Australian Broker Call

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

Ardent Leisure selling its Marinas operations is seen as yet another move to unlock value with Citi analysts explaining the proceeds from the low returning asset will be reinvested in the high growth Main Events expansion in the USA.

On Citi's calculation, Ardent Leisure will have circa $102m leftover "net" from the sale, which could fund 10 new Main Event centres. The bottom line should also benefit from a weaker AUD.

All in all, small reductions to estimates have been implemented. DPS forecasts have been cut too. Target price gains 10c to $2.65. Upgrade to Buy from Neutral.

Target price is $2.65 Current Price is $2.29 Difference: $0.36
If AAD meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.27, suggesting downside of -1.9% (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 AAD as Neutral (3) -

The company has realised around $385m post the divestments of health clubs and marinas. Credit Suisse considers the outcome a solid one for businesses which are low growth and subject to intense competition. Of equal significance is the improved balance sheet.

Marinas will be sold to a consortium for $126m. With the assets sitting within a trust element the impact at the earnings per share line is somewhat pronounced, the broker observes. Credit Suisse reduces earnings per share estimates by 10% for FY18 and 7% for FY19.

Neutral retained. Target is reduced to $2.30 from $2.35.

Target price is $2.30 Current Price is $2.29 Difference: $0.01
If AAD meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $2.27, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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

Citi rates ACX as Buy (1) -

One of the company's competitors, Procore, US-based and thus far solely US-focused, has raised a further US$50m with the intent of expanding into Canada and Australia.

Citi analysts acknowledge this might heat up competition in the Software-as-a-Service construction collaboration software industry, but hardly a dent is expected in Australia where Aconex has an estimated market share in excess of 65%.

Historically both competitors have been focusing on different market segments, explain the analysts, so they haven't genuinely been competing against each other. Buy. Target $8.69 (unchanged).

Target price is $8.69 Current Price is $4.35 Difference: $4.34
If ACX meets the Citi target it will return approximately 100% (excluding dividends, fees and charges).

Current consensus price target is $7.72, suggesting upside of 70.3% (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

Morgans rates CL1 as Initiation of coverage with Hold (3) -

The company is a fast-growing provider of administration and portfolio management tools for Self-Managed Superannuation Funds.

The broker expects the business to benefit from scale economies as its base SMSF accounts grow. Morgan initiates coverage with a Hold rating and target of $3.17.

The broker notes, as the company is reliant on a niche sector, it is more exposed to regulatory risk than financial services players with multiple applications.

Target price is $3.17 Current Price is $2.88 Difference: $0.29
If CL1 meets the Morgans target it will return approximately 10% (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

Macquarie rates CVO as No Rating (-1) -

The company has entered into a scheme implementation agreement with Zurich Insurance. Shareholders will receive $1.95 cash per share.

The company is entitled to pay an interim and/or special dividend prior to the scheme's implementation and the offer will be reduced by the cash component. The board unanimously recommends the offer.

Macquarie is unable to advise on a rating and target at this stage.

Current Price is $1.87. Target price not assessed.

Current consensus price target is $1.45, suggesting downside of -23.8% (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

UBS rates CVO as Neutral (3) -

The company has entered a scheme implementation agreement with Zurich Insurance, which will acquire all ordinary shares at an offer price of $1.95 each. Directors unanimously recommended shareholders vote in favour of the scheme.

The company is also permitted to pay an interim and/or special dividend, with the scheme consideration reduced by any such cash amount. Updated EBITDA guidance of $54-57m includes a part contribution from Travelex.

Neutral and $1.38 target retained.

Target price is $1.38 Current Price is $1.87 Difference: minus $0.49 (current price is over target).
If CVO meets the UBS target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.45, suggesting downside of -23.8% (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

Macquarie rates EHE as No Rating (-1) -

The company has announced a fully underwritten 1-for-3 accelerated, non-renounceable entitlement offer. The offer is at $2.10 a share. The proceeds are to be used to pay down debt.

The company has reiterated its FY17 guidance for EBITDA in a range of $86-90m. The company will pay no interim dividend in FY17  and from then on look to target 70% of net profit as the pay-out ratio.

Macquarie is restricted on offering a rating and target at this stage.

Current Price is $2.68. Target price not assessed.

Current consensus price target is $2.70, suggesting upside of 8.0% (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

Morgan Stanley rates EHE as Underweight (5) -

An equity raising has reduced balance sheet risk but diluted earnings per share by 17.4%. FY17 guidance has been reaffirmed.

Morgan Stanley observes there is still uncertainty regarding regulatory changes in FY18 and a strong second half skew is required. The broker maintains an Underweight rating and lowers the target  to $2.10 from $2.50. Industry view is In-Line..

Target price is $2.10 Current Price is $2.68 Difference: minus $0.58 (current price is over target).
If EHE meets the Morgan Stanley target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.70, suggesting upside of 8.0% (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

UBS rates EHE as Buy (1) -

The company will undertake a capital raising to reduce debt. UBS doubts there is any significant issue, as trading in the year to date is in line with guidance, which is been reconfirmed for EBITDA in a range of $86-90m.

The company will offer 1-for-3 shares at $2.10 each. As a result, the broker reduces its target to $3.30 from $3.85.

A Buy rating is retained. Ultimately, residential aged care is unclouded by balance sheet concerns and the broker expects the stock price to revert towards peers.

Target price is $3.30 Current Price is $2.68 Difference: $0.62
If EHE meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $2.70, suggesting upside of 8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Deutsche Bank rates FLT as Hold (3) -

October stats show a 3.4% yoy increase in international departures, down from 4.6% and below the 12-month average of 4.9%. Business travel grew 4.8% in the month but leisure was weak, the broker notes, contracting 1.2%.

Volumes are relatively healthy and the broker is pleased Flight Centre appears to be gaining market share. But there is a risk to volumes as ticket price deflation moderates, and the broker questions the big second half skew to earnings guidance. Hold and $33 target retained. 

Target price is $33.00 Current Price is $30.46 Difference: $2.54
If FLT meets the Deutsche Bank target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $32.17, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

Macquarie rates IGO as Outperform (1) -

Progress on Nova continues to impress Macquarie and the broker believes upside risks exist to base case forecasts, given the excellent pace of underground development.

The company has completed its first shipment of nickel concentrate to the Nickel West concentrator in Kambalda. The results of the Long Island study for the Tropicana gold project are expected this month.

Target is $5.00. Outperform retained.

Target price is $5.00 Current Price is $4.33 Difference: $0.67
If IGO meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.17, suggesting downside of -2.4% (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

Morgans rates IIL as No Rating (-1) -

The company has completed recruitment for its clinical trial. Top line results will read out in the third quarter of 2017. The positive read-out would add value and partnering possibilities may quickly emerge, in Morgans' opinion.

The broker is ceasing formal coverage immediately and will continue to cover the stock through a desk note.

Target price is $1.16 Current Price is $0.81 Difference: $0.35
If IIL meets the Morgans target it will return approximately 43% (excluding dividends, fees and charges).

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

Deutsche Bank rates ILU as Sell (5) -

In a counter-cyclical move, Iluka has acquired Sierra Rutile. The broker can't see why.

While Iluka has the capacity to boost production and reduce costs, even if it does the deal is value neutral at the broker's long term rutile price forecast of US$1000/t (spot US$750). Capex will be required and the mine, located in remote Sierra Leone, will run cash flow negative to 2020.

Sell and $5.30 target retained.

Target price is $5.30 Current Price is $7.30 Difference: minus $2 (current price is over target).
If ILU meets the Deutsche Bank target it will return approximately minus 27% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.86, suggesting downside of -5.1% (ex-dividends)

The company's fiscal year ends in December.

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

Citi rates JBH as Neutral (3) -

In a two-series analysis of the prospects for JB Hi-Fi, Citi analysts zoom in on the decision to pause the roll-out of "Home". It'll depress like-for-like sales growth, but it'll also be beneficial to group margins, suggest the analysts.

The analysts think management can still  drive earnings growth through store network optimisation. All in all, the analysts anticipate an approaching slowdown in LFL sales growth, but they also suggest this is already reflected in the share price. Neutral with a $27.30 target.

Target price is $27.30 Current Price is $26.21 Difference: $1.09
If JBH meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $29.84, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Macquarie rates JBH as Reinstate coverage with Outperform rating (1) -

Macquarie revises forecasts after coming off a research restriction.The acquisition of The Good Guys embeds the company's position as a low-cost operator across distinct channels, categories and customers.

Macquarie believes the medium-term outlook and earnings, as well as the dividend yield, more than offset the risks around integrating the acquisition. The broker reinstates an Outperform rating and raises the target to $30.60 from $25 prior to the restriction..

Target price is $30.60 Current Price is $26.21 Difference: $4.39
If JBH meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $29.84, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Macquarie rates LOV as Outperform (1) -

The company has had a very strong start to the year, with year-to-date, like-for-like sales growth over 10%. Gross margin is also stronger than forecast and currently tracking at around 77%.

Macquarie believes the company has capacity to roll out more than the 45 stores that are factored into forecasts for the UK. As such, the broker envisages potential for medium to long-term upside as confidence in the UK opportunity grows.

Outperform retained. Target rises to $4.44 from $4.08.

Target price is $4.44 Current Price is $3.47 Difference: $0.97
If LOV meets the Macquarie target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in July.

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

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

Morgans found the first half trading update and guidance particularly strong. Like-for-like sales growth is around 10% with a 77% gross margin. The broker notes the sales growth was entirely driven by price increases.

Morgans considers the trading update highlights just how the company can perform when product execution is strong.

Based on the quantum of upward revisions to earnings per share the broker upgrades to Add from Hold. Target is raised to $4.26 from $3.43.

Target price is $4.26 Current Price is $3.47 Difference: $0.79
If LOV meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $3.87, suggesting downside of -2.8% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates MGC as Neutral (3) -

The company has appointed a new CEO and the role will start on February 13, 2017. While this addresses part of the management uncertainty, Macquarie believes it will be a while before Ari Mervis is up to speed and influencing the performance of the company.

Commodity prices are starting to become a strong tailwind, although there is lower exposure for MGC because of declines in milk intake. Macquarie considers a lower exposure could continue to create competitive challenges for milk prices if other processors are passing through improved commodity returns.

A Neutral rating and $1.15 target are retained.

Target price is $1.15 Current Price is $0.91 Difference: $0.24
If MGC meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Deutsche Bank rates MND as Sell (5) -

The 55/45 JV between Monadelphous and ZEM Energy has won the contract to provide civil and electrical works in construction of the Sapphire wind farm in NSW.

It's a positive for Monadelphous, the broker suggests, demonstrating the company's ability to participate in a large pipeline of renewable projects planned over the next few years.

That said, the Sapphire contract is only relatively small, and the broker continues to see the stock trading above fair value. Sell and $7.94 target retained.

Target price is $7.94 Current Price is $11.15 Difference: minus $3.21 (current price is over target).
If MND meets the Deutsche Bank target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.69, suggesting downside of -31.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.8

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

Citi rates NXT as Buy (1) -

Singapore startup AirTrunk Pte is looking to shake up the data center industry in the Asia-Pacific region with large, new data centers that undercut competitors on price, Bloomberg reported recently and one assumes the fear for increased competition has scared investors out of NextDC shares.

Citi analysts remain firm in their assessment: growing demand will absorb the entrance of the new competitor. The analysts refer to industry researchers Frost & Sullivan who expect the Australian data market to more than double by 2021.

Even allowing for slower growth further out, Citi analysts are still projecting FY16-FY21 CAGR revenue growth of 24%. The analysts note their peers have upgraded the sector internationally, to Buy, and NextDC shares are trading at a relative discount of -28%. Buy. Target falls to $4.50 from $4.86.

Target price is $4.50 Current Price is $2.96 Difference: $1.54
If NXT meets the Citi target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $4.65, suggesting upside of 57.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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

Macquarie rates PRG as Outperform (1) -

The company has won a "significant" contract to provide manning and logistical support services on the Prelude project. Macquarie estimates this means over $50m and the bulk of the work will impact on FY18 earnings.

Outperform retained. The broker considers the valuation of the stock undemanding, while debt is reducing. Target is $2.

Target price is $2.00 Current Price is $1.86 Difference: $0.145
If PRG meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $1.94, suggesting upside of 2.1% (ex-dividends)

The company's fiscal year ends in March.

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

Credit Suisse rates S32 as Neutral (3) -

After visiting the South African  operations Credit Suisse observes these are well-run assets, with some modest ability to reduce costs further.

The broker makes modest changes to earnings estimates, with earnings per share up 6.4% for FY18. Neutral retained. Target is $2.80.

Target price is $2.80 Current Price is $2.95 Difference: minus $0.15 (current price is over target).
If S32 meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.85, suggesting downside of -3.6% (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: 0.4

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

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

UBS observes the market, at current prices, is attributing zero value to Harris CapRock synergies. The risk, therefore, is skewed to the upside.

The broker upgrades to Buy on valuation, despite concerns over exposure to the energy sector and the reliance on an overall energy sector rebound.

Gearing also looks aggressive to UBS and there is little earnings visibility, particularly given two operational downgrades in FY16. A $3.80 target is retained

Target price is $3.80 Current Price is $3.10 Difference: $0.7
If SDA meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $4.33, suggesting upside of 35.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.8

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

Morgan Stanley rates SRX as Overweight (1) -

Morgan Stanley suggests that the company's market share losses are better explained as a result of competitors with superior sales/marketing, which underscores the need for robust study data to support continuing growth.

The broker observes clinical practice has not changed as a result of the introduction of competitor product Lonsurf and believes it is more likely to be a case of referral patterns.

Should trials and pooled data analysis fail to meet primary end points, the broker believes questions on the use of SIR-Spheres in any setting are likely to remain unanswered. Overweight rating and In-Line view retained. Target falls to $26.60.

Target price is $26.60 Current Price is $16.60 Difference: $10
If SRX meets the Morgan Stanley target it will return approximately 60% (excluding dividends, fees and charges).

Current consensus price target is $26.43, suggesting upside of 55.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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

Morgans rates SRX as Upgrade to Hold from Reduce (3) -

The company has downgraded FY17 dose sales growth expectations. Issues such as competition, reimbursement, a short sales cycle, and the first admission that SIRFLOX survival data is needed to drive front-line use, have been cited as causing the weakness.

Morgans considers the timing of the update curious but believes the base business is viable and able to recover,  although SIR-Spheres remains relegated to last resort treatment.

The broker considers the sell-off in the stock now better balances the risk/return profile and upgrades to Hold from Reduce. Target is lowered to $15.60 from $20.08.

Target price is $15.60 Current Price is $16.60 Difference: minus $1 (current price is over target).
If SRX meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.43, suggesting upside of 55.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

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