Australian Broker Call

Ord Minnett rates AJA as Hold (3) -

The company has acquired a major shopping centre outside Tokyo for $118m and a hotel for $18m in Fukuoka. The transaction increases Ord Minnett's FY18 estimates for earnings per share by around 10%.

Ord Minnett notes a muted reaction to the acquisitions, suspecting the market is focusing on the realisable assets from the potential winding up, reducing the relevance of the income stream.

Ord Minnett believes Astro Japan is moving incrementally closer to advancing a transaction, having received an approach from Lone Star in December. Hold rating and $6.75 target retained.

Target price is $6.75 Current Price is $6.37 Difference: $0.38
If AJA meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

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

Ord Minnett rates ALQ as Hold (3) -

Ord Minnett updates its modelling and increases FY18 estimates by 2%, driven by higher margins in minerals. Valuation is reduced because the higher valued life sciences business is proportionately less of group earnings.

Hold rating retained. Target is reduced to $6.12 from $6.22. The main risks the broker envisages to the upside are more earnings upgrades from commodities or life sciences acquisitions.

Target price is $6.12 Current Price is $6.27 Difference: minus $0.15 (current price is over target).
If ALQ 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 $5.90, suggesting downside of -4.9% (ex-dividends)

The company's fiscal year ends in March.

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

Macquarie rates BEN as Underperform (5) -

The bank has followed the majors and re-priced investor loans by 25 basis points. Macquarie estimates, on a full year basis, this will add  around 4% to earnings.

While this is positive for earnings in the near term the widening differential between the bank and the majors is likely to put pressure on volumes and limit re-pricing opportunities in the future. Macquarie retains an Underperform rating and $11.50 target.

Target price is $11.50 Current Price is $12.03 Difference: minus $0.53 (current price is over target).
If BEN 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 $11.03, suggesting downside of -9.1% (ex-dividends)

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

Citi rates BOQ as Buy (1) -

Interim financial performance turned out weaker than expected, even with the market already positioned for a weak result, comment analysts at Citi. The analysts observe there was negative lending growth, on top of as margin pressure on both the front-book asset yields and retail deposit spreads.

But bank management is confident NIM will bounce back in 2H17. Plus BOQ has most leverage in Australia to the re-pricing of investor mortgage loans, point out the analysts.

As things will get better from here onwards, Citi analysts confidently retain their Buy rating. Target price remains unchanged at $13.25. Estimates have been scaled back.

Target price is $13.25 Current Price is $12.04 Difference: $1.21
If BOQ meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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 BOQ as Neutral (3) -

First half results missed Credit Suisse estimates. The broker downgrades earnings estimates by -3-6%, increasing the target to $12.75 from $12.25. Neutral rating retained.

The stock now appears fair value and Credit Suisse awaits evidence of the revenue turnaround that management expects.

The broker notes regional banks are now all positive on the near-term margin outlook. The main risks to the downside envisaged are an adverse turn in the credit cycle and a narrowing of net interest margin.

Target price is $12.75 Current Price is $12.04 Difference: $0.71
If BOQ meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

Deutsche Bank rates BOQ as Hold (3) -

First-half results were weaker than expected. Deutsche Bank notes management is upbeat about improving margins for the second half as well as a return to positive lending growth.

The broker is concerned that the bank continues to lead on price in most of its markets  and efforts to size the branch network appropriately are likely to drag on volumes.

Following modest reductions to earnings forecasts the broker observes the stock appears fairly valued and a Hold rating is retained. Target rises to $11.90 from $11.50.

Target price is $11.90 Current Price is $12.04 Difference: minus $0.14 (current price is over target).
If BOQ meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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 BOQ as Neutral (3) -

The first half disappointed Macquarie because of declining margins and poor trends in volume growth. While trends are expected to rebound in the second half, the broker remains unclear as to whether the bank can grow volumes without sacrificing margins.

The broker continues to believe that the front-to-back book price gap will be a drag on profitability in the medium term. As a result, the current valuation discount to peers is considered appropriate. Neutral rating and $12.50 target retained.

Target price is $12.50 Current Price is $12.04 Difference: $0.46
If BOQ meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

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

First half margins narrowed more than Morgan Stanley expected. However, given re-pricing benefits, management is expecting second half margins to return to 190 basis points.

The broker notes upside risk from further potential for re-pricing. Application volumes are up around 30% in the past six weeks and, if sustained, the broker estimates this implies 4% annualised growth in home loans in the second half.

Morgan Stanley also notes a strong capital position and attractive dividend yield. Target rises to $11.10 from $11.00. Equal-weight rating and In-Line industry view retained.

Target price is $11.10 Current Price is $12.04 Difference: minus $0.94 (current price is over target).
If BOQ 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 $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

Morgans rates BOQ as Hold (3) -

First half cash earnings were lower than Morgans forecast, with the miss largely because of lower revenue. The broker notes the current share price appears to be building upside from re-pricing which may not eventuate.

The broker observes the bank's slow mortgage fulfilment times means it cannot simply match competitors on price and expect to grow at system levels.

Morgans retains a Hold rating and raises the target to $11.20 from $11.00.

Target price is $11.20 Current Price is $12.04 Difference: minus $0.84 (current price is over target).
If BOQ meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

Ord Minnett rates BOQ as Upgrade to Hold from Lighten (3) -

First half earnings underwhelmed Ord Minnett but are believed to be a low point in the earnings trajectory,  with improved prospects for margins, volumes and costs.

The broker expects the bank to look for further cost savings with FY17 result and now believes the risk/reward balance is more appropriate.

Ord Minnett raises its recommendation to Hold from Lighten. Target is $11.00.

Target price is $11.00 Current Price is $12.04 Difference: minus $1.04 (current price is over target).
If BOQ meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

UBS rates BOQ as Sell (5) -

First half results disappointed UBS. The disappointment was mainly because of the top line, with revenue falling -5%.The broker believes the mortgage book faces material headwinds.

The bank highlighted a pick up in front book applications, which should help alleviate some of the pressure, but the broker believes it will be challenging to stabilise the declining proprietary mortgage book.

As a result, UBS suspects the bank will become increasingly reliant on brokers and the roll out of Virgin Money Australia. Sell rating retained. Target is lowered to $10.00 from $10.25.

Target price is $10.00 Current Price is $12.04 Difference: minus $2.04 (current price is over target).
If BOQ meets the UBS target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.71, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in August.

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

Ord Minnett rates CSL as Accumulate (2) -

Following a review of plasma collections and fractionation capacity, Ord Minnett believes some competitors will face structural challenges over the next couple of years.

The broker notes the Australian company has increased its lead in market share, benefiting from being better positioned than its rivals to take advantage of atypical conditions. Accumulate rating retained. Target is $130.

Target price is $130.00 Current Price is $125.49 Difference: $4.51
If CSL meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $128.14, suggesting upside of 1.7% (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: 0.6

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

Macquarie rates DCN as Outperform (1) -

Macquarie resumes coverage of the stock, with an Outperform rating and $2.90 target, following the completion of its $110m placement and retail offer.

The Mount Morgans gold development is now fully funded and on track for first gold in early 2018. The broker notes upside exists in both extensions to the planned underground and open pit positions as well as ongoing exploration.

Target price is $2.90 Current Price is $1.93 Difference: $0.97
If DCN meets the Macquarie target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 53.1% (ex-dividends)

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

Macquarie rates GMA as Outperform (1) -

The company is seeking approval to buy back up to 125m shares over a period of up to 12 months from the AGM on May 11.

Macquarie estimates, in the next 36 months, the company has ability to return $2.95 to shareholders via dividends and on the back of lower required regulatory capital.

Outperform rating retained. Target rises to $3.62 from $3.56.

Target price is $3.62 Current Price is $3.12 Difference: $0.5
If GMA meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

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 GMA as Neutral (3) -

The company is seeking approval for a buy-back. This raises questions for UBS about the "profitable  opportunities"  the company was pursuing less than two months ago.

The broker assumes special dividends continue as a preferred short-term method of sharing surplus capital.

UBS continues to believe that the operating outlook and growth challenges are more relevant issues. Neutral and $2.80 target retained.

Target price is $2.80 Current Price is $3.12 Difference: minus $0.32 (current price is over target).
If GMA meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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

Macquarie rates KAR as Outperform (1) -

Petrobras has withdrawn the appeal process for Bauna and Tartararuga Verde, effectively ending the sales process for the final negotiation rights. Despite the disappointment, Karoon's management believes the assets will be back on the market in the future.

Macquarie had not attributed any value to the deal. The termination removes the possibility of the transaction being tied up in courts and allows the parties to progress with a court-approved methodology.

Outperform and $2.40 target retained.

Target price is $2.40 Current Price is $1.50 Difference: $0.905
If KAR meets the Macquarie target it will return approximately 61% (excluding dividends, fees and charges).

Current consensus price target is $2.01, suggesting upside of 24.6% (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 KAR as Equal-weight (3) -

The exclusive negotiations with Petrobras to acquire the Bauna and Tartaruga Verde oil fields in Brazil have been terminated. Morgan Stanley observes this is a setback for the company, given the transformational nature of the assets.

The company is likely to participate in another sales process but now has to contend with other potential buyers. Morgan Stanley would not be surprised to witness the stock trade lower in the near term, given the uncertainty around the process.

Equal-weight and $1.67 target retained. Sector view In-Line.

Target price is $1.67 Current Price is $1.50 Difference: $0.175
If KAR meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.01, suggesting upside of 24.6% (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

Credit Suisse rates OGC as Outperform (1) -

The company has released its reserve and resource update, indicating that depleted reserves were partially offset by replacements in New Zealand. There is no change to the gold price assumptions.

The update excludes results from the extended Haile drilling, which will feed into the optimisation study during the June quarter when a maiden underground resource is expected.

Credit Suisse retains an Outperform rating and $4.20 target.

Target price is $4.20 Current Price is $3.83 Difference: $0.37
If OGC meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.60, suggesting upside of 20.2% (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: 0.4

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

UBS rates PMV as Buy (1) -

UBS retains a positive view on the stock following the 10.77% investment in Myer ((MYR)).The company has stated it does not currently intend to make a takeover offer and, should its intentions change, the broker envisages synergies of well over $25m in the form of revenues and gross profit.

While a potential takeover would be strongly accretive, UBS notes it would come with substantial risk. Department stores globally have face significant pressure from online competition like Amazon in recent years. UBS retains a Buy rating and $17 target.

Target price is $17.00 Current Price is $14.20 Difference: $2.8
If PMV meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $15.73, suggesting upside of 9.2% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates QBE as Outperform (1) -

The company has released the FY16 lenders mortgage insurance ASIC accounts. The insurer experienced an increased volume of claims and arrears from regional Queensland and Western Australia, contributing to a step up in its adjusted loss ratio to 22.6% from 7.5% in the prior year.

A stop-loss re-insurance contract was created with external parties in relation to claims on policies written in FY16 and FY17. Macquarie notes this is the most efficient way to manage the Australian regulatory capital requirements for mortgage insurance risks.

Outperform rating of $13.45 target retained. QBE is the broker's preference in the general insurance sector, supported by macro factors.

Target price is $13.45 Current Price is $12.93 Difference: $0.52
If QBE meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $13.17, suggesting upside of 1.8% (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: 0.3

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

Citi rates SEH as Buy (1) -

The company reported smaller losses than Citi had anticipated with the analysts pointing at lower SG&A and higher interest income. Estimates have thus been pushed higher.

The analysts do make a point of highlighting near-term earnings are not a large driver of valuation for this company. This investment story is all about ramping up production and cashflows from the Ordos basin, in their assessment. Buy/High Risk rating retained, target loses 1c to $0.16.

The analysts also mention there remains the risk that funding ongoing development may result in value dilution through an asset sell down or equity raising.

Target price is $0.16 Current Price is $0.09 Difference: $0.066
If SEH meets the Citi target it will return approximately 70% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates STO as Outperform (1) -

Macquarie believes the market has not factored in the improved performance in GLNG being experienced in the Roma fields.

Channel checks report improved gas flows to around 35TJ/d. As such, the broker believes production will be better than the market is expecting.

Macquarie has not witnessed significant changes to loading data from Gladstone throughout Cyclone Debbie and therefore does not believe this will affect expected exports.

Outperform retained. Target is $4.70.

Target price is $4.70 Current Price is $3.83 Difference: $0.87
If STO meets the Macquarie target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $4.63, suggesting upside of 21.5% (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: 0.5

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

Morgan Stanley rates WSA as Underweight (5) -

The Odysseus pre-feasibility study has been released. The project remains in Morgan Stanley's bull case scenario but is calculated to be negative at current prices. Moreover, the broker notes pre-feasibility estimates typically have 20-30% margin of error.

The broker acknowledges the stock as a high-quality nickel producer with an impeccable operating record, but there is significant downside on current nickel prices and currency, along with a step down of around 45% in production expected after 2021.

With this in mind, Morgan Stanley believes production growth would be challenging should nickel prices not recover significantly. Underweight rating, Attractive industry view and $2.05 target retained.

Target price is $2.05 Current Price is $2.31 Difference: minus $0.26 (current price is over target).
If WSA meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.52, suggesting upside of 8.8% (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

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

UBS updates its valuation to include the Odysseus pre-feasibility study. The broker notes potential for mine life to be extended towards 10 or more years.

The broker believes the market has previously provided no value for this project and, given how short the market is on the stock, there is growing risk to the upside.

UBS upgrades to Neutral from Sell, believing the risk/reward is more balanced. Target is raised to $2.58 from $2.38.

Target price is $2.58 Current Price is $2.31 Difference: $0.27
If WSA meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.52, suggesting upside of 8.8% (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