Australian Broker Call

Citi rates A2M as Neutral (3) -

A2 has again upgraded revenue guidance, by 4%, due to ongoing strong demand for Platinum. Taking into account high margins for infant formula, reduced marketing costs, plus freight costs on higher sales, the broker estimates a 10% upgrade in earnings.

The monthly sales run rate is around 18% on increased supply from Synlait and strong demand. The risk is periods of out-of-stock, the broker warns, encouraging brand-switching and new players. The broker has lifted its target to $3.65 from $3.10 but retains Neutral.

Target price is $3.65 Current Price is $3.69 Difference: minus $0.04 (current price is over target).
If A2M meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.65, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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

Credit Suisse rates A2M as Outperform (1) -

The company has raised its revenue guidance to NZ$545m for FY17. Credit Suisse believes increased production and delivery of infant formula stock to distributors is signal of the ongoing, and previously unsatisfied, demand for the company's products.

The broker also believes this is an indication that the economic incentives on the company's infant formula remain attractive to channel partners in the market.

Credit Suisse retains an Outperform rating and raises the target to NZ$4.10 from NZ$3.92.

Current Price is $3.69. Target price not assessed.

Current consensus price target is $3.65, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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 A2M as Neutral (3) -

The company has increased FY17 revenue guidance to NZ$545m and reduced second half expectations for marketing expenses. UBS increases FY17 forecasts for earnings by 9%. The broker believes the trading update reinforces the strong momentum in the company's Platinum brand in China.

A Neutral rating is maintained based on strong share price performance and potential for infant formula de-stocking in the lead up to CFDA registration.

UBS lifts its target to NZ$3.55 from NZ$.3.45.

Current Price is $3.69. Target price not assessed.

Current consensus price target is $3.65, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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 ADH as Upgrade to Buy from Neutral (1) -

The company has responded to a large rise in the share price, stating it is not aware of any information that would lead to earnings differing materially from current guidance. UBS observes the share price increased  further and closed up 47% on the day but, while the move was substantial, the share price is 30% below its closing level at the first half result.

The broker believes, if the business can stabilise, the upside could be material. Rating is upgraded to Buy from Neutral based on forecast shareholder returns.

UBS downgrades FY17 forecasts for earnings per share slightly and removes the risk discount in the price target methodology. While the company is moving away from its previous bed-linen range in-store it still has headwinds across the macro conditions as well as competitive intensity to deal with, the analysts highlight.

UBS finds it difficult to have a high degree of confidence in the sales margin profile. Target is reduced to $1.16 from $1.25.

Target price is $1.16 Current Price is $0.84 Difference: $0.32
If ADH meets the UBS target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

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

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

Innovation is expected to support stronger volumes for Amcor's rigids business in the near term, Morgan Stanley believes. The broker believes superior capabilities in technology have created a mechanism to offset volume pressure in the Americas beverage market.

Therefore, the broker is more positive on the stock in the near term and upgrades to Equal-weight from Underweight. Increasing regulation and a growing anti-sugar movement will  present structural challenges, nonetheless, the broker adds.

Target is raised to $15.35 from $12.20. Sector view is Cautious.

Target price is $15.35 Current Price is $16.35 Difference: minus $1 (current price is over target).
If AMC meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.05, 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: 0.4

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

Citi rates BBN as Initiation of Coverage: Buy (-1) -

Baby Bunting has underperformed specialty retail peers by -24% since October, the broker notes. Yet the company has the best store roll-out in the sector, in its early stage, is less exposed to a housing downturn, and satisfies strict Oz safety standards that should shut out around 70% of Amazon's offerings, the broker suggests.

Slower consumer spending is a risk but the broker notes baby goods tend to be more defensive and have traditionally grown with population growth. The broker initiates coverage with a Buy rating and $2.00 target.

Target price is $2.00 Current Price is $1.82 Difference: $0.18
If BBN meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting upside of 54.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Citi rates BHP as Buy (1) -

Citi is bearish on the iron ore price, noting Chinese port inventories have built and more low-cost supply is coming onto the market. The broker has downgraded its price forecasts, suggesting a level below US$50/t is required to close down high cost Chinese domestic production.

Discounts for lower grade ore have also widened and while the broker sees this as more cyclical than structural, the trend may remain in place for a while.

BHP target cut to $26.50 from $28.50. Buy retained.

Target price is $26.50 Current Price is $22.99 Difference: $3.51
If BHP meets the Citi target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $27.52, suggesting upside of 19.6% (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 CLW as Upgrade to Accumulate from Hold (2) -

Ord Minnett economists (read: JP Morgan's) have now changed their view in that there will be no more RBA rate cuts in the foreseeable future. This, they say, will translate into more interest from investors into property trusts with long weighted-average lease expiries (WALE).

Charter Hall Long WALE is one such AREIT and thus the rating has been lifted to Accumulate from Hold. Target price jumps to $4.45 from $4.15.

Target price is $4.45 Current Price is $4.19 Difference: $0.26
If CLW meets the Ord Minnett target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.16, suggesting downside of -1.8% (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

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

Citi is bearish on the iron ore price, noting Chinese port inventories have built and more low-cost supply is coming onto the market. The broker has downgraded its price forecasts, suggesting a level below US$50/t is required to close down high cost Chinese domestic production.

Discounts for lower grade ore have also widened and while the broker sees this as more cyclical than structural, the trend may remain in place for a while.

Fortescue target cut to $3.90 from $5.80, downgrade to Sell.

Target price is $3.90 Current Price is $4.70 Difference: minus $0.8 (current price is over target).
If FMG meets the Citi target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.04, suggesting upside of 30.5% (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

Credit Suisse rates FXL as Downgrade to Neutral from Outperform (3) -

Credit Suisse previously had an Outperform rating based on cheap valuation and a view the company could start to produce growth.

However, despite valuation looking compelling, the stock is still in a downgrade cycle and the broker is increasingly cautious about Certegy, which could offset growth in other areas.

The broker has low conviction on earnings and still envisages downside risk, preferring to wait until growth concerns are alleviated. Hence the move to Neutral. Target is reduced to $1.85 from $2.70.

Target price is $1.85 Current Price is $1.70 Difference: $0.15
If FXL meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $2.33, suggesting upside of 45.7% (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

Deutsche Bank rates GMG as Hold (3) -

Deutsche Bank continues to believe the company is well-positioned globally to capitalise on the growth in e-commerce, largely driven by Amazon. Asset sales in Australia are expected to fund development and occupancy rates at 96% remain high.

The broker retains a Hold rating as the stock is trading in line with the target of $8.53.

Target price is $8.53 Current Price is $8.66 Difference: minus $0.13 (current price is over target).
If GMG meets the Deutsche Bank target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.06, suggesting downside of -7.1% (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

Macquarie rates GMG as Outperform (1) -

The company hosted an asset tour in Sydney. Macquarie observes, given the company's significant relationship with Amazon globally, it still appears well-placed to satisfy some of the requirements.

That said, little information was provided regarding Amazon, with the broker noting confidentiality constraints were cited frequently. The broker observes the balance sheet is fine, with the business still focused on its core and in no rush to deploy surplus funds. Gearing remains low.

The stock is not cheap, but Macquarie believes the certainty of near-term earnings and the options on the balance sheet, with further potential upside from renewal opportunities suggests it will continue to outperform.

Outperform retained. Target is $8.52.

Target price is $8.52 Current Price is $8.66 Difference: minus $0.14 (current price is over target).
If GMG meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.06, suggesting downside of -7.1% (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

Ord Minnett rates HPI as Upgrade to Accumulate from Hold (2) -

Ord Minnett economists (read: JP Morgan's) have now changed their view in that there will be no more RBA rate cuts in the foreseeable future. This, they say, will translate into more interest from investors into property trusts with long weighted-average lease expiries (WALE).

Hotel Property Investments is one such AREIT and thus the rating has been lifted to Accumulate from Hold. Target price jumps to $3.35 from $2.90.

Target price is $3.35 Current Price is $3.04 Difference: $0.31
If HPI meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

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 JHG as Neutral (3) -

Marking to market and accounting for improved flows, the broker lifts Janus Henderson forecast earnings and its target price to $45 from $41. 

The broker retains Neutral, noting the stock now trades broadly in line with US peers on a PE basis.

Target price is $45.00 Current Price is $44.10 Difference: $0.9
If JHG meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $42.87, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

This company reports in GBP. 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 LVH as Add (1) -

The company has signed its second major new healthcare client in as many months, with a mandate from Queensland Health to establish a new talent community for regional nurses and midwives.

Morgans believes, should the company be successful in implementing its strategy, the rewards for shareholders will be substantial.

Nevertheless, the company is an early-stage technology business and is yet to become self-sustaining from a cashflow perspective.

Add recommendation retained. Target is $0.68.

Target price is $0.68 Current Price is $0.56 Difference: $0.12
If LVH meets the Morgans target it will return approximately 21% (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

Morgans rates MQG as Hold (3) -

Morgans has dug deeper into the operating income trends to obtain a better insight into the company's recent performance. The broker believes there is merit to the view that the stock should be valued differently versus the past, given increased skew to annuity income.

The company has traditionally been viewed as an investment bank but annuity-style earnings are now around 70%.

Morgans still likes the story in the longer term, as the business model is strong and the management team has a track record.. The current valuation is considered fair for this point of the cycle. Morgans maintains a Hold rating. Target is raised to $92.70 from $89.20.

Target price is $92.70 Current Price is $90.35 Difference: $2.35
If MQG meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $88.29, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in March.

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

Citi rates RIO as Buy (1) -

Citi is bearish on the iron ore price, noting Chinese port inventories have built and more low-cost supply is coming onto the market. The broker has downgraded its price forecasts, suggesting a level below US$50/t is required to close down high cost Chinese domestic production.

Discounts for lower grade ore have also widened and while the broker sees this as more cyclical than structural, the trend may remain in place for a while.

Rio target cut to $66 from $70, Buy retained.

Target price is $66.00 Current Price is $60.08 Difference: $5.92
If RIO meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $71.38, suggesting upside of 19.5% (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

Credit Suisse rates S32 as Outperform (1) -

South Africa's government has published the review of its black economic empowerment charter for the mining and minerals industry. Mining companies have been asked to comply with a black ownership threshold of 30%, up from the previous 26%, within a maximum of 12 months.

The charter applies only to mining so the company's Hillside aluminium smelter is exempt. Credit Suisse understands the potential direct impact on South32 could be a -2.4% and -22% decrease in its effective interest in the SA manganese and energy coal businesses, respectively.

 The Chamber of Mines is likely to seek an injunction and the charter may ultimately be tested in courts. As a result timing of implementation is unclear. Outperform rating and $2.95 target retained.

Target price is $2.95 Current Price is $2.61 Difference: $0.34
If S32 meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.01, suggesting upside of 14.6% (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

Morgan Stanley rates S32 as Overweight (1) -

Morgan Stanley observes the new South African mining charter highlights the company's exposure to policy risk. Black empowerment shareholdings are to be lifted to 30% from 26%.

If the equity is dragged down Morgan Stanley highlights that just 10% of FY18 group EBITDA is exposed, so the dilution effect is modest and a sharp fall in the equity, meanwhile, could be an opportunity.

Overweight retained. Target is $3.10. Industry view: Attractive.

Target price is $3.10 Current Price is $2.61 Difference: $0.49
If S32 meets the Morgan Stanley target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $3.01, suggesting upside of 14.6% (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

Ord Minnett rates S32 as Buy (1) -

It is the broker's assessment the new South African Mining Charter implies a negative impact for South32. Circa 14% of Ord Minnett’s valuation stems from assets directly exposed to the rule changes.

The broker also questions whether the company should not be more cautious and reconsider further investments in South Africa. Buy rating and $3.40 price target left unchanged.

Target price is $3.40 Current Price is $2.61 Difference: $0.79
If S32 meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $3.01, suggesting upside of 14.6% (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 SGM as Underperform (5) -

Competitor Schnitzer's May quarter results suggest to Credit Suisse the thesis regarding Sims Metal's operating leverage is not supported.

The results show an EBIT increase following an increase in ferrous tonnage but no operating leverage. Credit Suisse retains an Underperform rating. Target rises to $11.00 from $10.50 to align with valuation.

Target price is $11.00 Current Price is $13.47 Difference: minus $2.47 (current price is over target).
If SGM meets the Credit Suisse target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.38, suggesting downside of -2.7% (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

Deutsche Bank rates SGP as Hold (3) -

The company's investor briefing in Queensland indicated management is comfortable with its overweight position in that state. Economic growth in Queensland is expected to be the highest in Australia from 2018-2021.

Deutsche Bank retains a Hold rating and $4.86 target.

Target price is $4.86 Current Price is $4.86 Difference: $0
If SGP meets the Deutsche Bank target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.82, suggesting downside of -0.6% (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

Credit Suisse rates SXL as Upgrade to Outperform from Neutral (1) -

Credit Suisse does not believe the current share price is factoring in the potential upside from proposed regulatory changes. The company stands to benefit from the media reforms such as the abolition of licence fees and the removal of the 75% audience reach rule.

Meanwhile, the metro radio market has returned to positive territory in May with a five-city year-on-year growth rate of 0.5%. Credit Suisse considers the stock inexpensive and upgrades to Outperform from Neutral. Target is raised $1.35 from $1.30.

Target price is $1.35 Current Price is $1.17 Difference: $0.18
If SXL meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.23, suggesting downside of -3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Morgans rates TLS as Hold (3) -

In the short term Morgans believes the share price has risk to the downside and remains cautious ahead of the August results, amid expectations for a refreshed capital management framework and the potential for re-basing dividend expectations.

In the longer term the broker envisages upside risk. This assumes the NBN is forced to re-base its last-mile access costs.

Hold rating retained. Target is $4.50.

Target price is $4.50 Current Price is $4.38 Difference: $0.12
If TLS meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $4.41, suggesting upside of 0.1% (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 WSA as Neutral (3) -

Western Areas has upgraded the resource at Odysseus in WA. Given greater confidence the broker has modeled valuation and removed the asset from exploration value.

The offset is the broker has downgraded its nickel price forecasts, leading to a net reduction in target price to $2.20 from $2.45. Neutral retained.

Target price is $2.20 Current Price is $1.93 Difference: $0.275
If WSA meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $2.27, suggesting upside of 18.5% (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 WTP as Add (1) -

The company has downgraded earnings guidance to breaking even in FY17, having previously forecast a pre-tax profit of $8.5m. The downgrade has been triggered by pressure on under-performing contracts.

While under-performing projects raise the risk of depleting cash, Morgans believes the net position is sound in FY17. The broker retains a Add rating based on the latent value in the balance sheet. Target is reduced to $0.75 from $0.88.

Target price is $0.75 Current Price is $0.63 Difference: $0.125
If WTP meets the Morgans target it will return approximately 20% (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