Australian Broker Call

UBS rates CMA as Buy (1) -

Centuria Metropolitan has announced the acquisition of a portfolio of three assets for $150m, funded by $90m equity raise at $2.35 and debt. UBS analysts note management seems to have adopted a contrarian view on Perth, not a traditional market for CMA.

In addition, the analysts suggest this transaction increases CMA's chances of entering the ASX 300 A-REIT Index, which UBS has previously argued, should reduce CMA's illiquidity discount.

Price target loses 10c to $2.60. Buy rating retained.

Target price is $2.60 Current Price is $2.41 Difference: $0.19
If CMA meets the UBS target it will return approximately 8% (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

Citi rates COH as Neutral (3) -

Cochlear will invest $50m to build a manufacturing facility in China -- the company's first outside Australia. Production is expected to commence in four years.

China is Cochlear's second biggest market (after US), the broker notes, and $50m is a small investment relative to free cash flow. The stock is nevertheless priced for perfection. Neutral and $127.50 target retained.

Target price is $127.50 Current Price is $153.50 Difference: minus $26 (current price is over target).
If COH 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 $132.60, suggesting downside of -14.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Ord Minnett rates COH as Hold (3) -

Cochlear will invest $50m in expanding its manufacturing capacity by constructing a facility in Chengdu, China. Ord Minnett’s sees the move as proof management remains confident in the outlook for emerging markets.

Post the investment, Cochlear’s production capacity will expand by circa 50%. Referencing the recent Investor Day presentations by company management, the analysts points out Cochlear believes the growth opportunity in the adult segment in emerging economies remains largely untapped.

Hold rating retained. Price target $148 (was $125).

Target price is $148.00 Current Price is $153.50 Difference: minus $5.5 (current price is over target).
If COH meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $132.60, suggesting downside of -14.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Credit Suisse rates FBU as Outperform (1) -

June Q home sales in Auckland were weaker but the rest of the country, including Canterbury, is showing signs of stabilisation, the broker notes. Following tighter lending restrictions last year, mortgage approvals have now been stable for the past six months.

Fletcher nevertheless lacks any clear catalysts over the next few months but the broker retains Outperform and an NZ$9.80 target.

Current Price is $7.33. Target price not assessed.

Current consensus price target is $9.00, suggesting upside of 22.1% (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: 0.7

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

Morgans rates HPI as Add (1) -

The broker notes Hotel Property Investments priced long-term debt finance of A$230m via the US Private Placement (USPP) market. This, the analysts point out, materially increases its weighted average debt tenor while diversifying funding sources.

In addition, HPI has declared a 2H17 distribution of 9.9c, to be paid on 6 September. Morgans expects FY18 distribution guidance to be provided with the FY result on 24 August.

The stockbroker retains the Add rating with a revised $3.06 price target, up from $3.01.

Target price is $3.06 Current Price is $2.92 Difference: $0.14
If HPI meets the Morgans target it will return approximately 5% (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

Credit Suisse rates MHJ as Outperform (1) -

Michael Hill posted 6% sales growth for the June Q with Canada the outperformer, while Aust suffered from margin pressure and the US from declining sales, the broker notes. The broker has trimmed forecast earnings to reflect sentiment and a slower Emma & Roe store rollout.

The stock is nevertheless trading at a discount to the broker's core valuation of the A&NZ business and growth in Canada with limited upside being attributed to Emma & Roe. Outperform retained. Target falls to NZ$1.45 from NZ$1.53.

Current Price is $1.17. Target price not assessed.

Current consensus price target is $1.48, suggesting upside of 31.0% (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

Citi rates NST as Downgrade to Neutral from Buy (3) -

Northern Star's June Q production beat Citi's forecast by 19% and costs by 4%, with Jundee driving outperformance. FY18 guidance is in line with expectation as Kalgoorlie and Jundee grow while the focus at Paulsens shifts to exploration.

Citi expects positive news and a reserve upgrade at the August strategy update but believes the good news is priced in for now. Downgrade to Neutral. Target rises to $5.10 from $4.85.

Target price is $5.10 Current Price is $4.81 Difference: $0.29
If NST meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.50, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Credit Suisse rates NST as Neutral (3) -

Hitting the mid-range FY17 production guidance looked like a big ask for Northern Star after the March Q results but a surging June Q means the top end will now be met, the broker notes. Jundee grades provided outperformance, offsetting declines at Paulsens.

FY18 guidance is in line with the broker on a mix of strength at Kalgoorlie and Jundee and weakness at Paulsens, with the company committed to further exploration at the latter and plenty of cash to do so. Neutral and $4.15 target retained.

Target price is $4.15 Current Price is $4.81 Difference: minus $0.66 (current price is over target).
If NST meets the Credit Suisse target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.50, suggesting downside of -1.8% (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 NST as Upgrade to Hold from Sell (3) -

Northern Star's June Q production came in 25% ahead of Deutsche Bank thanks to an excellent quarter at Jundee featuring a 50% grade increase. The FY17 result will come in at the top end of guidance.

The broker believes a more muted FY18 guidance range is conservative given a number of short term catalysts ahead, such as the Kalgoorlie plant extension study and reserve upgrade. The company's August strategy day awaits. A target increase to $4.40 from $4.30 prompts an upgrade to Hold.

Target price is $4.40 Current Price is $4.81 Difference: minus $0.41 (current price is over target).
If NST meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.50, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Macquarie rates NST as Neutral (3) -

Northern Star has posted a strong beat on June Q production thanks to higher than expected grades at Jundee. This resulted in production 39% above the broker's forecast and costs -39% below, and represented more than double the mine's average run-rate.

Unfortunately FY18 production guidance is underwhelming, the broker notes, given the impending exhaustion of the Paulsens mine and the deferral of Central Tanami are not sufficiently offset by increased production elsewhere. The broker retains Neutral and a $4.00 target.

Target price is $4.00 Current Price is $4.81 Difference: minus $0.81 (current price is over target).
If NST meets the Macquarie target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.50, suggesting downside of -1.8% (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

UBS rates NST as Sell (5) -

Does the Northern Star share price represent good value? UBS analysts suggest it's a tussle between profit multiples and mine life. The upcoming Strategy Day in early August might become a decisive factor in the debate, suggest the analysts.

Meanwhile, there is a chance that anything positive coming from the August event has already been priced in, suggest the analysts. Hence why UBS argues, despite the company's well demonstrated track record, there are likely better risk weighted opportunities available elsewhere in the gold sector today.

Sell rating retained. Target $4.49.

Target price is $4.49 Current Price is $4.81 Difference: minus $0.32 (current price is over target).
If NST meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.50, suggesting downside of -1.8% (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

UBS rates NVT as Downgrade to Neutral from Buy (3) -

UBS continues to like the longer term structural thematic that supports the outlook for a company like Navitas; it's all about increasing wealth in developing countries driving demand for education services within developed countries.

Plus the risk for Navitas losing another contract like Macquarie or Curtin within the Australian operations is lower than the analysts thought previously. Nevertheless, UBS sees headwinds on the horizon for FY18, and that's why the rating has been pulled back to Neutral from Buy.

Estimates have been lifted, but even so the forecast remains for a minor -3% EPS decline in FY18. This makes the current share price less attractive after recent appreciation. Target lifts to $5 from $4.50.

Target price is $5.00 Current Price is $4.96 Difference: $0.04
If NVT meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $4.73, suggesting downside of -6.1% (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

Macquarie rates SAR as Outperform (1) -

The Karari underground prospect at Saracen's Carosue Dam is providing impressive drilling results and ongoing success will underpin mine life extensions for the project, the broker notes. Further portfolio mine life may also be provided by the Thunderbox feasibility study due this quarter.

The broker retains Outperform and a $1.30 target.

Target price is $1.30 Current Price is $1.17 Difference: $0.13
If SAR meets the Macquarie target it will return approximately 11% (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

Citi rates TWE as Sell (5) -

Treasury Wines is set for a pause in its earnings upgrade cycle, the broker suggests, given a weaker vintage, French brand launch costs and higher IT costs.

These are transient issues but should weigh on the stock's lofty 27x FY18 multiple, the broker warns.

Things should pick up in FY19 based on a good 2016 vintage. Sell and $10.50 target retained.

Target price is $10.50 Current Price is $12.89 Difference: minus $2.39 (current price is over target).
If TWE meets the Citi target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.93, suggesting downside of -7.4% (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 WHC as Buy (1) -

Whitehaven's production volume in the June quarter missed the company's own guidance. Citi recently also lowered its price outlook for coal (with a bearish bias) and the analysts have now incorporated both into their updated modeling.

Target price falls to $3.30 (-20c) but Citi reiterates the Buy rating, while highlighting the key risks are weaker semisoft spot prices and uncontracted volumes from Maules Creek.

Coal sales were down -13% qoq primarily due to a train derailment in early June and port congestion towards the quarter end, explain the analysts. They add management has guided towards higher costs.

Target price is $3.30 Current Price is $2.92 Difference: $0.38
If WHC meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Credit Suisse rates WHC as Outperform (1) -

Whitehaven's June Q production fell short of forecast on operational issues and weaker pricing, but the broker notes the stock started the FY with $860m in debt and a $1.1bn market cap and will end with $360m and $3bn. The outlook for thermal coal prices appears solid, the broker suggests.

There's a chance of a dividend this half but the broker is not forecasting one. Outperform retained, target falls to $3.20 from $3.60.

Target price is $3.20 Current Price is $2.92 Difference: $0.28
If WHC meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 8.6% (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 WHC as Hold (3) -

Whitehaven's June Q production fell -10% short of the broker's forecast due to commissioning issues at Narrabri and inventory build-ups. FY17 production has fallen short of guidance. Met coal pricing realisation was also disappointing, the broker suggests.

Whitehaven is nevertheless generating strong free cash flow and paying down debt, but appears fully valued to the broker. Hold and $2.80 target retained.

Target price is $2.80 Current Price is $2.92 Difference: minus $0.12 (current price is over target).
If WHC meets the Deutsche Bank target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.09, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Ord Minnett rates WHC as Accumulate (2) -

Whitehaven Coal's June quarter production volume missed Ord Minnett's expectation by some -5%. Achieved prices missed too; met coal by -3% and thermal by -4%. No surprise thus, the analysts have reduced their estimates post the market update.

The stockbroker continues to like the stock, as it doesn't look expensive, the balance sheet is moving towards $290m net cash and the outlook retains a positive production growth profile. Accumulate rating remains in place. Target price tumbles to $2.94 from $3.60.

The FY17 release is expected to mark the return of dividends for shareholders.

Target price is $2.94 Current Price is $2.92 Difference: $0.02
If WHC meets the Ord Minnett target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 8.6% (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

UBS rates WHC as Neutral (3) -

UBS thought the June quarter production was, sort of, in-line, but it was achieved pricing that disappointed the market, suggest the analysts.

UBS analysts were, according to their own observation, positioned some -8% below market consensus.

FY17 estimates have been lowered by -4% post the update. August could well see the return of a shareholder dividends, suggest the analysts. Target remains at $3.15 and the rating Neutral.

Target price is $3.15 Current Price is $2.92 Difference: $0.23
If WHC meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.09, suggesting upside of 8.6% (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 WOR as Buy (1) -

WorleyParsons' US peer Aker solutions has posted a disappointing June Q result and maintained FY17 guidance of a -10-15% fall in revenues. The broker nevertheless sees a positive read-through for WorleyParsons.

WorleyParsons should benefit from an increase in front-end engineering studies in a growing tendering pipeline. The broker also believes a recovery in oil & gas capex has commenced. Buy and $13.74 target retained.

Target price is $13.74 Current Price is $10.60 Difference: $3.14
If WOR meets the Deutsche Bank target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $12.30, suggesting upside of 7.9% (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