus $8.25 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $108.66, suggesting upside of 3.5% (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: 0.1

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

Citi rates CSR as Buy (1) -

Citi analysts note housing data and indicators continue to suggest an increasingly extended cycle is upon us in Australia and a seasonally strong first half should ensure a good performance from CSR at the upcoming interim report release.

The analysts also note there has been little actual buying regarding the announced share buy back. Regarding the actual numbers, Citi is anticipating 1H17 EBIT of $147m and a dividend of 12c. Target has gained 2c to $4.07.

Target price is $4.07 Current Price is $3.74 Difference: $0.33
If CSR meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.67, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in March.

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 MPL as Upgrade to Neutral from Underperform (3) -

The share price has fallen 25% from its peak less than six months ago. Credit Suisse now considers the stock fair value and upgrades to Neutral from Underperform. Target is $2.50.

The broker continues to expect earnings will be volatile with potential for large moves in profitability in both directions. Moreover, investors are cautioned to be mindful of the regulatory risk. The broker is in no doubt the industry is over earning and that the magnitude of the 2016 premium rate increases should have been lower.

Target price is $2.50 Current Price is $2.54 Difference: minus $0.04 (current price is over target).
If MPL meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.73, suggesting upside of 7.1% (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

Citi rates NCM as Buy (1) -

Contractor MacMahon ((MAH)) is having problems at Telfer, but Citi analysts don't think it'll impact on Newcrest's production guidance for the year. Buy rating and $28 price target retained.

Target price is $28.00 Current Price is $20.48 Difference: $7.52
If NCM meets the Citi target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $20.58, suggesting downside of -0.6% (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

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

Following the recent back tracking of the shares Credit Suisse upgrades to Outperform from Neutral. The share price weakness has been driven by lower property listing volumes but the broker believes this is only a temporary issue.

Hence, there is a buying opportunity and Credit Suisse expects the share price to re-rate as listings recover. Target is unchanged at $61.00.

Target price is $61.00 Current Price is $54.24 Difference: $6.76
If REA meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $57.60, suggesting upside of 6.1% (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

Citi rates RIO as Downgrade to Sell from Neutral (5) -

Citi analysts expect prices for bulk commodities to pull back "significantly" in late-16 and into 2017 on cooling demand and as supply responds. They have downgraded to Sell from Neutral.

There is a chance for an offset, say the analysts, were Chinese authorities to implement further policy measures to support coal and steel prices and/or monetary
stimulus to support growth. Price target has moved to $47 from $46.

Also, Citi analysts foresee capex starting to rise again in order to maintain iron ore production levels, to US$5.2bn in 2017 and further to US$5.5bn in 2018. Regardless, the company has room for capital management in 2017 due to an estimated US$2bn in excess capital, even with lower iron ore prices, on Citi's calculations.

Target price is $47.00 Current Price is $53.00 Difference: minus $6 (current price is over target).
If RIO 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 $55.29, suggesting upside of 5.8% (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 SCP as Upgrade to Accumulate from Lighten (2) -

Ord Minnett has reviewed earnings and re-assessed the value of the company's property portfolio. The stock appears to be in sound shape and the portfolio composition improved post the sale of its NZ assets.

The transaction market is still conducive to acquiring neighbourhood centres at reasonable yields and the company is now the leading industry consolidator, the broker observes.

These factors are expected to underpin growth in earnings per share of around 5% per annum over the next three years. The broker upgrades to Accumulate from Lighten and raises the target to $2.33 from $2.14.

Target price is $2.33 Current Price is $2.24 Difference: $0.09
If SCP meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.12, suggesting downside of -6.4% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates VOC as Buy (1) -

Two board members have resigned. The two had proposed a change in CEO in early 2017 and a review of board leadership. The proposal was not accepted by the rest of the board, hence the resignations.

The company has re-affirmed its Amcom synergy targets of $13-15m by end FY17 and M2 synergy target of $40m by end FY18.

Deutsche Bank believes the apparent board split introduces potential risk to these targets, if the division that has occurred at board level is representative of other divisions in the company. A Buy rating is retained. Target is $12.01.

Target price is $12.01 Current Price is $5.49 Difference: $6.52
If VOC meets the Deutsche Bank target it will return approximately 119% (excluding dividends, fees and charges).

Current consensus price target is $8.92, suggesting upside of 60.4% (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

Ord Minnett rates WBC as Hold (3) -

Ord Minnett forecasts FY16 cash earnings of $7.83bn and a flat final dividend of 94c. Westpac has flagged margin headwinds and the broker expects margins in the second half of 2.11%, down three basis points over the half.

The broker forecasts second half credit growth of around 5%, annualised. Hold rating retained with a $32.50 target.

Target price is $32.50 Current Price is $30.83 Difference: $1.67
If WBC meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $32.34, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.6

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

Ord Minnett rates WES as Hold (3) -

Ord Minnett now has greater confidence in the market pricing of coal, following the December quarter coal prices agreed by Peabody.

Coal prices for Wesfarmers' resource division are upgraded and divisional EBIT of $150m is forecast for FY17.

A Hold rating is retained. Target rises to $45 from $44.

Target price is $45.00 Current Price is $45.01 Difference: minus $0.01 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.71, suggesting downside of -5.4% (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