Australian Broker Call

UBS rates BAP as Neutral (3) -

New Zealand's Hellaby Holdings has rejected the company's takeover offer at NZD3.30 cash per share. The independent expert valued it at NZD3.60-4.12 per share.

UBS expects Bapcor will either increase its offer price or walk away from the transaction. The latter is considered unlikely at this point, given the company has already raised equity to pursue the transaction. The broker retains a Neutral rating and $6.30 target.

Target price is $6.30 Current Price is $5.03 Difference: $1.27
If BAP meets the UBS target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $6.50, suggesting upside of 30.0% (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

Deutsche Bank rates CKF as Buy (1) -

The company has acquired 11 KFC stores in Germany. Deutsche Bank considers this to be minor positive given the accretive nature of the deal and potential for further opportunities in a new growth market.

The deal has the potential to cause a re-pricing of the growth profile, in the brokers opinion, as there have been some concerns regarding the company's ability to expand.

Deutsche Bank increases FY17 and FY18 forecasts for earnings per share by 1% in both years. Target rises to $5.20 from $4.85 and Buy rating retained.

Target price is $5.20 Current Price is $4.99 Difference: $0.21
If CKF meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

The company's fiscal year ends in April.

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 CKF as Neutral (3) -

The company will acquire 11 KFC restaurants in Germany for $18.4m, which provide a springboard for growth into other parts of Europe.

Nevertheless, UBS believes the weakening macro environment in Western Australia could potentially affect FY17 like-for- like sales growth.

Neutral rating retained. Target slips to $4.75 from $4.90.

Target price is $4.75 Current Price is $4.99 Difference: minus $0.24 (current price is over target).
If CKF meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in April.

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 GNC as Neutral (3) -

Ahead of the FY16 results, Macquarie lifts FY17-18 earnings per share estimates by 36% and 23%, respectively, to factor in a strong rebound in volumes and margins from an above-average crop year.

While the potential for a bumper crop in FY17 is likely to help the company recover in the short term Macquarie is aware that this could mask the structural challenges that the company still faces.

Neutral rating and $8.90 target retained.

Target price is $8.90 Current Price is $8.30 Difference: $0.6
If GNC meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.94, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

Macquarie rates GXY as Underperform (5) -

Progress at Mt Cattlin continued through the September quarter, although at a slower pace than Macquarie had expected. The new debt facility appears sufficient to the broker to be able to manage near-term working capital.

Still, achieving commercial production as quickly as possible is key to securing longer-term funding, in Macquaries view. Underperform rating maintained. Target drops to 30c from 40c.

Target price is $0.30 Current Price is $0.35 Difference: minus $0.05 (current price is over target).
If GXY meets the Macquarie target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -1.0

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

Morgans rates IDT as Add (1) -

The company has sold its clinical trial business and will receive a minimum $14m in consideration in a staged transaction.

This removes any funding pressure and funds will be re-directed to generic drug operations, which Morgans construes positively.

The term catalyst is the launch of temozomide, which the broker believes should be positive for the share price. Morgans retains an Add rating and 38c target.

Target price is $0.38 Current Price is $0.23 Difference: $0.155
If IDT meets the Morgans target it will return approximately 69% (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

Morgans rates MDL as Add (1) -

Grande Cote was EBITDA positive at around 75% of nameplate capacity in the September quarter, with a dredge path cross over and plant availability limiting throughput.

Morgans lowers 2016 production forecasts and now projects nameplate capacity from mid 2017.

An Add rating is maintained. Target falls to 92c from 96c.

Target price is $0.92 Current Price is $0.35 Difference: $0.57
If MDL meets the Morgans target it will return approximately 163% (excluding dividends, fees and charges).

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: 1.0

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

Macquarie rates MIN as Neutral (3) -

Mineral Resources shipped 3.6m tonnes of iron ore during the September quarter, with the run rate well ahead of Macquarie's forecast and reflecting both high iron ore prices and efforts to get in ahead of the cyclone season.

Mount Marion lithium is currently being prepared for the commencement of exports. Neutral retained. Target rises to $11.70 from $10.59.

Target price is $11.70 Current Price is $11.56 Difference: $0.14
If MIN meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.40, suggesting downside of -0.7% (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

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

Mineral Resources' Sep Q report showed iron ore production ahead of guidance run-rate, and noted the Mt Marion lithium project is on plan. Drilling is underway at Wodgina. The broker sees upside if Wodgina becomes a lithium mine and processing hub.

The conversion of Mt Marion to LNG from diesel is underway and the broker also sees this as offering upside if LNG can be supplied to the company's other remote mines. Equal-weight and $11.10 target retained. Industry view: In Line.

Target price is $11.10 Current Price is $11.56 Difference: minus $0.46 (current price is over target).
If MIN 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 $11.40, suggesting downside of -0.7% (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 MML as Neutral (3) -

Citi analysts find Co-O is operationally stable while management guides towards improvement in both ounces and costs in 2017. Neutral rating retained, as well as the 70c price target.

Target price is $0.70 Current Price is $0.62 Difference: $0.08
If MML meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $0.65, suggesting upside of 5.7% (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: 0.0

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

Morgan Stanley rates ORI as Underweight (5) -

Orica shares have been re-rated over the last six months on what the broker suggests is a logical argument of rising coal, iron ore and gold prices translating into recovering demand for explosives.

However this argument fails to acknowledge, the broker warns,  that ammonium nitrate prices are continuing to fall.

The upcoming earnings report is unlikely to hold any surprises, the broker suggests, but FY17 may be a different matter as costs rise. Underweight retained. Target falls to $11.20 from $11.32. Industry view: Cautious.

Target price is $11.20 Current Price is $16.15 Difference: minus $4.95 (current price is over target).
If ORI meets the Morgan Stanley target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.84, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.0

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

Macquarie rates PRT as Neutral (3) -

Advertising revenue in the first quarter grew 16% in the company's three aggregated markets compared with flat regional markets over the same period.

The company expects second-half growth will be softer as national advertisers tend to pull forward budgets in an Olympic year. First half guidance is for core net profit of $15.3-16.3m, ahead of Macquarie's estimates. The broker revises forecasts to be in line with guidance.

Neutral rating retained. Target rises to 35c from 31c.

Target price is $0.35 Current Price is $0.28 Difference: $0.075
If PRT meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $0.37, suggesting upside of 25.4% (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 QAN as Outperform (1) -

Qantas reported a 3% revenue decline to $3.98bn in the September quarter. Revenue per available seat kilometre (RASK) was down 5.5%.

In the second half Credit Suisse expects domestic RASK to improve with a stabilising demand environment and less weakness from routes exposed to mineral resource weakness. 

Outperform retained. Target falls to $4.40 from $4.60.

Target price is $4.40 Current Price is $2.99 Difference: $1.41
If QAN meets the Credit Suisse target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $4.31, suggesting upside of 46.2% (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

Deutsche Bank rates S32 as Hold (3) -

The company has become more bullish on demand as 2016 has progressed. South32 expects tightness to persist in metallurgical coal and manganese markets.

Regarding its IIawarra mine, the company has informed analysts that ground stability issues are due to mining the first longwall, and should ease as the mine moves to the second wall in early 2017.

Contracts for the “lost” 500,000 tonnes have been deferred or canceled as per force majeure. Deutsche Bank retains a Hold rating and $2.10 target.

Target price is $2.10 Current Price is $2.63 Difference: minus $0.53 (current price is over target).
If S32 meets the Deutsche Bank target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.64, suggesting upside of 0.7% (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: 0.1

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

Morgan Stanley rates S32 as Overweight (1) -

A problem at the Illawarra met coal mine has led to an expected loss of 500kt of production and sales as the issue is dealt with, the broker notes.

South32 has a strong cash position and the expected coal production loss flows through to a modest group revenue loss and a negligible valuation impact, the broker calculates. Overweight and $3.00 target retained. Industry view: Attractive.

Target price is $3.00 Current Price is $2.63 Difference: $0.37
If S32 meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.64, suggesting upside of 0.7% (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: 0.1

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

UBS rates S32 as Neutral (3) -

The company has advised analysts it is addressing the issues at Illawarra Coal, with another temporary suspension because of a build up of gas at Appin 7 and difficult ground conditions at Appin 9 which will reduce production by around 500,000t.

UBS trims FY17 earning estimates by 6% to US$880m to reflect the lower production guidance for Illawarra and updates for September quarter production.

Neutral rating and $2.50 target retained.

Target price is $2.50 Current Price is $2.63 Difference: minus $0.13 (current price is over target).
If S32 meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.64, suggesting upside of 0.7% (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: 0.1

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

Morgan Stanley rates SCG as Upgrade to Overweight from Underweight (1) -

The pullback in Scentre's share price driven by the global rise in bond yields has taken valuation to 12% below Morgan Stanley's target price. For the broker, this offers an attractive entry point.

Scentre offers the highest quality retail portfolio in the country, defensive earnings offering 4-5% growth, and a 5% yield, Morgan Stanley notes. Upgrade to Overweight. Target unchanged at $4.75. Industry view: Attractive.

Target price is $4.75 Current Price is $4.24 Difference: $0.51
If SCG meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $4.68, suggesting upside of 9.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.0

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

Macquarie rates TGZ as Outperform (1) -

September quarter production and costs beat Macquarie's estimates. The Sabodala mill is performing well and stockpiles and higher recoveries are providing the flexibility to re-affirm production guidance despite material movements being revised lower.

While the company is pursuing a multi-mine strategy Macquarie remains cautious on the economic potential until there are further exploration results which suggest that Banfora is being enhanced. Neutral retained. Target is $1.48.

Target price is $1.48 Current Price is $1.06 Difference: $0.425
If TGZ meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 1.0

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

Morgan Stanley rates VCX as Underweight (5) -

Vicinity is offering a 6.2% yield, 100 basis points above peer Scentre Group's ((SCG)) yield, the broker notes. But over the past year, Vicinity's funds from operations growth has fallen 360bps to only 0.1%.

The broker does not believe the dividend yield differential compensates investors for a lower quality portfolio, a lower FFO growth profile and elevated risk from a $1.7bn development pipeline. The broker retains Underweight and a $3.25 target, preferring Scentre. Industry view: Attractive.

Target price is $3.25 Current Price is $2.87 Difference: $0.38
If VCX meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.20, suggesting upside of 11.8% (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