Australian Broker Call

Credit Suisse rates ANZ as Neutral (3) -

ANZ has settled the Oswal litigation and guided to an additional charge around $145m pre-tax. Credit Suisse downgrades FY16 earnings estimates by 1%.

The broker considers the settlement surprisingly large and highlighting the bank's long-standing propensity to hold relatively large exposures compared with its major bank peers.

Nevertheless, the matter relates to a 2010 receivership and the broker does not envisage it as a reflection of current bad debt charges. Price target is $27.30. Neutral rating retained.

Target price is $27.30 Current Price is $27.23 Difference: $0.07
If ANZ meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $28.28, suggesting upside of 2.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.4

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

Macquarie rates ANZ as Outperform (1) -

The bank has disclosed an additional provision charge in FY16 of $145m relating to a legal settlement with the Oswal family. This results in a 1.6% reduction to Macquarie's cash earnings forecast.

This is another reminder of the legacy issues that ANZ is facing but Macquarie believes the bank is better placed than its peers to maintain or improve returns over the medium term. Outperform and a $28.50 target retained.

Target price is $28.50 Current Price is $27.23 Difference: $1.27
If ANZ meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $28.28, suggesting upside of 2.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.4

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

Morgans rates ANZ as Hold (3) -

ANZ will take an additional provision of around $145m in relation to the settlement of the Oswal dispute. Morgans downgrades FY16 cash earnings per share estimates by 1.4%.

The broker retains a Hold rating and $24.00 target.

Target price is $24.00 Current Price is $27.23 Difference: minus $3.23 (current price is over target).
If ANZ meets the Morgans target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.28, suggesting upside of 2.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.4

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

Macquarie rates AWC as Underperform (5) -

Alumina Ltd's credit rating is downgraded by Standard & Poor's two notches to BB. Macquarie believes the downgrade is a re-basing of the rating to bring it closer to its upcoming JV partner's rating rather than because of any real change in the financial profile.

While the dividend yield is expected to increase to 5% in FY17 Macquarie remains of the view that the market under appreciates the challenges facing the alumina market, a traded market that it expects will disappear by the end of the decade.

Macquarie believes the upcoming de-merger of Alcoa represents a negative for AWC, given increased risk of smelter closures would depress traded alumina prices. Underperform rating and $1.00 target retained.

Target price is $1.00 Current Price is $1.40 Difference: minus $0.4 (current price is over target).
If AWC meets the Macquarie target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.39, suggesting downside of -0.8% (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: 0.1

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

Citi rates BKW as Neutral (3) -

Citi analysts see sufficient factors lining up for a robust year ahead. The anticipation that management will tell shareholders just that at the AGM in November is seen as one of multiple catalysts for the share price.

Also, the company still owns 42.7% of WH Soul Pattinson ((SOL)) and here too Citi analysts see positive news ahead, which should also be reflected in Brickworks' share price. Price target drops to $14.00 (was $15.50). Neutral.

Target price is $14.00 Current Price is $13.47 Difference: $0.53
If BKW meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $15.09, suggesting upside of 12.9% (ex-dividends)

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

Deutsche Bank rates BKW as Buy (1) -

FY16 underlying EBIT was slightly ahead of Deutsche Bank's expectations. The broker believes a further margin expansion in FY17 is likely, to 13%, given housing demand remains robust on the east coast.

Further upside is expected when the Oakdale West site is approved for development, with the first section expected to be ready for sale into the trust in FY17.

Deutsche Bank retains a Buy rating and reduces the target to $17.53 from $17.68.

Target price is $17.53 Current Price is $13.47 Difference: $4.06
If BKW meets the Deutsche Bank target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $15.09, suggesting upside of 12.9% (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

Macquarie rates BKW as Upgrade to Neutral from Underperform (3) -

FY16 results were ahead of expectations. Macquarie expects housing activity to slow over 2017 and weigh on demand in FY18. The negative impact is expected to amplify rising energy costs, for bricks in particular.

Still, the broker believes the current discount in the stock adequately reflects future earnings risk. Rating is upgraded to Neutral from Underperform and the target is reduced to $14.50 from $15.35.

Target price is $14.50 Current Price is $13.47 Difference: $1.03
If BKW meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $15.09, suggesting upside of 12.9% (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

Morgans rates BKW as Hold (3) -

FY16 results were ahead of expectations and Morgans notes FY17 guidance implies another strong year. Yet building products are expected to be affected by lower volumes in two years time.

The broker remains conscious that the peak of the cycle is at hand. While the cross holding with WH Soul Pattinson ((SOL)) makes the stock more complicated, Morgans believes Brickworks' considerable exposure to residential construction has meant good leverage over the past few years.

With the good times now factored into the share price the broker's Hold rating is retained. Target falls to $14.33 from $17.27.

Target price is $14.33 Current Price is $13.47 Difference: $0.86
If BKW meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $15.09, suggesting upside of 12.9% (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

Morgan Stanley rates BOQ as Overweight (1) -

Ahead of next month's result, the broker has cut its earnings forecasts for Bank of Qld by around 2% to reflect tough conditions. BOQ had a very strong first half but has spent the second half trying to manage margins and grow deposits, the broker notes.

Overweight nevertheless retained on the benefits of cost cutting and mortgage repricing opportunities. The bank's strong capital position and modest loan growth will support dividends, the broker suggests. Target falls to $12.00 from $12.30.

Industry view: In-Line

Target price is $12.00 Current Price is $11.10 Difference: $0.9
If BOQ meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $12.00, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.3

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

UBS rates ILU as Upgrade to Buy from Neutral (1) -

The share price has declined around 18% since the interim results but UBS believes much of the bad news should have been known and/or has subsequently reversed.

The broker believes both zircon and titanium dioxide feedstock prices will start rising over the next couple of years and upgrades to Buy from Neutral. Target rises to $7.50 from $6.80.

Target price is $7.50 Current Price is $6.06 Difference: $1.44
If ILU meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $6.74, suggesting upside of 6.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

Morgan Stanley rates MPL as Underweight (5) -

The broker has cut its target for Medibank to $2.40 from $2.50. A survey of health insurance policyholders supports the broker's view that restoring Medibank franchise momentum is a medium term story requiring reinvestment and a review of growth and retention strategies.

The broker has downgraded assumptions for policyholder growth and premium growth and trimmed earnings forecasts on the back of assumed reinvestment. Underweight retained.

Industry view: In-Line

Target price is $2.40 Current Price is $2.54 Difference: minus $0.14 (current price is over target).
If MPL meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.76, suggesting upside of 10.7% (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

Morgans rates NCM as Reinstate coverage with Add rating (1) -

Morgans reinstates coverage with an Add rating and $27.02 target. The broker believes the market is unfairly discounting the value of the company's long life assets and the reserves at Cadia and Lihir remove the need for a large acquisition.

The stock remains highly leveraged to the gold price and the favourable gold environment underscores the broker's call. Morgans considers the strong cash flow outlook and balance sheet will allow the company to pursue growth efficiently and opportunistically.

Target price is $27.02 Current Price is $22.85 Difference: $4.17
If NCM meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $20.54, suggesting downside of -7.9% (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 ORE as Add (1) -

The headline loss of US$58.1m for FY16 related largely to the effect of currency fluctuations and corporate and administrative charges.

The main positive, Morgans believes, is that commercial production from Olaroz was declared at the end of April.

Morgans prefers the stock in the lithium sector and retains an Add rating. Target is $5.66.

Target price is $5.66 Current Price is $3.64 Difference: $2.02
If ORE meets the Morgans target it will return approximately 55% (excluding dividends, fees and charges).

Current consensus price target is $4.32, suggesting upside of 20.8% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates ORL as Neutral (3) -

Citi analysts seemed rather lukewarm post OrotonGroup's interim report in March, and the mood hasn't changed post yesterday's FY16 report. On the analysts' calculation, LFL sales grew 11% in 1H16 but there was a -9% drop off in 2H16.

The analysts note Oroton is reducing its exposure to Gap and to Asia, which are both a drag on earnings. Gross margin should rise from here onwards. Estimates have been lowered. Target drops to $2.50 from $2.60. Neutral.

Target price is $2.50 Current Price is $2.30 Difference: $0.2
If ORL meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Market Sentiment: 0.5

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

Citi rates PMV as Sell (5) -

As predicted beforehand, Premier Investments' FY16 report showed like-for-like sales trends slowed markedly in 2H16, but Smiggle continues to record impressive growth, comment Citi analysts.

There is no doubting Smiggle continues to perform, but elsewhere in the portfolio "low growth" reigns, point out the analysts. Gross margin pressure is expected to weigh upon the share price in the year ahead. Sell rating retained.

Current Price is $16.17. Target price not assessed.

Current consensus price target is $15.37, suggesting downside of -6.5% (ex-dividends)

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 PMV as Underperform (5) -

FY16 results were in line with forecasts. Credit Suisse believes the market is not taking into account the fact the company is cycling a perfect Christmas and suspects earnings will under perform expectations in FY17.

The broker's target is reduced to $14.57 from $14.70 and does not include expansion of Smiggle beyond current markets. The development of Smiggle remains a key valuation and earnings variable. Underperform retained.

Target price is $14.57 Current Price is $16.17 Difference: minus $1.6 (current price is over target).
If PMV meets the Credit Suisse target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.37, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in July.

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 PMV as Hold (3) -

FY16 results were below Deutsche Bank's expectations, with sales and margins affected by softer trading in Australasia. The broker believes initiatives around supply chain and brand will provide meaningful growth and margin uplift in the near term.

Hold rating retained on valuation. Target is $14.25.

Target price is $14.25 Current Price is $16.17 Difference: minus $1.92 (current price is over target).
If PMV meets the Deutsche Bank target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.37, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates PMV as Neutral (3) -

FY16 underlying retail EBIT was largely in line with expectations. Macquarie notes Smiggle and Peter Alexander continue to perform well.

The broker warns that there are some big comparable numbers to deal with in the first half and Smiggle UK is facing GBP translation headwinds. With the stock trading close to target the broker retains a Neutral rating. Target moves to $16.43 from $16.35.

Target price is $16.43 Current Price is $16.17 Difference: $0.26
If PMV meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $15.37, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in July.

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

Morgan Stanley rates PMV as Equal-weight (3) -

Premier's result fell short of the broker. The star performers of Smiggle and Peter Alexander continued to star but weak trading in the second half saw sales declines for Premier's mature brands, the broker notes. Cash flow was also impacted by the cost of further Smiggle rollouts.

The two stars still offer the upside but the broker believes this is priced in at current levels, while mature brands will continue to drag. Equal-weight retained. Target falls to $14.75 from $15.10. Industry view: In-Line

Target price is $14.75 Current Price is $16.17 Difference: minus $1.42 (current price is over target).
If PMV meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.37, suggesting downside of -6.5% (ex-dividends)

The company's fiscal year ends in July.

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

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

Patrick has lost the contract with the Asia Australia consortium (A3). While the contract is not material to Qube in FY17 Macquarie suspects this is not the case with Patrick. The broker attributes the contract loss to the prioritisation of the Asciano sale process.

Macquarie believes the growth potential for Qube is substantial with longer term upside arising from Moorebank and, with the stock having fallen significantly, believes this negates further downside risk. Rating is upgraded to Outperform from Neutral. Target falls to $2.74 from $2.82.

Target price is $2.74 Current Price is $2.29 Difference: $0.45
If QUB meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $2.65, suggesting upside of 11.4% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates SCG as Underperform (5) -

The company's investor briefing held little news for Macquarie. The share price is down around 15% from its recent highs but is still above the broker's valuation range.

Macquarie continues to envisage the probability of an ultimate sell down of stock by the Lowy family, which may provide for a better entry price for investors.

Underperform rating and $4.45 target retained.

Target price is $4.45 Current Price is $4.62 Difference: minus $0.17 (current price is over target).
If SCG meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.68, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

UBS rates SCG as Neutral (3) -

The investor briefing provided UBS with greater confidence that earnings growth will remain strong in FY18/19 and there is more clarity on the development pipeline.

The stock has outperformed the sector over the past three months and the broker continues to prefer Westfield ((WFD)) and Vicinity Centres ((VCX)), retaining a Neutral rating. Target is $4.62.

Target price is $4.62 Current Price is $4.62 Difference: $0
If SCG meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.68, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

Deutsche Bank rates VOC as Buy (1) -

The ACCC will not oppose the proposed acquisition of Nextgen and Vocus anticipates completing the transaction in October. Deutsche Bank has already adjusted forecasts so makes no changes.

Management has indicated the corporate and wholesale business continues to perform strongly and has exceeded new sales targets in the first quarter. A Buy rating is retained. Target is $12.01.

Target price is $12.01 Current Price is $6.26 Difference: $5.75
If VOC meets the Deutsche Bank target it will return approximately 92% (excluding dividends, fees and charges).

Current consensus price target is $9.40, suggesting upside of 44.6% (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