Australian Broker Call

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

The company has lifted its offer for Hellaby Holdings, to NZ $3.60, which is at the lower end of the independent expert's valuation range.

The board has stated it will not recommend the offer unless a dividend is paid, making use of its imputation credits.

Regardless of whether the board endorses the offer, UBS believes it highly likely that Bapcor will attain at least a majority ownership. Given this likelihood the broker incorporates the business into forecasts.

UBS notes the company is long on growth options and pricing is attractive and upgrades to Buy from Neutral. Target is raised to $6.85 from $6.30.

Target price is $6.85 Current Price is $5.02 Difference: $1.83
If BAP meets the UBS target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $6.06, suggesting upside of 13.1% (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

Macquarie rates BHP as Outperform (1) -

The company has won rights to develop the Trion deep water oil project in the Gulf of Mexico. The project has potential to add to post 2020 oil production, along with Mad Dog 2.

Macquarie considers this a positive development, as it gives the company a second long-term growth option in its petroleum business without relying on greenfield exploration success.

The broker suspects the project will generate only modest returns after incorporating the acquisition costs and has not yet included it in estimates.

The broker retains a Outperform rating and $28 target.

Target price is $28.00 Current Price is $25.48 Difference: $2.52
If BHP meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $25.09, suggesting downside of -2.2% (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: 0.4

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

Morgans rates BHP as Hold (3) -

The company will acquire a 60% interest and be operator of two blocks in offshore Mexico. The acreage includes the Trion oil field. The company will pay an initial amount of US$62.4m at the completion of the deal and has committed to a minimum work program of US$320m.

The acquisition is essentially a bolt-on asset for the company, given the scale of its petroleum division and Morgans expects BHP to continue adding other growth options, that are light on capital, in the near term.

The broker retains a Hold rating and $25.82 target.

Target price is $25.82 Current Price is $25.48 Difference: $0.34
If BHP meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $25.09, suggesting downside of -2.2% (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: 0.4

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

Ord Minnett rates BHP as Hold (3) -

The company has won the bid for a 60% interest in the Trion oil & gas project in the Gulf of Mexico. The acquisition is consistent with the strategy laid out at the October investor briefing for the petroleum division.

Ord Minnett retains a Hold rating, believing the share price risks are evenly skewed. Target is $23.

Target price is $23.00 Current Price is $25.48 Difference: minus $2.48 (current price is over target).
If BHP meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.09, suggesting downside of -2.2% (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: 0.4

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

UBS rates BHP as Neutral (3) -

BHP is the winning bidder for two deepwater blocks in the Trion oil field, Gulf of Mexico. The bid includes a US$62.4m up-front payment and a commitment to a US$320m minimum work program over three years.

UBS believes the acquisition provides a complementary conventional target to the Trinidad & Tobago field, with the notable advantage of having an existing reserve.

The broker retains a Neutral rating and $25 target.

Target price is $25.00 Current Price is $25.48 Difference: minus $0.48 (current price is over target).
If BHP meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.09, suggesting downside of -2.2% (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: 0.4

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

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

UBS upgrades to Neutral from Sell without accompanying commentary. Target is $10.50.

Target price is $10.50 Current Price is $10.03 Difference: $0.47
If CAR meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.94, suggesting upside of 17.5% (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

Deutsche Bank rates DCN as Buy (1) -

Dacian's attempted capital raising has been a disaster. The company wanted $150m through a $100m rights issue and $50m placement but ending up pulling the rights issue, despite first increasing the discount to 15% from 7.5%, and placing only $26m. 

The amount was too overwhelming for the market, the broker suggests, and the timing was unfortunate given the plunge in the gold price. The broker is a fan of the Mt Morgan project but notes there will now be an overhang on Dacian of another raising attempt needed.

Target falls to $3.30 from $3.60 but the broker believes that in the ensuing confusion, the stock looks cheap. Buy retained.

Target price is $3.30 Current Price is $2.21 Difference: $1.09
If DCN meets the Deutsche Bank target it will return approximately 49% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting upside of 73.3% (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

Credit Suisse rates GNC as Outperform (1) -

Credit Suisse increases the Australian east coast crop forecast by 16% for FY17, resulting in an earnings upgrade for the company of 42%. The broker has also increased forecast EBIT in FY17 for storage & logistics and also for marketing.

A larger crop is expected to support  trading margins and the likely quality variance in this year's winter crop is expected to enhance blending profits in FY17. The broker retains an Outperform rating and raises the target to $9.58 from $9.19.

Target price is $9.58 Current Price is $8.79 Difference: $0.79
If GNC meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $9.61, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

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 GNC as Hold (3) -

ADM has left the Graincorp share register, the broker notes, removing a key overhang for the stock. Meanwhile, forecasts for the winter crop continue to be upgraded. All good news for Graincorp.

Except that bumper crops across the globe mean weak prices, suggesting stiff competition for sales and the possibility of farmers storing grain rather than selling at low prices, the broker warns. Target rises to $9.80 from $8.90 and Hold retained.

Target price is $9.80 Current Price is $8.79 Difference: $1.01
If GNC meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $9.61, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

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 Upgrade to Outperform from Neutral (1) -

A strong crop season and the latest receivables data suggest that the company is catching up after a delayed start to harvest and Macquarie lifts its forecast for FY17 receivables to 11.2mt and also raises export expectations to 5mt.

The broker also removes the overhang from ADM's sell down of its stake and transfers coverage to another analyst. FY17 and FY18 earnings per share estimates are raised by 14% and 4% respectively.

Rating is upgraded to Outperform from Neutral. The target is raised to $9.75 from $9.00..

Target price is $9.75 Current Price is $8.79 Difference: $0.96
If GNC meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $9.61, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

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 GNC as Hold (3) -

Australia's winter grain harvest is expected to be the largest on record. A large crop has positive implications for most of the company's business units, and Morgans subsequently upgrades forecasts.

The broker notes the degree of upside is unclear, as the extent to which farmers hold back their grain because of low prices and the impact of increased competition both domestically and internationally is unknown.

The broker retains a Hold recommendation. Target is raised to $9.55 from $8.70.

Target price is $9.55 Current Price is $8.79 Difference: $0.76
If GNC meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $9.61, suggesting upside of 7.6% (ex-dividends)

The company's fiscal year ends in September.

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 GTN as No Rating (-1) -

The company has exercised its option to acquire Radiate, a short form radio advertising platform in the US. Macquarie observes the company's existing markets have started the year strongly and prospectus forecasts, ex Radiate, have been maintained.

Radiate's competitive position has improved materially following the signing of CBS as an affiliate in October. The broker observes multiple opportunities to grow revenue.

Macquarie is restricted on providing a rating or target at this stage.

Current Price is $3.00. Target price not assessed.

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Morgans rates JHC as Downgrade to Hold from Add (3) -

Given the rally in the company's share price, Morgans downgrades to Hold from Add.

After a period of uncertainty, the broker notes the industry and the government have reached a broad agreement with some of the measures outlined in the FY16 budget regarding funding cuts being moderated.

The broker remains comfortable that current forecasts reflect the new arrangements. The target is unchanged at $2.47.

Target price is $2.47 Current Price is $2.21 Difference: $0.26
If JHC meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $2.32, suggesting upside of 2.5% (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

Citi rates ORG as Downgrade to Neutral from Buy (3) -

Citi has lifted its price target to $6.95 from $6.61 on the news Origin is looking to spin off its conventional oil assets through an IPO, while pulling back the rating to Neutral from Buy.

The analysts think the initiative is "OK", but not game changing. Debt will be reduced and the spin-off requires board approval without shareholders having their say, note the analysts.

Also, the analysts observe AGL Energy ((AGL)) is currently trading at a comparable premium, but this seems justified, in their opinion, because AGL has a stronger growth outlook and a stronger balance sheet, even after the planned divestment. Citi thinks a meaningful multiple re-rating for Origin may take several years.

Target price is $6.95 Current Price is $6.58 Difference: $0.37
If ORG meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.27, suggesting downside of -1.9% (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 ORG as Downgrade to Underperform from Neutral (5) -

The company has announced plans for an IPO of its conventional upstream assets. Credit Suisse believes this is strategically, and financially, the right thing to do. That said, the broker is baffled by a decision to sell to the equity market versus a trade sale.

The broker carries a value of $1.4bn for the assets noting that this is inclusive of the $350m in hedging cost. This does not include remediation or corporate costs, which are either not disclosed or unknown, and both will reduce the net present value.

Credit Suisse downgrades to Underperform from Neutral, reluctantly, but notes the valuation is hard to measure and an IPO is unlikely to be materially accretive to value. While the company will be a more investable business after this IPO, the broker believes the starting point share price is wrong. Target is steady at $5.40.

Target price is $5.40 Current Price is $6.58 Difference: minus $1.18 (current price is over target).
If ORG meets the Credit Suisse target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.27, suggesting downside of -1.9% (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 ORG as Hold (3) -

Origin's plan to spin off its upstream conventional assets is a sensible one as it will provide for debt reduction, the broker suggests, but no game changer, given lost earnings and a still elevated debt level. A later spin off of LNG assets would serve to crystalise long term value, the broker notes.

The broker has lifted its target to $5.80 from $5.60 and retains Hold, noting an attempted sale of assets is not without risk.

Target price is $5.80 Current Price is $6.58 Difference: minus $0.78 (current price is over target).
If ORG 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 $6.27, suggesting downside of -1.9% (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

Macquarie rates ORG as No Rating (-1) -

The company intends to hive off its traditional E&P business.This includes key investments in Kupe, Bass, Otway, Cooper and Perth.The non-conventional project such as Ironbark, Poseidon and Betaloo will be retained.

The IPO details are limited at this stage with the timing set for next year. Macquarie considers the IPO a logical step and in line with the company's focus on debt reduction, and packaging of the assets as a single entity is more logical compared with the piecemeal sale program that was previously flagged.

Macquarie is restricted on rating and target at this stage.

Current Price is $6.58. Target price not assessed.

Current consensus price target is $6.27, suggesting downside of -1.9% (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 ORG as Equal-weight (3) -

The company plans to accelerate debt reduction by spinning off its conventional reserves via an IPO. Morgan Stanley considers the strategy logical and awaits the details next year. Details on the new company's contracts with Origin will determine the value allocation.

Origin will remain an integrated energy company, retaining interests in APLNG, and exploration assets in Browse, Bettaloo and Ironbark.

Morgan Stanley retains an Equal-weight rating and $6.04 target. Industry view is Cautious.

Target price is $6.04 Current Price is $6.58 Difference: minus $0.54 (current price is over target).
If ORG 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 $6.27, suggesting downside of -1.9% (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

Morgans rates ORG as Downgrade to Hold from Add (3) -

With the intention of fast tracking the de-gearing of its balance sheet, the company is preparing to spin off its conventional upstream oil & gas assets via an IPO.

Morgans values the combined assets at  $1.5-1.7bn,  Although recognises that the debt load, corporate costs and offtake contracts will have an impact.

After recent share price strength, the broker downgrades to Hold from Add. Target is steady at $6.40.

Target price is $6.40 Current Price is $6.58 Difference: minus $0.18 (current price is over target).
If ORG meets the Morgans target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.27, suggesting downside of -1.9% (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 ORG as Downgrade to Hold from Accumulate (3) -

The company's intention to spin out its conventional petroleum business via an IPO partially addresses Ord Minnett's immediate concerns regarding the balance sheet.

While the sale proceeds could net as much as $3bn, the downside, the broker envisages, is that it removes the natural hedge for the gas retailing business. It also remains to be seen what contractual or other arrangements the company can make.

The recent run-up in the share price has led the broker to reduce its rating to Hold from Accumulate. Target is steady at $6.60.

Target price is $6.60 Current Price is $6.58 Difference: $0.02
If ORG meets the Ord Minnett target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $6.27, suggesting downside of -1.9% (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

Macquarie rates QBE as Outperform (1) -

Despite difficult industry conditions on pricing, Macquarie believes QBE is attractive, with potential upside from investment yields.The broker reviews its analysis of the US market and focuses on the performance of product lines where the company is overweight.

The broker believes the product mix leaves the company better protected from falling premium rates versus the broader market, because of a weighting towards personal lines and commercial motor insurance.

Outperform and $12.34 target retained.

Target price is $12.34 Current Price is $11.78 Difference: $0.56
If QBE meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.29, suggesting downside of -5.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.4

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

Macquarie rates SUN as Outperform (1) -

Macquarie observes Suncorp is gaining market share in NSW CTP, with a competitive premium rate. The broker estimates NSW CTP accounted for around 6.4% of the company's gross written premium in FY16.

The broker believes the bulk of re-pricing for prevailing claims experience has finished. Further premium rate changes are expected to be based upon average cost inflation and claims frequency.

Outperform rating and $12.97 target maintained.

Target price is $12.97 Current Price is $12.78 Difference: $0.19
If SUN meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $13.24, suggesting upside of 3.2% (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

Deutsche Bank rates VOC as Buy (1) -

Vocus has announced it will proceed with its ASC cable project at an expected cost of $170m, higher than the broker had assumed. The broker believes the balance sheet can handle it but calculates only a 6.5% internal rate of return for ASC.

The broker has reduced near term earnings forecasts on the cost but raised longer term forecasts on the benefit. Target rises to $8.20 from $8.19, Buy retained.

Target price is $8.20 Current Price is $4.04 Difference: $4.16
If VOC meets the Deutsche Bank target it will return approximately 103% (excluding dividends, fees and charges).

Current consensus price target is $6.09, suggesting upside of 46.3% (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