Australian Broker Call

Ord Minnett rates ABP as Upgrade to Buy from Hold (1) -

Ord Minnett has undertaken a sector-wide review, analysing implications for passive property trusts after the recent sharp pull-back.

The company is envisaged making good progress in FY17 and realising more than $30m in profits on the sale of two transactions - Browns Road in Clayton, Victoria, and Westpac House in Adelaide.

The broker believes the market is valuing the company's investment portfolio below its conservative book value. Given current metrics, Ord Minnett upgrades to Buy from Hold and the target to $3.30 from $3.20.

Target price is $3.30 Current Price is $2.74 Difference: $0.56
If ABP meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 7.8% (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

Morgans rates BBN as Hold (3) -

The company reported 20% sales growth in the first 20 weeks of FY17. Morgans found the update solid, and necessary at the current valuation.

Hence, while the broker likes the stock and believes a material premium is warranted to peers, the valuation means a Hold rating is maintained. Target is reduced to $3.05 from $3.14.

Target price is $3.05 Current Price is $2.88 Difference: $0.17
If BBN meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $3.18, suggesting upside of 11.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

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

Credit Suisse rates BLD as Neutral (3) -

The company is acquiring Headwaters, a US building products business. Credit Suisse believes the economics of the deal only stack up on a post-synergy basis. The price is US$2.6bn and synergies of US$100m are identified over four years.

The broker observes this is not yet a done deal as potential regulatory approval issues could arise, particularly around fly ash. Credit Suisse also finds quantifying the underlying organic growth rate is difficult and there is no guarantee that fly ash contracts will be renewed.

The US housing market is choppy and timing around US infrastructure expenditure is also uncertain, so Credit Suisse retains a Neutral rating and $6.45 target.

Target price is $6.45 Current Price is $6.15 Difference: $0.3
If BLD meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.34, suggesting upside of 3.1% (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

Deutsche Bank rates BLD as No Rating (-1) -

Boral intends to acquire Headwaters for US$2.6bn.The company expects to be able to extract US$100m in synergies from the US building products business over the next four years.

Deutsche Bank believes the announcement is in line with the company's strategy to grow in the US and notes expansion was always likely to be expensive, given the US housing market is 8% below its historical average.

The acquisition, if completed, will increase the company's US exposure to 38% from 19%, reduce its Australian exposure to 51% from 67% and Asian business to 11% from 14%. Deutsche Bank is restricted on rating and price target at this stage.

Current Price is $6.15. Target price not assessed.

Current consensus price target is $6.34, suggesting upside of 3.1% (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 BLD as No Rating (-1) -

The broker has called Boral's acquisition of US-based Headwaters Inc a "step change", augmenting existing positions in fly ash, stone and roof tiles and repositioning the group in others. Boral suggests the deal should be high single digit earnings accretive after synergies.

The company will raise over $2m in a $1.6m retail/institutional rights offer and a $450m institutional placement at $4.80ps. As the broker is involved in the deal it is currently restricted from making a recommendation.

Current Price is $6.15. Target price not assessed.

Current consensus price target is $6.34, suggesting upside of 3.1% (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

Morgan Stanley rates BLD as Underweight (5) -

Boral intends to acquire Headwaters for US$2.6bn. Morgan Stanley calculates that significant synergies are required for accretion to be achieved.

Headwaters' cost of debt appears high and the ability to refinance at a lower rate is key to the synergy outcomes, the broker believes. Boral expects synergies of US$30-35m to be delivered in the first full year.

Morgan Stanley retains a Underweight rating, In-line industry view and $6.07 target.

Target price is $6.07 Current Price is $6.15 Difference: minus $0.08 (current price is over target).
If BLD meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.34, suggesting upside of 3.1% (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

Ord Minnett rates BLD as No Rating (-1) -

The company has an agreement to acquire US building and construction materials company, Headwaters, for around US$2.6bn.

The transaction will be funded through a combination of a $450m institutional placement and a 1- for-2.22 pro rata accelerated renounceable entitlement offer, an underwritten debt bridge facility and existing cash. The deal is expected to be completed by mid 2017.

Ord Minnett is currently restricted on Boral and cannot provide a recommendation or price target at this stage.

Current Price is $6.15. Target price not assessed.

Current consensus price target is $6.34, suggesting upside of 3.1% (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 BRG as Outperform (1) -

The company is on track for the broker's forecast of 6% EBITDA growth  in FY17, notwithstanding a challenging domestic market.

Credit Suisse makes some minor reductions to FY18 forecast on the expiry of the Phillips distribution arrangement. The company has reported that the first half is tracking broadly in line with expectations and the new product pipeline is gathering momentum.

Credit Suisse retains an Outperform rating and $9.00 target.

Target price is $9.00 Current Price is $8.61 Difference: $0.39
If BRG meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $8.80, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Ord Minnett rates CWY as Accumulate (2) -

Press speculation suggests Cleanaway is in the race to acquire Bingo Industries. Price expectations for the Bingo business are at more than $500m.

Ord Minnett would be very surprised if Cleanaway emerged as the acquirer, as it would be out of step with management strategy.

The broker suggests Cleanaway is likely kicking tyres rather than being genuinely interested at the reported price. Accumulate rating and $1.08 target retained.

Target price is $1.08 Current Price is $1.07 Difference: $0.01
If CWY meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.10, suggesting upside of 0.7% (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

Morgans rates CYB as Downgrade to Reduce from Hold (5) -

Morgans changes its cash earnings per share estimates, reducing forecasts by 4.7% in FY18 and raising by 2.7% for FY19, ahead of the FY16 results.

This is because of higher net interest margin forecasts in each of these years as well as higher credit impairments in FY18.

The rating is downgraded to Reduce from Hold as the broker considers the rally this month has resulted in the stock being overvalued. Target is unchanged at $4.17.

Target price is $4.17 Current Price is $4.97 Difference: minus $0.8 (current price is over target).
If CYB meets the Morgans target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.56, suggesting downside of -6.5% (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 DCN as Outperform (1) -

Dacian has released a feasibility study for Mt Morgans suggesting an eight-year gold mining operation, and a pre-feasibility expansion study. The broker's valuation includes expansion as a base case.

On a reduced debt component and dilution on an assumed price for new equity, the broker lowers its target to $4.50 from $5.00. The outcomes of the studies are largely as the broker expected and exploration upside is also assumed. Outperform retained.

Target price is $4.50 Current Price is $3.07 Difference: $1.43
If DCN meets the Macquarie target it will return approximately 47% (excluding dividends, fees and charges).

Current consensus price target is $4.25, suggesting upside of 40.3% (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

Ord Minnett rates GPT as Upgrade to Buy from Hold (1) -

Ord Minnett has undertaken a sector-wide review, analysing implications for large capitalisation passive property trusts after the recent sharp pull-back. The broker considers GPT oversold, warranting a better cost of capital given its asset quality and growth prospects.

The broker upgrades to Buy from Hold on the basis that its portfolio is in sound shape, with sector leading portfolio income growth over the next three years translating into circa 4% distribution growth over five years. Target is raised to $5.40 from $5.32.

Target price is $5.40 Current Price is $4.53 Difference: $0.87
If GPT meets the Ord Minnett target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $5.09, suggesting upside of 11.4% (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

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

Private health insurer affordability needs to improve, amongst other regulatory changes, to restore confidence in growth, Morgan Stanley believes.

While the broker finds no compelling valuation argument for Healthscope that would change its Equal-weight status it also envisages no short-term signs that industry growth will recover.

Target is reduced to $2.39 from  $2.53. Industry view is In-Line.

Target price is $2.39 Current Price is $2.20 Difference: $0.19
If HSO meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.63, suggesting upside of 20.2% (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

UBS rates IDX as Buy (1) -

The company has flagged a slower recovery in radiology volumes, along with increased local competition. Hence, FY17 net profit  is likely to fall below normalised FY16 trading net profit of $16.6m.

UBS observes the company is joining a growing list of other Medicare/hospital exposed stocks which are reporting a soft start to FY17.

The broker expects a slowdown in the near term but a return to growth in the longer term. A Buy rating is retained. Target is reduced to $1.85 from $2.06.

Target price is $1.85 Current Price is $1.16 Difference: $0.69
If IDX meets the UBS target it will return approximately 59% (excluding dividends, fees and charges).

Current consensus price target is $1.59, suggesting upside of 33.7% (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

Morgans rates IPD as Add (1) -

The AGM has highlighted a productive year, Morgans believes, which included the commercial launch of L-Dex and key alliances.

The broker moderates near-term revenue assumptions to reflect a lower first quarter. The catalysts for 2017 include European and FDA clearance for SOZO, for use in lymphoedema and heart failure.

An Add rating is retained. Target is reduced to $2.08 from $2.13.

Target price is $2.08 Current Price is $1.24 Difference: $0.84
If IPD meets the Morgans target it will return approximately 68% (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 KAR as Buy (1) -

A court injunction has delayed the sale process for the Bauna and Tartaruga Verde fields in Brazil. Karoon Gas was the preferred bidder for the fields. As with any court case,  Deutsche Bank notes the risk of a negative outcome exists.

The best outcome in the broker's view is that the injunction is dismissed after 30 days. The worst outcome is if the sale process has to start again. A Buy rating and $2.30 target are retained.

Target price is $2.30 Current Price is $1.97 Difference: $0.33
If KAR meets the Deutsche Bank target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.14, suggesting upside of 7.1% (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

Deutsche Bank rates NCM as Sell (5) -

After the investor briefing Deutsche Bank notes Newcrest intends to prove up its Cadia expansion, with Lihir set to reach 14mtpa by late 2017.

The broker believes the company is likely to increase its merger and acquisition activity, with both investments and divestments possible.

Cadia provides one of the best growth options in the global gold space, in the broker's opinion. Deutsche Bank retains a Sell rating on valuation. Target is steady at $19.

Target price is $19.00 Current Price is $20.93 Difference: minus $1.93 (current price is over target).
If NCM meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.96, suggesting upside of 0.6% (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 NCM as Neutral (3) -

Newcrest's AGM provided an update on the new production target goal at Lihir, which is on track, and noted an intention to lift throughput at Cadia to offset declining grades. The company's other operations offer short mine lives compared to these two, the broker notes.

The broker's forecasts are largely in line with guidance. Ahead of Lihir and Cadia site tours later in the week the broker has eased its target back to $24 from $25 and retains Neutral.

Target price is $24.00 Current Price is $20.93 Difference: $3.07
If NCM meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $20.96, suggesting upside of 0.6% (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

Ord Minnett rates NCM as Lighten (4) -

In the wake of the investor briefing, Ord Minnett suspects throughput and grade profile at Cadia could be weaker than consensus estimates.

Throughput at Lihir could conceptually increase to 17mtpa in the long-term. The broker notes the company continues to prioritise internal growth opportunities, by reducing bottlenecks and expanding its core assets.

The broker maintains a Lighten rating and $19.00 target.

Target price is $19.00 Current Price is $20.93 Difference: minus $1.93 (current price is over target).
If NCM meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.96, suggesting upside of 0.6% (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

UBS rates NCM as Sell (5) -

The strategy briefing focused on why the company's operational performance has improved over the last two years. While confidence is increased, UBS still cannot justify the share price.

The broker believes that, while the stock may appear favourable on a simple value/reserve ratio or mine life metric, a large part of the reserves are tied up in undeveloped or long-life assets,  which carry uncertainty.

Sell rating and $12.25 target retained.

Target price is $12.25 Current Price is $20.93 Difference: minus $8.68 (current price is over target).
If NCM meets the UBS target it will return approximately minus 41% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.96, suggesting upside of 0.6% (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 OTW as Initiation of coverage with Add (1) -

Over The Wire is a business telco offering services to medium sized organisations. Morgans notes the exceptionally strong customer retention with an ability to provide personalised services as opposed to typically selling products.

The broker also notes a 20% return on equity, surplus net cash and strong free cash flow generation.

Morgans initiates coverage with an Add rating and $3.30 target, noting the the only real bear point is the valuation, which is higher than peers. The broker considers this justifiable given superior earnings growth.

Target price is $3.30 Current Price is $2.85 Difference: $0.45
If OTW meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Ord Minnett rates QAN as Buy (1) -

The US Department of Transport has issued a "show cause" order, tentatively denying the application by American Airlines and Qantas to expand their existing alliance services between the US and Australasia.

The decision has negative potential implications for what is Qantas' largest and most profitable international market but Ord Minnett believes the current share price already reflects significant earnings risk, so maintains a Buy rating and $4.50 target.

Target price is $4.50 Current Price is $3.10 Difference: $1.4
If QAN meets the Ord Minnett target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $4.28, suggesting upside of 36.7% (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 QBE as Neutral (3) -

Credit Suisse observes the company's earnings have disappointed in previous years and the region that has disappointed the most has been North America. Hence, the broker believes the fact North America should deliver some significant earnings upside in 2016 will be welcome.

While arguably this is a one off, and does not ease the pain from the earnings risk in outer years, the broker believes it will buy management time and deliver some much-needed earnings growth for investors.

Credit Suisse upgrades 2016 earnings forecast by 30%. A Neutral rating is retained and the target is raised to $11.85 from $10.50.

Target price is $11.85 Current Price is $11.19 Difference: $0.66
If QBE meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $11.02, suggesting downside of -2.2% (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

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

Morgan Stanley still envisages volume risk for Australian hospitals, although Ramsey Health Care's portfolio leaves it less exposed. Private health insurer affordability needs to improve, amongst other regulatory changes, to restore confidence in growth, the broker believes.

Price target is reduced to $70.40 from $79.40. Equal-weight rating retained. Industry view is In-Line.

Target price is $70.40 Current Price is $69.23 Difference: $1.17
If RHC meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $79.75, suggesting upside of 14.0% (ex-dividends)

The company's fiscal year ends in June.

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 SCG as Upgrade to Buy from Hold (1) -

Ord Minnett has undertaken a sector-wide review, analysing implications for large capitalisation passive property trusts after the recent sharp pull-back.

Scentre Group has the best portfolio and the most conservative valuations, in the broker's opinion. It also has the best development track record and a growing work book. Ord Minnett upgrades to Buy from Hold and retains a $4.70 target.

Target price is $4.70 Current Price is $4.12 Difference: $0.58
If SCG meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.68, suggesting upside of 12.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.2

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

Macquarie rates SMX as Neutral (3) -

The broker had expected downside risk to earnings as SMS undergoes its transformation and it's been worse than thought. Despite recent measures to diversify, traditional consulting is still a large portion of revenue and the first four months of FY17 have been very tough.

The broker sees long term opportunities but ongoing short term risk. In the absence of M&A, the broker sees few catalysts before next February's result. Earnings cut by 40%, target falls to $1.24 from $1.71, Neutral retained.

Target price is $1.24 Current Price is $1.28 Difference: minus $0.04 (current price is over target).
If SMX meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.46, suggesting upside of 18.8% (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

Morgan Stanley rates SYR as Underweight (5) -

The company's update on its battery strategy signals a slow ramp up and higher capital expenditure, along with a delay to Balama.

Morgan Stanley acknowledges that Balama remains a world-class reserve and building downstream processing is sensible, but believes the funding headwinds continue. In this light the broker retains a Underweight rating.

Although announcements of any new offtakes will be positive for sentiment, the broker notes that actual pricing, and existence of any discounts to achieve the offtake contracts, will likely only be clear once revenue recognition commences.

Industry view: Attractive. Target is reduced to $2.75 from $3.75.

Target price is $2.75 Current Price is $2.89 Difference: minus $0.14 (current price is over target).
If SYR meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.74, suggesting upside of 103.1% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates VCX as Underweight (5) -

Morgan Stanley believes Vicinity Centres needs to address its high, but unsustainable, pay-out ratio, as well as elevated execution risk, to drive a sustainable re-rating of the stock.

The broker reduces its FY18-20 compound growth rate forecast to 4.2% from 4.8% and envisages better value in Scentre Group ((SCG)), which trades on the same 5.9% cap rate. Underweight retained. Target is reduced to $3.00 from $3.25. Industry view: Attractive.

Target price is $3.00 Current Price is $2.78 Difference: $0.22
If VCX meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.15, suggesting upside of 13.9% (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