Australian Broker Call

Deutsche Bank rates AMC as Buy (1) -

Deutsche Bank forecasts three-year growth in earnings per share of 11%, primarily driven by the acquisition of Alusa and Sonoco and flexibles restructuring.

While the flexibles division is performing well, softness is observed in tobacco and North American flexibles. As a result, the broker reduces forecasts by -1-2% to reflect slightly lower earnings from this segment.

Buy and $17.35 target retained.

Target price is $17.35 Current Price is $15.90 Difference: $1.45
If AMC meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $15.66, suggesting downside of -1.0% (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

Morgans rates ATL as Add (1) -

The company will acquire the remaining 80% stake in TSXV-listed CanaDream, an RV rental and sales company, and Kratzmanns, which operates four retail locations in south-east Queensland, for around $44m.

FY17 prospectus net profit forecasts are also upgraded by 5-10%. Morgans believes the underlying business can deliver double-digit profit growth in coming years.

The broker believes the market fundamentals are attractive and there are further growth options offshore. Add rating retained. Target rises to $1.52 from $1.44.

Target price is $1.52 Current Price is $1.31 Difference: $0.21
If ATL 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

Credit Suisse rates AZJ as Underperform (5) -

Credit Suisse notes Aurizon is running a sale process for its loss-making intermodal rail business. There are several groups reportedly shortlisted as interested, with final bids expected at the end of June. The broker calculates a sale at $200m would be 5% accretive for Aurizon by FY19.

The broker believes the intermodal terminals could be strategic assets and include Acacia Ridge in Brisbane, North Dynon in Melbourne  and Enfield in Sydney. The broker suspects Qube ((QUB)), currently operating  Acacia Ridge and North Dynon on behalf of Aurizon, is likely to be keen to participate but less interested in taking on intermodal as a going concern.

Genesee and Macquarie ((MQG)) consortium acquired Glencore's coal rail haulage operations in NSW last year and are seeking to enter the Queensland coal haulage market. The broker speculates, if Queensland intermodal operations were acquired, this would provide access to facilities in Gladstone, Mackay and Rockhampton that would assist in winning coal haulage contracts.

Underperform rating and $4.75 target retained.

Target price is $4.75 Current Price is $5.41 Difference: minus $0.66 (current price is over target).
If AZJ 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 $4.84, suggesting downside of -9.8% (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 BHP as Upgrade to Buy from Neutral (1) -

The stock is down around -5% in the year to date, underperforming rival Rio Tinto ((RIO)) by -10%. UBS observes near-term momentum in China is negative but the company is still expected to report robust second half earnings and pay a $0.56 per share dividend.

BHP remains out of favour and under growing pressure to show its strategy is working. UBS envisages potential for further disposals near term, which will accelerate de-leveraging and position the company to step up its returns more aggressively in FY18.

On this basis the broker upgrades to Buy from Neutral. Target is $28.

Target price is $28.00 Current Price is $23.31 Difference: $4.69
If BHP meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $27.77, suggesting upside of 19.0% (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: 0.6

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

Ord Minnett rates CSL as Accumulate (2) -

Ord Minnett raises earnings estimates after reviewing recent industry news, competitor quarterlies, clinical results and regulatory rulings. The broker expects growth in earnings per share of more than 20% in FY17 and FY18.

The broker believes the competitive advantage that CSL has built from an investment in collections and fractionation capacity should ensure double-digit growth can continue. Accumulate retained. Target rises to $145 from $130.

Target price is $145.00 Current Price is $135.32 Difference: $9.68
If CSL meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $137.55, suggesting upside 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: 0.8

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

Credit Suisse rates CTX as Outperform (1) -

Credit Suisse notes new fears about volumes and premium margins have emerged, along with speculation about fuel standards and the potential removal of regular unleaded. The broker observes there is little evidence this will happen and does not believe it is necessarily bad for margins.

As Coles ((WES)) is stepping away from discounting, conditions in retail appear very strong and, while premium volumes may be a little down, the broker believes margins are compensating.

Moreover, Credit Suisse believes there is no chance that Caltex could spend $300-400m to upgrade Lytton for more stringent fuel standards. The broker believes a paucity of data and disclosures has allowed misconceptions to thrive and the stock remains a compelling and misunderstood story.

Outperform rating and $39.70 target maintained.

Target price is $39.70 Current Price is $32.17 Difference: $7.53
If CTX meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $33.16, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Morgans - Cessation of coverage

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 IEL as Outperform (1) -

The company will purchase a 20% stake in HCP, a Chinese company specialising in delivering English-language test preparation materials via social media  and mobile apps.

Macquarie observes the investment is immaterial from an earnings perspective but does provide a strategic option for the company and a lead generator for the student placement business via a digital channel in the world's largest international student market.

Outperform retained. Target rises to $4.87 from $4.76.

Target price is $4.87 Current Price is $4.58 Difference: $0.29
If IEL meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.47, suggesting downside of -2.5% (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

Ord Minnett rates IEL as Hold (3) -

Ord Minnett suggests that recent data indicates strong growth in Australian and Canadian student volumes. Signs of recovery are also evident in the UK. Nevertheless, US student visas issued in 2016 fell -26.8%.

This divergent growth underlines the importance of a diversified approach to student placements and highlights the appeal of the stock, in the broker's opinion.

The broker remains highly supportive of the investment the company is making in the digital platform but remains desirous of some progress before moving to a more positive rating. Hold retained. Target is $4.55.

Target price is $4.55 Current Price is $4.58 Difference: minus $0.03 (current price is over target).
If IEL meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.47, suggesting downside of -2.5% (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

UBS rates ORG as Buy (1) -

UBS trims near-term Brent oil price estimates for 2017-19. The new forecasts are (averages) US$56/bbl in 2017, US$60/bbl in 2018 and US$65/bbl in 2019.

The broker observes oil prices in the June quarter to date have been weaker, despite declining global oil inventory and an extension to the OPEC production cuts.

UBS notes, as Origin's portfolio is very much weighted to gas, a change in oil price assumptions has limited impact and, for the business, lower prices are offset by higher energy market valuations.

Buy rating retained. Target is raised to $8.30 from $8.20.

Target price is $8.30 Current Price is $7.40 Difference: $0.9
If ORG meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $7.63, suggesting upside of 4.6% (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

Citi rates OZL as Buy (1) -

Citi analysts met with top of management at OZ Minerals and the in-depth discussions seem to have strengthened their positive view on the outlook for the company and its shareholders.

One of the takeaway observations is the company is now focused on growth in three areas: Prominent Hill copper mine in SA, Carrapateena project (SA); and a pipeline of base metal exploration assets.

Also, management indicated there's no push back on costs for larger capital projects, such as Carrapateena, as there’s still little competition to interest services providers. Buy rating and $10.30 price target left untouched.

Target price is $10.30 Current Price is $7.25 Difference: $3.05
If OZL meets the Citi target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $8.57, suggesting upside of 15.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Deutsche Bank rates PGH as Hold (3) -

The company has highlighted the growth drivers for FY18 and beyond in its new market segments of contract manufacturing and materials handling. Materials handling represents 10% of group revenue but will increase with the crate washing and pooling contract with Woolworths ((WOW)).

Contract manufacturing has grown by way of acquisitions, with Pascoe's being the most recent, and now represents 23% of group revenue. Contract manufacturing diversifies the base into higher growth segments, explain the analysts.

Deutsche Bank notes integration is progressing and targeted synergies are on track and maintains a Buy rating and target of $6.70.

Target price is $6.70 Current Price is $5.96 Difference: $0.74
If PGH meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.68, suggesting upside of 15.0% (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

Macquarie rates PGH as Neutral (3) -

The company has provided a tour of its Pascoe contract manufacturing acquisition and investment in RPC. Macquarie observes the tour provided greater detail regarding the company's ability to deliver on the growth strategy in these areas.

The broker reduces FY18 and FY19 forecasts for earnings per share by -1% and -2% respectively to reflect a flatter revenue profile for the base business in Australia.

The broker believes there is a need for volumes to stabilise before the stock can re-rate. Neutral maintained. Target is reduced to $6.60 from $6.80.

Target price is $6.60 Current Price is $5.96 Difference: $0.64
If PGH meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.68, suggesting upside of 15.0% (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 PTM as Underperform (5) -

Credit Suisse observes outflows re-accelerated in May. The deterioration was disappointing for the broker, considering it followed fee cuts in April.

Persistent outflows continue to present downside risk to the broker's earnings estimates, particularly when medium-term fund performance remains weak. Underperform retained. Target is $4.50.

Target price is $4.50 Current Price is $4.62 Difference: minus $0.12 (current price is over target).
If PTM meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.32, suggesting downside of -6.6% (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 PTM as Neutral (3) -

Funds under management were up 1.8% in May, affected by more than -$500m in net outflows and higher key benchmarks. Macquarie observes outflows remain a drag on funds under management.

Neutral rating retained. Target rises to $4.43 from $4.40.

Target price is $4.43 Current Price is $4.62 Difference: minus $0.19 (current price is over target).
If PTM meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.32, suggesting downside of -6.6% (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

Citi rates QAN as Buy (1) -

Citi analysts observe a re-rating of Qantas shares is genuinely taking place. They are of the opinion the shares are still trading at a discount; one that is no longer warranted.

Estimates have been amended, but more importantly, the analysts continue to expect material consensus upgrades across FY18 onwards. A change in valuation methodology has pushed up the price target to $7.09 from $4.71. Buy rating retained.

Target price is $7.09 Current Price is $5.15 Difference: $1.94
If QAN meets the Citi target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $4.89, suggesting downside of -7.0% (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

UBS rates QUB as Buy (1) -

UBS incorporates the $350m equity raising, makes a number of changes to operating earnings estimates for Patrick and timing adjustments for Moorebank, noting the net change to forecasts is immaterial.

The broker continues to envisage earnings per share in FY17 and FY18 to be broadly flat. Buy rating retained. Target rises to $2.90 from $2.80.

Target price is $2.90 Current Price is $2.61 Difference: $0.29
If QUB meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $2.66, suggesting upside 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 RHP as Add (1) -

The company has been upgraded by Microsoft to be one of eight distributors globally to have a direct management relationship with head office in Seattle. Morgans believes the announcement signifies Microsoft's serious interest  in the company, given its impressive customer uptake  of the CSP program.

Morgans continues to believe the risk/reward is attractive for investors, given a relatively low valuation and high growth outlook. The broker believes when FY17 guidance is reached the stock should re-rate. Add rating retained. Target is $0.63.

Target price is $0.63 Current Price is $0.42 Difference: $0.215
If RHP meets the Morgans target it will return approximately 52% (excluding dividends, fees and charges).

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

Citi rates RIO as Buy (1) -

Citi analysts take their clientele to Memory Lane, the good old days of the 1980s and 1990s when Rio Tinto was the world's pre-eminent mining company. Oh how things have changed since.

Is it possible for the company to regain that position? Citi analysts believe the answer lies not with more acquisitions, and neither should today's large exposure to iron ore prove an insurmountable barrier.

The solution, the analysts suggest, lies with maintaining conservative gearing ratio’s and returning cash to shareholders. Buy rating retained, as well as the $70 price target.

Target price is $70.00 Current Price is $62.10 Difference: $7.9
If RIO meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $71.63, suggesting upside of 14.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.9

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

Deutsche Bank rates TAH as Upgrade to Buy from Hold (1) -

Deutsche Bank upgrades to Buy from Hold as the stock is trading at a -6% discount to valuation and this excludes any benefit from the proposed merger with Tatts ((TTS)).

The broker estimates a merger could provide earnings and valuation upside of 11% and the regulatory environment is improving for traditional wagering operators.

While the Australian Competition Tribunal has delayed its determination on the merger to no later than September 10 2017, from June 13 previously, the broker believes this could still result in a positive outcome, albeit subject to conditions.

Target is reduced to $4.80 from $5.00.

Target price is $4.80 Current Price is $4.50 Difference: $0.3
If TAH meets the Deutsche Bank target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.61, suggesting upside of 1.5% (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

Macquarie rates VCX as Neutral (3) -

Macquarie attended an investor briefing focused on the development opportunities in the Perth market. Western Australia represents 44% of the company's development pipeline and 14% of the portfolio.

The broker observes since the last mining boom the building blocks for retail sales in this market have softened as population growth is just 1.0% and wage inflation 1.2%. Macquarie remains cautious about the aggregate amount of retail space being added to the market.

The company has indicated no material asset sales were planned post completion of the current program, with a $25-30m asset currently being close to finalising sale at a slight premium to book value.

Neutral retained. Target is $2.91.

Target price is $2.91 Current Price is $2.76 Difference: $0.15
If VCX meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 8.2% (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

UBS rates WPL as Buy (1) -

UBS trims near-term Brent oil price estimates for 2017-19. The new forecasts are (averages) US$56/bbl in 2017, US$60/bbl in 2018 and US$65/bbl in 2019.

The broker observes oil prices in the June quarter to date have been weaker, despite declining global oil inventory and an extension to the OPEC production cuts.

Meanwhile, US shale productivity gains have been significant. The broker retains a Buy rating and reduces the target to $35.00 from $37.40.

Target price is $35.00 Current Price is $31.02 Difference: $3.98
If WPL meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $32.15, suggesting upside of 5.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.2

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