Australian Broker Call

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

A sustained recovery in commodities is driving momentum in equipment sales and replacement, supporting the company's turnaround post the balance sheet repair.

Morgans believes growth in market share by leveraging the niche business into closer relationships with end-users and larger distribution networks is the key catalyst in the longer term. The broker initiates coverage with a Hold rating and $0.27 target.

Target price is $0.27 Current Price is $0.26 Difference: $0.01
If ANG meets the Morgans target it will return approximately 4% (excluding dividends, fees and charges).

Market Sentiment: 0.0

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

Deutsche Bank rates ASX as Hold (3) -

November capital raisings appear strong, although the value traded is soft, Deutsche Bank observes.

While the company's market positioning remains attractive, the elevated cost growth for FY18 is of concern, given the current earnings multiple.

Hold retained. Target is $54.50.

Target price is $54.50 Current Price is $57.03 Difference: minus $2.53 (current price is over target).
If ASX meets the Deutsche Bank target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $51.44, suggesting downside of -9.8% (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

UBS rates AWE as Sell (5) -

China Energy Reserve and Chemical has withdrawn its conditional proposal to acquire the company.

UBS believes the main driver of the share price is the commercialisation of the large undeveloped gas reserves at Waitsia.

UBS maintains a Sell rating and $0.54 target.

Target price is $0.54 Current Price is $0.63 Difference: minus $0.09 (current price is over target).
If AWE meets the UBS target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.57, suggesting downside of -9.8% (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

Macquarie rates BHP as Outperform (1) -

The broker believes that Woodside Petroleum's ((WPL)) plan to pipe gas from offshore Browse to the Karratha processing plant could prompt BHP to exit its share of the North West Shelf operation. Woodside is a co-owner and single operator of NWS.

While NWS provides BHP with strong free cash flow, Woodside's strategy does not match that of BHP's the broker suggests, and the share could be sold for around US$5bn. Outperform and $32 target retained.

Target price is $32.00 Current Price is $27.30 Difference: $4.7
If BHP meets the Macquarie target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $30.33, suggesting upside of 11.1% (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: 0.8

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

Morgans rates CAT as Add (1) -

The company has secured its ninth league-wide deal in three years, signing an exclusive agreement with England's Rugby Football League.

Morgans does not upgrade forecasts as it already assumes significant gains in new signings in FY18, but the win increases confidence that the company will achieve guidance.

Add retained. Target is $2.97.

Target price is $2.97 Current Price is $1.47 Difference: $1.5
If CAT meets the Morgans target it will return approximately 102% (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 COH as Downgrade to Lighten from Hold (4) -

Ord Minnett revises medium-term earnings estimates to better reflect the large opportunity the company has begun to tap in the seniors category. While the potential is substantial, the broker is also wary that expectations have become elevated.

Management's stated intention to invest in market development as aggressively as its financial situation allows also limits potential for a near-term earnings surprise, in the broker's opinion.

Rating is downgraded to Lighten from Hold. Target is raised to $162 from $145.

Target price is $162.00 Current Price is $179.72 Difference: minus $17.72 (current price is over target).
If COH meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $148.69, suggesting downside of -17.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.7

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

Credit Suisse rates CSL as Outperform (1) -

The company will progress to a phase 3 trial on CSL112 subject to final discussions with the US FDA. Given the lack of efficacy data to date Credit Suisse suggests there is significant risk the trial will not reach commercialisation.

The broker awaits confirmation that the trial will proceed, in addition to evidence of efficacy, before factoring it into numbers.

Outperform rating and $155 target maintained.

Target price is $155.00 Current Price is $143.00 Difference: $12
If CSL meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $145.20, suggesting upside of 1.5% (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

Macquarie rates CSL as Outperform (1) -

CSL's R&D day revealed new product CSL112 is progressing into phase 3, leading the broker to increase its target to $154 from $146. Forecast earnings rise 1% on higher Haegarda sales.

The broker's Outperform rating is based on a favourable outlook for CSL's core portfolio as well as growth form recent product launches.

Target price is $154.00 Current Price is $143.00 Difference: $11
If CSL meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $145.20, suggesting upside of 1.5% (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

Ord Minnett rates CSL as Accumulate (2) -

The company's R&D briefing largely confirmed Ord Minnett's expectations regarding plans to undertake its largest ever clinical trial.

The broker suspects only constrained access to plasma will hold the company back from delivering stronger profit growth. Accumulate maintained. Target is raised to $160 from $148.

Target price is $160.00 Current Price is $143.00 Difference: $17
If CSL meets the Ord Minnett target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $145.20, suggesting upside of 1.5% (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

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

Following share price weakness Morgans upgrades to Add from Hold. The broker expects the company to deliver strong double digit growth in earnings per share over coming years.

The highly fragmented nature of the global corporate travel market means there is significant share opportunities to realise over time.

The broker also believes the company can increase its market share in Australasia from around 15%. The company also stands to benefit from lower tax rates in the UK and the US should they materialise. Target is $23.

Target price is $23.00 Current Price is $19.60 Difference: $3.4
If CTD meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $22.53, suggesting upside of 14.9% (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

Morgans rates DHG as Initiation of coverage with Reduce (5) -

Morgans believes Domain has an opportunity to deliver several years of double digit earnings growth while the industry background is favourable.

Yet, the shares are trading in excess of the broker's valuation and coverage is initiated with a Reduce rating. Target is $2.74.

Target price is $2.74 Current Price is $3.40 Difference: minus $0.66 (current price is over target).
If DHG meets the Morgans target it will return approximately minus 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.50, suggesting upside of 2.9% (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 HPI as Hold (3) -

The company has reaffirmed FY18 distribution guidance of 9.6 cents per share. Morgans expects around 50% of the portfolio will be independently valued as of December 2017.

The broker rolls forward its valuation, raising the target to $3.10 from $3.02.  Hold rating retained. The main risk relates to any potential adverse changes to gaming and liquor laws in Queensland, which could negatively affect property values and lower inflation.

Target price is $3.10 Current Price is $3.30 Difference: minus $0.2 (current price is over target).
If HPI meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

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

UBS rates IGO as Neutral (3) -

UBS has lifted its forecasts for electric vehicle adoption in 2025 by 16%. This implies sales penetration of almost one in every six cars sold globally being electric. Subsequently, the outlook for nickel has been upgraded leading to a 3-4% increase in the price estimates from 2020.

The broker believes the recent momentum in the company's share price reflects a leverage to this industry rather than the perceived upside of Nova exploration. UBS believes Independence is the best positioned in the nickel space.

Neutral rating and $4.40 target maintained.

Target price is $4.40 Current Price is $4.12 Difference: $0.28
If IGO meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.04, suggesting downside of -1.9% (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 IVC as Lighten (4) -

Ord Minnett reviews the company's business model in the light of the recent de-rating of its peer, Dignity, the largest funeral services business in the UK.

Dignity has experienced a share price decline of about -35% over the past month, amid concerns around the impact of price comparison platforms on future price rises with the growth of the price conscious segment.

Ord Minnett notes similar platforms are relatively new to the Australian market and remains cautious regarding the medium-term assumption that InvoCare will be able to push through 4-5% price rises each year.

Lighten maintained. Target is raised to $13.75 from $13.30.

Target price is $13.75 Current Price is $17.57 Difference: minus $3.82 (current price is over target).
If IVC meets the Ord Minnett target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.04, suggesting downside of -20.1% (ex-dividends)

The company's fiscal year ends in December.

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 NCM as Underperform (5) -

Newcrest has confirmed a five-year extension to the Cadia electricity contract with Energy Australia, providing a lower tariff for its energy intensive and largest cash generating operation.

While the lower power contract is a good outcome, Credit Suisse remains focused on the September quarter gold recovery of only 78.4%.

The revenue foregone from recovery losses compared to expectations is twice the power savings that have been achieved.

Underperform and $18.20 target retained.

Target price is $18.20 Current Price is $23.10 Difference: minus $4.9 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.06, suggesting downside of -13.1% (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: -0.5

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

Macquarie rates PLS as Outperform (1) -

The broker has visited Pilbara Minerals' Pilgangoora spudomene (lithium) project. It's early days, but progress is gathering pace and the project is on track for June 2018 delivery.

The broker expects Pilgangoora to be a robust, long life, low cost, high quality supplier of spudomene. Outperform retained, target rises to $1.10 from 90c.

Target price is $1.10 Current Price is $0.93 Difference: $0.17
If PLS meets the Macquarie target it will return approximately 18% (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

Morgan Stanley rates QBE as Overweight (1) -

Morgan Stanley notes the market is concerned that incoming CEO Patrick Regan will re-base 2018 earnings estimates at the 2017 result.

Benchmarked against US and European peer comparables, amid analysis of earnings multiples at prior downgrades, the broker estimates QBE is currently priced for a 96.0-97.0% COR guidance range.

The broker flags the upside risk and suggests any re-basing needs to be tempered with a likely upbeat pricing cycle that will benefit 2019.

Overweight maintained. Target is $12.90. Industry view: In-Line.

Target price is $12.90 Current Price is $10.69 Difference: $2.21
If QBE meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $11.44, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

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: 0.3

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

UBS rates QBE as Buy (1) -

UBS does not believe the balance sheet reveals a significant risk in terms of management succession. The company's new CEO will commence on January 1, 2018.

However, the broker is not so sure about the medium-term profitability with respect to expense targets. 2018 forecasts for earnings per share are reduced by -9.3%, as more conservative calculations are applied across a range of drivers.

Buy rating retained. Target is reduced to $11.85 from $12.20.

Target price is $11.85 Current Price is $10.69 Difference: $1.16
If QBE meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $11.44, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

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: 0.3

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

UBS rates RIO as Buy (1) -

The company has guided to iron ore production of 330-340mt, slightly below UBS estimates. Despite iron ore discounts becoming more of a structural trend, the company believes its product can withstand the discounting.

The company also envisages a longer term positive outlook for aluminium.  As there is a lack of industry investment in new projects, UBS believes the company is well-positioned to take advantage of longer-term market tightness.

Target is $79.50. Buy retained.

Target price is $79.50 Current Price is $69.30 Difference: $10.2
If RIO meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $76.69, suggesting upside of 10.7% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Credit Suisse rates S32 as Neutral (3) -

Credit Suisse found nothing new from the investor briefing albeit a few incremental positives. The broker notes cost inflation has not yet translated to any changes to FY18 guidance.

Credit Suisse retains a Neutral rating. Target is $3.10.

Target price is $3.10 Current Price is $3.27 Difference: minus $0.17 (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 $3.25, suggesting downside of -0.7% (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: 0.0

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

Macquarie rates S32 as Neutral (3) -

South32's strategy day revealed a weaker outlook for Cannington and risks around Illawarra returning to full production. Rising alumunium production costs are a concern but as this relates to alumina prices, which the company also produces, it is a net positive, the broker notes.

The broker expects the prices of most of South32's commodities to decline from here, but were current spot to be used for valuation, upside would be material. Neutral retained, target falls to $3.20 from $3.30.

Target price is $3.20 Current Price is $3.27 Difference: minus $0.07 (current price is over target).
If S32 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 $3.25, suggesting downside of -0.7% (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: 0.0

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

Ord Minnett rates S32 as Hold (3) -

The company made no changes to FY18 production guidance at its investor briefing. Cost guidance is also unchanged.

Ord Minnett continues to be attracted to the diversified earnings stream and strong balance sheet but considers the stock fairly valued.

Hold rating retained. Target is $3.40.

Target price is $3.40 Current Price is $3.27 Difference: $0.13
If S32 meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.25, suggesting downside of -0.7% (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: 0.0

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

Macquarie rates STO as Downgrade to Neutral from Outperform (3) -

Macquarie was an "early believer" in the sustainability of Santos' cost cutting and the change of culture in the company. Forecast LNG prices have now been increased due to strong Asian winter demand, while a site tour has made the broker more comfortable about GLNG.

Santos will continue to deliver strong earning in 2018, the broker believes, but since the Harbour Energy bid the stock has re-rated, and the broker does not believe an offer can be made high enough to satisfy the board. Downgrade to Neutral from Outperform.

Target rises to $5.50 from $5.00.

Target price is $5.50 Current Price is $4.95 Difference: $0.55
If STO meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.80, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in December.

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: 0.3

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

Macquarie rates WPL as Underperform (5) -

The broker believes Woodside is going to run into problems renegotiating 2019 LNG prices with the Japanese, as Japan is more focused on flexibility. The broker remains concerned about this downside risk and by a lack of quality growth/development options compared to those of Santos ((STO)) and Oil Search ((OSH)).

Underperform reiterated and $28.10 target retained.

Target price is $28.10 Current Price is $31.56 Difference: minus $3.46 (current price is over target).
If WPL meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.09, suggesting downside of -4.7% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates WSA as Sell (5) -

UBS believes the risk profile for the company is starting to change. The development of Odysseus suggests balance sheet strength will weaken and risks for construction and execution could lift. This may cause investors to be cautious and erode the valuation premium.

For investors that want exposure to electric vehicles, UBS believes the stock has a high degree of leverage.

The Sell rating is based on valuation that is derived from just the reserves at Forrestania, Odysseus and a long-term nickel price of US$6.00/lb. Target is raised to $2.62 from $2.44.

Target price is $2.62 Current Price is $2.94 Difference: minus $0.32 (current price is over target).
If WSA meets the UBS target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.64, suggesting downside of -10.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.6

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