Australian Broker Call

Deutsche Bank rates ASL as Buy (1) -

The company has announced a new contract for its 50%-owned African underground mining business. The contract is for the provision of all underground mining services for the Siou mine in Burkina Faso.

Estimated value is US$211m over 70 months. Deutsche Bank expects associated project capital expenditure to be comfortably funded within the joint venture.

Buy rating maintained. Target is $3.20.

Target price is $3.20 Current Price is $2.51 Difference: $0.69
If ASL meets the Deutsche Bank target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Ord Minnett rates CHC as Accumulate (2) -

The company will issue around $230m in long-term debt to fund future investments, which are yet to be determined. Ord Minnett assesses this move shifts the business to a slightly higher-risk and higher-return model.

Accumulate rating and $6.90 target maintained.

Target price is $6.90 Current Price is $6.40 Difference: $0.5
If CHC meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

Macquarie rates EPW as Downgrade to Underperform from Neutral (5) -

The company has lowered its FY18-19 outlook and guidance for US gross margins but reiterated its expectations for Australia. Macquarie observes the company has a buyback, which will reduce liquidity and slow the weakness, but considers the fundamental value remains stretched.

Cash flow is attractive but another disappointment in the US suggests predictability is low. Target is reduced to $1.39 from $1.51, but the broker believes there is potential upside to $1.50 if management divests the US operation. Rating is downgraded to Underperform from Neutral.

Target price is $1.39 Current Price is $1.65 Difference: minus $0.26 (current price is over target).
If EPW meets the Macquarie target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

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

The company's business update indicated domestic operations are performing well but the loss-making US venture is less profitable than previously expected. Morgans materially reduces expectations for the US retail business.

The broker downgrades to Hold from Add, given the outlook for total returns. Target is reduced to $1.64 from $1.93.

Target price is $1.64 Current Price is $1.65 Difference: minus $0.01 (current price is over target).
If EPW meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

Ord Minnett rates EPW as Downgrade to Hold from Buy (3) -

The company has guided to lower sales volumes and margins in its US business, the second downgrade since the beginning of 2018. Ord Minnett understands the reasons but believes this reduces the market's confidence in the outlook for the US retail business.

Ord Minnett now values the US business at $34m, equivalent to less than 9% of the overall discounted cash flow valuation. The broker downgrades to Hold from Buy and lowers the target to $1.69 from $1.75.

Target price is $1.69 Current Price is $1.65 Difference: $0.04
If EPW meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

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

Morgans rates HIG as Add (1) -

Highlands Pacific is moving to an 11.3% interest in the Ramu nickel-cobalt project, from 8.56%. A streaming deal has been structured whereby partner Cobalt 27 will acquire the right to 55% of Highland Pacific's attributable payable cobalt and 27.5% of attributable nickel.

Morgans estimates this will cover Highland Pacific's all-in sustaining costs of production. The deal is expected to focus market interest on the inherent value of Ramu. The broker maintains an Add rating and raises the target to $0.33 from $0.21.

Target price is $0.33 Current Price is $0.13 Difference: $0.2
If HIG meets the Morgans target it will return approximately 154% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

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

Market Sentiment: 1.0

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

Citi rates LVT as Buy (1) -

Citi has only just initiated coverage (see one week ago) and LiveTiles announces the proposed acquisition of Hyperfish, a software solution to improve platform effectiveness. Citi analysts can see the rationale behind the acquisition.

Hyperfish is compatible with Microsoft platforms and others, and Citi suggests it could be accretive for LiveTiles from as early as FY19. Target price climbs to 59c from 56c. Buy/High Risk rating retained.

Target price is $0.59 Current Price is $0.42 Difference: $0.17
If LVT meets the Citi target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates RIC as Neutral (3) -

Credit Suisse believes the company's decision to appoint a corporate advisor to explore options relating to Novacq is positive in that it follows expressions of interest and may lead to accelerated growth, relative to what the company could be able to fund alone.

The broker incorporates earnings reductions of around -12-13% because of the previously guided negative impact from the loss of raw materials rendering supply at Maroota. Neutral rating maintained and target is reduced to $1.35 from $1.45.

Target price is $1.35 Current Price is $1.45 Difference: minus $0.1 (current price is over target).
If RIC meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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

Citi rates RSG as Buy (1) -

Resolute Mining has reported drilling at Tabakoroni, 35km south of the Syama Gold Mine in Mali, Africa, has returned high-grade oxide and sulphide gold mineralisation.

Citi analysts revisit the time when they visited the Syama greenstone belt in March last year. At that time, they returned impressed with the gold prospectivity of the district. Strong Buy/High Risk rating retained. Price target $1.70.
 

Target price is $1.70 Current Price is $1.18 Difference: $0.52
If RSG meets the Citi target it will return approximately 44% (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

Macquarie rates RSG as Outperform (1) -

The company has produced a strong set of drilling results from the Tabakoroni site near Syama. Macquarie believes the grade and widths signal the potential for underground mining and this should provide good grades for the Syama oxide circuit.

The Nord discovery also bodes well, in the broker's opinion, for the longevity of oxide mining at Tabakoroni. Outperform and $1.40 target retained.

Target price is $1.40 Current Price is $1.18 Difference: $0.22
If RSG meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Credit Suisse rates SPK as Underperform (5) -

The company has decided to bring forward costs associated with the Quantum project labour savings from FY19 to FY18. This means a major upgrade to Credit Suisse's FY19 estimates for operating earnings.

Underperform rating retained and target is raised to NZ$3.21 from NZ$3.17.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

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

The company has confirmed the acceleration of its Quantum program, bringing forward implementation costs of $25-30m in FY18. Macquarie observes competitive pressures remain but cost reductions provide an offset.

The broker envisages modest earnings growth in the next two years. Rating is upgraded to Neutral from Underperform. Target is raised to NZ$3.60 from NZ$3.50.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

Morgan Stanley rates SPK as Overweight (1) -

The company will accelerate its cost reduction program, called Quantum, bringing forward an extra NZ$25-30m in implementation costs. This is not a complete surprise to Morgan Stanley and the broker notes no guidance is yet being issued for FY19.

The news is considered incrementally positive and should improve the sustainability of medium-term earnings and distributions. Overweight rating. Industry view is In-Line. Price target is NZ$3.80.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

UBS rates SPK as Neutral (3) -

Spark NZ has announced the acceleration of its Quantum cost out program in FY18, which the broker believes is becoming more essential if the company is going to hit its aspiration targets. Spark will do what it can to avoid a credit rating and/or dividend downgrade.

A fiercely competitive broadband market means reinvestment is required to attract and retain customers, but the broker believes margins may now have bottomed out. Neutral retained, target rises to NZ$3.50 from NZ$3.35.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. 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

Macquarie rates SVW as Outperform (1) -

Macquarie observes the upgrade cycle continues, with strong momentum across WesTrac, Coates and the energy divisions, supported by strengthening industry conditions.

The company has lifted margin expectations at WesTrac and reinforced its track record of capital allocation and investment decisions.

Macquarie maintains an Outperform rating and raises the target to $22.08 from $18.80.

Target price is $22.08 Current Price is $19.59 Difference: $2.49
If SVW meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $21.56, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.9

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

Citi rates WES as Downgrade to Sell from Neutral (5) -

Wesfarmers has announced the sale of Bunnings UK & Ireland. The 24 Bunnings pilot stores will revert back to the Homebase brand following completion of the transaction.

Wesfarmers expects to recognise a -GBP200-230m loss on disposal in its FY18 results. While the acquisition was a poor one, Citi observes the costs of exit are much better than expected and remove a risk hanging over the stock, improving the balance sheet.

Following recent share price appreciation, Citi downgrades to Sell from Neutral. Target lifts to $41.50 from $40.10.

Target price is $41.50 Current Price is $45.52 Difference: minus $4.02 (current price is over target).
If WES meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Credit Suisse rates WES as Outperform (1) -

The plans to divest the Bunnings UK & Ireland business to Hilco is a better outcome than Credit Suisse had expected. With the sale, Wesfarmers retains a perpetual right to a 20% share of any future equity distribution from the Homebase business.

Target is raised to $47.36 from $45.20. Outperform retained.

Target price is $47.36 Current Price is $45.52 Difference: $1.84
If WES meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Deutsche Bank rates WES as Hold (3) -

Wesfarmers has reached an agreement to divest the Homebase business in the UK for a nominal amount to Hilco Capital. The company is expected to incur a loss on disposal of -GBP200-230m.

The business was written down to GBP150m in February, which suggests to Deutsche Bank exit costs of GBP 50-80m.

Hold rating. Target is $42.

Target price is $42.00 Current Price is $45.52 Difference: minus $3.52 (current price is over target).
If WES meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Macquarie rates WES as No Rating (-1) -

Wesfarmers has secured a buyer for the Bunnings UK & Ireland stores. Hilco will acquire all Homebase assets, including the brand, store network, freehold property, leases and inventory.

The 24 Bunnings pilot stores will convert to Homebase. Wesfarmers estimates a -GBP200-230m loss in the FY18 results.

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

Current Price is $45.52. Target price not assessed.

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Morgan Stanley rates WES as Underweight (5) -

Wesfarmers has sold its Homebase business to Hilco Capital for a nominal amount. A value share mechanism is included, with Wesfarmers entitled to 20% of the equity distributions indefinitely.

Morgan Stanley observes the deal should eliminate losses at the Bunnings UK & Ireland business from FY19 onwards.

Underweight rating retained. Industry view is Cautious. Target is $39.

Target price is $39.00 Current Price is $45.52 Difference: minus $6.52 (current price is over target).
If WES meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Ord Minnett rates WES as Hold (3) -

Wesfarmers will sell its Bunnings UK & Ireland business and incur a loss on disposal of -GBP200-230m. Hilco Capital will pay a nominal amount for the business.

Ord Minnett considers the outlook somewhat mixed for Wesfarmers while a lack of valuation support remains evident. The broker maintains a Hold rating and raises the target to $43.00 from $42.50.

Target price is $43.00 Current Price is $45.52 Difference: minus $2.52 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

UBS rates WES as Neutral (3) -

The divestment of Bunnings UK&I comes at a cost to Wesfarmers but is accretive to the broker's earnings forecasts given further losses were expected. FY19 forecast earnings rise by 3%.

The broker believes the company otherwise has a strong suite of businesses, but the short to medium term outlook is relatively muted. Neutral retained. The broker has not factored the planned Coles demerger into forecasts as yet.

Target rises to $43.00 from $41.30.

Target price is $43.00 Current Price is $45.52 Difference: minus $2.52 (current price is over target).
If WES meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Macquarie rates WOR as Outperform (1) -

Macquarie observes contract announcements have picked up in the market and should back recovery prospects, notwithstanding the uncertainty regarding timing.

The broker's margin calculations over FY20-21 revert to long-term average levels. Macquarie maintains an Outperform rating and raises the target is $17.70 from $16.08.

Target price is $17.70 Current Price is $16.78 Difference: $0.92
If WOR meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $16.70, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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