Australian Broker Call

Credit Suisse rates BGL as Outperform (1) -

Superloop ((SLC)) has announced a bid to acquire BigAir. Superloop believes the acquisition will allow it to leverage the fibre network and broaden connectivity offerings.

The consideration involves two alternatives, with 100% scrip at 0.371 shares per BigAir share or a mixture of 70c cash and 0.118 SLC shares per BGL share.

Credit Suisse expects the deal to go ahead, subject to the usual approvals but does not foresee any issues. Outperform retained. Target rises to $1.21 from 90c.

Target price is $1.21 Current Price is $0.84 Difference: $0.37
If BGL meets the Credit Suisse target it will return approximately 44% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.5

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

UBS rates BHP as Buy (1) -

UBS does not expect BHP to get involved in the merger plans of Potash Corp and Agrium Inc. The company bid for Potash Corp in 2010 and this was withdrawn when the Canadian government decided the merger was not of net benefit to Canada.

BHP has remained committed to Jansen since abandoning the bid and intends to spend US$300m on the project in FY17. Buy rating and $23 target retained.

Target price is $23.00 Current Price is $20.00 Difference: $3
If BHP meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $22.25, suggesting upside of 11.9% (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: 0.5

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

Morgan Stanley rates BLD as Underweight (5) -

Boral's focus was on fly ash and a brick update at its US investor briefing. Combined market share across the proposed brick joint venture would be 29-30% across North America and 27% in the US.

Competition approvals remain a hurdle, the broker observes, and given higher share in certain regions this may create problems.

Morgan Stanley remains of the view that the earnings profile of the company's US assets is somewhat over-estimated by the market, given the lower operating leverage in this business.

Underweight rating and $6.15 target retained. Industry view: In-Line.

Target price is $6.15 Current Price is $6.24 Difference: minus $0.09 (current price is over target).
If BLD meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.72, suggesting upside of 7.8% (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 CSL as Neutral (3) -

CSL's subcutaneous Berinert will be rapidly adopted, Citi believes. The broker expects half of FY18 profit growth will come from this high priced, high margin product.

Following the recent fall in the share price the broker is more positive on the stock but considers trading multiples are high, given increasing volatility in the composition of earnings.

Neutral rating and $110.73 target retained.

Target price is $110.73 Current Price is $99.94 Difference: $10.79
If CSL meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $108.67, suggesting upside of 7.6% (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: 0.1

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

Credit Suisse rates CYB as Outperform (1) -

Following the company's briefing Credit Suisse makes only compositional changes to FY16-17 estimates but reduces FY18 earnings estimates by 8%.

The broker envisages the stock as an inexpensive self-help story.  $5.25 target and Outperform rating are retained.

Target price is $5.25 Current Price is $4.63 Difference: $0.62
If CYB meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.26, suggesting downside of -3.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

Ord Minnett rates CYB as Lighten (4) -

The company has held an investor briefing and provided new targets along with a strategic plan which targets double digit returns on tangible equity by 2019.

Ord Minnett observes this will require double-digit cumulative revenue growth in addition to a lower cost base and a move to internal ratings-based accreditation risk weighting on the mortgage book.

Lighten rating and $4.00 target retained.

Target price is $4.00 Current Price is $4.63 Difference: minus $0.63 (current price is over target).
If CYB meets the Ord Minnett target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.26, suggesting downside of -3.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

Credit Suisse rates EVN as Outperform (1) -

The company has updated on the addition of Ernest Henry and divestment of Pajingo and confirmed Credit Suisse's production and cost forecasts.

Upside is envisaged at Cowal in the near term from productivity gains and cost reductions. An Outperform rating and $2.45 target are retained.

Target price is $2.45 Current Price is $2.42 Difference: $0.03
If EVN meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 15.9% (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

UBS rates EVN as Buy (1) -

The company has updated its guidance for production and costs to incorporate recent deals. FY17 guidance for the economic interest in Ernest Henry has been clarified at 55-60,000 ozs, with an all-in cash cost of $100-150/oz.

UBS is cautious about Ernest Henry and attributes no value to the upside potential. A Buy rating is retained. Target is $2.89.

Target price is $2.89 Current Price is $2.42 Difference: $0.47
If EVN meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.73, suggesting upside of 15.9% (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

UBS rates FMG as Neutral (3) -

The company has issued a US$700m repayment notice for the 2019 senior secured term loan. Incorporating the repayment of the debt means the broker's FY17/18 earnings estimates lift 1%. Neutral and $5.00 target retained.

UBS believes the quantum of the company's debt remains of concern to the market and early redemption and partial terming out would be a positive, given a view that iron ore prices will decline from current levels. UBS forecasts iron ore to average US$50/dmt CFR, sufficient for the company to de-gear.

Target price is $5.25 Current Price is $4.74 Difference: $0.51
If FMG meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.61, suggesting downside of -1.0% (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: -0.1

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

Citi rates JBH as Sell (5) -

The company has acquired The Good Guys at an attractive price in Citi's view. The broker believes the acquisition represents a fair multiple for a rare industry consolidation opportunity.

The broker does express surprise that JB Hi-Fi intends to roll out Home stores, given the cannibalisation of The Good Guys sales and lack of profitability in Home.

The acquisition has been factored into the share price for some months, Citi observes, and while the earnings and synergy targets may be seen as conservative Citi sticks to its Sell rating. Price target moves up to $27.20 from $25.00.

Target price is $27.20 Current Price is $28.85 Difference: minus $1.65 (current price is over target).
If JBH meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.51, suggesting upside of 2.3% (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 JBH as Underperform (5) -

JB Hi-Fi will acquire The Good Guys for $820m, to be funded by an accelerated rights issue and debt. Credit Suisse finds the debt metrics remain acceptable and the transaction is 11% accretive on a pro forma FY16 basis.

JB Hi-Fi expects the synergies of $15-20m after three years and year one implementation costs of $10-12m. The broker's Underperform rating and $25.21 target are retained.

Target price is $25.21 Current Price is $28.85 Difference: minus $3.64 (current price is over target).
If JBH meets the Credit Suisse target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.51, suggesting upside of 2.3% (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

Deutsche Bank rates JBH as Hold (3) -

JB Hi-Fi has paid less than expected for The Good Guys, $870m, which Deutsche Bank considers is a good sign that payment for growth the vendor was expecting was not made.

Still, subdued expectations for FY17 signal to the broker the departure of key people is affecting sales during a buoyant period and the housing tailwind may ebb by the time the business has been integrated.

The broker believes the benefits of the synergies have already been priced in and retains a Hold rating. Target rises to $30 from $29.

Target price is $30.00 Current Price is $28.85 Difference: $1.15
If JBH meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $29.51, suggesting upside of 2.3% (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

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

The acquisition of The Good Guys for $870m is full, given the three-year synergy target of $15-20m, in Morgan Stanley's view.

The broker considers the critical issue centres on the integration of two very different retail cultures as well as the future of JB Home and the longer term profit outlook for The Good Guys.

Morgan Stanley observes The Good Guys is a high cost, high service retailer which compares with JB Hi-Fi which operates on a low cost, low service model. Equal-weight rating and $28 target retained. Industry view is In-Line.

Target price is $28.00 Current Price is $28.85 Difference: minus $0.85 (current price is over target).
If JBH 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 $29.51, suggesting upside of 2.3% (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

Morgans rates JBH as Upgrade to Add from Hold (1) -

JB Hi-Fi will acquire The Good Guys for $870m. Morgans likes the deal and expects the power of the combined group's increased scale will become evident in coming years.

The broker acknowledges the risks in the transaction, particularly in the case of the joint venture stores which were dissolved ahead of the merger, with 30 retiring and the remaining 25 staying on a store managers.

Morgans assumes the company's synergy target of $15-20m is achieved progressively over three years. Rating is upgraded to Add from Hold. Target increases to $32.55 from $28.70.

Target price is $32.55 Current Price is $28.85 Difference: $3.7
If JBH meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $29.51, suggesting upside of 2.3% (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 JBH as Upgrade to Accumulate from Hold (2) -

JB Hi-Fi will acquire The Good Guys for $870m. Ord Minnett believes the acquisition provides valuation support with forecast earnings growth to be strong in the medium term as synergies are realised.

The broker acknowledges execution risks, especially with the significant number of joint venture partners that are leaving. The broker, nevertheless, considers the operating performance has been strong and, given the retention of senior management from The Good Guys, suggests a return to Accumulate rating from Hold is justified.

Target price rises to $32 from $28.

Target price is $32.00 Current Price is $28.85 Difference: $3.15
If JBH meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $29.51, suggesting upside of 2.3% (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

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

The company will acquire The Good Guys for $870m and expects the deal to be around 12% accretive, funded by equity and debt. UBS upgrades estimates to incorporate the acquisition and assumes a 3-year sales compound growth rate of 3%.

UBS expects the acquisition will provide upside risk to forecasts in coming years via upside to synergies and a more rational market. Rating is upgraded to Buy from Neutral. Target rises to $31.60 from $28.60.

Target price is $31.60 Current Price is $28.85 Difference: $2.75
If JBH meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $29.51, suggesting upside of 2.3% (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 MQA as Upgrade to Outperform from Neutral (1) -

The Supreme Court of Virginia's positive ruling on toll increases clears the way for Macquarie Atlas'  50% partner in the Dulles Greenway asset to start a sale process.

Credit Suisse suspects MQA will probably sell its stake as well but may keep the proceeds to finance an additional 10% stake in APRR which could become available next year.

As the share have fallen 13% since late August the broker upgrades to Outperform from Neutral on valuation grounds. Target rises to $6.00 from $5.90.

Target price is $6.00 Current Price is $5.07 Difference: $0.93
If MQA meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $5.95, suggesting upside of 17.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.7

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

UBS rates NXT as Buy (1) -

Another strong contract win has meant the trigger for expanding to a second Sydney data centre has been hit.

With evidence that the transition to the cloud is accelerating, UBS remains comfortable around the long-term structural drivers for the company.

A Buy rating is retained. Target is raised to $4.75 from $4.40.

Target price is $4.75 Current Price is $3.99 Difference: $0.76
If NXT meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $4.46, suggesting upside of 12.1% (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

Ord Minnett rates PLG as Initiation of coverage with Accumulate (2) -

Ord Minnett initiates coverage of Propertylink, an internally managed property trust and fund manager, with an Accumulate rating and 95c target.

The company owns a $685m portfolio of 33 industrial properties, predominantly in Sydney and Melbourne and is the manager of a suite of institutional funds and mandates.

In FY17 Propertylink is aiming to lift occupancy to 96% and grow external assets under management to $1.5bn.

Target price is $0.95 Current Price is $2.74 Difference: minus $1.79 (current price is over target).
If PLG meets the Ord Minnett target it will return approximately minus 65% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Market Sentiment: 0.5

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

Credit Suisse rates PTM as Upgrade to Neutral from Underperform (3) -

The company has announced a buy-back of 10% of equity, funded out of existing cash flow. Following a period of underperformance Credit Suisse upgrades to Neutral from Underperform. Target is lowered to $5.25 from $5.65.

Credit Suisse assumes the company completes only half of the buy-back and the buy-back has a minimal impact on valuation, given excess cash was already valued. Fund performance remains weak over the medium term and the broker expects outflows to continue.

Target price is $5.25 Current Price is $4.88 Difference: $0.37
If PTM meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.01, suggesting downside of -9.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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 suspects the company is unlikely to buy back its full 10% of issued capital at the current share price. The timing of the announcement is surprising to the broker, given the company reduced its pay-out ratio in FY16 and dropped its special dividend.

The company intends to fund the buy-back from existing cash flow, although the balance sheet is ungeared. Underweight rating retained. Target is $4.50. In-Line sector view retained.

Target price is $4.50 Current Price is $4.88 Difference: minus $0.38 (current price is over target).
If PTM meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.01, suggesting downside of -9.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

Citi rates QUB as Buy (1) -

Citi resumes coverage of the company after its acquisition of 50% of Patrick Ports, and the respective capital raising and placement.

The broker notes the growth in rail volumes to and from Port Botany highlights the critical need for rail to increase its share of freight and avoid a significant increase in congestion costs for the NSW economy.

Buy rating retained. Target is raised to $2.98 from $2.91.

Target price is $2.98 Current Price is $2.33 Difference: $0.65
If QUB meets the Citi target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $2.68, suggesting upside of 15.5% (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