Australian Broker Call

Morgan Stanley rates ACX as Overweight (1) -

Morgan Stanley must have been receiving requests for more info/insights from its clients about Aconex. The share price is well down from its high, but has been creeping higher in recent weeks.

Bottom line is the analysts remain bullish, seeing healthy growth numbers in clients using the SaaS platform, but cautious in extrapolating too much in the short term. FX has proved a headwind, but is already accounted for, in the analysts' opinion.

They highlight Aconex's platform (ex-Conject) has hit the 5 million user milestone, which is up circa 18% yoy. Activity levels and use of the product are up 28-30% yoy. In the analysts' view, these numbers are suggesting that network growth remains strong.

In addition, the company has been reporting higher win rates as a result of offering a more complete product set that incorporates budgeting and payments, according to Morgan Stanley. Overweight rating retained, alongside an In-Line industry view. Price target remains $4. Estimates remain above market consensus.

Target price is $4.00 Current Price is $3.92 Difference: $0.08
If ACX meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.97, suggesting upside of 0.6% (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

UBS rates AMP as Neutral (3) -

UBS believes a stronger March quarter across both the domestic equity and bond markets will provide a solid start for the year for Australian wealth managers.  This has driven small upgrades to earnings per share across the sector.

Nevertheless, the broker is cautious about the medium-term outlook as any pulling forward of net fund flows is likely to lead to slower growth in assets under management in subsequent periods.

Also, scrutiny of regulatory fees could mean higher fee pressure may not subside post the July 1, 2017 MySuper transition deadline. Neutral rating retained. Target rises to $5.30 from $5.15.

Target price is $5.30 Current Price is $5.20 Difference: $0.1
If AMP meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $5.57, suggesting upside of 6.6% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates CKF as Neutral (3) -

The company will acquire 16 KFC stores in the Netherlands for around $87.9m, which includes corporate costs to set the base for expansion going forward. The company has a development agreement to roll out more than 20 new KFC restaurants in the Netherlands by 2021.

The acquisition will be funded via a $54.5m equity raising and $35.1m in debt. Management is guiding to 5.4% growth at the EBITDA level for the remainder of the second half.

This implies a  downgrade to UBS FY17 estimates for earnings per share, and forecasts are lowered by -9% for FY17 and -5% for FY18 to also include the Netherlands acquisition.

The broker retains a Neutral rating and reduces the target to $5.60 from $5.75.

Target price is $5.60 Current Price is $5.24 Difference: $0.36
If CKF meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in April.

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 DXS as Overweight (1) -

Morgan Stanley believes the company is on track to deliver its targeted 3-4% industrial growth in FY17. Improvement is being driven by recent revisions to reporting that results in greater accountability for the industrial performance.

The company has taken a stronger focus on customer relationships and secured a greater number of direct leases with corporates. Meanwhile, returns from recent acquisitions appear attractive to the broker.

Overweight rating,  $9.65 target and Cautious industry view retained.

Target price is $9.65 Current Price is $10.04 Difference: minus $0.39 (current price is over target).
If DXS meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.19, suggesting downside of -8.7% (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 EVT as Sell (5) -

Citi analysts have undertaken a detailed analysis of movie theaters throughout Australia. Smaller chain Reading has adopted a discounting strategy which is unlikely to have a noticeable impact on the larger players, finds Citi, mostly because Reading's market share is only around 7%.

Hoyts, however, is a much larger player, representing around 16% market share and its refurbishing strategy is believed to be of significance for both Event Hospitality and for Village Roadshow, together operating some 35% of all theatres.

Citi analysts, already on the cautious side, believe their analysis highlights rising risks for the sector. EPS accretive acquisitions are the biggest risk to their Sell rating, the analysts acknowledge. Price target remains $10.95.

Target price is $10.95 Current Price is $13.10 Difference: minus $2.15 (current price is over target).
If EVT meets the Citi target it will return approximately minus 16% (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 GTY as Outperform (1) -

The company will acquire Sundown Motor Resort in Canberra for $17m. This is the company's second large park acquisition for FY17  following the first half acquisition in Rockhampton.

Macquarie notes the pace of acquisitions has slowed across the industry over the past year, probably because of continued press speculation regarding offshore buyers of parks.

Outperform rating and $2.19 target retained..

Target price is $2.19 Current Price is $2.15 Difference: $0.04
If GTY meets the Macquarie target it will return approximately 2% (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 HLO as Hold (3) -

The company has upgraded FY17 EBITDA guidance to $52-55m. Deutsche Bank's forecasts w ere already at the top end of this range.

The broker notes management initiatives and cost reductions post the merger with AOT have more than offset the difficult industry conditions. Hold retained on valuation grounds.  Target is $4.60.

Target price is $4.60 Current Price is $4.00 Difference: $0.6
If HLO meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.69, suggesting upside of 17.6% (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

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

Morgan Stanley believes the company is uniquely placed to capture cost benefits and price tailwinds. The analysis shows margins of 17% in FY20 are achievable.

Organic capital generation is strong and the unwinding of the New Zealand tax losses and continuing quota benefits from Berkshire provide for options on capital. Adjusting for any Asian investment, capacity exists for over $500m in buy-backs, the broker observes.

Rating is upgraded to Overweight from Equal-weight. Target is raised to $6.80 from $6.30. Industry view is In-Line.

Target price is $6.80 Current Price is $5.98 Difference: $0.82
If IAG meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 0.4% (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

Ord Minnett rates IOF as Lighten (4) -

The board has provided Cromwell ((CMW)) access to non-exclusive due diligence in response to its acquisition proposal.

Ord Minnett believes this is the right decision, recognising the time has come to test the capital because the price is right and it is all cash.

While the equity sources for the bid are still unclear, the broker believes this is a second order issue because there is no scrip.

Lighten retained. Target is $4.75.

Target price is $4.75 Current Price is $4.78 Difference: minus $0.03 (current price is over target).
If IOF meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.57, suggesting downside of -5.3% (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 MIN as Hold (3) -

Neometals ((NMT)), a minority stakeholder in the Mount Marion project, intends to sell its 13.8% stake for US$96m.

Deutsche Bank considers this a positive for Mineral Resources which, although previously indicating an intention to sell down its stake, may still choose to purchase its 6.9% entitlement.

In the event Neometals ceases to be a shareholder in the project, Mineral Resources will automatically acquire its share of the offtake agreement for 51% of Mount Marion production.

Hold retained on valuation. Target is $10.80.

Target price is $10.80 Current Price is $11.10 Difference: minus $0.3 (current price is over target).
If MIN meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.82, suggesting upside of 12.6% (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

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

Morgan Stanley expects the company can create valuation upside through the lithium operations, while mining services should reach a trough in FY17.

The company has no debt and generates significant amounts of cash which can either be returned to shareholders or deployed for growth. The broker currently forecasts a 50% pay-out ratio for dividends in future periods.

Morgan Stanley upgrades to Overweight from Equal-weight and raises the target to $13.15 from $11.70. Industry view is In-Line.

Target price is $13.15 Current Price is $11.10 Difference: $2.05
If MIN meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $12.82, suggesting upside of 12.6% (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

Macquarie rates NMT as Outperform (1) -

The company intends to sell its 13.8% stake in the Mount Marion lithium project. The joint-venture partners have a month in which to exercise their pre-emptive right to acquire the stake. The asking price of US$96m is in line with Macquarie's valuation.

Macquarie assumes the sale goes ahead and has factored this into forecasts. Being the only near-term source of earnings, selling out of Mount Marion has an impact on earnings estimates and the broker reduces the target to $0.40 from $0.43. Outperform retained.

It appears unlikely to the broker that the joint-venture partners would want a third-party entering the project while trying to negotiate on price would only erode the value of their own stakes.

Target price is $0.40 Current Price is $0.34 Difference: $0.065
If NMT meets the Macquarie target it will return approximately 19% (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

Ord Minnett rates RIO as Accumulate (2) -

Ord Minnett has raised its forecast for coking coal prices by 7-12% and forecast for thermal coal by 14-17% over 2017-18. This has lifted the broker's near-term earnings outlook for the miners, helping bolster cash flow and balance sheets.

Accumulate rating retained. Target is reduced to $73 from $74.

Target price is $73.00 Current Price is $60.01 Difference: $12.99
If RIO meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $71.76, suggesting upside of 18.7% (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: 0.8

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

Citi rates SEK as Neutral (3) -

Zhaopin will become a privately-held company if the agreement with Hillhouse Capital and FountainVest  goes ahead to acquire all the outstanding shares. Seek will retain a 61% stake.

Consideration is in the form of a special dividend and a further cash payment bringing the total to US$18.20 per ADS.

 While Citi envisages no real benefit in having the business privately owned instead of listed, the transaction has two positive features.

Zhaopin becomes nearly 40% owned by local Chinese companies as opposed to being a foreign owned business and the special dividend payment will mean a portion of the cash balance is transferred back to Seek in Australia.

Citi retains a Neutral rating and $16.20 target.

Target price is $16.20 Current Price is $16.33 Difference: minus $0.13 (current price is over target).
If SEK meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.05, suggesting downside of -1.1% (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

Macquarie rates SEK as Outperform (1) -

The company has entered into an agreement with Hillhouse Capital and FountainVest to acquire all outstanding shares in Zhaopin for US$18.20 per ADS, the equivalent of two ordinary shares in Zhaopin.

This will result in the privatisation of Zhaopin. The company's consideration includes a special dividend of between US$19.1-92.2m, with the final amount dependent on the amount of funds legally available to distribute.

The company would, as previously flagged, retain a controlling interest in the newly privatised Zhaopin if the deal proceeds.  Macquarie notes this is one of the company's most attractive and fastest-growing assets.

The broker remains positive on the outlook for the company, with the latest development  being a small uptick in the offer price, the special dividend and some direction on timing. Outperform and $16.50 target retained.

Target price is $16.50 Current Price is $16.33 Difference: $0.17
If SEK meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $16.05, suggesting downside of -1.1% (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

Credit Suisse rates SGM as Underperform (5) -

Credit Suisse expects the company will have benefited from the rise in ferrous and non-ferrous prices.  Sims, however, has increasingly positioned its US business to sell into the export market and capture the arbitrage between US domestic scrap prices and export prices.

The broker advises that an inversion of the historical price relationship has recently occurred and this does not support the company's business model.

Credit Suisse expects the scrap price to fall from this point, which will also be negative for volumes and inventory management. Underperform and $10.50 target retained.

Target price is $10.50 Current Price is $12.47 Difference: minus $1.97 (current price is over target).
If SGM meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.19, suggesting upside of 4.4% (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

Macquarie rates SKI as Outperform (1) -

The company has confirmed it is bidding as part of a consortium for Endeavour Energy. Macquarie observes  this, like other assets in the government sale process, will go for a hefty price and has strong fundamentals.

Any acquisition will be modest for the company to the extent that the government will have an ongoing 49.6% interest.  Macquarie retains a $2.75 target and Outperform rating.

Target price is $2.75 Current Price is $2.34 Difference: $0.41
If SKI meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $2.50, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in December.

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 TRS as Neutral (3) -

The tough market conditions and soft sales performance flagged at the start of the second half have continued, Macquarie observes. The company's trading update has led to material downgrades to estimates for the full year.

The broker notes that the continued inability to generate sustainable growth in like-for-like sales has crunched overall profitability. No final dividend will be declared.

While the company remains highly leveraged to any improvement in the sales trajectory, the broker wants some evidence that new merchandising initiatives are gaining traction before considering the stock is a turnaround opportunity.

Neutral retained. Target is reduced to $6.00 from $8.50.

Target price is $6.00 Current Price is $5.11 Difference: $0.89
If TRS meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.70, suggesting upside of 15.2% (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

Morgan Stanley rates TRS as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley observes a strong focus on variety products that did not sell well has been exacerbated by weak consumer environment and results in a sharp downgrade to FY17 net profit forecasts.

The broker believes merchandising risk remains high and this poses a risk for the short term, lowering confidence in the business turnaround. Rating is downgraded to Equal-weight from Overweight. Target is reduced to $5.35 from $9.15.

While there is a strategy in place to re-balance the sales mix towards everyday value, with long product lead times the broker does not expect this to be fully implemented until August-September. This raises the risk of disappointment for the remainder of FY17. Industry view is In-Line.

Target price is $5.35 Current Price is $5.11 Difference: $0.24
If TRS meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.70, suggesting upside of 15.2% (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 TRS as Downgrade to Neutral from Buy (3) -

The company has reported a drop in like-for-like sales growth in the third quarter, down -4% as the impact of the move to variety  from "Everyday Value" worsened.

UBS reduces forecast for earnings per share by -39-45% from FY18 onwards and downgrades to Neutral from Buy. The broker had maintained a Buy rating predicated on the expectation of returning to positive sales growth in the second half.  Target is reduced to $5.75 from $11.15.

The broker notes the weak performance in foot traffic and sales has overwhelmed any operational improvements being made from the supply chain cost reductions.

UBS finds it difficult to separate the macro and competitive issues in Western Australia and the challenging external environment from the impact of merchandising decisions and supply chain disruptions.

Target price is $5.75 Current Price is $5.11 Difference: $0.64
If TRS meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $5.70, suggesting upside of 15.2% (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

Citi rates VRL as Neutral (3) -

Citi analysts have undertaken a detailed analysis of movie theaters throughout Australia. Smaller chain Reading has adopted a discounting strategy which is unlikely to have a noticeable impact on the larger players, finds Citi, mostly because Reading's market share is only around 7%.

Hoyts, however, is a much larger player, representing around 16% market share and its refurbishing strategy is believed to be of significance for both Event Hospitality and for Village Roadshow, together operating some 35% of all theatres.

Citi analysts, already on the cautious side, believe their analysis highlights rising risks for the sector. They note the shares have rallied as investors are anticipating asset sales, but nevertheless maintain risks are increasing around the Cinema Exhibition, Theme Park and Film Distribution segments of the business.

Neutral rating and $3.65 price target left untouched.

Target price is $3.65 Current Price is $4.03 Difference: minus $0.38 (current price is over target).
If VRL meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.98, suggesting downside of -1.5% (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

Ord Minnett rates WHC as Accumulate (2) -

Ord Minnett has raised its forecast for coking coal prices by 7-12% and forecast for thermal coal by 14-17% over 2017-18.This has lifted the broker's near-term earnings outlook for the miners, helping bolster cash flow and and balance sheets.

Accumulate retained. Target is raised to $3.50 from $3.20, although after the near 20% spike in the stock in the past month the broker considers it is approaching its fair value measure.

Target price is $3.50 Current Price is $3.29 Difference: $0.21
If WHC meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.20, suggesting downside of -4.2% (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