Australian Broker Call

Citi rates AGL as Upgrade to Buy from Neutral (1) -

Citi analysts believe the case for higher electricity prices has strengthened and this has pushed up their estimates for AGL by 14/25% for FY18/19. The analysts observe the share price has disconnected from electricity prices recently.

Target price jumps by 10% to $20.62. Upgrade to Buy from Neutral.

Target price is $20.62 Current Price is $18.70 Difference: $1.92
If AGL meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $20.10, suggesting upside of 3.7% (ex-dividends)

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

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

AGL has announced a 5% on-market buy-back and an increase in the distribution pay-out ratio to 75%. FY17 profit guidance of $720-800m is in line with Credit Suisse's expectations.

The broker estimates the company will generate $600m in free cash flow pre-growth and $400-500m per annum after growth capex in FY17-19. With the company pursuing a capital-light approach to renewables and limited other opportunities this suggests more room for buy-backs, in the broker's opinion.

Credit Suisse upgrades to Outperform from Neutral. Target is $19.90.

Target price is $19.90 Current Price is $18.70 Difference: $1.2
If AGL meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $20.10, suggesting upside of 3.7% (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

Deutsche Bank rates AGL as Buy (1) -

The company will undertake an on-market buy-back of up to 5% of stock. AGL will also target a 75% pay-out ratio starting from FY17. FY17 underlying profit guidance is $720-800m in line with Deutsche Bank's forecasts at the mid point.

Applying the new guidance to earnings forecasts, Deutsche Bank suggests dividends of 84c in FY17. The broker is positive about the buy-back and believes the 15% sell-off in the share price has made buy-backs a more productive use of free cash flow.

The broker notes recent media reports regarding the potential closure of Hazelwood and expects, if that were to be the case, that it would substantially tighten the supply/demand balance in Victoria's wholesale electricity market.

Buy rating and $20.85 target price retained.

Target price is $20.85 Current Price is $18.70 Difference: $2.15
If AGL meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $20.10, suggesting upside of 3.7% (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

Macquarie rates AGL as Outperform (1) -

FY17 guidance announced at AGL's AGM is in line with forecasts but the big news is long-awaited capital management. AGL will conduct a 5% buyback and raise its dividend payout ratio to 75% from a prior 60-65%. The broker had forecast 70%.

The dividend upgrade solidifies confidence in the medium term earnings outlook, the broker suggests. As the biggest supplier of base load power, AGL stands to be the biggest winner from rising wholesale electricity prices.

Target rises to $20.12 from $20.04. Outperform retained.

Target price is $20.12 Current Price is $18.70 Difference: $1.42
If AGL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $20.10, suggesting upside of 3.7% (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

Morgan Stanley rates AGL as Underweight (5) -

FY17 profit guidance of $720-800m has been provided. AGL is also lifting its pay-out ratio to 75% and has announced a $600m buy-back.

Morgan Stanley suspects the pool price outlook for FY18 and FY19 is dominated by changes from large generator and/or user closures such as the potential closure of Hazelwood.

The broker estimates the company's head room to pursue growth initiative is up to $2.5bn. Underweight retained. Target price is $18.13. Industry view: Cautious.

Target price is $18.13 Current Price is $18.70 Difference: minus $0.57 (current price is over target).
If AGL meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.10, suggesting upside of 3.7% (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

Ord Minnett rates AGL as Accumulate (2) -

Ord Minnett observes market consensus forecasts had come off by some -5% post the release of FY16 financials. Now all of that will have to be reversed post AGL's FY17 guidance which came with a share buyback and increased dividend payout guidance.

As AGL remains the biggest beneficiary of strong wholesale electricity prices, the stockbroker believes the near-term outlook looks significantly brighter. Ord Minnett retains Accumulate rating alongside a target of $21.

Target price is $21.00 Current Price is $18.70 Difference: $2.3
If AGL meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $20.10, suggesting upside of 3.7% (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

Credit Suisse rates AOF as Initiation of coverage with Neutral (3) -

Credit Suisse initiates coverage of Australian Unity Fund with a Neutral rating and $2.10 target. The broker considers the stock an attractive defensive play, albeit fully priced.

The stock has delivered a 7.0% total return, outperforming A-REITs and Australian equities by 620 basis points and 270 basis points respectively, the broker observes.

The stock is an externally managed metropolitan office A-REIT with a $391.1m portfolio comprising eight business park properties. The main risk to earnings is a broad based deterioration in occupier conditions, which would affect the ability to re-lease the 32% of leases expiring over FY17-20, the broker notes.

Target price is $2.10 Current Price is $2.13 Difference: minus $0.03 (current price is over target).
If AOF meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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 BXB as No Rating (-1) -

The broker is currently advising Brambles on something undisclosed and as such is now on research restriction.

Current Price is $11.99. Target price not assessed.

Current consensus price target is $13.44, suggesting upside of 12.3% (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: 0.2

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

Macquarie rates FLT as Underperform (5) -

At the 2016 Traveltech conference, the broker learned of Flight Centre's list of problems.

The OTA Aunt Betty digital business is not hitting early profit targets. Fight Centre is stuck in the traditional economy of price sensitive travellers and is not benefitting from a new "desire" economy of travellers spending up for extraordinary experiences. While inbound travel numbers are growing, visitors are spending less per head.

The broker has lifted ts target to $28.31 from $27.62, retaining Underperform.

Target price is $28.31 Current Price is $36.11 Difference: minus $7.8 (current price is over target).
If FLT meets the Macquarie target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.04, suggesting downside of -1.2% (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

Citi rates KAR as Buy (1) -

The company has acquired a 35% equity interest in the Santos Basin for US$20.5m from its insolvent JV partner Pacific Exploration.

Citi analysts assume Karoon will restart a farm-down process to bring in a new JV partner. Buy/High Risk rating retained, while the target price reduces to $1.68.

Target price is $1.68 Current Price is $1.26 Difference: $0.415
If KAR meets the Citi target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $2.34, suggesting upside of 72.9% (ex-dividends)

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 KAR as Outperform (1) -

Karoon will buy out its 35% JV partner in the Santos Basin exploration blocks, Pacific Exploration & Production Corp, for US$20.5m. Pacific had previously applied for insolvency protection in Canada.

It was small price to pay to remove a big problem, the broker suggests. Karoon can now look for a more solid JV partner to assist in the development of Echidna. Outperform and $2.90 target retained.

Target price is $2.90 Current Price is $1.26 Difference: $1.635
If KAR meets the Macquarie target it will return approximately 129% (excluding dividends, fees and charges).

Current consensus price target is $2.34, suggesting upside of 72.9% (ex-dividends)

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

Morgan Stanley - Cessation of coverage

Forecast for FY16:

Forecast for FY17:

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

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

Resolute Mining has raised $150m to fund capex and working capital, for the Ravenswood Expansion Project. Citi analysts note the share price has gained 500% over the past twelve months.

The analysts have a positive view on the outlook, but for now the rating goes back to Neutral from Buy. Price target improves to $2.17.

Target price is $2.17 Current Price is $2.00 Difference: $0.175
If RSG meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Market Sentiment: 0.0

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

Morgan Stanley - Cessation of coverage

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

Deutsche Bank rates SUL as Buy (1) -

Deutsche Bank was disappointed with the company's performance over the past three years but FY16 is considered to be a turning point with the problems in leisure largely addressed.

This has created an opportunity for the strongly performing sports and automobile divisions to finally drive earnings growth.

Deutsche Bank acknowledges its estimate of 19% growth may be ambitious but believes it is highly achievable. Buy rating and $11.50 target retained.

Target price is $11.50 Current Price is $10.16 Difference: $1.34
If SUL meets the Deutsche Bank target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $10.84, suggesting upside of 5.4% (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

Macquarie rates TCL as Outperform (1) -

Transurban's share price has fallen 6% since the FY16 result release on a global exit from yield stocks. At this level the stock is offering a compelling valuation, the broker suggests, with a yield of 4.6% sitting some 2.5ppt above the bond rate.

The coming year will see progress on a large proportion of Transurban's construction pipeline, which the broker notes will only add to the earnings growth outlook. Target rises to $12.43 from $12.34, Outperform reiterated.

Target price is $12.43 Current Price is $11.28 Difference: $1.15
If TCL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $12.24, suggesting upside of 8.4% (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

Deutsche Bank rates WOW as Hold (3) -

Deutsche Bank suggests the turnaround for Woolworths is proving to be slow. The strategy may be sound but the broker suspects there is a disconnect between the direction that senior management wish to take and what is happening on the ground.

Issues surrounding promotional effectiveness and compliance persist and the broker observes a continued focus on category gross margin which is not maximising sales and gross profit dollars.

Hold rating retained. Target reduced to $22 from $23.

Target price is $22.00 Current Price is $22.95 Difference: minus $0.95 (current price is over target).
If WOW 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 $21.06, suggesting downside of -8.5% (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