Australian Broker Call

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September 05, 2018

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COMPANIES DISCUSSED IN THIS ISSUE

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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)

THIS REPORT WILL BE UPDATED SHORTLY

Last Updated: 11:03 AM

Your daily news report on the latest recommendation, valuation, forecast and opinion changes.

This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.

For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE

Today's Upgrades and Downgrades
EVN - EVOLUTION MINING Upgrade to Neutral from Underperform Credit Suisse
Upgrade to Outperform from Neutral Macquarie
BSL  BLUESCOPE STEEL LIMITED

Steel & Scrap

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Overnight Price: $17.38

UBS rates BSL as Buy (1) -

China's efforts to reduce steel capacity, industry consolidation in India and Europe, robust steel demand outside of China and no sign of tariff-based demand destruction in the US have brought about the "best industry structure in ten years," BluseScope's CEO told brokers at a round table yesterday.

Resultant balance sheet strength puts the company in the right position to explore organic growth options while still retaining ample capacity for capital management, the broker notes. Buy and $21.30 target retained.

Target price is $21.00 Current Price is $17.38 Difference: $3.62
If BSL meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $20.43, suggesting upside of 17.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 17.00 cents and EPS of 213.00 cents.
At the last closing share price the estimated dividend yield is 0.98%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.16.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 216.2, implying annual growth of 45.8%.

Current consensus DPS estimate is 16.7, implying a prospective dividend yield of 1.0%.

Current consensus EPS estimate suggests the PER is 8.0.

Forecast for FY20:

UBS forecasts a full year FY20 dividend of 15.00 cents and EPS of 190.00 cents.
At the last closing share price the estimated dividend yield is 0.86%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.15.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 175.0, implying annual growth of -19.1%.

Current consensus DPS estimate is 16.8, implying a prospective dividend yield of 1.0%.

Current consensus EPS estimate suggests the PER is 9.9.

Market Sentiment: 0.8

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

EVN  EVOLUTION MINING LIMITED

Gold & Silver

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Overnight Price: $2.86

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

Credit Suisse believes the emerging high-grade underground opportunity supports the company's aspirations to increase Cowal's production to 300,000 ounces per year for 20 years.

The broker also believes Evolution Mining's disciplined business development continues to improve average asset quality. Credit Suisse upgrades to Neutral from Underperform. Target is $2.65.

Target price is $2.65 Current Price is $2.86 Difference: minus $0.21 (current price is over target).
If EVN meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.00, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 9.00 cents and EPS of 14.61 cents.
At the last closing share price the estimated dividend yield is 3.15%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 19.58.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.6, implying annual growth of 0.2%.

Current consensus DPS estimate is 8.2, implying a prospective dividend yield of 2.9%.

Current consensus EPS estimate suggests the PER is 18.3.

Forecast for FY20:

Credit Suisse forecasts a full year FY20 dividend of 10.00 cents and EPS of 18.02 cents.
At the last closing share price the estimated dividend yield is 3.50%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.87.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 18.6, implying annual growth of 19.2%.

Current consensus DPS estimate is 9.1, implying a prospective dividend yield of 3.2%.

Current consensus EPS estimate suggests the PER is 15.4.

Market Sentiment: 0.4

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


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

The company appears set to commit to the underground development of Cowal. Along with plant plant extensions and upgrades this should deliver on the long-term goal of a sustainable 300,000 ounces per annum run rate, Macquarie expects.

Macquarie upgrades FY19 and FY20 earnings estimates by 8% and 3% respectively. The broker believes the company is well-positioned to execute on organic as well as acquisition opportunities.

Rating is upgraded to Outperform from Neutral. Target is raised to $3.30 from $3.20.

Target price is $3.30 Current Price is $2.86 Difference: $0.44
If EVN meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 10.00 cents and EPS of 17.80 cents.
At the last closing share price the estimated dividend yield is 3.50%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.07.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.6, implying annual growth of 0.2%.

Current consensus DPS estimate is 8.2, implying a prospective dividend yield of 2.9%.

Current consensus EPS estimate suggests the PER is 18.3.

Forecast for FY20:

Macquarie forecasts a full year FY20 dividend of 10.00 cents and EPS of 21.10 cents.
At the last closing share price the estimated dividend yield is 3.50%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.55.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 18.6, implying annual growth of 19.2%.

Current consensus DPS estimate is 9.1, implying a prospective dividend yield of 3.2%.

Current consensus EPS estimate suggests the PER is 15.4.

Market Sentiment: 0.4

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


ADDED

Ord Minnett rates EVN as Hold (3) -

The analysts have returned from the gold miner's Investor Day with ongoing confidence Evolution Mining should be able to maintain present performance into the years ahead ("medium term").

Capital guidance of $175m for the three years ahead proved higher than anticipated, but is seen as necessary support for the production profile longer term.

All in all, the analysts retain the view this is a high-quality company with strong cash margins, a healthy balance sheet and a sustainable production profile. Hold rating retained alongside $3 price target.

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

Target price is $3.00 Current Price is $2.86 Difference: $0.14
If EVN meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Ord Minnett forecasts a full year FY19 dividend of 9.00 cents and EPS of 18.00 cents.
At the last closing share price the estimated dividend yield is 3.15%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.89.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.6, implying annual growth of 0.2%.

Current consensus DPS estimate is 8.2, implying a prospective dividend yield of 2.9%.

Current consensus EPS estimate suggests the PER is 18.3.

Forecast for FY20:

Ord Minnett forecasts a full year FY20 dividend of 11.00 cents and EPS of 22.00 cents.
At the last closing share price the estimated dividend yield is 3.85%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.00.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 18.6, implying annual growth of 19.2%.

Current consensus DPS estimate is 9.1, implying a prospective dividend yield of 3.2%.

Current consensus EPS estimate suggests the PER is 15.4.

Market Sentiment: 0.4

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


UBS rates EVN as Neutral (3) -

At its strategy day, Evolution outlined three-year production, capex and cost guidance and aspirational longer term guidance for its Cowal and Mungari mines.

The broker suggests the miner is a well-run gold company boasting high margins and steady cash flow. Investors looking for gold exposure, high cash generation and low operational risk could do worse than to consider Evolution. However the stock is seen as fairly priced. Neutral and $2.90.

Target price is $2.90 Current Price is $2.86 Difference: $0.04
If EVN meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 6.00 cents and EPS of 12.00 cents.
At the last closing share price the estimated dividend yield is 2.10%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.83.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.6, implying annual growth of 0.2%.

Current consensus DPS estimate is 8.2, implying a prospective dividend yield of 2.9%.

Current consensus EPS estimate suggests the PER is 18.3.

Forecast for FY20:

UBS forecasts a full year FY20 dividend of 6.00 cents and EPS of 14.00 cents.
At the last closing share price the estimated dividend yield is 2.10%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 20.43.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 18.6, implying annual growth of 19.2%.

Current consensus DPS estimate is 9.1, implying a prospective dividend yield of 3.2%.

Current consensus EPS estimate suggests the PER is 15.4.

Market Sentiment: 0.4

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

KLL  KALIUM LAKES LIMITED

Mining

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Overnight Price: $0.47

Macquarie rates KLL as Outperform (1) -

The company has upgraded resources at Beyondie by around 3%, with measured and indicated resources rising 150%. The upgraded confidence should deliver a material increase in brine reserves, Macquarie believes.

The broker has already factored in a doubling of the current reserves in its mining inventory and adds a further 11%. The bankable feasibility study in September presents the next catalyst. Outperform rating and target raised to $0.65 from $0.60.

Target price is $0.65 Current Price is $0.47 Difference: $0.18
If KLL meets the Macquarie target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 6.20 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 7.58.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 2.60 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 18.08.

Market Sentiment: 1.0

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

NUF  NUFARM LIMITED

Agriculture

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Overnight Price: $7.10

Citi rates NUF as Buy (1) -

The company's shares are slowly recovering from the recent lows of early August, Citi observes. The Brazilian court has overturned the ban on glyphosate which ensures Nufarm can continue to sell glyphosate for use in the forthcoming soybean planting season.

The next catalyst is the company's FY18 results, due September 26, and a weak result has been guided because of the Australian drought. Buy rating and $9 target.

Target price is $9.00 Current Price is $7.10 Difference: $1.9
If NUF meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $8.96, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Citi forecasts a full year FY18 dividend of 8.00 cents and EPS of 26.60 cents.
At the last closing share price the estimated dividend yield is 1.13%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 26.69.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 30.7, implying annual growth of -34.3%.

Current consensus DPS estimate is 9.8, implying a prospective dividend yield of 1.4%.

Current consensus EPS estimate suggests the PER is 23.1.

Forecast for FY19:

Citi forecasts a full year FY19 dividend of 13.00 cents and EPS of 46.30 cents.
At the last closing share price the estimated dividend yield is 1.83%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.33.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 51.9, implying annual growth of 69.1%.

Current consensus DPS estimate is 14.0, implying a prospective dividend yield of 2.0%.

Current consensus EPS estimate suggests the PER is 13.7.

Market Sentiment: 0.7

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


Morgan Stanley rates NUF as Overweight (1) -

A Brazilian court has overturned the proposed ban on products containing glyphosate. The ban was due to come into effect on September 3. Morgan Stanley believes there will be limited, if any, disruption to Nufarm's business in Brazil, consistent with prior expectations.

Overweight rating. Price target $10.65. Industry view: Cautious.

Target price is $10.65 Current Price is $7.10 Difference: $3.55
If NUF meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $8.96, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Morgan Stanley forecasts a full year FY18 dividend of 11.00 cents and EPS of 30.00 cents.
At the last closing share price the estimated dividend yield is 1.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.67.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 30.7, implying annual growth of -34.3%.

Current consensus DPS estimate is 9.8, implying a prospective dividend yield of 1.4%.

Current consensus EPS estimate suggests the PER is 23.1.

Forecast for FY19:

Morgan Stanley forecasts a full year FY19 dividend of 11.00 cents and EPS of 51.00 cents.
At the last closing share price the estimated dividend yield is 1.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.92.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 51.9, implying annual growth of 69.1%.

Current consensus DPS estimate is 14.0, implying a prospective dividend yield of 2.0%.

Current consensus EPS estimate suggests the PER is 13.7.

Market Sentiment: 0.7

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

ORA  ORORA LIMITED

Paper & Packaging

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Overnight Price: $3.55

UBS rates ORA as Neutral (3) -

UBS last reported on Orora a year ago and then went quiet, but the broker is back covering the stock and has reopened with a Neutral rating and $3.74 target.

The broker suggests M&A in the US provides the key near term value driver for the company given lack of further opportunity domestically. Packaging is highly fragmented in the US. At its core Orora will nevertheless remain a defensive domestic proposition, leveraged to GDP growth.

Target price is $3.74 Current Price is $3.55 Difference: $0.19
If ORA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.59, suggesting upside of 1.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 13.00 cents and EPS of 18.00 cents.
At the last closing share price the estimated dividend yield is 3.66%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 19.72.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 18.6, implying annual growth of 5.1%.

Current consensus DPS estimate is 13.2, implying a prospective dividend yield of 3.7%.

Current consensus EPS estimate suggests the PER is 19.1.

Forecast for FY20:

UBS forecasts a full year FY20 dividend of 14.00 cents and EPS of 19.00 cents.
At the last closing share price the estimated dividend yield is 3.94%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.68.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 19.5, implying annual growth of 4.8%.

Current consensus DPS estimate is 14.0, implying a prospective dividend yield of 3.9%.

Current consensus EPS estimate suggests the PER is 18.2.

Market Sentiment: 0.1

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

ORE  OROCOBRE LIMITED

New Battery Elements

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Overnight Price: $4.16

Citi rates ORE as Buy (1) -

Citi notes the company has gone into trading halt pending an update on the proposed Argentinian export taxes. The broker is still seeking confirmation of the classification for lithium.

The proposed taxes are four Argentinian pesos for every US dollar for primary industries and three pesos for non-primary industries. The only potential positive offset to the tax for Orocobre is the ongoing devaluation of the Argentinian currency.

Citi suspects the imposition of the tax and turmoil in Argentina will make investment in a number of lithium projects potentially less likely and that could be a positive for the overall market. Buy rating and $6.50 target maintained.

Target price is $6.50 Current Price is $4.16 Difference: $2.34
If ORE meets the Citi target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $6.17, suggesting upside of 48.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Citi forecasts a full year FY19 dividend of 0.00 cents and EPS of 22.80 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.25.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.3, implying annual growth of 1743.4%.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 27.2.

Forecast for FY20:

Citi forecasts a full year FY20 dividend of 0.00 cents and EPS of 32.80 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 12.68.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 17.7, implying annual growth of 15.7%.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 23.5.

Market Sentiment: 0.6

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


Credit Suisse rates ORE as Outperform (1) -

Reports are circulating that the Argentinian President has announced an emergency austerity program to address a rapid depreciation in the currency and escalating inflation. The proposals include tax on the export of primary products. This would be in addition to the existing royalty arrangements.

Credit Suisse believes the tax highlights the risk of operating in South America versus the hard rock mining mecca of Western Australia.

The broker does not believe the announcement will affect the company's decision to progress with Olaroz stage 2, which is fully funded and well advanced, but it may have implications for other brine producing aspirants in Argentina.

Outperform rating and $5.70 target maintained.

Target price is $5.70 Current Price is $4.16 Difference: $1.54
If ORE meets the Credit Suisse target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $6.17, suggesting upside of 48.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 0.00 cents and EPS of 22.96 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.12.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 15.3, implying annual growth of 1743.4%.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 27.2.

Forecast for FY20:

Credit Suisse forecasts a full year FY20 dividend of 0.00 cents and EPS of 20.80 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 20.00.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 17.7, implying annual growth of 15.7%.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 23.5.

Market Sentiment: 0.6

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

OZL  OZ MINERALS LIMITED

Copper

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Overnight Price: $8.73

Macquarie rates OZL as Outperform (1) -

The company now has three projects which should underpin growth in copper equivalent production of 13% over the next 3-5 years, Macquarie suggests.

Study work on West Musgrave is advancing and, if scoping study economics can be confirmed, this could add nickel to the production mix within five years.

Prominent Hill and Carrapateena remains the key drivers of earnings, accounting for around 75% of five-year EBITDA and around 75% of Macquarie's valuation. Outperform rating. Target lifted to $12.20 from $11.30.

Target price is $12.20 Current Price is $8.73 Difference: $3.47
If OZL meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $10.74, suggesting upside of 23.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 22.00 cents and EPS of 90.30 cents.
At the last closing share price the estimated dividend yield is 2.52%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.67.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 76.9, implying annual growth of -0.1%.

Current consensus DPS estimate is 20.2, implying a prospective dividend yield of 2.3%.

Current consensus EPS estimate suggests the PER is 11.4.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 20.00 cents and EPS of 59.20 cents.
At the last closing share price the estimated dividend yield is 2.29%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.75.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 61.9, implying annual growth of -19.5%.

Current consensus DPS estimate is 17.7, implying a prospective dividend yield of 2.0%.

Current consensus EPS estimate suggests the PER is 14.1.

Market Sentiment: 0.7

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

SUN  SUNCORP GROUP LIMITED

Banks

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Overnight Price: $15.32

Deutsche Bank rates SUN as Hold (3) -

The company has signed a share sale deed for its Australian life assets for $725m with TAL Dai-Ichi Life Australia.
SunCorp will continue to distribute Suncorp branded life products that are underwritten by TAL for at least the next 20 years.

Around $600m of capital will be returned to shareholders following completion of the transaction at the end of the year. The broker maintains a Hold rating and $15.10 target.

Target price is $15.10 Current Price is $15.32 Difference: minus $0.22 (current price is over target).
If SUN meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.31, suggesting downside of -0.1% (ex-dividends)

Forecast for FY19:

Current consensus EPS estimate is 85.8, implying annual growth of 4.4%.

Current consensus DPS estimate is 78.0, implying a prospective dividend yield of 5.1%.

Current consensus EPS estimate suggests the PER is 17.9.

Forecast for FY20:

Current consensus EPS estimate is 101.6, implying annual growth of 18.4%.

Current consensus DPS estimate is 79.6, implying a prospective dividend yield of 5.2%.

Current consensus EPS estimate suggests the PER is 15.1.

Market Sentiment: 0.1

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

SYR  SYRAH RESOURCES LIMITED

New Battery Elements

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Overnight Price: $2.29

Macquarie rates SYR as Outperform (1) -

Syrah Resources has launched a placement and share purchase plan to raise $108m. Funds will be used to support Balama's ramp up. Macquarie adds the capital raising to its modelling while removing the US$25m in debt it previously assumed would be drawn.

Production metrics at the Balama mine continue to improve and the development of the customer base also appears to be moving in the right direction, the broker suggests. Outperform maintained. Target falls to $3.90 from $4.40.

Target price is $3.90 Current Price is $2.29 Difference: $1.61
If SYR meets the Macquarie target it will return approximately 70% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 6.30 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 36.35.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is -5.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is N/A.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 0.00 cents and EPS of 12.70 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.03.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 13.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 17.3.

Market Sentiment: 0.8

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


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

Morgan Stanley was surprised by the capital raising announcement, not because of the need for extra capital but largely because of the choice of discounted equity over debt.

The company will make a fully underwritten placement of 42.2m new shares at $2.23 a share. An additional purchase plan will be offered to eligible shareholders.

The capital raising should ease any further requirements for Balama. Morgan Stanley continues to believe downstream is the key area for profits and value in the graphite chain. Equal-weight retained. Target is $3.05. Industry view is In-Line.

Target price is $3.05 Current Price is $2.29 Difference: $0.76
If SYR meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Morgan Stanley forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 14.36 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 15.95.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is -5.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is N/A.

Forecast for FY19:

Morgan Stanley forecasts a full year FY19 EPS of 8.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 28.63.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 13.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 17.3.

Market Sentiment: 0.8

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


UBS rates SYR as Buy (1) -

The broker was not surprised by Syrah's announcement yesterday of a $94m institutional placement at $2.23 to fund the ramping up of the Balama graphite project in Mozambique through to positive cash flow, expected by late this year. It will also progress the company's battery strategy to the end of 2019 and fund evaluation of the vanadium opportunity at the site.

While the placement is dilutive, significant upside is on offer if Syrah can get it right, the broker believes. Buy retained, target falls to $3.40 from $3.75 on dilution.

Target price is $3.40 Current Price is $2.29 Difference: $1.11
If SYR meets the UBS target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

UBS forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 4.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 57.25.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is -5.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is N/A.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 0.00 cents and EPS of 12.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 19.08.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 13.2, implying annual growth of N/A.

Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.

Current consensus EPS estimate suggests the PER is 17.3.

Market Sentiment: 0.8

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

WBC  WESTPAC BANKING CORPORATION

Banks

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Overnight Price: $28.18

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

Westpac has agreed to settle with ASIC regarding responsible lending contraventions. Morgan Stanley observes the $35m penalty is immaterial to earnings and the bank did not admit the loans were unsuitable for customers.

The broker considers this a positive outcome as the penalty equates to around 1.1% of the balances of loans that should not have been approved, based on its estimates. Still, the broker considers an ongoing focus on responsible lending as well as fines or partial loan forgiveness remain as risks.

Equal-weight. Target is $27.50. Industry view: In Line.

Target price is $27.50 Current Price is $28.18 Difference: minus $0.68 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.50, suggesting upside of 8.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Morgan Stanley forecasts a full year FY18 dividend of 188.00 cents and EPS of 237.00 cents.
At the last closing share price the estimated dividend yield is 6.67%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 11.89.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 239.0, implying annual growth of 0.4%.

Current consensus DPS estimate is 188.7, implying a prospective dividend yield of 6.7%.

Current consensus EPS estimate suggests the PER is 11.8.

Forecast for FY19:

Morgan Stanley forecasts a full year FY19 dividend of 188.00 cents and EPS of 232.00 cents.
At the last closing share price the estimated dividend yield is 6.67%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 12.15.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 237.5, implying annual growth of -0.6%.

Current consensus DPS estimate is 190.2, implying a prospective dividend yield of 6.7%.

Current consensus EPS estimate suggests the PER is 11.9.

Market Sentiment: 0.2

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

WOW  WOOLWORTHS LIMITED

Food, Beverages & Tobacco

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Overnight Price: $28.44

Macquarie rates WOW as Underperform (5) -

Macquarie evaluates the impact of AASB 16 (lease accounting) on Woolworths and expects pre-tax profit to decline. The broker also considers a potential sale of the drinks/hotels business would not provide any strategic or financial merit at current pricing.

The essence of changes in accounting is for operating leases to be capitalised on the balance sheet as debt. Woolworths has identified a $14-15bn lease liability.

Macquarie maintains an Underperform rating and $27.91 target.

Target price is $27.91 Current Price is $28.44 Difference: minus $0.53 (current price is over target).
If WOW meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.53, suggesting upside of 0.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 92.50 cents and EPS of 132.10 cents.
At the last closing share price the estimated dividend yield is 3.25%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 21.53.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 138.4, implying annual growth of 0.5%.

Current consensus DPS estimate is 99.8, implying a prospective dividend yield of 3.5%.

Current consensus EPS estimate suggests the PER is 20.5.

Forecast for FY20:

Macquarie forecasts a full year FY20 dividend of 97.70 cents and EPS of 139.50 cents.
At the last closing share price the estimated dividend yield is 3.44%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 20.39.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 149.9, implying annual growth of 8.3%.

Current consensus DPS estimate is 105.4, implying a prospective dividend yield of 3.7%.

Current consensus EPS estimate suggests the PER is 19.0.

Market Sentiment: -0.3

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

Summaries
BSL BLUESCOPE STEEL Buy - UBS Overnight Price $17.38
EVN EVOLUTION MINING Upgrade to Neutral from Underperform - Credit Suisse Overnight Price $2.86
Upgrade to Outperform from Neutral - Macquarie Overnight Price $2.86
Hold - Ord Minnett Overnight Price $2.86
Neutral - UBS Overnight Price $2.86
KLL KALIUM LAKES Outperform - Macquarie Overnight Price $0.47
NUF NUFARM Buy - Citi Overnight Price $7.10
Overweight - Morgan Stanley Overnight Price $7.10
ORA ORORA Neutral - UBS Overnight Price $3.55
ORE OROCOBRE Buy - Citi Overnight Price $4.16
Outperform - Credit Suisse Overnight Price $4.16
OZL OZ MINERALS Outperform - Macquarie Overnight Price $8.73
SUN SUNCORP Hold - Deutsche Bank Overnight Price $15.32
SYR SYRAH RESOURCES Outperform - Macquarie Overnight Price $2.29
Equal-weight - Morgan Stanley Overnight Price $2.29
Buy - UBS Overnight Price $2.29
WBC WESTPAC BANKING Equal-weight - Morgan Stanley Overnight Price $28.18
WOW WOOLWORTHS Underperform - Macquarie Overnight Price $28.44
RATING SUMMARY
Rating No. Of Recommendations
1. Buy

10

3. Hold

7

5. Sell

1

Wednesday 05 September 2018

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Disclaimer:
The content of this information does in no way reflect the opinions of FNArena, or of its journalists. In fact we don't have any opinion about the stock market, its value, future direction or individual shares. FNArena solely reports about what the main experts in the market note, believe and comment on. By doing so we believe we provide intelligent investors with a valuable tool that helps them in making up their own minds, reading market trends and getting a feel for what is happening beneath the surface. This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. FNArena employs very experienced journalists who base their work on information believed to be reliable and accurate, though no guarantee is given that the daily report is accurate or complete. Investors should contact their personal adviser before making any investment decision.