Australian Broker Call

Morgans rates AZY as Initiation of coverage with Add (1) -

Antipa Minerals has started drilling at the Citadel project. The company is exploring for copper-gold discoveries, along with the extension of existing discoveries.

The company is in joint venture with Rio Tinto ((RIO)), which Morgans considers a stamp of approval. With two large drilling campaigns to be completed before the end of the year, the broker considers the stock to be highly leveraged to exploration success.

Morgans initiates coverage with a Speculative Add rating and 3.1c target.

Target price is $0.03 Current Price is $0.02 Difference: $0.007
If AZY meets the Morgans target it will return approximately 29% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

Deutsche Bank rates BHP as Hold (3) -

The company has been a successful bidder for the first block in Mexico's deepwater auctions. BHP will have a 60% stake and be the operator in the Trion field. Deutsche Bank values the company's stake at around US$750m, excluding exploration upside.

The broker expects the company will be provided a first mover advantage from this tender and potential operational  synergies in relation to the other four blocks that are to be auctioned in the Perdido Basin.

Nevertheless, any developments in the Gulf of Mexico are expected to only boost volumes in the next decade. Hold and a $22.30 target retained.

Target price is $22.30 Current Price is $25.98 Difference: minus $3.68 (current price is over target).
If BHP meets the Deutsche Bank target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $25.45, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.3

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

Morgan Stanley rates BLD as Upgrade to Equal-weight from Underweight (3) -

Uncertainty surrounding the Headwaters transaction is likely to continue for some time, but Morgan Stanley believes the current price fairly incorporates this.

Headwaters' guidance appears achievable to the broker, as the US housing market continues to improve.

The valuation now appears more attractive, given the movement in the stock price after the capital raising, and the broker upgrades to Equal-weight from Underweight. Target is $5.58. Industry view is In-Line.

Target price is $5.58 Current Price is $5.34 Difference: $0.24
If BLD meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.18, suggesting upside of 16.1% (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 CSL as Hold (3) -

New data from the US Centre for Medicare and Medicaid provides an opportunity to assess the company's share of this important segment of the US market.

Ord Minnett notes overall spending on plasma-delivered therapies, especially  immunoglobulin, has grown strongly although CSL has ceded some share to the second tier of fractionaters. The company has enjoyed success in hereditary angioedema, doubling its share of the market since 2011.

The company's share of haemophilia spending has declined as competitors launch new therapies and spending on plasma-derived therapies has fallen. Hold retained. Target is $100.

Target price is $100.00 Current Price is $95.00 Difference: $5
If CSL meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $108.99, suggesting upside of 18.1% (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

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

Domino's has been caught in the high growth stock sell-off, UBS notes, dropping 20% since August despite 5% consensus earnings upgrades. This has put the share price back into attractive territory.

Domino's is looking to expand in takeaway in A&NZ from its pizza dominance, is starting to integrate its new A&NZ technology into Europe and there remains significant store count upside, UBS believes. The market is now under-pricing this growth potential and hence the broker upgrades to Buy. Target rises to 79.70 from $56.00.

Target price is $79.70 Current Price is $65.14 Difference: $14.56
If DMP meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $79.18, suggesting upside of 17.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

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

Morgan Stanley rates FLT as Downgrade to Underweight from Equal-weight (5) -

Morgan Stanley suspects second half guidance is again too bullish.The broker's data points to an acceleration in international flight price deflation.  Analysis of historical seasonality trends also highlights a risk to FY17 profit guidance.

Morgan Stanley takes advantage of the recent share price strength to downgrade to Underweight from Equal-weight. Target is reduced to $25 from $30. Industry view is In-Line.

Target price is $25.00 Current Price is $32.99 Difference: minus $7.99 (current price is over target).
If FLT meets the Morgan Stanley target it will return approximately minus 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.17, suggesting upside of 5.4% (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

Citi rates IAG as Neutral (3) -

Citi analysts believe the freshly announced cost cutting program should materially improve the insurer's EPS growth profile, albeit not until FY19. The organisational transformation towards "customer centricity" means less staff, with tasks offshored.

While execution risk seems high, the analysts note the operational environment appears to be improving somewhat, plus higher bond yields offer further support. Neutral. Target $5.80.

Target price is $5.80 Current Price is $5.90 Difference: minus $0.1 (current price is over target).
If IAG meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.78, suggesting downside of -1.2% (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

Morgans rates IAG as Hold (3) -

The main feature of the strategy briefing for Morgans was the optimisation program aimed at reducing costs by $250m pre-tax by the end of FY19.

While the broker believes sustaining margin benefits will be difficult, it now envisages downside risks are reduced. Morgans expects capital management to be on the agenda in FY18.

A Hold rating is retained and the target is raised to $5.74 from $5.11.

Target price is $5.74 Current Price is $5.90 Difference: minus $0.16 (current price is over target).
If IAG 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 $5.78, suggesting downside of -1.2% (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 IDR as Neutral (3) -

After acquiring WesTrac's Newcastle facility, Industria has outperformed the REIT sector by 6%, the broker notes.

However year on year, Industria is flat and the sector has risen 0.2%. The WestTrac acquisition indicated the REIT can benefit from greater scale and diversification away from single tenant risk, the broker suggests.

But more is needed. Neutral retained. Target falls to $2.13 from $2.17.

Target price is $2.13 Current Price is $2.08 Difference: $0.05
If IDR meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.11, suggesting upside 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 ILU as Neutral (3) -

The company has completed the acquisition of Sierra Rutile for $473m. The net impact for Credit Suisse's estimates is a 17% reduction in EBITDA in 2016 from expensed transaction fees.

FY17 EBITDA estimate increases 5%. Credit Suisse retains a Neutral rating and raises the target to $7.00 from $6.65.

Target price is $7.00 Current Price is $6.95 Difference: $0.05
If ILU meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $6.86, suggesting downside of -6.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.3

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

Macquarie rates ILU as Upgrade to Neutral from Underperform (3) -

The company  has completed its merger with Sierra Rutile. The total transaction costs of $473m are fully funded from existing debt facilities.

This cements the company's position as a dominant player in the global chloride titanium dioxide market. Yet, Macquarie notes it also skews the company's resource base away from a predominantly sulphate route Chinese pigment market.

With the planned expenditure at the Sierra Leone operations and likely construction of the Cataby project in Western Australia in FY18, Macquarie expects gearing will peak at 31% in FY17/FY18. The broker also believes that, without a significant uplift in mineral  sands prices, the company's dividend could potentially be suspended during the construction of new projects.

Rating is upgraded to Neutral from Underperform. Target rises to $6.40 from $4.60.

Target price is $6.40 Current Price is $6.95 Difference: minus $0.55 (current price is over target).
If ILU meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.86, suggesting downside of -6.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.3

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

UBS rates ILU as Buy (1) -

Iluka has completed the acquisition of Sierra Rutile. When the deal was first announced, the broker estimated earnings accretion of 17%. On the basis of more recent Iluka estimations, the broker is now suggesting more like 70-80% accretion.

Sierra adds a scalable, long-life asset with options to improve performance, the broker believes. The broker has not yet incorporated the acquisition into valuation and retains Buy and a $7.50 target.

Target price is $7.50 Current Price is $6.95 Difference: $0.55
If ILU meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.86, suggesting downside of -6.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.3

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

Macquarie rates MGX as Outperform (1) -

The company has received development approval from the Western Australian government. Macquarie believes this materially reduces the risk that the development of Iron Hill could be delayed.

The broker already factors in the development for Iron Hill. Koolan Island re-start is expected to occur in 2018 and will be a major catalyst, the broker's opinion.

Outperform and 48c target retained.

Target price is $0.48 Current Price is $0.34 Difference: $0.14
If MGX meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $0.39, suggesting upside of 7.4% (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

Morgans rates OTW as Add (1) -

Over The Wire has acquired Melbourne-based telco Telarus. The acquisition is expected to provide good strategic value,  in terms of boosting the company's scale in Melbourne and strengthening the product range.

Morgans observes many cultural similarities to Over The Wire and expects Telarus to fit well within the business. The broker upgrades FY18 forecasts for earnings per share by 18% and retains an Add rating. Target is reduced to $3.03 from $3.30.

Target price is $3.03 Current Price is $2.65 Difference: $0.38
If OTW meets the Morgans target it will return approximately 14% (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

Macquarie rates OZL as Outperform (1) -

The company has released an updated resource estimate for the Carrapateena sub-level cave development. Resource confidence has improved with 45% now in the measured category.

Macquarie notes the updated resource estimate should enable the company to upgrade categories of the reserve but it is unlikely to result in a material change in tonnage.

Outperform rating and $9.20 target retained.

Target price is $9.20 Current Price is $8.43 Difference: $0.77
If OZL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $7.60, suggesting downside of -10.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

Ord Minnett rates QBE as Lighten (4) -

The stock has rallied 25% since the US election, following movements in the yield curve. Ord Minnett also believes, if rates are linked to inflation, the upside may be much less than the market expects.

In addition, stock-specific issues will weigh heavily on the 2017 margin outlook. The broker marks earnings estimates to current markets, with some upside noted.

Ord Minnett retains a Lighten rating and raises the target to $9.32 from $8.83.

Target price is $9.32 Current Price is $12.58 Difference: minus $3.26 (current price is over target).
If QBE meets the Ord Minnett target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.35, suggesting downside of -8.0% (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 RWC as Outperform (1) -

Macquarie observes US winter weather could benefit sales for the company.

While not factoring in a freeze event into FY17 expectations, the broker estimates a freeze event could provide 1-4% volume uplift in the Americas segment which would result in a 0.4-6.0% uplift to group profit.

The broker's meteorology team is forecasting  an unseasonably cold winter across the US over the next few weeks. Outperform retained. Target is steady at $3.40.

Target price is $3.40 Current Price is $3.14 Difference: $0.26
If RWC meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.16, suggesting upside of 1.0% (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 SGP as Buy (1) -

Stockland's investor day highlighted ongoing positive trends across the business, from elevated volumes and price for residential to improving sales at retail assets, the broker notes.

Demand for Sydney apartments is even stronger than it was this time last year. The broker sees no reason to alter its Buy rating and $4.64 target.

Target price is $4.64 Current Price is $4.38 Difference: $0.26
If SGP meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.73, suggesting upside of 7.1% (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 SRX as Outperform (1) -

First half trading guidance has disappointed Macquarie. The company expects FY17 dose sales growth  of 5-11% compared with growth of 16.4% in FY16.

Macquarie anticipates only a modest improvement in the second half. Positive data from clinical studies early next year is the key catalyst for growth to return to previous levels.

Outperform retained. Target falls to $30 from $42.

Target price is $30.00 Current Price is $16.00 Difference: $14
If SRX meets the Macquarie target it will return approximately 88% (excluding dividends, fees and charges).

Current consensus price target is $31.10, suggesting upside of 84.2% (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 SRX as Buy (1) -

The broker is advising investors to hang in there following Sirtex' big fall on Friday. Such volatility is not unprecedented for the company. Sirtex has downgraded sales guidance citing the impact of alternate but inferior therapies available in the US.

The same thing happened in 2012, the broker notes, and Sirtex soon returned to growth. The broker has cut its FY17 earnings forecasts but suggests the sell-off was overdone. Target falls to $33.50 from $39.00, Buy retained.

Target price is $33.50 Current Price is $16.00 Difference: $17.5
If SRX meets the UBS target it will return approximately 109% (excluding dividends, fees and charges).

Current consensus price target is $31.10, suggesting upside of 84.2% (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 VRL as Upgrade to Buy from Hold (1) -

The stock has underperformed the market materially over the last two months, in large part because of concerns about the impact of the Dreamworld incident on theme parks.

Deutsche Bank notes the impact is difficult to determine but retains a more relevant concern about the high level of gearing and weak cash flow at Village Roadshow.

The broker envisages a need to reduce debt through asset sales or an equity issue and believes the stock has meaningful latent asset value, which could deliver valuation upside through divestments.

Rating is upgraded to Buy from Hold. Target is reduced to $4.75 from $4.90.

Target price is $4.75 Current Price is $4.33 Difference: $0.42
If VRL meets the Deutsche Bank target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.99, suggesting upside of 12.4% (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