Australian Broker Call

Credit Suisse rates AGL as Downgrade to Neutral from Outperform (3) -

Given a substantial amount of new wind and solar, either under construction or announced, plus the growing threat of intervention to relieve pressure on the gas market, Credit Suisse suspects the winter of 2017 could well represent the peak in terms of gas and electricity market tightness.

 With downside risks increasing and a lack of positive catalysts, the broker downgrades the stock to Neutral from Outperform, although concedes the prospect of earnings and valuation upside remain. Target is raised to $28 from $26.

Target price is $28.00 Current Price is $27.13 Difference: $0.87
If AGL meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $27.16, suggesting upside of 0.1% (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

Credit Suisse rates ALL as Neutral (3) -

Credit Suisse upgrades FY19 and FY20 forecasts for net profit. The broker has the view that the astounding performance of Dragon games in Queensland may result in exceptional revenue for Aristocrat in the North America as well as secure annuity revenue in Australia.

Dragon Cash, the stand-alone version, will be released in New South Wales and North America around September/October, in time to affect FY18 financials. Dragon Cash has just been released in Victoria.

Credit Suisse retains a Neutral rating and raises the target to $20.50 from $17.30.

Target price is $20.50 Current Price is $19.75 Difference: $0.75
If ALL meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $19.95, suggesting upside of 1.0% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates BDR as Outperform (1) -

The company has completed its feasibility study into the upgrading of the plant at Tucano. Completion is expected in mid 2018.

Macquarie tempers production forecasts  for FY17, which reduces estimates for earnings by -16%. The broker observes local costs, driven by the appreciating Brazilian currency, has put pressure on the company's share price.

Nevertheless, the planned upgrade should deliver a marked improvement in the production outlook.  Outperform retained. Target is raised to $0.40 from $0.30.

Target price is $0.40 Current Price is $0.24 Difference: $0.165
If BDR meets the Macquarie target it will return approximately 70% (excluding dividends, fees and charges).

Current consensus price target is $0.31, suggesting upside of 30.5% (ex-dividends)

The company's fiscal year ends in December.

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 BHP as Buy (1) -

Citi analysts have taken the view that current shareholder activism can potentially lead to a break-up of BHP in smaller parts. The first obvious departure would be the petroleum division, in the analysts' view, in its entirety.

Citi sees BHP's dilemma as the choice between unlocking value and growing value. The company will need to demonstrate it can deliver on the latter option, say the analysts.

As the shares are seen trading at a discount, the Buy rating remains in place. Target $28.50 (unchanged).

Target price is $28.50 Current Price is $23.75 Difference: $4.75
If BHP meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $27.65, suggesting upside of 16.4% (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: 0.5

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

Credit Suisse rates BSL as Outperform (1) -

Credit Suisse has undertaken a review of steel spread assumptions and this confirms second half expectations. The broker believes FY17 guidance  is achievable.

Outperform rating and $13.30 target retained.

Target price is $13.30 Current Price is $11.45 Difference: $1.85
If BSL meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $13.63, suggesting upside of 19.0% (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 CHC as Resume coverage with Outperform (1) -

Macquarie resumes coverage with a Outperform rating and $6.03 target. The company has completed a $275m equity raising to partly fund $333m in co-investments and has announced an earnings upgrade.

Macquarie observes the company has a track record of sourcing capital and finding opportunities in direct real estate. The valuation backdrop is expected to remain supportive in the near term, with a upside risk to earnings from further performance fees.

Target price is $6.03 Current Price is $5.77 Difference: $0.26
If CHC meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $5.49, suggesting downside of -4.9% (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 DMP as Overweight (1) -

Morgan Stanley met with management to discuss the ongoing investigation of franchisee underpayment and enterprise bargaining negotiations.

The company's investigation of underpayment to staff by franchisees is ongoing. The company has indicated there is no negative correlation from the bad press received in terms of trading.

Franchisee demand in Japan remains solid and, as the company continues to sell down corporate stores, the broker expects this to contribute to a large part of the profit from the gain on the sale of corporate stores.

Price target is $80. Overweight. Sector view is In-Line.

Target price is $80.00 Current Price is $64.26 Difference: $15.74
If DMP meets the Morgan Stanley target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $70.40, suggesting upside of 9.5% (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

Deutsche Bank rates FLT as Hold (3) -

International departures rose 6.9% in March having risen 7.0% last March. But Easter was in March this year and April last year. The broker estimates a 12-month growth rate of 4.7%.

Departure volumes remain healthy, the broker suggests, but this is being driven by falls in airfares, which flow through to weaker growth and margins for Flight Centre. The company is gaining market share and cost controls will soon flow through, but the broker believes an adjustment in the business model is needed for a lower price environment.

Hold and $31 target retained.

Target price is $31.00 Current Price is $35.35 Difference: minus $4.35 (current price is over target).
If FLT 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 $30.74, suggesting downside of -13.0% (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

Credit Suisse rates FMG as Outperform (1) -

Credit Suisse adjusts second quarter iron ore price estimates to US$65/t from US$95/t. The broker makes no changes to forecasts beyond the second quarter, continuing to expect US$70/t in the September quarter and US$55/t in the December quarter, where cyclical de-stocking typically contributes to lower prices.

The broker continues to believe the end of 2017 will be the start of a period of oversupply. Outperform rating retained. Target is lowered to $6.50 from $7.35.

Target price is $6.50 Current Price is $4.74 Difference: $1.76
If FMG meets the Credit Suisse target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $6.34, suggesting upside of 33.8% (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: 0.3

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

Morgan Stanley rates ILU as Overweight (1) -

The strength of the zircon market has surprised Morgan Stanley and leads to an upgrade to 2017 sales and production forecasts. The broker now forecasts production around 7% above guidance.

Gearing is expected to reduce to 15% by 2019 from 46% in 2016. Higher sales are also likely to allow the company to generate higher cash flows. Overweight rating and Attractive industry view retained. Target is raised to $9.30 from $8.25.

Target price is $9.30 Current Price is $8.43 Difference: $0.87
If ILU meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.84, suggesting downside of -7.0% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates JHX as Hold (3) -

Ord Minnett expects underlying net profit of $253m, towards the top end of guidance, at the FY17 results on May 18. The broker expects the focus to be on volume growth in the fourth quarter as well as expectations for margins in the North American business.

A strong finish is expected to North American fibre cement volume growth in FY17. The broker expects the company will continue to outperform in FY18.  Hold rating retained. Target is raised to $19.25 from $18.65.

Target price is $19.25 Current Price is $21.73 Difference: minus $2.48 (current price is over target).
If JHX meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.26, suggesting downside of -2.2% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates JIN as Add (1) -

The company has extended all its current re-seller licenses with Tatts ((TTS)) for a further five years.  Additionally, Tatts has purchased 6.6m shares in the company and been granted a 12-month option to acquire a further 3.47m shares at the same cost of $2.37 a share.

 Morgans expects the option to be exercised in FY18  and after this Tatts will become a 15% shareholder. Morgans continues to see upside in the share price and retains a Add rating. Target is raised to $3.19 from $2.16.

Target price is $3.19 Current Price is $2.75 Difference: $0.44
If JIN meets the Morgans target it will return approximately 16% (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 MYO as Buy (1) -

The broker notes that while MYOB's practice of capitalising rather than expensing R&D is within the rules, it gives investors the impression earnings are inflated. The broker has run the numbers were R&D to be expensed, and finds that while PE rises, it remains considerably below those of online media names. 

MYOB has a similar earnings growth profile to online media, the broker suggests, hence Buy and $4.40 target retained.

Target price is $4.40 Current Price is $3.62 Difference: $0.78
If MYO meets the Deutsche Bank target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting upside of 11.6% (ex-dividends)

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

Citi rates NCM as Neutral (3) -

The operations at Cadia East had been damaged following an earthquake and Citi analysts believed there would be a longer term the impact but the company's latest update suggests otherwise.

Newcrest thinks the operation will be able to continue as per usual from next year onwards. Citi analysts have recalibrated their forecasts. Neutral rating retained.

Target price is $24.00 Current Price is $20.68 Difference: $3.32
If NCM meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $19.68, suggesting downside of -4.8% (ex-dividends)

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

Credit Suisse rates NCM as Underperform (5) -

The company's update on Cadia suggests faster restoration and no significant impact on production beyond FY17, although Credit Suisse believes that  guidance of 650-750,000 ounces for FY18, if it is not a downgrade, should have been above the FY17 initial guidance of 730-820,000 ounces.

The broker suspects the FY18 in figure is deliberately conservative and has a high probability of been upwardly revised. Underperform rating and $18.20 target retained.

Target price is $18.20 Current Price is $20.68 Difference: minus $2.48 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.68, suggesting downside of -4.8% (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

Macquarie rates NCM as Neutral (3) -

The company has indicated that no permanent damage has occurred to the underground infrastructure at Cadia as a result of the earthquake. The mine is expected to produce 650-750,000 ounces in FY18 and the cost of the rehabilitation work is estimated at US$25m.

Macquarie's forecasts are at the bottom end of guidance.  The feasibility study will be reviewed once operations have normalised. Neutral and $22 target retained.

Target price is $22.00 Current Price is $20.68 Difference: $1.32
If NCM meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $19.68, suggesting downside of -4.8% (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

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

The company expects Cadia to be re-started in the first quarter of FY18.This is consistent with Morgan Stanley's expectations.

The broker retains some concerns about ore consolidation and stress-induced damage to the ground support, and will watch for commentary regarding these issues as mining resumes.

Equal-weight rating,  Attractive industry view and $21.50 target retained.

Target price is $21.50 Current Price is $20.68 Difference: $0.82
If NCM meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $19.68, suggesting downside of -4.8% (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

Morgans rates NCM as Hold (3) -

The company expects its Cadia operation to be operational in the first quarter of FY18. The update on the seismic event did not address all questions and the broker has some lingering concerns.

Remediation and upgrade costs of US$25m are considered well below the level previously expected. The broker retains a Hold rating. Target is reduced to $21.48 from $24.42.

Target price is $21.48 Current Price is $20.68 Difference: $0.8
If NCM meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $19.68, suggesting downside of -4.8% (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

UBS rates NCM as Sell (5) -

The company has found no permanent damage to the Cadia East underground mine.  Remediation work is expected to be completed in the September quarter.

UBS expects a return to nameplate production in late FY18. The company has provided FY18 production guidance of 650-750,000 ounces, although the broker notes this includes the use of stockpiles and some ore from Ridgeway.

The broker expects the market will b relieved that the risk of the medium-long-term outlook being compromised has now reduced significantly. Sell rating retained. Target is $12.68.

Target price is $12.68 Current Price is $20.68 Difference: minus $8 (current price is over target).
If NCM meets the UBS target it will return approximately minus 39% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $19.68, suggesting downside of -4.8% (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

Credit Suisse rates ORG as Downgrade to Neutral from Outperform (3) -

Credit Suisse believes winter 2017 is potentially the peak for gas and electricity market tightness. Hence, Origin's rating is downgraded to Neutral from Outperform, as a substantial amount of new wind and solar is either under construction or being announced, and there is a growing threat of intervention to relieve pressure on the gas market.

The broker estimates that combined risks to  the company's gas and electricity portfolio from the recently announced domestic gas security mechanism is -11% of FY19 EBITDA and $0.67 of the DCF valuation.

The broker increases its modelled FY20 wholesale electricity prices, which drives a 4.8% increase to FY18 net profit estimates an increase in the target to $8.10 from $7.00.

Target price is $8.10 Current Price is $7.71 Difference: $0.39
If ORG meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $7.58, suggesting downside of -1.7% (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 QUB as Downgrade to Hold from Add (3) -

Morgan found the company's FY17 earnings guidance ambiguous amid expectations for underlying earnings growth in both operating divisions. The company continues to expect initial tenants for Moorebank to be announced within the  6-9 months target.

The broker observes Patrick has not followed  DP World in putting an infrastructure levy increase at Botany and Melbourne, nor has its rent view at Port of Melbourne been finalised. The positive news on volumes is that Patrick has agreed contract extensions with its two largest customers.

Morgans raises the target to $2.74 from $2.65. As the share price has risen and is now trading in line with the revised target the broker downgrades to Hold from Add.

Target price is $2.74 Current Price is $2.68 Difference: $0.06
If QUB meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.68, suggesting downside of -0.1% (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

Credit Suisse rates RWH as Neutral (3) -

March quarter results were in line with expectations, with leasing continuing to post growth and sales revenue declining. Credit Suisse observes the company has largely cycled the negative impact from the loss of resource/energy sector work, although in FY18 it will be cycling someone on-off benefits.

The broker believes there is potential downside earnings risk, with the positive swing factor being redeployment/sale of idle assets. Neutral retained. Target is reduced to $1.30 from $1.45.

Target price is $1.30 Current Price is $1.35 Difference: minus $0.05 (current price is over target).
If RWH meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.48, suggesting upside of 9.3% (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

Morgan Stanley rates SUL as Overweight (1) -

Morgan Stanley has recently met with the management to discuss the impact from the pending arrival of Amazon and progress on the leisure turnaround.

The company's analysis suggests that 20% of its top 100 lines are not available on Amazon and it is cheaper on 36% of comparable products and more expensive on 45%. The key question for the Australian retailer is whether third-party re-sellers on the Amazon website will sell products at the same prices they do in the US.

The company has indicated it has an extra 300 basis points of gross margin, which can be reinvested to combat Amazon's arrival and allow it to retain long-term margin targets. Management expects a solid year of growth in FY18.

An Overweight rating and In-Line industry view are retained. Target is $12.00.

Target price is $12.00 Current Price is $8.15 Difference: $3.85
If SUL meets the Morgan Stanley target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $11.11, suggesting upside of 36.3% (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 TOX as Equal-weight (3) -

After the company's site tour of Daniels and Tox Free incinerators and facilities Morgan Stanley observes Daniels management are empowered to drive continued growth, by up-selling innovative solutions and total waste management.

The broker forecasts a slowing from the 12% growth rate over the past two years but any significant contract win from state health departments represents upside to estimates.

Equal-weight rating retained. Target is $2.25. Industry view: In-line.

Target price is $2.25 Current Price is $2.39 Difference: minus $0.14 (current price is over target).
If TOX 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 $2.30, suggesting downside of -3.8% (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

Ord Minnett rates TTS as Lighten (4) -

The company has responded to Lottoland's 7% purchase of a stake in Jumbo Interactive ((JIN)) with a new $15.7m purchase of shares. A new five-year contract was signed which will entail a breach if Jumbo enters into a distribution agreement with competitors.

Recently,  Lottoland took the stake in Jumbo, knowing Tatts had not re-signed selling agreements. Lighten rating retained. Target is $4.10.

Target price is $4.10 Current Price is $4.34 Difference: minus $0.24 (current price is over target).
If TTS meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.28, suggesting downside of -1.5% (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

Deutsche Bank rates XRO as Hold (3) -

While Xero's full year revenue growth was in line with the broker's forecast, a strong second half meant margins are improving faster than anticipated and cash burn was materially reduced. The broker continues to see positive earnings from FY18 and positive cash flow from FY19.

But on the share price reaction to the result, the broker retains Hold. Target rises to NZ$24.10 from NZ$18.20.

Current Price is $21.62. Target price not assessed.

Current consensus price target is $17.50, suggesting downside of -19.1% (ex-dividends)

The company's fiscal year ends in March.

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