Australian Broker Call

Morgans rates A2M as Initiation of coverage with Add (1) -

Morgans initiates coverage with an Add rating and $14.40 target. The broker expects strong growth over the coming years as the company wins market share across its product range in larger markets such as China.

The broker believes the premium products the company has developed, and which generate high margins, mean the stock deserves a premium rating.

Target price is $14.40 Current Price is $12.95 Difference: $1.45
If A2M meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $13.80, suggesting upside of 6.6% (ex-dividends)

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: 0.8

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

Credit Suisse rates APE as Neutral (3) -

Credit Suisse believes AP Eagers should be in a position to grow car retailing earnings. The outcome will be influenced by the national car sales data, particularly in Queensland, where year to date they have been supportive. Consolidation remains a driver, more likely in FY19 than FY18.

The broker considers the valuation fair and retains a Neutral rating. Target is raised to $8.65 from $8.40.

Target price is $8.65 Current Price is $8.45 Difference: $0.2
If APE meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $8.19, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in December.

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

Macquarie rates AZJ as Outperform (1) -

The company has provided its response to the draft proposal from the Queensland Competition Authority. Macquarie suggests Aurizon has dug in and emphasised the inadequate compensation.

The question is now whether the QCA will soften its hard line. The stock has been de-rated since December because of the impact around the draft decision, combined with rising rates and the end of the share buyback, and Macquarie considers this excessive. Outperform rating and $4.91 target maintained.

Target price is $4.91 Current Price is $4.41 Difference: $0.5
If AZJ meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.69, suggesting upside of 6.3% (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

Morgan Stanley rates CAR as Overweight (1) -

Morgan Stanley considers the greatest risk to the equity value is a change in the competitive landscape. The company's main advantages are its dominant audience share and cost efficiency for dealers.

Nevertheless, the broker notes CarGurus has successfully disrupted the US online car classified marketplace and could present a risk if it were to land in Australia. Overweight rating, Attractive industry view and $16 target maintained.

Target price is $16.00 Current Price is $14.46 Difference: $1.54
If CAR meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $14.13, suggesting downside of -2.3% (ex-dividends)

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

Morgan Stanley rates CGF as Underweight (5) -

The Department of Social Security has proposed new means test rules for lifetime retirement income products, including annuities. The target implementation date is the 2018 federal budget, although Morgan Stanley suggests this could prove optimistic.

The rules pave the way for a less favourable assessment of existing lifetime annuities for Social Security purposes. Morgan Stanley suggests annuity sales within the market segment motivated by Social Security benefits is likely to decline on this basis.

Underweight rating. Target is reduced to $11.00 from $11.50. Industry view: In-line.

Target price is $11.00 Current Price is $12.21 Difference: minus $1.21 (current price is over target).
If CGF 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 $12.30, suggesting upside of 0.7% (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 GEM as Initiation of coverage with Add (1) -

Morgans initiates coverage with an Add rating and $3.53 target. While recent industry challenges have put pressure on occupancy and wages, taking a medium-term view, the broker believes the company is well positioned to grow via acquisitions, as well as organically.

Operating efficiency should also improve with the more stable regulatory and supply backdrop. The company noted in its 2017 results that occupancy in January had been relatively stable with committed bookings heading in the right direction.

Target price is $3.53 Current Price is $2.77 Difference: $0.76
If GEM meets the Morgans target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $3.69, suggesting upside of 33.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Ord Minnett rates IDX as Upgrade to Buy from Hold (1) -

Capitol Health ((CAJ)) will not be increasing or extending the takeover bid for Integral Diagnostics and the offer is now expected to lapse. The outcome was increasingly apparent to Ord Minnett given an acrimonious relationship between the companies and some key shareholders.

The broker considers each business positively on a standalone basis. Both are trading at discounts to health care peers, which Ord Minnett considers unjustified given the avenues to growth. Rating is upgraded to Buy from Hold and the target is $2.39.

Target price is $2.39 Current Price is $2.11 Difference: $0.28
If IDX meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $2.18, suggesting upside of 3.3% (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

Deutsche Bank rates JHX as Buy (1) -

Buy rating retained while the price target lifts to $24.98 from $24.11 after the analysts tried to get a better grip on the underlying demand dynamics for James Hardie's PDG product. The conclusion has been a positive one.

Part of the optimism seems to be built on the observation that some US builders have indicated they are considering switching back to James Hardie's product, having stopped using it in the recent past. Production issues experienced by the company are seen as the culprit.

Target price is $24.98 Current Price is $22.49 Difference: $2.49
If JHX meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $24.54, suggesting upside of 9.1% (ex-dividends)

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: 0.5

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

Macquarie rates KAR as Outperform (1) -

The interim loss of -$28.2m was larger than Macquarie expected, because of the impairments. The broker believes the market is discounting Echidna's development, which should provide a positive catalyst in the near term as FEED is finalised.

The company remains committed to acquiring production assets and, with cash of $320m and no exploration commitments, the broker believes it should be well funded to undertake an acquisition. Outperform rating maintained. Target is reduced by -10% to $1.35.

Target price is $1.35 Current Price is $1.15 Difference: $0.2
If KAR meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

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

Ord Minnett rates MYR as Lighten (4) -

The company will report its first half results on March 21. Ord Minnett forecasts an underlying net profit of $39.4m, down -37.2% on the prior corresponding half but in line with guidance.

The broker observes that, while retail sales have been stronger than expected recently, the department store category is structurally challenged and, while the company's strategy is sound, execution mis-steps have resulted in disappointing sales and earnings growth.

Lighten and 50c target retained.

Target price is $0.50 Current Price is $0.42 Difference: $0.08
If MYR meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $0.46, suggesting upside of 9.1% (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

Credit Suisse rates NCM as Underperform (5) -

In the wake of the dam wall failure at Cadia and the cessation of production, Credit Suisse suggests lost production is likely to be more significant than the repair and remediation costs.

The Cadia Hill pit was under active consideration for tailings containment and potentially offers a near-term alternative, the broker notes. Expansion commitments may be delayed following the failure and the broker suggests it might be increasingly challenging for the company to commit more capital to a large-scale operation following two mine-stopping events in 12 months.

Underperform and $18.50 target maintained.

Target price is $18.50 Current Price is $20.14 Difference: minus $1.64 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.82, suggesting upside of 3.4% (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: -0.2

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

Macquarie rates OFX as Outperform (1) -

The investor briefing highlighted positive operating metrics for the second half, Macquarie observes. No specific FY18 earnings guidance was provided.

The broker notes revenue opportunity in the fragmented FX and cross-border market remains attractive, albeit not without risk of competition. Outperform rating maintained. Target rises to $1.71 from $1.54.

Target price is $1.71 Current Price is $1.59 Difference: $0.12
If OFX meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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

Credit Suisse rates OSH as Neutral (3) -

The company has provided its first capital expenditure guidance for PNG expansion, this being a range of US$2.75-3.5bn in total net capital commitments.

Credit Suisse suggests the balance sheet is maintaining a fine line, although remains confident in management's judgement. Neutral rating and $7.55 target maintained.

Target price is $7.55 Current Price is $7.03 Difference: $0.52
If OSH meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.16, suggesting upside of 16.1% (ex-dividends)

The company's fiscal year ends in December.

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 RRL as Upgrade to Outperform from Neutral (1) -

The company has delivered a maiden inferred underground resource estimate for Rosemont of 1.4mt at 5.1g/t for 230,000 ozs, using a 2.0g/t cut-off grade. This may be only an inferred resource but Macquarie suggests it highlights the options the company has in the Duketon portfolio to extend mine life.

Grades at Rosemont Main are particularly encouraging. Macquarie raises the target to $5.00 from $4.60. Rating is upgraded to Outperform from Neutral. The addition of the underground resources in FY20 means estimates for earnings per share lift 26% in that year.

Target price is $5.00 Current Price is $4.58 Difference: $0.42
If RRL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.75, suggesting downside of -18.0% (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 SXL as Upgrade to Outperform from Neutral (1) -

The stock has sold off since the February result and improved operating momentum in metro radio and regional TV does not appear to be priced in at current levels.

Macquarie suggests, while one rating survey does not guarantee a successful year, if sustained it represents upside risk to forecasts. Rating is upgraded to Outperform from Neutral. Target is $1.18.

Target price is $1.18 Current Price is $1.07 Difference: $0.11
If SXL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.12, suggesting upside of 4.8% (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

Ord Minnett rates TPM as Lighten (4) -

The company will report its first half result on March 20. Ord Minnett envisages downside risk to consensus estimates and remains concerned that the weaker consumer broadband margins witnessed at Telstra ((TLS)) and Vocus ((VOC)) in the first half could also pressure TPG Telecom.

TPG is more susceptible because its consumer segment accounts for 70% of revenue and 60% of operating earnings. Lighten rating and $4.90 target maintained.

Target price is $4.90 Current Price is $6.03 Difference: minus $1.13 (current price is over target).
If TPM meets the Ord Minnett target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.74, suggesting downside of -4.9% (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

UBS rates WHC as Buy (1) -

Media reports indicate Whitehaven Coal is one of the companies bidding for Rio Tinto's ((RIO)) remaining coal assets. Given the low cost of funding, the potential acquisition would be highly accretive to FY19 earnings, UBS suggests, assuming a US$2bn estimate for the assets.

The broker believes Whitehaven Coal has capacity to bid for one or all of the assets. Buy rating maintained. Target is $5.35.

Target price is $5.35 Current Price is $4.18 Difference: $1.17
If WHC meets the UBS target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $4.51, suggesting upside of 7.8% (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

UBS rates WPL as Buy (1) -

Woodside has moved to a 75% interest in the Scarborough gasfield and will become operator following an agreement with partner BHP Billiton ((BHP)). BHP will waive its pre-emptive rights and receive an option to acquire a further 10% stake in Scarborough under the same terms as the Woodside deal with ExxonMobil.

UBS believes the agreement provides Woodside with a way to have greater control of the timeframe and development of the project. The broker is more confident Scarborough will achieve FEED in 2019 with the final investment decision planned for 2020.

Buy rating and $34.70 target maintained.

Target price is $34.70 Current Price is $28.71 Difference: $5.99
If WPL meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $30.76, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in December.

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