Australian Broker Call

Ord Minnett rates AGL as Accumulate (2) -

Ord Minnett has reviewed the wholesale electricity market and believes policy uncertainty and historically weak generator returns have meant the rolling out of renewable generation has not kept pace with base-load capacity closures.

Shortages of electricity should lead to higher spot and forward prices and the assumption is that those with existing assets, such as AGL Energy should benefit.

Accumulate retained. Target is lifted to $28.85 from $28.30.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $28.85 Current Price is $23.71 Difference: $5.14
If AGL meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $26.56, suggesting upside of 9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

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

Industry data has shown the Western Australia new vehicle sales grew by 4.2% in August, the second month of positive growth in four months. The company faced a number of challenges in FY17 relating to finance impacts from tightening consumer credit conditions  and declining vehicle sales.

Morgans suspects the risk/reward is now to the upside. The broker likes the strong exposure to an eventual upswing in the WA economy and believes it's only a matter of time before trading conditions improve. Rating is upgraded to Add from Hold, target is $3.60.

Target price is $3.60 Current Price is $3.34 Difference: $0.26
If AHG meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.51, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Morgan Stanley rates ARF as Overweight (1) -

Morgan Stanley expects the benefits of upward market rent reviews will outweigh the risks from new childcare supply. The company is currently testing the market at higher yields for potential acquisitions, given the increased pressure on speculative developers.

Overweight and $2.40 target retained. Industry view: Cautious.

Target price is $2.40 Current Price is $2.27 Difference: $0.13
If ARF meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

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

The exit of another competitor in Queensland, Bubs, is an opportunity for Baby Bunting, Morgans believes. There is the potential to take on a couple of the leases where Baby Bunting does not have a presence.

In the short term the clearance of Bubs stock may impact sales growth for Baby Bunting and, therefore, margin but the broker believes the market will look through this for the medium-long-term.

Rating is upgraded to Add from Hold, as it is a reminder of the company's strengthening competitive position and the strong growth that is still on offer. Target rises to $1.96 from $1.80.

Target price is $1.96 Current Price is $1.82 Difference: $0.14
If BBN meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.93, suggesting upside of 6.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

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 reduces near-term oil price forecasts. September quarter prices have failed to recover to the extent the broker had originally expected. US production is not expected to balance global markets in the medium to long-term.

UBS reduces BHP Billiton's estimates by -4% for FY18. The oil & gas business represented around 20% of group earnings in FY17, down from 30% in FY16, as other commodities recovered from oversold positions, the broker observes.

Target price is $29.50 Current Price is $27.73 Difference: $1.77
If BHP meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $28.36, suggesting upside of 3.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Credit Suisse rates BLD as Outperform (1) -

Credit Suisse suspects the range in estimates for FY18 earnings can only be explained by disparate views around the US division post the consolidation of Headwaters.

The broker observes an opportunity in Hurricane Harvey, as Texas accounts for around 25% of US division revenue and 30% of EBIT because of the overweight fly ash position.

The broker does not assume upside from remediation works as it is too early to assess damage. Texas also accounts for around 70% of US ethylene production and most manufacturers are affected by the hurricane, which means resin prices could spike.

Outperform retained. Target is $7.30.

Target price is $7.30 Current Price is $6.46 Difference: $0.84
If BLD meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $6.91, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Morgans rates CRR as Initiation of coverage with Add (1) -

Convenience Retail REIT has a portfolio of 66 service station sites valued at $308m, primarily leased to Puma Energy Australia and Woolworths ((WOW)). Income is supported by a weighted average lease expiry of 13.6 years. Leases are a mix of CPI and fixed increases averaging 2.9% per annum.

Morgans initiates coverage with an Add rating and $3.14 target. The company is forecast to pay an annualised FY18 distribution yield of 6.8% and FY19 distribution yield of 7.1%.

Target price is $3.14

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Deutsche Bank rates CSR as Hold (3) -

Deutsche Bank's expectations are largely unchanged after the company's site visit and investor presentation.

Given CSR is net cash, and there is the possibility of an aluminium sale as part of any Pacific Aluminium divestment, the broke believes it possible a special dividend could be paid, in the absence of an acquisition.

The company is no longer required to seek approval for the payment of special dividends from the end of 2017. The broker retains a Hold rating. Target is reduced to $4.44 from $4.47.

Target price is $4.44 Current Price is $4.19 Difference: $0.25
If CSR meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.38, suggesting upside of 5.5% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Ord Minnett rates DOW as Re-instate Coverage with Lighten (4) -

Ord Minnett believes majority of the company's businesses are well-positioned to experience growth over the next couple of years, particularly in transport.

Nevertheless, earnings risks are heightened from the newly-acquired Spotless. Cash flow conversion is much lower at Spotless and the broker envisages a risk that the business will downgrade guidance for FY18.

Ord Minnett reinstates coverage with a Lighten rating and target of $6.20.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $6.20 Current Price is $6.94 Difference: minus $0.74 (current price is over target).
If DOW meets the Ord Minnett target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.58, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

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

Morgan Stanley rates GMG as Overweight (1) -

Management has suggested that, whilst its business can drive earnings growth in excess of the 6-7% that was delivered over the past five years, it would rather use operating strengths to improve the portfolio quality. The US remains the preferred market.

The company envisages the peak in dilution from asset sales will occur over the next 12 months and the benefits of its re-mixing may not be seen until the next downturn, which could be some time away.

Overweight rating and $8.20 target retained. Industry view is Cautious.

Target price is $8.20 Current Price is $8.18 Difference: $0.02
If GMG meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $8.25, suggesting upside of 0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Ord Minnett rates HSN as Upgrade to Buy from Accumulate (1) -

Ord Minnett upgrades to Buy from Accumulate. The stock has significantly de-rated through 2017 and is now trading at levels that are lower than at any point since the broker started coverage.

Ord Minnett suspects the stock is now set to deliver a strong cash result in the first half. As Hansen is typically a mean reversion business, the broker envisages 15% upside to base case.

Price target is reduced to $3.93 from $3.98.

Target price is $3.93 Current Price is $3.15 Difference: $0.78
If HSN meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Credit Suisse rates IAG as Outperform (1) -

Credit Suisse reviews the opportunities for capital management, envisaging $500m to in excess of $1bn could be returned in coming years.

With premium rates now moving higher and a strong focus on cost initiatives, the broker believes now is not the time to walk away from the stock despite a disappointing FY17 result.

Outperform retained. Target is $7.00.

Target price is $7.00 Current Price is $6.20 Difference: $0.8
If IAG meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $6.27, suggesting upside of 0.9% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates LVH as Add (1) -

FY17 results were in line with Morgans. The broker changes accounting treatment for R&D costs, in line with the company's treatment. R&D costs will now be capitalised.

The broker believes the stock offers investors participation in the growth of the game-changing recruitment system and the rewards could be substantial. Yet, this is early-stage technology and is yet to become self-sustaining from a cash flow perspective.

Add rating retained. Target is raised to $0.86 from $0.68.

Target price is $0.86 Current Price is $0.73 Difference: $0.135
If LVH meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Ord Minnett rates MND as Re-instate Coverage with Hold (3) -

Ord Minnett suspects oil & gas construction will cause headwinds in FY19 but the business has a strong net cash balance sheet and aspirations for acquisitions. The broker believes Monadelphous is well-positioned to benefit from recovering mining capital expenditure.

The broker reinstates coverage with a Hold rating and $14.30 target.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $14.30 Current Price is $14.67 Difference: minus $0.37 (current price is over target).
If MND meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.02, suggesting downside of -23.8% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.9

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

Credit Suisse rates NHC as Neutral (3) -

Upside for the stock is heavily dependent on approval for stage III at New Acland. The company has initiated a judicial review of the findings of the Queensland Land Court, which recommended that mining leases not be granted. The ultimate decision will be in the hands of the Queensland government minister.

Meanwhile, the company's 90%-owned Lenton joint venture has entered into an agreement with Peabody to acquire four tenements and infrastructure for $14m. The transaction is conditional on a number of regulatory requirements.

Neutral retained. Target is $1.60.

Target price is $1.60 Current Price is $1.67 Difference: minus $0.07 (current price is over target).
If NHC meets the Credit Suisse target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.82, suggesting upside of 9.3% (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

Ord Minnett rates ORG as Accumulate (2) -

Ord Minnett has reviewed the wholesale electricity market and believes policy uncertainty and historically weak generator returns have meant the rolling out of renewable generation has not kept pace with base-load capacity closures.

Shortages of electricity should lead to higher spot and forward prices and the assumption is that those with existing assets should benefit. Origin Energy is short electricity but is expected to benefit from higher retail prices.

The company's generation assets cover the residential retail book and higher wholesale cost are likely to pass through to commercial and industrial customers.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Ord Minnett retains an Accumulate rating and raises the target to $8.30 from $7.75.

Target price is $8.30 Current Price is $7.75 Difference: $0.55
If ORG meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $7.87, suggesting upside of 1.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates PMV as Outperform (1) -

Macquarie reviews the outlook ahead of the FY17 results. Coverage is also transferred to another analyst. Feedback from both listed and unlisted apparel retailers suggests trading conditions have been difficult.

The broker expects Smiggle and Peter Alexander to drive growth, and thus envisages any share price weakness on the back of a soft apparel result in established brands as a buying opportunity.

Outperform rating retained. Target reduced to $16.28 from $17.92.

Target price is $16.28 Current Price is $12.98 Difference: $3.3
If PMV meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $15.17, suggesting upside of 15.5% (ex-dividends)

The company's fiscal year ends in July.

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 RCR as Initiation of coverage with Buy (1) -

Ord Minnett suggests Australian contractors may be set for a brighter future. Mining capital expenditure appears set to increase by more than 10% in FY18 and Australia's east coast should benefit from a boom in infrastructure spending.

The broker initiates coverage of RCR Tomlinson with a Buy rating and $5.08 target, envisaging great opportunity in solar. The company has won close to $1bn of solar work, has a strengthened balance sheet and attractive valuation relative to the opportunity.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $5.08 Current Price is $4.06 Difference: $1.02
If RCR meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

Market Sentiment: 1.0

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

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

Citi analysts have upgraded to Buy from Neutral in response to recent share price weakness. Target price is kept at $14. The analysts find Suncorp shares have by now fallen far enough to account for the FY18 margin headwinds.

Also, at present level Citi thinks the shares offer an attractive entry point to gain leverage to the improving Australian general insurance market. The banking operations should stay reasonably strong, the analysts add.

They see better value on offer than in Insurance Australia Group ((IAG)).

Target price is $14.00 Current Price is $12.53 Difference: $1.47
If SUN meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $13.95, suggesting upside of 10.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Ord Minnett rates TGR as Buy (1) -

Ord Minnett has been reassured by management commentary regarding the domestic wholesale price of salmon. Despite generally favourable results the broker believes concerns over pricing have restricted the performance of salmon companies in recent weeks.

Growing conditions remain positive and the broker considers the valuation attractive. The broker maintains a Buy rating and $5.00 target.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $5.00 Current Price is $3.90 Difference: $1.1
If TGR meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $4.70, suggesting upside of 19.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

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

Credit Suisse believes the majority of the negative news flow is now out of the way for Telstra and reflected in the share price.

The broker believes the new dividend policy and the creation of a special dividend pool provides flexibility for the company to maintain a $0.22 per share dividend for at least the next four years.

The broker upgrades to Outperform from Neutral. Target is raised to $4.00 from $3.90.

Target price is $4.00 Current Price is $3.62 Difference: $0.38
If TLS meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates TLS as Re-instate Coverage with Neutral (3) -

Macquarie resumes coverage with a Neutral rating and $3.70 target. The broker considers the operating outlook is challenging across all key operating segments over the medium term, including from the introduction of the fourth mobile operator.

Telstra has adjusted its mobiles offering ahead of the launch of the iPhone 8 next week. Base plan costs are increased by $4 per month. Macquarie believes the new iPhone will be key to the December half year performance.

Target price is $3.70 Current Price is $3.62 Difference: $0.08
If TLS meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $3.91, suggesting upside of 5.1% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates WAF as Outperform (1) -

Further high-grade drill results are reported from Sanbrado gold project. Macquarie believes the new resource update, expected this quarter, will provide a significant lift to the resources while also increasing open reserves.

Drilling success over the next six months is expected to be a major catalyst. Outperform rating and $0.50 target maintained.

Target price is $0.50 Current Price is $0.36 Difference: $0.145
If WAF meets the Macquarie target it will return approximately 41% (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