Australian Broker Call

Macquarie rates AZJ as Upgrade to Outperform from Neutral (1) -

Strikes and more normalised volumes heading to China meant total port volumes were soft in July and August, Macquarie notes. However the big surge in coal prices improves the profitability of coal miners, which flows through to an improved outlook for Aurizon, the broker suggests.

Coal price strength may prove fleeting but Aurizon shares have well underperformed the infrastructure sector over the last month, Macquarie notes. Earnings growth from a lower base should lead to stronger cash flows and reduced debt, increasing the possibility of capital management initiatives.

Upgrade to Outperform. Target rises to $4.86 from $4.79.

Target price is $4.86 Current Price is $4.38 Difference: $0.48
If AZJ meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.58, suggesting upside of 3.4% (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

Credit Suisse rates CYB as Outperform (1) -

Credit Suisse has conducted a sensitivity analysis in relation to the potential upside risks to the medium-term cost target and the potential for regulatory capital relief. Achieving advanced accreditation on the mortgage portfolio alone would release pro-forma $781m in equity Tier 1 capital.

Separately, the company's European economists have upgraded UK growth forecasts for 2016 and 2017, suggesting that the negative impact of the Brexit vote appears to be materially less than what was expected in late June.

The broker remains positive on the stock as a medium-term cost restructuring story. $5.25 target and Outperform rating are retained.

Target price is $5.25 Current Price is $4.78 Difference: $0.47
If CYB meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.26, suggesting downside of -11.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.2

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

Morgans rates FNP as Hold (3) -

FY16 results were slightly below forecasts with a softer performance from Pactum Dairy. Final dividend surprised on the upside. Morgans observes the trend to healthy eating is strong and the company has new categories and additional channels to market.

The broker observes good prospects over the next few years and a significant opportunity in offshore markets. Based on fundamentals a Hold rating is retained. Target is raised to $5.20 from $4.15.

Target price is $5.20 Current Price is $4.99 Difference: $0.21
If FNP meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

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 IAG as Neutral (3) -

Tower NZ has announced it will need to increase its claims provisions for the 2011 Canterbury earthquake. While IAG is also exposed the insurer has already taken a more conservative view on provisioning, the broker notes, and also has cover from Berkshire Hathaway.

Therefore the broker does not see Tower's issues flowing through to IAG. Neutral and $5.80 target retained.

Target price is $5.80 Current Price is $5.32 Difference: $0.48
If IAG meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.56, suggesting upside of 4.1% (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 MFG as Outperform (1) -

The broker's benchmark assumption for Magellan's fund under management growth is 5% plus (annualised) per month. August saw Magellan register 12% growth.

Outperform and $26.54 target retained.

Target price is $26.54 Current Price is $22.81 Difference: $3.73
If MFG meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $25.53, suggesting upside of 13.1% (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

Deutsche Bank rates OGC as Sell (5) -

A preliminary economic assessment has been released on the viability of an underground operation at Haile in the US. Deutsche Bank notes the key difference with its previous assessment is that first production is now scheduled 12 months later, in 2019.

Also, higher grades are delineated and positive results from 2016 drilling suggest further upside to the assessment is possible.

Deutsche Bank retains a Sell rating on valuation. Target is raised to $3.90 from $3.60.

Target price is $3.90 Current Price is $4.84 Difference: minus $0.94 (current price is over target).
If OGC meets the Deutsche Bank target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.15, suggesting downside of -14.3% (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

Ord Minnett rates PRY as Hold (3) -

The interim report from the review of the Medicare Benefits Schedule has highlighted the potential for significant funding reforms. Ord Minnett expects the uncertainty is set to stick around for at least another year.

Services specifically recommended for review include administrative GP consultations and unnecessary imaging and pathology.

Ord Minnett considers Primary Health Care the most exposed to potential changes. Hold rating and $4.10 target retained.

Target price is $4.10 Current Price is $3.91 Difference: $0.19
If PRY meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.96, suggesting upside of 3.8% (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 PTM as Neutral (3) -

Platinum's funds outperformed their benchmarks in August but only 2.2% annualised growth in funds under management was achieved. Better flows are required to drive outperformance, the broker suggests.

On that basis the broker prefers all of BT Asset Management ((BTT)), Henderson Group ((HGG)) and Magellan Financial (MFG)) to Platinum. Neutral and $5.09 target retained.

Target price is $5.09 Current Price is $5.15 Difference: minus $0.06 (current price is over target).
If PTM meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.11, suggesting upside of 0.8% (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

Morgan Stanley rates PTM as Underweight (5) -

Morgan Stanley estimates net outflows of $300m in August, increasing the downside risks to FY17 forecasts. The company is exploring a broader channel mix and this is expected to improve gross inflows, which have been below peers.

The broker observes the recent performance and the prospects for new managed funds are supportive but a return to net inflows requires patience.

Underweight rating retained. Target is $4.50. In-Line sector view retained.

Target price is $4.50 Current Price is $5.15 Difference: minus $0.65 (current price is over target).
If PTM meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.11, suggesting upside of 0.8% (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

Morgans rates REG as Add (1) -

The Department of Health has clarified the guidelines regarding capital refurbishment fees and asset replacement contributions, indicating these would not be supported by legislation where the fee does not provide a direct benefit to the resident.

Morgans believes a sensible compromise will be reached between the government and aged care operators. The share price has fallen significantly over the past month but the broker retains a positive outlook on the medium term.

Morgans retains an Add rating and reduces the target to $5.13 from $5.36.

Target price is $5.13 Current Price is $3.91 Difference: $1.22
If REG meets the Morgans target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $5.21, suggesting upside of 31.5% (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

Ord Minnett rates SHL as Accumulate (2) -

The interim report from the review of the Medicare Benefits Schedule has highlighted the potential for significant funding reforms. Ord Minnett suspects the uncertainty is set to stick around for at least another year.

Services specifically recommended for review include administrative GP consultations and unnecessary imaging and pathology. Ord Minnett believes Sonic Healthcare's offshore operations limit its exposure as it generates only 40% of revenue from Australian operations. 

Accumulate rating and $26 target retained.

Target price is $26.00 Current Price is $21.75 Difference: $4.25
If SHL meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $21.86, suggesting upside of 2.0% (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 SIP as Downgrade to Sell from Neutral (5) -

Half-yearly report beat expectations with management upgrading guidance for the full year. Citi analysts note the company is diversifying away from PBS revenues and this involves investment in a multiyear distribution centres CapEx program, plus new ERP system.

Citi has decided to downgrade to Sell from Neutral. This seems partially motivated by the share price, seen as overvalued at present level, as well as by the realisation execution risks are soaring, while efficiency benefits are not a given.

Citi analysts do believe Sigma will beat its own guidance this year.

Current Price is $1.29. Target price not assessed.

Current consensus price target is $1.23, suggesting downside of -6.8% (ex-dividends)

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

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

First half results were better than expected and Credit Suisse increases earnings per share estimates by an average of 7%. Management has upgraded FY17 EBIT growth guidance to 10%.

The broker expects that higher growth in non-PBS revenue as well as the winding back of trade discounts to pharmacy should sustain gross profit growth through 2017.

The broker believes, with an un-geared balanced sheet, the business is well positioned to pursue suitable M&A opportunities. Rating is upgraded to Outperform from Neutral. Target is raised to $1.35 from $1.05.

Target price is $1.35 Current Price is $1.29 Difference: $0.065
If SIP meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $1.23, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in January.

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

Morgan Stanley rates SIP as Equal-weight (3) -

First half results signalled strong underlying revenue growth, driven by like-for-like pharmacy brand sales and were better than Morgan Stanley expected.

The broker notes the entry into hospital pharmacy is beginning in earnest and is expected to annualise around $200m in sales by year end.

Rating is Equal-weight.  In-Line sector view retained. Target is $1.15.

Target price is $1.15 Current Price is $1.29 Difference: minus $0.135 (current price is over target).
If SIP meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.23, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in January.

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

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

The first half result reveals a base business that is reliable and stable, UBS believes. Underlying sales were ahead of expectations with 30 basis points of margin expansion.

The company has upgraded guidance, now expecting 10% EBIT growth for FY17 and 5% for FY18. UBS identifies a higher portion of management time dedicated to growth opportunities, including expanding buying programs to extract higher rebates.

UBS upgrades to Buy from Neutral and raises the target to $1.40 from $1.23.

Target price is $1.40 Current Price is $1.29 Difference: $0.115
If SIP meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $1.23, suggesting downside of -6.8% (ex-dividends)

The company's fiscal year ends in January.

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

Morgan Stanley rates WOW as Underweight (5) -

Morgan Stanley believes the market is over-estimating Woolworths' FY17 earnings per share by 10%. The broker observes consensus is factoring in food margins holding up into FY17 yet suspects there is more re-basing to go.

Food margins are expected to slip to 4% in FY17 from 4.8% in FY16, based on the annualisation of price investment taken in the fourth quarter and higher capital expenditure in food associated with store refurbishments.

The broker retains an Underweight rating, In-Line industry view and $17 target.

Target price is $17.00 Current Price is $23.27 Difference: minus $6.27 (current price is over target).
If WOW meets the Morgan Stanley target it will return approximately minus 27% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.21, suggesting downside of -6.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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